ABSTRACT: The market is sometimes thought to be a largely neutral means for coordinating
cooperation among strangers under complex conditions because it is, as Hayek noted, a
“spontaneous order. ” But in fact the market actively shapes the kinds of values it rewards, as do
other spontaneous orders. Recognizing these biases allows us to see how such orders impinge on
one another and on other communities basic to human life, sometimes negatively. In this way we
may come to acknowledge the inevitability of placing limits on spontaneous orders.
The modern world is uniquely characterized by the enormous rise in influence of the abstract and
anonymous liberal community over all other communities, human and natural alike. As I use the
term, “communities” are distinguished by the different relationships fundamental to each. The
liberal community is rooted in market relations sustained and modified by democratic political
intervention. Its standard of truth is found in science, the chief source of the technology most
people use every day. In all three of these domains-the market, democracy, and science the
liberal community is characterized by the abstract procedural rules its members follow in
pursuing their goals. These rules generate the market, democracy, and science by helping people
who are largely unknown to each another to enter into extended cooperation for mutual benefit.
The rules of the market, democracy, and science are abstract in applying to the generically
human, divorced from all personal qualities. Their abstraction enables an indefinitely large
number of people and projects to be integrated into complex and coherent patterns of
cooperation, despite universal ignorance of the concrete conditions prevailing among those with
whom one interacts in market, democratic, and scientific contexts. That they integrate the
unpredictable plans of mutual strangers is the reason these three liberal orders are rightfully
considered “self-organizing” or “spontaneous.” Their order is very real, but unplanned.
Libertarians, and classical liberals in general, defend the market order as the most successful
institution for facilitating creative and voluntary exchanges among equals. In addition, they tend
to argue that because any given distribution of resources within the market is the unintended
result of countless individuals making voluntary transactions with one another, whatever pattern
of distribution arises is beyond fundamental criticism. In a spontaneous order, just means cannot
generate unjust ends. Consequently, as Hayek (1976) has argued, “social justice” is a
meaningless concept when applied to the spontaneous order of the market. This article offers a
Hayekian challenge to this Hayekian line of thought. Two considerations weigh against these
defenses of the market. First, the market is not the only spontaneous order generated by liberal
principles of equality of status, abstract procedural rules, and voluntary transactions operating
under conditions of complexity. Different procedural rules among equals promote different kinds
of cooperation. For different rules promote different values, hence different spontaneous orders.
Second, the liberal community tends progressively to subordinate other communities to its
standards, at the cost of narrowing the range of values that can be easily manifested. Even within
the liberal community, its constitutive spontaneous orders tend to intrude on one another,
distorting the values each exemplifies. Some values are unintentionally given precedence over
others, even within systems of action where their dominance is unwelcome. Because these
patterns of influence are forseeable, they raise questions of social justice not at the level of
individual distribution, where Hayek’s criticisms are valid, but at the systemic level, where they
are not. 1
Varieties Of Spontaneous Order
Self-organizing social systems economize on the knowledge people need to pursue their goals
successfully. Science, the market, and democracy are so complex that no human being can grasp
them except by using a theory divorced from concrete details (Hayek 1969, 22-42). Such a
theory, however, can provide little or no guidance in making specific decisions within such an
order. Few economists are successful entrepreneurs, few political scientists win public office,
and few philosophers of science do valuable scientific research. The skills required to succeed
within a spontaneous order are little connected to the skills needed to understand it.
As with all spontaneous social orders, the market promotes voluntary cooperation in pursuit of
an indefinite number of independently chosen goals. The market is a discovery process
encouraging people to cooperate in the pursuit of economic ends (Hayek 1978, 179-90). People
acting within a framework of rules of private property, tort, and contract unintentionally generate
an economic order; the wider the bundle of property rights, the wider the range of cooperative
discovery that is made possible. The more secure the possession of such rights and the greater
the certainty that agreements will be honored, the more exchange possibilities will be explored.
Similarly, procedural rules developed within the scientific community allow individual
scientists’ work to contribute to an unintentional overall order. Scientific rules, like those of the
market, are applicable to all participants and are procedural in form, leaving to individual
initiative how they are applied and leaving to the scientific community the outcome of their
application. Again, cooperation in the pursuit of discovery is fostered, only in this case the goal
is the discovery of scientifically verifiable truths (Polanyi 1969; Ziman 1968), not the discovery
of efficient ways to satisfy economic demands.
In liberal democracy, freedom of speech and organization, and equality of the vote, generate a
spontaneous political order. Like property rights, contract and tort law, and the principles of
scientific method, democracy’s rules are procedural and abstract. Freedom of speech and
organization make it possible for the advocates of any cause to try to gain supporters. Equality of
the vote ensures that successful political causes appeal to the perceived desires of more people
than would be the case were votes not equally distributed. Liberal democracy encourages both the
discovery of political goals and cooperation in their pursuit (diZerega 1989 and 1994).
The basic principle formally ordering human relations within all three of these spontaneous
orders, which together make up the liberal community, is voluntary agreement among equals.
The rules that generate the three spontaneous liberal orders require respect for individuals’
autonomy. It is primarily in the context of individuals’ agreements, in the number of people
required for agreements to be productive, and in the nature of the issues over which agreement is
sought, that the spontaneous orders of the market, democracy, and science differ from one
another. 2
The ethical principle underlying these liberal orders is largely isomorphic with Jurgen
Habermas’s analysis of the value underlying language (Habermas 1979, 1-68). Like the market,
science, and democracy, language is self-organizing. Its order arises from each speaker
appropriating common abstract rules of grammar so as to communicate, for whatever purpose
she or he envisions. Moreover, in democracy, the market, and science, individual interaction
proceeds largely through speech or written communication. In these respects they constitute
contextually differentiated subsets of Habermas’s more inclusive ideal speech community, and
the values it exemplifies.
The only modification I would make to Habermas’s basic argument is that his excessively
egalitarian ideal of speech equality obscures the fact that knowledge is not and cannot be equally
distributed. Knowledge as it exists in the scientific, market, and democratic orders must be
discovered and tentatively validated through complex social processes. It is always incomplete
and conjectural. 3 In other words, language is also a discovery process, facilitating our learning
about one another, the world around us, and even ourselves. Under such circumstances equality
of mutual influence is an absurd ethical ideal. A complex society where it could be attained is
unimaginable. 4
The market, democracy, and science all maintain an ongoing institutional openness to
unpredictable initiatives by unknown others (Hayek 1978; Polanyi 1954; diZerega 1988, 1991).
Because of our fragmentary knowledge of the plans of others, we experience these orders as
impersonal. Hayek has discussed the positive dimension of the impersonality that characterizes
relationships within the abstract liberal community of strangers. When fewer demands are made
upon us in order to cooperate, we find cooperation easier. The range of viable human projects
increases. On balance, we all benefit from this increase in cooperative opportunities. The
evidence is readily apparent. The incidence of famine, disease, and poverty has been brought to
the lowest levels in thousands of years due to the growth of spontaneous liberal orders. Less
remarked upon, but equally important, their impersonality helps explain why liberal democracies
do not make war upon one another. They are the first form of organized political life where this
has been the case, and their peaceful record is intimately connected to their self-organizing
character (diZerega 1995c).
However, there is more to human life than the liberal community of strangers; there are also
families, face-to-face and reputational communities, and nature. Hayek himself was aware of
some of these communities as necessary elements of any good society (Hayek 1976, 150-52).
But I believe he underestimated the power of the liberal community to overwhelm them.
The Market as Non-Neutral
The market is the most fundamental spontaneous order in the liberal community. This is not
only because we use material goods and human services in most or all of the communities in
which we participate, but because the abundance and the characteristics of the goods and
services available in the market powerfully influence the possibilities that can be pursued in the
other spontaneous orders constituting the liberal community. Consequently, I will focus
primarily upon the market order. However, broadly similar arguments can be developed for the
social impact of science and liberal democracy.
The market is the most important facilitator of cooperation among producers of goods and
services. These goods come from and often impinge upon the natural world, and also modify the
broader social environment that sustains familial, face-to-face, and reputational communities.
Libertarians and classical liberals are reluctant to criticize this feature of the market precisely
because it is a spontaneous order. They tend to emphasize the fundamentally cooperative nature
of the relationships that constitute the market order. Hence they view the market as essentially
neutral. There is an important truth here. Critics of the market too rarely acknowledge its
fundamentally cooperative character. 5 However, the classical liberal claim is overly broad,
glossing over important circumstances in which it is not entirely true. The market would be
perfectly neutral only for beings whose values and preferences were unaffected by the
environment in which they live. Such beings would not be human.
It is difficult to imagine a truly neutral tool for facilitating human cooperation. All actual
cooperation takes place within a particular institutional context, and this context influences what
cooperative opportunities will emerge. As contexts differ, the rules most able to facilitate
cooperation within them will also change. The point is as true for self-organizing systems as it is
for instrumental organizations, although the ways in which it is manifested differ profoundly.
For example, the context of a work environment and the context of a romantic date generate
different principles of cooperation because they are enmeshed in different community
relationships. One is largely a means to other ends and is often impersonal; the other is usually
considered an end in itself and is highly personal. Cooperation between friends will be facilitated
by different rules than will cooperation between members of an organization who are otherwise
unknown to one another. Even among strangers, the likelihood of cooperation will be influenced
by whether additional encounters are likely (Axelrod 1984). At a minimum, these circumstances
imply the existence of scale effects.
The market injects the bias of the contextual rules that characterize it into the community at
large. Since these rules are impersonal, abstract, and formally voluntary, they can produce
institutions as different as a supermarket or a crafts fair. In both cases people come together in
order to make mutually satisfactory exchanges. In both cases money assists in making those
exchanges. Assuming the parties involved act on adequate information, in both instances people
will consider themselves better off after the exchanges than before them. But even in these two
instances, we can begin to see a scale effect that ultimately turns out to be quite important.
Many, perhaps most, people who go to a crafts fair are attracted in part by the opportunity to
interact with the creators of what they might purchase. They want their shopping experience to
have a personal dimension. I have often sold art at such fairs. A frequent question I encounter is,
“Did you make this?” By contrast, going to a supermarket focuses customers’ attention on
convenience and price. As the personal dimension fades, transactions become more impersonal
and instrumental in character. In such cases one usually does not care who made something, for
this knowledge adds nothing to its value. One only wants efficiency: the best quality at the least
expense. (Think of shopping at Costco.) Catalogs and electronic shopping are perhaps the
ultimate forms of impersonal markets, diminishing human contact to nearly zero.
From a libertarian or classical liberal perspective the success of Costco and other megastores
simply represents a more efficient serving of consumer needs than did the more personalized
forms of retail service they have replaced. Personalized service remains available in other stores,
but customers now pay a premium for it. Costs are in better alignment with benefits. I believe
this point of view is misleading.
The market order possesses a dynamic principle intrinsic to its spontaneous character.
Precisely because it is not the outcome of deliberate decisions, it cannot simply be assumed to
reflect people’s desires faithfully. If we were to see the impact on others generated by the
collective impact of our choices, we might make different choices. If the effect of collective
choices is to select for some values and not others, we can legitimately ask whether the pattern
of selection is fully desirable.
Systemic Resources and Value Biases
Every self-organizing social system depends for its success on both positive and negative
feedback to those acting within it. This feedback takes the form of participants accruing or losing
resources. What counts as a resource is defined by the system of cooperation. But what may be
highly valued systemically may not be so valued by the individuals acting within the system. 6
In the market order, the basic systemic resource is money. As the universal means of market
exchange, money is the glue that holds impersonal economic cooperation together. In the
democratic order, the systemic resource is political support measured in votes. Votes ultimately
determine who will succeed politically and who will not. Money is a very important, but still
secondary, political influence (diZerega 1991). In the scientific order, money again plays an
important but subordinate role. The amount of grant money a scientist brings in is supposed to
be, at best, a proxy for the quality of his work. Indeed, the increasing focus upon obtaining
grants may constitute a corruption of science by market values, akin to selling and buying votes
in politics. For science to continue as a way of discovering how the world works, scientific
reputation, not money, must be its most important systemic resource.
Because what counts as a resource is determined by the spontaneous order within which
participants act, systemic resources may not necessarily be valued by the order’s participants. I
can participate in the market order without primarily seeking money, and be successful by my
own standards. However, to the extent that I lose money, my ability to influence the market
order fades. I have fewer systemic resources. The same point holds for the scientific and
democratic orders. I need not be concerned with peer recognition as a scientist, or with getting
votes as a politician, but without recognition or votes I lose the ability to influence these orders. I
may be happy, and in my own eyes legitimately successful, but systemically I will be invisible.
To the extent that I seek to gain systemic resources, adopting them as my standard of success, I
accept the values of the order in which I participate. But whether I will ultimately regard myself,
or will be regarded by others, as a successful human being is quite another thing.
As a spontaneous order becomes more developed and all-inclusive, options to act will be
greater for those possessing the most Systemic resources. Viewed from within the order, this
outcome appears as only natural. However, because resources are systemically defined,
something that counts as a resource within one system may be systemically denied or devalued
within another. There is a potential problem where systems border upon each other. This holds
between the three spontaneous orders comprising the liberal community, and even more so
between that community as a whole and the other basic communities within which we live.
Systemic boundaries are defined by networks of relationships structured by the rules and
values that generate them. While the market, scientific, and democratic orders obviously
influence one another, and while, to some degree, the resources of one can always be turned into
resources for another, each can, when taken separately, be seen to comprise a coherent
sub-community of the liberal community. Their interpenetration causes reductionists to seek
some common principle, usually money, as their common foundation. But each system’s ideal
relationships are quite distinct from those of the others. When systemic resources from one
system intrude on another, they are acknowledged as a potential threat to its integrity. Money is
regarded as necessary in order to acquire material and personal resources, but when its
availability determines how those resources will be used in the scientific or democratic order,
money is perceived as corrupting. This is because judgments are then made according to
“foreign” values, often by people who are not even members of the order in question. This
problem is clearest in the scientific order. When science is not financially self-sustaining,
research may follow financial rather than scientific judgment.
This problem is most complex in the democratic order because citizens are almost always
simultaneously participants in the market order. Thus, they may try to turn the resources of one
system into systemic resources in the other. Money can be used to influence political decisions,
just as corrupt politicians may try to pass legislation to obtain money.
However, what is true of money in the scientific and democratic orders is equally true of
scientific expertise in the economic and political orders. Scientific standards are biased in favor
of measurement and prediction, but most political questions are also, or even mostly, imprecise
or qualitative. And, as experience repeatedly demonstrates, voting is a poor way to make either
scientific or economic decisions. Yet due to the interpenetrating character of these orders, each
will always influence the others. It is often a judgment call whether influence in any particular
instance is tolerable or excessive, because any standard will itself be biased in favor of one order
or another.
The Market Place and the Market Order
Impersonality is a central but largely unintended outcome of acting within the context of a
spontaneous order. As these orders tend to grow more encompassing, human relationships within
them become increasingly characterized by their utility in acquiring systemic resources. In the
market, growth is the result of successfully serving consumers. But growth itself influences the
mix of services an enterprise offers, and it alters its owners’ way of relating to their employees.
In both cases impersonal relationships tend to replace personal ones.
As growth continues, the division of labor becomes increasingly elaborated. Most importantly
for my purposes, the functions of ownership become divided. Different people begin to exercise
separate dimensions of tasks once performed as a unity in the mind of a small proprietor. As the
market becomes increasingly impersonal and anonymous, the market place is subsumed into the
market order. 7
Large corporations are a powerful institutional expression of market-order relations, as
contrasted with relations in the market place. Within them, the functions of ownership are
divided among many people often unknown to one another. In the market place, people
encounter one another as owners of resources potentially available for exchange. In corporations,
neither managers nor shareholders really act as owners in this sense. Neither managers nor
shareholders have the scope of choice and responsibility that actual owners face in the market
place.
Managers are under legal mandate to serve shareholders’ financial interests. Among
shareholders, the voting process is proportional to the number of shares owned, and therefore to
the amount of money each shareholder has at stake. Within the market order there is nothing
wrong with this. Most people only invest in corporations for financial reasons. So even if they
own only a few shares, on balance they benefit from the weighting of influence in favor of
financial values. Large shareholders provide oversight and expertise that ultimately assists even
small shareholders, for the value of everyone’s shares rises or falls in unison.
For shareholders, ownership almost never carries the ambiguities and conflicts that arise from
exercising personal responsibility over tangible property in the market place. Personal values are
subordinated to financial values because of the institutional framework in which people exercise
their “ownership” rights. For example, the largest First Interstate Bank shareholders became
angry when corporate managers considered the impact on the California economy of Wells
Fargo Bank’s proposed takeover of First Interstate. Yet in their personal relationships, it is
common for owners to take account of such non-economic criteria in determining what to do.
Although the corporation is legally regarded as a human being, it possesses three relevant
characteristics that no human being has. First, it is potentially immortal. Second, its physical
assets can be either absorbed or broken apart into other companies without changing its
productive activities. Third, and most significantly, the corporation is entirely a creature of the
liberal community. Indeed, many economists criticize managers who act on the basis of values
more appropriate to other communities. As Milton Friedman writes:
Few trends could so thoroughly undermine the very foundations of our free society as the
acceptance by corporate officials of a social responsibility other than to make as much
money for their stockholders as possible…. If businessmen do have a social responsibility
other than making maximum profits for stockholders, how are they to know what it is? Can
self-selected private individuals decide what the social interest is? (Friedman 1963, 133-34)
8
Friedman emphasizes that charitable giving by corporations “is an inappropriate use of
corporate funds in a free enterprise society.” Instead, “contributions should be made by the
individuals who are the ultimate owners of property in our society.” Allowing corporations to
make tax-deductible charitable contributions “is a step in the direction of creating a true divorce
between ownership and control and of undermining the basic nature and character of our
society” (1963, 135-36). 9
Friedman’s point is not without weight. Yet in an important sense ownership has already been
divorced from control simply by the creation of joint stock corporations. In addition to this shift
of control, there has been a change in what it means to own something. Within the context of
their daily lives, real people integrate the varying and conflicting demands and responsibilities
arising from membership in all the basic communities in which they live. As citizens, for
instance, they continually participate in deciding “what the social interest is.” Corporations, to
the extent they operate impersonally, are incapable of doing so. They are purely creatures of the
market order, not the market place. Shareholders are owners from whom every characteristic has
been abstracted except their financial interests. They invest for a return. Many shareholders
regard financial return as only one value among many in their lives. They may treat the concrete
things they own as if financial return is not the most important value. But financial return alone
influences the actions of the organizations they “own” in their capacity as stockholders.
Investment fund managers, who may control enormous blocs of shares, carry this abstraction
from personal ownership one step further. The investor in a mutual fund is further removed from
the organizations in which he or she invests, and her ability to focus only on financial return is
therefore made more efficient. This can be seen by contrasting normal investment funds against
special “conscience” funds, such as those which invest only in “green” businesses. In these funds
the abiding principle is “greenness”; financial considerations place (an important) second.
However, that such rules have to be specially structured into the decision making of green
mutual fund managers demonstrates how extraneous they are to the market order.
Mutual funds are the most complete expression of market-order relationships. Their investors
are often completely unaware of the companies whose shares they “own.” To equate such a
relationship with the personal ownership of tangible property is to blur very important
distinctions rooted in different kinds of systemic relationships-that is, different kinds of
community. Friedman falsely equates the owners of impersonal shares with the owners of
tangible property, over which they exercise direct control and have personal responsibility.
These constitute fundamentally different kinds of ownership.
In the market order, as our decisions become increasingly impersonal, they become
dominated by the requirements of efficiency. We will put up with a friend’s inefficiencies when
we would not tolerate similar failings by a stranger. As our relationships become impersonal,
interpersonal transactions come increasingly to be pure means to other ends. What justifies such
relationships is their anticipated end result, considered completely separately from the
relationship itself. The relationship as such becomes a pure cost. As the market process develops
and elaborates, personal choices become more and more constrained by one’s ability to serve
consumers per se rather than by one’s ability to serve neighbors, friends, or even human beings
per se.
This evolution is “spontaneous,” in Hayek’s sense. We never deliberately choose a social order
reflecting these values. This transition may seem innocuous because economists always speak of
us as consumers, and because we are all consumers some of the time. But thinking of ourselves
as consumers involves a subtle distortion of our understanding. All people are indeed consumers.
But no one is simply a consumer.
The free-market economist Ludwig von Mises once described consumers as
merciless bosses, full of whims and fancies, changeable and unpredictable. For them
nothing counts other than their own satisfaction. They do not care a whit for past merit or
vested interests. If something is offered to them that they like better, or that is cheaper,
they desert their old purveyors. In their capacity as buyers and consumers they are
hard-hearted and callous, without consideration for other people. (Mises 1963, 270, my
italics)
Mises further characterizes consumers as “unfeeling and stony hearted” and emphasizes the
subordination of all production to their demands (ibid., 273). But, as Mises acknowledges, a
consumer is not the same thing as a human being. Both “consumer” and “human being” are
abstractions, but the former focuses upon a much narrower range of behavior than does the latter.
Being a consumer is a single aspect of being human.
Yet the more impersonal market relations become, the more accurate Mises’s description is. To
the extent that social relationships are purely anonymous, all we have to go on in making
decisions are our personal desires, to which the intrinsically valuable aspects of more personal
transactions are subordinated. As anonymous consumers we do not know anything about those
with whom we are transacting. Therefore their concrete needs and circumstances will not enter
into our calculations. The goals we seek to realize become completely divorced from the
well-being of those producing the products and services competing for our attention.
It cannot be otherwise. The ever-growing complexity of a liberal market order is too great for
us to have any but the most fragmentary and often misleading knowledge about the producers of
most of what we consume. Therefore, the economic impact of our decisions upon those other
people will be the same as if we were “unfeeling and stony hearted.”
This situation has disquieting moral implications, implications hidden by an analysis that
naively equates human beings with consumers. The problem rests with the partial nature of the
market order compared to the full richness of human life.
Let us return to the classical liberal case for the market. Much of the ethical case for
liberalism, and for the market in particular, is based upon the formal voluntariness of
relationships in the liberal community and the market subcommunity. But in a market place such
as a crafts fair, this voluntariness takes the form of a face-to-face community rooted in a
relatively small and comprehensible geographic setting. The market order, as distinguished from
the market place, has no fixed social and geographical location. It encompasses the entire globe
and billions of people. A market place is concrete; the market order is abstract.
Economic efficiency is always a value in exchange relations. However, in a market place other
values moderate and condition it. For example, in 1995 a grocery strike took place in Northern
California. In the small town of Guerneville, Safeway is the only grocery store. Because there
were no nonstruck supermarkets within several miles of this town, many of Guerneville’s
citizens drove the extra distance to support the striking salespeople who lived in their community
and whom they saw every day.
Of course price mattered to these shoppers. All else being equal, like the rest of us, they would
have patronized the store with the lowest costs in terms of convenience and dollars. But all else
is not always equal, and when it is not, the small scale of a market place enables one more easily
to factor these other values into one’s economic decisions. Prices are vital but imperfect
measures of the values consumers associate with particular items.
Where economic efficiency overwhelms other values, the market place has been subsumed by
the market order. When this has happened, we have moved from a community held together in
part by personal relationships to one held together by impersonal ones.
Impersonality often grows through changes at the margins. It is rarely deliberately chosen. A
competitive market of small, individually owned stores will tend to have a relatively low rate of
profit; when innovations enable retailers using large-scale orders to obtain lower prices,
established stores will not suddenly lose all their customers to the new competitors. Some
customers are more loyal than others. Only those customers who are the most price sensitive will
shift. But to the extent that these marginal customers are crucial for the survival of the smaller
stores, they will cease to survive. Many consumers who preferred shopping at the smaller stores
will then have to shop at the larger one.
Over time retail outlets have tended to grow in size from “mom and pop” stores to
medium-sized chains to large chains to megastores. In the process, products have become
cheaper and more varied, while human relationships have become more impersonal. The
consumer is better served, but the depth of human relationships has become more shallow.
Small stores whose owners possess personal knowledge of their customers can perform a
variety of services that are not easily factored into the price system. For example, streets are
safer when there are many small enterprises and pedestrians. But since no single purchase will
have much impact on these “externalities,” they are ignored in pricing (Hardin 1985, 110). just
as the person who preferred lower prices and impersonal shopping was subsidizing the person
who preferred personalized service even if the prices were higher in the small stores, so now
those who suffer from greater crime are bearing the external impact of large impersonal
megastores. Prices simplify the information consumers need to make choices, but by definition,
any simplification eliminates something. And what is eliminated may be important.
The growth of the market order and other impersonal social processes is neither all gain nor all
loss. Values and ways of life focusing only on the personal are not always superior to more
abstract arrangements. Hatred as well as love is personal. The impersonality of market and other
anonymous liberal orders has liberated us from stifling social pressures and prejudices. But it
also liberates us from supportive social networks. The two go together.
My point is not that one way of life is better than the other, but that each serves values slighted
by the others. Therefore, if the liberal community, including the market order, favors one set of
values over another, particularly in ways that are not immediately obvious to its participants, it
cannot be said simply to facilitate exchanges. It also helps shape those exchanges by altering the
context in which they are made. And we are justified in asking whether that change is entirely to
our liking.
The market order allows cooperation to grow in complexity, because we do not need to agree
on as much as when relationships are personal. We need only agree about specific transactions
considered separately from their larger context. As the complexity of interpersonal cooperation
grows, its personal depth falls. Complexity and depth (as I am using these terms) are inversely
correlated.
Consider in response a defense of the market-neutrality thesis by James Buchanan and Viktor
Vanberg, who contend that
the market economy, as an aggregation, neither maximizes nor minimizes anything. It
simply allows participants to pursue that which they value, subject to the preferences and
endowments of others, and within the constraints of general “rules of the game” that
allow, and provide incentives for, individuals to try out new ways of doing things. There
simply is no “external,” independently defined objective against which the results of
market processes can be evaluated. (Buchanan and Vanberg 1992, 181) 10
Buchanan and Vanberg rightly emphasize the creativity of the market process. The market’s
openness to individual creativity makes it fundamentally unpredictable. But in justifiably
attacking “teleological” defenses of the market, which hold that their participants are likely to
discover objective exchange opportunities that are “out there” waiting to be exploited, the
authors go much too far in the direction of indeterminateness.
Buchanan and Vanberg suggest a thought experiment to illustrate their point. Suppose that
people lived in a society where no material goods existed, but where, once appropriated,
possession of physical resources would be respected. Under such circumstances, many people
would begin thinking about how they might improve their lot by making exchanges with others.
Each would ask, “‘What can I produce that will prove of exchange value to others?’ . . .
Individuals would use their imagination … in producing goods wholly divorced from their own
consumption, goods that are anticipated to yield values when put on the market.” This
hypothetical illustrates how “markets tend to satisfy the preferences of persons, regardless of
what their preferences might be. . .” (1992, 181-82). The market is not teleological because
nobody can know what future state it is approaching. The reason is that many future states are
possible, but the one that will occur will arise from unpredictable creative acts by market
participants.
Buchanan and Vanberg’s argument, however, conceals a subtle bias. Their imaginary example
deals only with goods that are produced because someone else wants them. To the producer
alone, they are worthless. The market order favors the creation of such exchangeable goods at
the expense of non-exchangeable ones. To say that we cannot predict what specific form market
goods will take is different from saying we can predict nothing about them; for we can predict
that they will have a bias toward exchange values. The market order is biased towards serving
certain kinds of cooperation and certain ends, not others. Consequently, we can make qualitative
evaluations of the market order.
Evaluations such as this do not entail arguing that some particular non-exchangeable value
trumps all others. Moreover, every social context favors some values over others. Because every
useful standard exists within a context, no context should be uniquely privileged for all
questions. The market process takes place within a social and environmental framework that
both modifies and is, in turn, modified by it. The market is no more value neutral than any other
social institution, and so no claim to exempt it from evaluations of its biases can be reasonably
justified.
Liberal and Other Communities
Within the liberal community, there is an unavoidable tension between the values privileged by
the market, democracy, and science. But the liberal community is only one of the basic
communities in which we live. As the liberal community expands, these other communities
come increasingly to be influenced, and even dominated, by market, scientific, and democratic
processes.
At the borders between liberal and other communities, the effect of subordinating other values
to efficiency is quite different than it is within the market order. In the family, in the
neighborhood, and in nature, efficiency is not the primary value. While usually important,
efficiency is, in these contexts, subordinated to other values. I will use the natural world to
illustrate this point because nature is the community that is most completely removed from the
liberal community. Yet the same basic tensions will also be found between the liberal world, on
the one hand, and the family and other personal communities, on the other.
Steven Jay Gould writes, of the magnificent variety of life that has evolved in nature, that
the watchwords for creativity are sloppiness, poor fit, quirky design, and above all else,
redundancy… Bacteria are marvels of efficiency, simple cells of consummate
workmanship, with internal programs, purged of junk and slop, containing single copies
of essential genes. But bacteria have been bacteria since life first left a fossil record 3.5
billion years ago-and so shall they probably be until the sun explodes.
Gould concluded that if evolution operated primarily on the basis of efficiency, it “would
generate no structural complexity, and bacteria would rule the world” (Gould 1990, 15, 18; see
also Worster 1977, 291-315). If Gould’s analysis is correct, then were efficiency the ultimate
value in nature, we would not exist.
In the world of nature, adaptation to change operates through a process of continuous mutual
adjustment. Because of its reliance upon abstract procedural rules within which each person can
act as she or he sees fit, the liberal community adapts in a similar manner. At this level there is a
systemic harmony between the natural and the liberal community that sets the latter apart from
communities dominated by organized hierarchies, prescriptive rules, and attempts at deliberate
control. To the extent that industrialized liberal societies have been less environmentally
destructive than illiberal ones, this may be the reason.
Yet this complementarity has important limits. Natural and social processes constitute
different systems, even though one emerged from the other, which continues to sustain it. Most
natural adaptation proceeds through generational change, and can occur no faster than can
physical reproduction. Most human adaptation occurs far more quickly, because it is generated
by changes in information that lead to intragenerational learning. More than other forms of
human society, liberal communities both generate and coordinate vast amounts of information,
allowing unknown and unpredictable people maximal opportunities to make use of creative
insights. The pace of change is therefore faster than in other societies. From the perspective of
individual human beings, the difference between human societies and nature is all to the good. In
nature, individuals who fail to adapt die. In society, individuals who fail to adapt suffer a loss of
systemic resources. They must find new jobs, support new policies, or abandon old theories on
pain of becoming systemically irrelevant. In liberal societies, it is companies, political causes,
and scientific theories that die, not the human beings associated with them (Rothschild 1990,
213-25).
This distinction between adaptation in nature and in human society, however, while
enormously beneficial, carries with it the continual risk that social adaptation may become
critically dissociated from natural adaptation. Compared to other societies, liberal society’s
greater rate of change increases not only intrasystemic adaptation but the risk-and the possibly
devastating consequences-of extrasysternic dissociation. Its strength can become a weakness.
Primarily because it does not focus on individual physical survival, but rather on enabling
individuals to reap the advantages they can extract from any opportunity they perceive, social
change in the liberal community cannot help but take a shorter-term perspective than natural
adaptation. It is more creative and less conservative. But these advantages do not come free of
cost. Its very kindness towards individuals disconnects the liberal community’s systemic
priorities from those of spontaneous natural orders. The liberal community also myopically
serves the advantage of living individuals, or at most their children, often neglecting that of
future generations.
The negative impact of this myopia is more important when societies have a substantial impact
upon the natural environment that sustains them. From ancient Sumer to the present, civilizations
have tended to destroy their sustaining natural foundations. Exceptions have been due more to
fortunate peculiarities in the physical environment than to the wisdom of their institutions. For
example, until the Aswan dam was built, the Nile’s floods regularly replenished the soil and
carried away dissolved salts from Egyptian farmland. Cultures in the Fertile Crescent were not
so fortunate, and so exhausted much of their land millennia ago.
Liberal societies have been spared the worst of the depredations that afflicted other industrial
orders. The democratic process and the legal protection of property rights have been the major
means by which those personally harmed by environmental destruction have been able, in part at
least, to resist the plans of the powerful. This, presumably, is why today the United States and
Western Europe do not resemble Russia environmentally
But as more and more of the communities within which we live become dominated by the
liberal one, this ability to resist degradation is weakened, for the multidimensional world of
private property in the market place is transformed into the one-dimensional world of corporate
property in the market order. A subtle, adaptive, and complex set of ethical relationships rooted
in personal responsibility for nature is swallowed up by a simple, abstract, and legalistic order.
As the social community becomes increasingly decoupled from nature, the information guiding
change no longer reflects knowledge of natural processes. Liberal society may remain
marvelously adaptive by its own standards while becoming increasingly parasitic in its
relationship to the natural world.
Adaptation always occurs within a context, but the circumstances that determine whether
survival is possible are not always respectful of that context. The context provided by the liberal
community does not weight individual choices toward the respect and maintenance of natural
processes. People’s short time horizons and the sheer quantity of more pressing and more
immediately “relevant” information generated by the market order guarantee that natural
processes influence social adaptation only with great difficulty, except when those processes are
in a state of collapse.
As it is conceived in our society, self-interest is inherently incapable of generating ecologically
sustainable behavior. The secular worldview encouraged by science, democracy, and the market
alike weakens ethical and cultural constraints against taking advantage of every perceived
opportunity for personal gain. And the impersonal character of the spontaneous market order
makes it difficult for anyone acting within it to weaken the forces that elevate serving the
consumer above all other human roles.
Some have observed that the long-run viability of the liberal community depends upon a
framework of moral constraints and values that it is itself incapable of generating or sustaining.
Usually this charge focuses on ethical values that structure relationships between human beings.
But the liberal community also dissolves institutional constraints on our behavior toward the
natural community. If this argument is basically sound, both people and nature need to be
protected from the transformative biases of the liberal community. Countervailing power needs
to be developed. Given the institutional amorality of corporations, bureaucracies, and, indeed, of
all large organizations, this power needs to be quite strong. Its ethical basis – perhaps the most
important contribution of the environmental movement 11 – must transcend the span of a human
life. But adequate institutional expressions of such principles need also to be developed. One
institutional form that historically has generated sustainable behavior, or at least a greater
approximation to it, is a certain kind of small-scale, face-to-face, and reputational community
that integrates individual self-interest with community standards. For example, in Switzerland
and Japan, local self-governing villages have successfully managed their common forest and
pasture land for as long as 800 years (McKean 1992, 63-98; Ostrom 1990, 58-69, 88-102).
In recent years the environmental failings of the liberal state have been subjected to withering
exposure and criticism. In response, libertarian policy analysts have proposed market-based
approaches to solving environmental problems. To be sure, market-based environmental
incentives are often more adaptive and sensitive to local conditions than the centralized
regulations they replace. But this superiority has led many to argue that the market order as such
is environmentally friendly, or at least that it can be, once property rights are properly adjusted.
They argue that the language of economics is sufficient to craft viable environmental policies.
This view is mistaken.
The problem is neither state nor market, but rather the abstract nature of the liberal
community, which operates on principles divorced from those of the natural world. None of its
defining institutions can provide a reliable foundation for ecologically sustainable interactions
with the spontaneous order of nature. Left to its own devices, liberal society is not harmonious
with natural processes, and is too powerful to refrain from subjecting them to its sway. But the
economic, political, and epistemological systems forming the liberal community are not the only
spontaenous orders we need to preserve.
The distinction between the market place and the market order offers a way for different
spontaneous orders to coexist. The faceto-face societies of the market place, the neighborhood,
and the small community function as far more sensitive evaluators of competing ends than does
the market order and its corporate institutions. Efficiency is not unimportant, but neither does it
come close to being all-important. Placing greater reliance on the role of faceto-face and
reputational communities holds great promise for maintaining relationships with the natural
order over the long term. Local communities not only possess more knowledge of local
circumstances; they also can learn more quickly from their successes and failures.
What is necessary for such communities to perform these functions successfully is not only
rapid feedback about the impact of their actions. They also need to be able to defend themselves
and their boundaries from the abstract orders of the market, science, and democracy. Nature and
the other communities in which we live must be provided with sufficient means to resist the
encroachments of liberal orders every bit as much as liberal orders, to work well, must be
protected from the impingement of illiberal organizing principles.
NOTES
1 .I believe Hayek missed the significance of this because he did not see that liberal society is
itself a network of spontaneous orders. Although he saw that both science and the market were
spontaneous orders, he failed to grasp the deep systemic differences between liberal
democracy and other forms of government. See diZerega 1989, 206-240; 1994, 57-86.
2. Jacobs 1992 is perhaps the best single work on the moral foundations of science and the
market. While Jacobs considers politics as requiring what she terms “Guardian” rather than
“Commercial” ethics, the ethics of the democratic process is actually quite in keeping with
Commercial ethics as she develops them, while the ethics internal to political organizations,
such as political parties and bureaucracies, are indeed Guardian in nature.
3. This point, made most insistently by the Popperian W. W. Bartley, III (1984), seems to me
unassailable, regardless of how one judges the controversy between Habermas and
philosophers of science working in the tradition initiated by Karl Popper.
4. Nowhere is this confusion more evident than in egalitarian democratic theory, which argues
that substantive equality among citizens is an ideal by which existing democracies can be
legitimately evaluated. For extensive discussions of this issue see diZerega 1988 and 1991.
5. Much of the responsibility for this failure must also be shared by many market advocates, who
frequently emphasize competition as fundamental to the market when in fact it is a secondary
characteristic, arising out of preexisting cooperation. See diZerega 1992, 322-24.
6. There is a similarity between this argument and that put forth in Michael Walzer’s Spheres of
Justice. Walzer emphasizes, correctly I think, that when various social goods “are distinct,
distributions must be autonomous . . . [and] only certain criteria and arrangements are
appropriate” (Walzer 1984, 10). Distribution in violation of these criteria is unjust.
Walzer analyzes both self-organizing systems, such as the market, and instrumental
organizations, such as a church hierarchy, from this perspective. By contrast, my approach
views the tension between the liberal community and other basic communities, and that
between the constitutive spontaneous orders of the liberal community, as unintended,
systemically generated outcomes. This unintentional dimension makes biases in spontaneous
orders quite distinct from biases in instrumental organizations. The latter express the views of a
power elite. The former reflect abstract values not necessarily connected with the particular
purposes of an), participant.
7. 1 owe this felicitous way of expressing the difference to Karl Hess,jr. One of the clearest
discussions of the tensions between the market place and the market order is McConnell 1988.
8. Of course, “self-selected private individuals” are always crucial in deciding what the “social
interest” is. They are called active citizens. The alternative, which I doubt Friedman would
condone, is for only elected officials to be free to determine what constitutes the social
interest.
9. Peter Drucker (1993, 101) appears at first glance to disagree with Friedman. But much of this
disagreement is terminological. Thus Drucker writes that “economic performance is the first
responsibility of a business. A business that does not show a profit at least equal to the cost of
its capital is socially irresponsible” (101).
10. See also Kirzner 19go, which argues that the market process simply “generates greater mutual
awareness” among participants, thereby helping them better to coordinate their opportunities
for cooperation (34).
11. I have tried to make this argument with minimal attention to ethical positions other than
long-term self-interest. However, I believe that a strong case can be made for ecocentric
ethics, and that liberal ethics are most appropriately viewed as a subset of them. See diZerega
1996; 1995a; and 1995b.
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