By the mid-1930s, Hayek believed his beleaguered band of brothers—Ludwig von Mises, Lionel Robbins, and others—had won the economic debate of socialism versus capitalism. They had demonstrated—not just once (in Red Vienna after the First World War), but twice (in 1930s Britain)—that it was not possible for socialist planners to gather and process the necessary information to anticipate and provide for the needs of a modern society without private property, the price mechanism, and other market institutions.
But that victory, Hayek came to realize, was pyrrhic. For the questions at stake weren’t just technical; they were moral and political. As he put it in a pioneering article from 1939:
[The] belief in the greater efficiency of a planned economy cannot any longer be defended on economic grounds. . . . But it can rightly be said that this is not the decisive question. Many planners would be willing to put up with a considerable decrease of efficiency if at that price greater distributive justice could be achieved. And this, indeed, brings us to the crucial question. The ultimate decision for and against socialism cannot rest on purely economic grounds, and cannot be based merely on the determination of whether a greater or smaller output of society is likely to be obtained under the alternative systems in question. The aims of socialism as well as the costs of its achievement are mainly in the moral sphere. The conflict of ideals is one of ideals other than merely material welfare. . . . it is on considerations like those discussed here that we shall have to base our final choice.
Far from resting neoliberalism on the authority of the natural sciences or mathematics (forms of inquiry Hayek and Mises sought to distance their work from) or on the technical knowledge of economists (as Naidu and his co-authors claim), Hayek recognized that the argument for capitalism had to be won on moral and political grounds through the political arts of persuasion.
Here’s where things get interesting. Though Hayek famously abandoned formal economics for social theory after the 1930s, his social theory remained dedicated to elaborating what he saw as the essential problem of economics: how to allocate finite resources between different purposes when society cannot agree on its most basic ends. With its emphasis on the irreconcilability of our moral ends—the fact that members of a modern society do not and cannot agree on a scale of values— Hayek’s point was fundamentally political, the sort of insight that has agitated everyone from Thomas Hobbes to John Rawls and Jürgen Habermas. Hayek was unique, however, in arguing that the political point was best addressed, indeed could only be addressed, in the realm of the economic. No other discourse—not moral philosophy, political theory, psychology, or theology—understood so well that our ultimate moral values and political purposes get expressed to others and revealed to ourselves only under conditions of radical economic constraint—when one is forced to assign a limited set of resources to different ends, ends that favor different sectors of society.
Morals are not really morals if they are not material, Hayek believed. Outside the constraining circumstance of the economy, our moral claims are so much wind. Inside the economy, they assume force and depth, achieving a revelatory clarity and profundity. “The sphere where material circumstances force a choice upon us,” Hayek wrote in The Road to Serfdom (1944), “is the air in which alone moral sense grows and in which moral values are daily re-created [emphasis added].” It is for that reason, Hayek concluded in that 1939 article, that “economic life is not a sector of human life which can be separated from” other spheres of life, including our moral life. Economic life “is the administration of the means for all our different ends. Whoever takes charge of these means must determine which ends shall be served, which values are to be rated higher and which lower—in short, what men should believe and strive for.”
The intrinsic links between moral and economic life as well as the intractability of moral conflict, the incommensurability of our moral views, were the kernels of insight that animated Hayek’s most far-reaching writing against socialism. The socialist presumes an agreement on ultimate ends: the putatively shared understanding of principles such as justice or equality is supposed to make it possible for state planners to conceive of their task as technical, as the neutral application of an agreed upon rule. But no such agreement exists, Hayek insisted, and if it is presumed to exist, nothing will reveal its non-existence more quickly than the attempt to implement it in practice, in the distribution of finite resources toward whatever end has been agreed upon.
Now we come back to Naidu, Rodrik, and Zucman. What strikes me about their text is its boldness at the level of policy, but its modesty at the level of public philosophy. That may be deliberate. But if it is, it may reinforce the very neoliberalism that it is meant to contest, insofar as it presumes that what the economist has to offer is neutral or technical authority on behalf of assumed moral ends such as justice or equality or inclusiveness—values for which we don’t have shared definitions. That was precisely the claim that Hayek sought to refute, and I’m not sure if Naidu and his co-authors have a response. Conversely, I fear that if they continue the course they have set on, showing that alternative policies are technically feasible, they may find themselves foundering on the same shoals as Hayek did before his turn to social theory: invoking economic knowledge when the field of play is in fact moral and political.
Hayek translated moral and political problems into an economic idiom. What we need now, I would argue, is a way to uninstall or reverse that translation.
Karl Marx attempted just such a project, but his answers were notoriously elusive. In a fascinating, but little-known 1927 essay, “On Freedom,” Karl Polanyi also attempted such a project, giving us a stylized rendition of what it would mean for a political collective, rather than a firm or a consumer, to make an economic decision—not in the marketplace, where price helps determine our decisions, but in a deliberative assembly, where other considerations are at play. One part of the assembly, representing the interests of the collective, will want to make an investment in a long-term good; healthcare was the example Polanyi chose. Another part of the assembly, representing the workers who would have to make the specific sacrifices for that good, resists that decision. What to do? Argue it out, says Polanyi. Whatever is the final decision, it will be:
a direct, internal choice, for here ideals within people are confronted with their costs; here everyone has to decide what his ideals are worth to him. No state and no market intervene between the two sides of our consciousness; here there can be no shifting of responsibility, and nothing outside of ourselves can be made responsible for our fate. The individual only confronts himself because his fate is in his own hands [emphasis added].
Notice that Polanyi doesn’t presume any agreement about moral and political ends, as Hayek claimed socialists must. Notice how insistent he is that decisions about production must confront the question of costs. Like Hayek, Polanyi is attuned to the materiality of moral choice, only he believes the question of costs and constraints is best mediated through moral and political arguments in the public square.
Hayek persuaded generations of elites that it is only the individual in the market who can engage in such a process. In a modern society, with a plurality of ends and purposes, the combination of informational challenges, on the one hand, and the intractability of moral conflict, on the other, was seen as too great to make decisions about economic life through public deliberation. Like an earlier generation of leftists from the early twentieth century, Naidu and his co-authors have an opportunity to reopen this question not just for elites (Hayek’s preferred audience) but for society as a whole: to ask whether it should be a political collective rather than the market that makes decisions about social value.
Polanyi thought that nothing less than human freedom was at stake in how we answer that question. Hayek, coming from the opposite end of the spectrum, did as well. Maybe it’s time for us to ask why and start talking about it again.
Re: EXIT NEGOTIATIONS
Originally Posted by rory_20_uk
[Sigh]
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