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Book: The Fatal Conceit

I just finished reading F.A. Hayek’s The Fatal Conceit.

I’m definitely not a libertarian, but I have been enjoying reading Hayek over the last 6 months and particularly enjoyed this book. I’ll give a quick summary and then highlight a few interesting portions.

The titular fatal conceit is that “man is able to shape the world around him according to his wishes”. Hayek claims that our morals are founded neither on our instinct (innate biological desires) or our reason, but by a larger evolutionary process of group selection. Groups that are more successful in multiplying and being fruitful, crowd out those who fail to survive and reproduce. Our instincts that guided us when we lived in small tribal groups lead us astray in the modern “extended order”. Similarly, the belief that through our reason we can craft the world to our liking also leads us astray - we did not choose our morals, and the belief that we can choose better ones is dangerous hubris. Hayek writes that “While facts alone can never determine what is right, ill-considered notions of what is reasonable, right and good may change the facts and circumstances in which we live”. Hayek clearly sees himself as a descendent of Hume and the “old whigs” like Edmund Burke.These morals and the traditions in which they are part of, are the basis for civilization and the current standard of living that the average person possesses.

Hayek is a big fan of the market because it guides people to take the most effective action “there is no known way, other than by the distribution of products in a competitive market, to inform individuals in what direction their several efforts must aim so as to contribute as much as possible to the total product”. Hayek describes the market as a profoundly complex system where individuals are able to communicate their private knowledge through the price system. Without having to know about a current shortage on the other side of the world, that fact is reflected in the price of a good. In other words, the price system condenses vastly distributed information into a single number. Hayek claims that the market is a product of evolution and that our reason is not up to the task of intentionally creating a better one.

Hayek acknowledges that civilization is not perfect, that the extended order is still very flawed. But the extended order is the best we can hope for, and the insitutions it has produced are the best opportunity to alleviate suffering.

Firstly, the conclusions that Hayek reaches are not clean, easy, or one-sided (although the ways that Hayek is presented by his popularizers often are). Hayek compares his book to Freud’s Civilization and it’s Discontents, because broth present society as a blessing and curse that both iberates men and psychologically warps then. In fact, the book doesn’t make the case that civilization is better than non-civilization, only that a functioning civilization is better than a broken one. The problem is, is that there is no way to go back to the way things were before: “Like it or not, the current world population already exists” (120) and that any attempt to “go back” would be to condemn billions of people to suffering and death. I find that Hayek’s book could even be read and accepted by a primitivist – unfortunately according to Hayek, the problem is that there are now billions of people reliant on the modern “extended order”.

The book is primarily philisophical, in that it’s basically a theory of civilization. I know that in his other writings Hayek has specific policy ideas and recommendations, but I still wish he concretized some of his ideas. Basically, The Fatal Conceit reads as an elborate exposition of Chesterton’s Fence: before you tear down a fence make sure you understand why it was there. This is a useful, if vague, rule of thumb; however it is difficult to apply other than as a reminder to be humble and conservative. Okay, so you shouldn’t try and change fundamental aspects of society - but what are those fundamental aspects? Although the industrial revolution was an organic non-intentional drastic shift, it was precipitated by intentionally constructed inventions. Some of these inventors were at least dimly aware that their inventions might be transformative. Is Hayek against radical innovation? Clearly Hayek is against transformations to our moral, legal, and market orders, but how would Hayek feel about Glenn Weyl’s Radical Markets?

My conservatism, such as it is, is entirely confined to morals within certain limits. I am entirely in favour of experimentation – indeed for very much more freedom than conservative governments tend to allow. What I object to among rationalist intellectuals such as those I shall be discussing is not that they experiment; rather, they experiment all too little, and what they fancy to be experimentation turns out mostly to be banal – after all, the idea of returning to instinct is really as common as rain and has by now been tried out so often that it is no longer clear in what sense it can any longer be called experimental. I object to such rationalists because they declare their experiments, such as they are, to be the results of reason, dress them up in pseudo-scientific methodology, and thus, whilst wooing influential recruits and subjecting invaluable traditional practices (the result of ages of evolutionary trial-and-error experiment) to unfounded attack, shelter their own ‘experiments’ from scrutiny.

We know that evolution does not find optimal solutions, merely solutions that are relatively “good enough”. We know that there are market failures that can’t easily be solved via the market. Coordination problems for instance, or externalities with high transaction costs (Coase theorem) are both instances where our rationality can help improve the market. These might be exceptions that prove the rule, but how can we tell if a problem is appropriate for our rationality? Or when our morals/traditions/extended order have given us a solution that we believe we can improve on? It does seem like both of these things have happened: we have solved problems with our rationality, and we have improved our morals - after all, Hayek is a conservative about morals but himself doesn’t believe in god. Why does he feel that he can “do away” with that important belief?

TL;DR of Fatal Conceit:

“This book has shown mankind as torn between two states of being. On one hand are the kinds of attitudes and emotions appropriate to behaviour in the small groups wherein mankind lived for more than a hundred thousand years, wherein known fellows learnt to serve one another, and to pursue common aims. Curiously, these archaic, more primitive attitudes and emotions are now supported by much of rationalism, and by the empiricism, hedonism, and socialism associated with it. On the other hand there is the more recent development in cultural evolution wherein we no longer chiefly serve known fellows or pursue common ends, but where institutions, moral systems, and traditions have evolved that have produced and now keep alive many times more people than existed before the dawn of civilisation, people who are engaged, largely peacefully though competitively, in pursuing thousands of different ends of their own choosing in collaboration with thousands of persons whom they will never know.” (135)