Hayek on the Extended Order et al.

April 15, 2009

Over at Cafe Hayek, they link to a 1985 interview with F.A. Hayek himself. It’s an hour long and much of it is interesting, but I can’t see any reasonable person listening to the whole thing. I transcribed some highlights, specifically those in which Hayek lays out his fundamental objection to socialism, his view of the much-maligned “profit motive,” and the mechanism of the extended order in general.


From the 8-minute mark:


I probably was, when I began my study, [..] convinced that there must be an intelligent solution of the many dissatisfactory events of this world.
I was very soon cured of this belief that socialism was the solution, because I came after three years under the direct influence of Ludwig von Mises, who had published his great book On Socialism, demonstrating that the socialist solution was impossible in a technical sense.


It proposes a solution which is not the solution. You cannot… well it takes a long time, but it is my central problem: Socialism assumes that all the available knowledge can be used by a single central authority.

It overlooks that the modern society which I now prefer to call the extended order, which exceeds the perception of any individual mind, is based on the utilization of widely dispersed knowledge. And once you are aware that we can achieve that great utilization of available resources only because we utilize the knowledge of millions of men it becomes clear that the assumption of socialism is that a central authority in command of this knowledge, is just not correct.


So what you’re doing is you’re turning on its head the common point that one often hears from the left, that because the problems of modern society are so difficult, they require planning, you’re saying because they’re so complex, they make planning impossible.


Well, I think the nicest form to put it is, to say that socialism protesting against the production for profit and not for use objects to what makes the extended society possible. Production for use is only possible in a society where we know all the facts.

But to achieve the situation where we’re all working for people we do not know, and are being supported by the work of people we do not know is made possible because we produce for profit. Profit is a signal which tells us what we must do in order to serve people whom we do not know.


47 minutes:


I have to then say, let us take a society in which nurses are paid much less than striptease dancers. I wonder if that society will accept that situation indefinitely or permanently, because people will tend to feel that it is immoral. Unjust in some sense.


[..] It is certainly objectionable to our instincts. I dislike it, and yet I’m convinced that if we are to maintain a society which makes use of much more information than any individual is… we have to put up to it.

But we are up against this very strong and in a sense justified resistance of our instincts. That’s our whole problem. A society which is efficient cannot be just, and unfortunately a society which is not efficient cannot maintain the present population of the world.


It is under the strong influence of Hayek that I sometimes make the point that even though there are genuine problems in the world, it is still possible that there are no solutions.


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