We recently attended Richard Epstein’s lecture at George Mason University on “The Continuing Relevance of Hayek’s The Constitution of Liberty.” (Disclosure: we are big fans of Epstein’s book “Simple Rules for a Complex World.”) In his lecture, Epstein delivered several devastating blows against Hayek’s body of work. Among other things, Epstein spotted an internal inconsistency in Hayek’s thinking. Let’s start with Hayek’s greatest contribution to the field of political economy: his counter-intuitive notion of “spontaneous order.” In his famous paper on “The Use of Knowledge in Society,” for example, Hayek explains why decentralized markets produce greater levels of peace and prosperity than centralized “command-and-control” systems do. Simply put, when people are free to decide for themselves what things to buy and sell, their choices spontaneously generate high levels of social coordination without any intentional design or central planning. In Hayek’s own words: “The continuous flow of goods and services is maintained by constant deliberate adjustments, by new dispositions made every day in the light of circumstances not known the day before, by B stepping in at once when A fails to deliver.” (Hayek, 1945, p. 522.) Hayek’s main point is that all these “deliberate adjustments” and “new dispositions” are made voluntarily by millions of individuals and firms acting independently of each other, and yet, in spite of the lack of centralized control, this chaotic process produces a wide array of complex goods and services that people want to buy. So, where’s the inconsistency?
The inconsistency in Hayek’s work appears later–in Hayek’s classic book “The Constitution of Liberty.” In short, markets do not exist in a vacuum. Markets require some kind of legal framework–a set of rules–one that respects people’s property rights and enforces their contracts. But where do we get legal frameworks and rules from? In the case of the United States, we have a Constitution, which is the supreme law of our land. But isn’t a constitution (and law generally, for that matter) a textbook example of human design and not of spontaneous order? Professor Epstein also criticized Hayek’s conception of coercion, and we will discuss Epstein’s critique in a future blog post. Suffice it to say for now that coercion poses a fundamental problem in political philosophy: under what circumstances is the state justified in using coercion?