Fatal Conceit Quotes

The curious task of economics is to demonstrate to men how little they really know about what they imagine the can design.

The fatal conceit of most spies is to believe they are loved, in a relationship between equals, and not merely manipulated.

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account.

Know this: I, Mercurius, have here set down a full, true and infallible account of the Great Work. But I give you fair warning that unless you seek the true philosophical gold and not the gold of the vulgar, unless you heart is fixed with unbending intent on the true Stone of the Philosophers, unless you are steadfast in your quest, abiding by God’s laws in all faith and humility and eschewing all vanity, conceit, falsehood, intemperance, pride, lust and faint-heartedness, read no farther lest I prove fatal to you. For I am the watery venomous serpent who lies buried at the earth’s centre; I am the fiery dragon who flies through the air. I am the one thing necessary for the whole Opus. I am the spirit of metals, the fire which does not burn, the water which does not wet the hands. If you find the way to slay me you will find the philosophical mercury of the wise, even the White Stone beloved of the Philosophers. If you find the way to raise me up again, you will find the philosophical sulphur, that is, the Red Stone and Elixir of Life. Obey me and I will be your servant; free me and I will be your friend. Enslave me and I am a dangerous enemy; command me and I will make you mad; give me life and you will die.

To understand our civilisation, one must appreciate that the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices, many of which men tend to dislike, whose significance they usually fail to understand, whose validity they cannot prove, and which have nonetheless fairly rapidly spread by means of an evolutionary selection – the comparative increase of population and wealth – of those groups that happened to follow them.

The creation of wealth is not simply a physical process and cannot be explained by a chain of cause and effect. It is determined not by objective physical facts known to any one mind but by the separate, differing, information of millions, which is precipitated in prices that serve to guide further decisions.

To me, there is only one God. An unnamed presence we'll never understand. Everything else is human politics. It was human beings who wrote the holy books, and human beings who made all the rules and rituals. In other words, it is human beings who turn life into hell. So yes'--he picked up his wine glass--'I try to live by the spirit of God, but not by the rules, because rules are made by man, and man is nothing but a fatally conceited flea on the mammoth of Creation.

It is fatal to meet life with the burden of certainty, with the conceit of knowledge, because, after all, knowledge is merely a thing of the past. So when you come to that life with a freshness, then you will know what it is to live without conflict, without this continual straining effort. Then you wander far on the floods of life.

The process of selection that shaped customs and morality could take account of more factual circumstances than individuals could perceive, and in consequence tradition is in some respects superior to, or ‘wiser’ than, human reason.

The four requirements just listed – that whatever is not scientifically proven, or is not fully understood, or lacks a fully specified purpose, or has some unknown effects, is unreasonable – are particularly well suited to constructivist rationalism and to socialist thought.

Central planning inevitably leads to economic chaos and failure. Friedrich Hayek called the delusion that a single person or a group of government planners could possibly possess the knowledge to plan an entire economy a “fatal conceit.” The overwhelming historical evidence is that the more freedom a nation has, the more economic opportunities will exist and the more dynamic that nation’s economy will be. Likewise, the more regulations, controls, taxes, governmentrun industries, protectionism, and other forms of interventionism that exists, the poorer the country will become.

So far as I personally am concerned I had better state that I feel as little entitled to assert as to deny the existence of what others call God, for I must admit that I just do not know what this word is supposed to mean. I certainly reject every anthropomorphic, personal or animistic interpretation of the term, interpretations through which many people succeed in giving it a meaning. The conception of a man-like or mind-like acting being appears to me rather the product of an arrogant overestimation of the capacities of a man-like mind. [...] I long hesitated whether to insert this personal note here, but ultimately decided to do so because support by a professed agnostic may help religious people more unhesitatingly to pursue that conclusions that we do share. Perhaps what many people mean in speaking of God is just a personification of that tradition of morals or values that keeps their community alive.

Morals, including especially, our institutions of property, freedom and justice, are not a creation of man’s reason but a distinct second endowment conferred on him by cultural evolution - runs counter to the main intellectual outlook of the twentieth century. The influence of rationalism has indeed been so profound and pervasive that, in general, the more intelligent an educated person is, the more likely he or she now is not only to be a rationalist, but also to hold socialist views (regardless of whether he or she is sufficiently doctrinal to attach to his or her views any label, including ‘socialist’). The higher we climb up the ladder of intelligence, the more we talk with intellectuals, the more likely we are to encounter socialist convictions. Rationalists tend to be intelligent and intellectual; and intelligent intellectuals tend to be socialist. One’s initial surprise at finding that intelligent people tend to be socialist diminishes when one realises that, of course, intelligent people will tend to overvalue intelligence, and to suppose that we must owe all the advantages and opportunities that our civilisation offers to deliberate design rather than to following traditional rules, and likewise to suppose that we can, by exercising our reason, eliminate any remaining undesired features by still more intelligence reflection, and still more appropriate design and ’rational coordination’ of our undertakings. This leads one to be favorably disposed to the central economic planning and control that lie at the heart of socialism… And since they have been taught that constructivism and scientism are what science and the use of reason are all about, they find it hard to believe that there can exist any useful knowledge that did not originate in deliberate experimentation, or to accept the validity of any tradition apart from their own tradition of reason. Thus [they say]: ‘Tradition is almost by definition reprehensible, something to be mocked and deplored’.

Learning how to behave is more the source than the result of insight, reason, and understanding. Man is not born wise, rational and good, but has to be taught to become so. It is not our intellect that created our morals; rather, human interactions governed by our morals make possible the growth of reason and those capabilities associated with it.

It is necessary to guard ourselves from thinking that the practice of the scientific method enlarges the powers of the human mind. Nothing is more flatly contradicted by experience than the belief that a man distinguished in one or even more departments of science, is more likely to think sensibly about ordinary affairs than anyone else. Wilfred Trotter

La curiosa tarea de la ciencia económica es demostrar a los hombres lo poco que realmente saben de lo que imaginan que pueden diseñar. Para la mente ingenua que puede concebir al orden sólo como el producto de una ordenación deliberada, puede parecer absurdo el hecho de que en condiciones complejas, el orden y la adaptación a lo desconocido se pueden lograr de manera más efectiva mediante la descentralización de las decisiones y que una división de la autoridad en realidad extenderá la posibilidad de orden general. Que la descentralización en realidad conduce a que se tome en cuenta una mayor cantidad de información.

Incomprehensible is the height of your spirit both in heroical resolution and matters of conceit. Unreprievably perishes that book whatsoever to wastepaper, which on the diamond rock of your judgement disasterly chances to be shipwrecked. A dear lover and cherisher you are, as well of the lovers of Poets, as of Poets themselves. Amongst their sacred number I dare not ascribe myself, though now and then I speak English: that small brain I have to no further use I convert, save to be kind to my friends and fatal to my enemies. A new brain, a new wit, a new style, a new soul will I get me, to canonize your name to posterity, if in this my first attempt I be not taxed of presumption.

One’s initial surprise at finding that intelligent people tend to be socialists diminishes when one realises that, of course, intelligent people will tend to overvalue intelligence, and to suppose that we must owe all the advantages and opportunities that our civilisation offers to deliberate design rather than to following traditional rules, and likewise to suppose that we can, by exercising our reason, eliminate any remaining undesired features by still more intelligent reflection, and still more appropriate design and ‘rational coordination’ of our undertakings. This leads one to be favourably disposed to the central economic planning and control that lie at the heart of socialism.

Yet, during the last forty years, its contributions have been obscured by the rise of ‘macro-economics’, which seeks causal connections between hypothetically measurable entities or statistical aggregates. These may sometimes, I concede, indicate some vague probabilities, but they certainly do not explain the processes involved in generating them. But because of the delusion that macro-economics is both viable and useful (a delusion encouraged by its extensive use of mathematics, which must always impress politicians lacking any mathematical education, and which is really the nearest thing to the practice of magic that occurs among professional economists) many opinions ruling contemporary government and politics are still based on naive explanations of such economic phenomena as value and prices, explanations that vainly endeavour to account for them as ‘objective’ occurrences independent of human knowledge and aims.

The belief that order must be intentionally generated and imposed upon society by institutional authorities continues to prevail. This centrally-directed model is premised upon what F.A. Hayek called “the fatal conceit,” namely, the proposition “that man is able to shape the world according to his wishes,”3 or what David Ehrenfeld labeled “the arrogance of humanism.”4That such practices have usually failed to produce their anticipated results has generally led not to a questioning of the model itself, but to the conclusion that failed policies have suffered only from inadequate leadership, or a lack of sufficient information, or a failure to better articulate rules. Once such deficiencies have been remedied, it has been supposed, new programs can be implemented which, reflective of this mechanistic outlook, will permit government officials to “fine tune” or “jump start” the economy, or “grow” jobs, or produce a “quick fix” for the ailing government school system. Even as modern society manifests its collapse in the form of violent crime, economic dislocation, seemingly endless warfare, inter-group hostilities, the decay of cities, a growing disaffection with institutions, and a general sense that nothing “works right” anymore, faith in the traditional model continues to drive the pyramidal systems. Most people still cling to the belief that there is something that can be done by political institutions to change such conditions: a new piece of legislation can be enacted, a judicial ruling can be ordered, or a new agency regulation can be promulgated. When a government-run program ends in disaster, the mechanistic mantra is invariably invoked: “we will find out what went wrong and fix it so that this doesn’t happen again.” That the traditional model itself, which is grounded in the state’s power to control the lives and property of individuals to desired ends, may be the principal contributor to such social disorder goes largely unexplored.

The influence of rationalism has indeed been so profound and pervasive that, in general, the more intelligent an educated person is, the more likely he or she now is not only to be a rationalist, but also to hold socialist views (regardless of whether he or she is sufficiently doctrinal to attach to his or her views any label, including ‘socialist’). The higher we climb up the ladder of intelligence, the more we talk with intellectuals, the more likely we are to encounter socialist convictions. Rationalists tend to be intelligent and intellectual; and intelligent intellectuals tend to be socialists. One’s initial surprise at finding that intelligent people tend to be socialists diminishes when one realises that, of course, intelligent people will tend to overvalue intelligence, and to suppose that we must owe all the advantages and opportunities that our civilisation offers to deliberate design rather than to following traditional rules, and likewise to suppose that we can, by exercising our reason, eliminate any remaining undesired features by still more intelligent reflection, and still more appropriate design and ‘rational coordination’ of our undertakings.

It was the first time that I entered the house on the lake. I had often begged the “trap-door lover,” as we used to call Erik in my country, to open its mysterious doors to me. He always refused. I made very many attempts, but in vain, to obtain admittance. Watch him as I might, after I first learned that he had taken up his permanent abode at the Opera, the darkness was always too thick to enable me to see how he worked the door in the wall on the lake. One day, when I thought myself alone, I stepped into the boat and rowed toward that part of the wall through which I had seen Erik disappear. It was then that I came into contact with the siren who guarded the approach and whose charm was very nearly fatal to me. I had no sooner put off from the bank than the silence amid which I floated on the water was disturbed by a sort of whispered singing that hovered all around me. It was half breath, half music; it rose softly from the waters of the lake; and I was surrounded by it through I knew not what artifice. It followed me, moved with me and was so soft that it did not alarm me. On the contrary, in my longing to approach the source of that sweet and enticing harmony, I leaned out of my little boat over the water, for there was no doubt in my mind that the singing came from the water itself. By this time, I was alone in the boat in the middle of the lake; the voice—for it was now distinctly a voice—was beside me, on the water. I leaned over, leaned still farther. The lake was perfectly calm, and a moonbeam that passed through the air hole in the Rue Scribe showed me absolutely nothing on its surface, which was smooth and black as ink. I shook my ears to get rid of a possible humming; but I soon had to accept the fact that there was no humming in the ears so harmonious as the singing whisper that followed and now attracted me. Had I been inclined to superstition, I should have certainly thought that I had to do with some siren whose business it was to confound the traveler who should venture on the waters of the house on the lake. Fortunately, I come from a country where we are too fond of fantastic things not to know them through and through; and I had no doubt but that I was face to face with some new invention of Erik’s. But this invention was so perfect that, as I leaned out of the boat, I was impelled less by a desire to discover its trick than to enjoy its charm; and I leaned out, leaned out until I almost overturned the boat. Suddenly, two monstrous arms issued from the bosom of the waters and seized me by the neck, dragging me down to the depths with irresistible force. I should certainly have been lost, if I had not had time to give a cry by which Erik knew me. For it was he; and, instead of drowning me, as was certainly his first intention, he swam with me and laid me gently on the bank: “How imprudent you are!” he said, as he stood before me, dripping with water. “Why try to enter my house? I never invited you! I don’t want you there, nor anybody! Did you save my life only to make it unbearable to me? However great the service you rendered him, Erik may end by forgetting it; and you know that nothing can restrain Erik, not even Erik himself.” He spoke, but I had now no other wish than to know what I already called the trick of the siren. He satisfied my curiosity, for Erik, who is a real monster—I have seen him at work in Persia, alas—is also, in certain respects, a regular child, vain and self-conceited, and there is nothing he loves so much, after astonishing people, as to prove all the really miraculous ingenuity of his mind. He laughed and showed me a long reed. “It’s the silliest trick you ever saw,” he said, “but it’s very useful for breathing and singing in the water. I learned it from the Tonkin pirates, who are able to remain hidden for hours in the beds of the rivers.

The fatal conceit of intellectuals, he said, is to think that smart people can design an economy or a society better than the apparently chaotic interactions of millions of people. Such intellectuals fail to realize how much they don’t know or how a market makes use of all the localized knowledge each of us possesses.

The most dangerous person on earth is the arrogant intellectual who lacks the humility necessary to see that society needs no masters and cannot be planned from the top down.

the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices, many of which men tend to dislike, whose significance they usually fail to understand, whose validity they cannot prove, and which have nonetheless fairly rapidly spread by means of an evolutionary selection – the comparative increase of population and wealth – of those groups that happened to follow them.

Although I attack the presumption of reason on the part of socialists, my argument is in no way directed against reason properly used. By ‘reason properly used’ I mean reason that recognises its own limitations and, itself taught by reason, faces the implications of the astonishing fact, revealed by economics and biology, that order generated without design can far outstrip plans men consciously contrive.

Nor do I dispute that reason may, although with caution and in humility, and in a piecemeal way, be directed to the examination, criticism and rejection of traditional institutions and moral principles.

an evolutionary theory of morality is indeed emerging, and its essential insight is that our morals are neither instinctual nor a creation of reason, but constitute a separate tradition – ‘between instinct and reason’, as the title of the first chapter indicates – a tradition of staggering importance in enabling us to adapt to problems and circumstances far exceeding our rational capacities.

Such new rules would spread not because men understood that they were more effective, or could calculate that they would lead to expansion, but simply because they enabled those groups practising them to procreate more successfully and to include outsiders.

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.

Thus the word ‘society’ has become a convenient label denoting almost any group of people, a group about whose structure or reason for coherence nothing need be known – a makeshift phrase people resort to when they do not quite know what they are talking about. Apparently a people, a nation, a population, a company, an association, a group, a horde, a band, a tribe, the members of a race, of a religion, sport, entertainment, and the inhabitants of any particular place, all are, or constitute, societies.

the religious view that morals were determined by processes incomprehensible to us may at any rate be truer (even if not exactly in the way intended) than the rationalist delusion that man, by exercising his intelligence, invented morals that gave him the power to achieve more than he could ever foresee. If we bear these things in mind, we can better understand and appreciate those clerics who are said to have become somewhat sceptical of the validity of some of their teachings and who yet continued to teach them because they feared that a loss of faith would lead to a decline of morals.

The undoubted historical connection between religion and the values that have shaped and furthered our civilisation, such as the family and several property, does not of course mean that there is any intrinsic connection between religion as such and such values. Among the founders of religions over the last two thousand years, many opposed property and the family. But the only religions that have survived are those which support property and the family.

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account

The League's platform, published that day, stated: "Where the white race rules, the negro is peaceful and happy; where the black rules, the negro is starved and oppressed." But it was no use explaining this to black people. "They have become maddened by the hatred and conceit of race, and it has become our duty to save them and to save ourselves from the fatal probabilities of their stupid extravagance and reckless vanity by arraying ourselves in the name of white civilization, resuming that just and legitimate superiority in the administration of our State affairs to which we are entitled by superior responsibility, superior numbers and superior intelligence.

Nobel Laureate Frederick Hayek eloquently makes this case in his book, The Fatal Conceit. Hayek inveighed against the notion of ever being able to plan a productive economy. He argues that formal planning methodologies—which are models of how an economy works—do not capture what really drives a competitive economy, in particular the information processed through decisions made daily by millions of buyers and sellers.

It is less accurate to suppose that thinking man creates and controls his cultural evolution than it is to say that culture, and evolution, created his reason.

In any case, the idea that at some point conscious design stepped in and displaced evolution substitutes a virtually supernatural postulate for scientific explanation. So far as scientific explanation is concerned, it was not what we know as mind that developed civilisation, let alone directed its evolution, but rather mind and civilisation which developed or evolved concurrently.

If it were for instance true that central direction of the means of production could effect a collective product of at least the same magnitude as that which we now produce, it would indeed prove a grave moral problem how this could be done justly.

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.

The main point of my argument is, then, that the conflict between, on one hand, advocates of the spontaneous extended human order created by a competitive market, and on the other hand those who demand a deliberate arrangement of human interaction by central authority based on collective command over available resources is due to a factual error by the latter about how knowledge of these resources is and can be generated and utilised.

The demands of socialism are not moral conclusions derived from the traditions that formed the extended order that made civilisation possible. Rather, they endeavour to overthrow these traditions by a rationally designed moral system whose appeal depends on the instinctual appeal of its promised consequences.

They assume that, since people had been able to generate some system of rules coordinating their efforts, they must also be able to design an even better and more gratifying system. But if humankind owes its very existence to one particular rule-guided form of conduct of proven effectiveness, it simply does not have the option of choosing another merely for the sake of the apparent pleasantness of its immediately visible effects.

By ‘reason properly used’ I mean reason that recognises its own limitations and, itself taught by reason, faces the implications of the astonishing fact, revealed by economics and biology, that order generated without design can far outstrip plans men consciously contrive.

It is important to confront these consequences, for the notion that, in the last resort, the whole debate is a matter of value judgements and not of facts has prevented professional students of the market order from stressing forcibly enough that socialism cannot possibly do what it promises.

The contention that we are constrained to preserve capitalism because of its superior capacity to utilise dispersed knowledge raises the question of how we came to acquire such an irreplaceable economic order – especially in view of my claim that powerful instinctual and rationalistic impulses rebel against the morals and institutions that capitalism requires.

Our moral traditions, like many other aspects of our culture, developed concurrently with our reason, not as its product. Surprising and paradoxical as it may seem to some to say this, these moral traditions outstrip the capacities of reason.

the error, later so common, of confusing two senses of freedom: that curious sense in which an isolated individual is supposed to be able to be free, and that in which many persons collaborating with one another can be free. Seen in the latter context of such collaboration, only abstract rules of property – i.e., the rules of law – guarantee freedom.

In our economic activities we do not know the needs which we satisfy nor the sources of the things which we get. Almost all of us serve people whom we do not know, and even of whose existence we are ignorant; and we in turn constantly live on the services of other people of whom we know nothing. All this is possible because we stand in a great framework of institutions and traditions – economic, legal, and moral – into which we fit ourselves by obeying certain rules of conduct that we never made, and which we have never understood in the sense in which we understand how the things that we manufacture function.

These modes of coordination depended decisively on instincts of solidarity and altruism – instincts applying to the members of one’s own group but not to others. The members of these small groups could thus exist only as such: an isolated man would soon have been a dead man. The primitive individualism described by Thomas Hobbes is hence a myth. The savage is not solitary, and his instinct is collectivist. There was never a ‘war of all against all’.

if our present order did not already exist we too might hardly believe any such thing could ever be possible, and dismiss any report about it as a tale of the miraculous, about what could never come into being. What are chiefly responsible for having generated this extraordinary order, and the existence of mankind in its present size and structure, are the rules of human conduct that gradually evolved (especially those dealing with several property, honesty, contract, exchange, trade, competition, gain, and privacy).

Mankind achieved civilisation by developing and learning to follow rules (first in territorial tribes and then over broader reaches) that often forbade him to do what his instincts demanded, and no longer depended on a common perception of events. These rules, in effect constituting a new and different morality, and to which I would indeed prefer to confine the term ‘morality’, suppress or restrain the ‘natural morality’, i.e., those instincts that welded together the small group and secured cooperation within it at the cost of hindering or blocking its expansion.

Nonetheless it is true that the greater part of our daily lives, and the pursuit of most occupations, give little satisfaction to deep-seated ‘altruistic’ desires to do visible good. Rather, accepted practices often require us to leave undone what our instincts impel us to do. It is not so much, as is often suggested, emotion and reason that conflict, but innate instincts and learnt rules. Yet, as we shall see, following these learnt rules generally does have the effect of providing a greater benefit to the community at large than most direct ‘altruistic’ action that a particular individual might take.

Competition is a procedure of discovery, a procedure involved in all evolution, that led man unwittingly to respond to novel situations; and through further competition, not through agreement, we gradually increase our efficiency.

operate beneficially, competition requires that those involved observe rules rather than resort to physical force. Rules alone can unite an extended order. (Common ends can do so only during a temporary emergency that creates a common danger for all.

Man became intelligent because there was tradition – that which lies between instinct and reason – for him to learn. This tradition, in turn, originated not from a capacity rationally to interpret observed facts but from habits of responding. It told man primarily what he ought or ought not to do under certain conditions rather than what he must expect to happen.

Shaped by the environment in which individuals grow up, mind in turn conditions the preservation, development, richness, and variety of traditions on which individuals draw. By being transmitted largely through families, mind preserves a multiplicity of concurrent streams into which each newcomer to the community can delve.

Just as instinct is older than custom and tradition, so then are the latter older than reason: custom and tradition stand between instinct and reason – logically, psychologically, temporally.

Learnt moral rules, customs, progressively displaced innate responses, not because men recognised by reason that they were better but because they made possible the growth of an extended order exceeding anyone’s vision, in which more effective collaboration enabled its members, however blindly, to maintain more people and to displace other groups.

cultural evolution is brought about through transmission of habits and information not merely from the individual’s physical parents, but from an indefinite number of ‘ancestors’. The processes furthering the transmission and spreading of cultural properties by learning also, as already noted, make cultural evolution incomparably faster than biological evolution. Finally, cultural evolution operates largely through group selection; whether group selection also operates in biological evolution remains an open question

Similarly, of the revival of European civilisation during the later Middle Ages it could be said that the expansion of capitalism – and European civilisation – owes its origins and raison d’être to political anarchy (Baechler, 1975:77). It was not under the more powerful governments, but in the towns of the Italian Renaissance, of South Germany and of the Low Countries, and finally in lightly-governed England, i.e., under the rule of the bourgeoisie rather than of warriors, that modern industrialism grew. Protection of several property, not the direction of its use by government, laid the foundations for the growth of the dense network of exchange of services that shaped the extended order.

Social Darwinism is wrong in many respects, but the intense dislike of it shown today is also partly due to its conflicting with the fatal conceit that man is able to shape the world around him according to his wishes.

If morals and tradition, rather than intelligence and calculating reason, lifted men above the savages, the distinctive foundations of modern civilisation were laid in antiquity in the region surrounding the Mediterranean Sea. There, possibilities of long-distance trade gave, to those communities whose individuals were allowed to make free use of their individual knowledge, an advantage over those in which common local knowledge or that of a ruler determined the activities of all.

While facts alone can never determine what is right, ill-considered notions of what is reasonable, right and good may change the facts and the circumstances in which we live; they may destroy, perhaps forever, not only developed individuals and buildings and art and cities (which we have long known to be vulnerable to the destructive powers of moralities and ideologies of various sorts), but also traditions, institutions, and interrelations without which such creations could hardly have come into being or ever be recreated.

Indeed, the basic point of my argument – that morals, including, especially, our institutions of property, freedom and justice, are not a creation of man’s reason but a distinct second endowment conferred on him by cultural evolution – runs counter to the main intellectual outlook of the twentieth century. The influence of rationalism has indeed been so profound and pervasive that, in general, the more intelligent an educated person is, the more likely he or she now is not only to be a rationalist, but also to hold socialist views (regardless of whether he or she is sufficiently doctrinal to attach to his or her views any label, including ‘socialist’). The higher we climb up the ladder of intelligence, the more we talk with intellectuals, the more likely we are to encounter socialist convictions.

What led the greatly advanced civilisation of China to fall behind Europe was its governments’ clamping down so tightly as to leave no room for new developments, while, as remarked in the last chapter, Europe probably owes its extraordinary expansion in the Middle Ages to its political anarchy

David Hume saw that the market made it possible ‘to do a service to another without bearing him a real kindness’ (1739/1886:II, 289) or even knowing him; or to act to the ‘advantage of the public, though it be not intended for that purpose by another’ (1739/1886:II, 296), by an order in which it was in the ‘interest, even of bad men to act for the public good’. With such insights, the conception of a self-organising structure began to dawn upon mankind, and has since become the basis of our understanding of all those complex orders which had, until then, appeared as miracles that could be brought about only by some super-human version of what man knew as his own mind. Now it gradually became understood how the market enabled each, within set limits, to use his own individual knowledge for his own individual purposes while being ignorant of most of the order into which he had to fit his actions.

Nevertheless, the possibility that the evolved order in which we live provides us with opportunities for happiness that equal or exceed those provided by primitive orders to far fewer people should not be dismissed (which is not to say that such matters can be calculated). Much of the ‘alienation’ or unhappiness of modern life stems from two sources, one of which affects primarily intellectuals, the other, all beneficiaries of material abundance. The first is a self-fulfilling prophecy of unhappiness for those within any ‘system’ that does not satisfy rationalistic criteria of conscious control. Thus intellectuals from Rousseau to such recent figures in French and German thought as Foucault and Habermas regard alienation as rampant in any system in which an order is ‘imposed’ on individuals without their conscious consent; consequently, their followers tend to find civilisation unbearable – by definition, as it were. Secondly, the persistence of instinctual feelings of altruism and solidarity subject those who follow the impersonal rules of the extended order to what is now fashionably called ‘bad conscience’; similarly, the acquisition of material success is supposed to be attended with feelings of guilt (or ‘social conscience’). In the midst of plenty, then, there is unhappiness not only born of peripheral poverty, but also of the incompatibility, on the part of instinct and of a hubristic reason, with an order that is of a decidedly non-instinctive and extra-rational character.

So, priding itself on having built its world as if it had designed it, and blaming itself for not having designed it better, humankind is now to set out to do just that. The aim of socialism is no less than to effect a complete redesigning of our traditional morals, law, and language, and on this basis to stamp out the old order and the supposedly inexorable, unjustifiable conditions that prevent the institution of reason, fulfilment, true freedom, and justice.

it is indeed true not only that our current scientific laws are not justified or justifiable in the way that constructivist methodologists demand, but that we have reason to suppose that we shall eventually learn that many of our present scientific conjectures are untrue. Any conception that guides us more successfully than what we hitherto believed may, moreover, although a great advance, be in substance as mistaken as its predecessor

there is much to indicate that those who aimed simply at happiness would have been overwhelmed by those who just wanted to preserve their lives.

While our moral traditions cannot be constructed, justified or demonstrated in the way demanded, their processes of formation can be partially reconstructed, and in doing so we can to some degree understand the needs that they serve. To the extent we succeed in this, we are indeed called upon to improve and revise our moral traditions by remedying recognisable defects by piecemeal improvement

The extended order depends on this morality in the sense that it came into being through the fact that those groups following its underlying rules increased in numbers and in wealth relative to other groups.

The extended order depends on this morality in the sense that it came into being through the fact that those groups following its underlying rules increased in numbers and in wealth relative to other groups. The paradox of our extended order, and of the market – and a stumbling block for socialists and constructivists – is that, through this process, we are able to sustain more from discoverable resources (and indeed in that very process discover more resources) than would be possible by a personally directed process. And although this morality is not ‘justified’ by the fact that it enables us to do these things, and thereby to survive, it does enable us to survive, and there is something perhaps to be said for that.

In the marketplace (as in other institutions of our extended order), unintended consequences are paramount: a distribution of resources is effected by an impersonal process in which individuals, acting for their own ends (themselves also often rather vague), literally do not and cannot know what will be the net result of their interactions.

Man’s inventiveness contributed so much to the formation of super-individual structures within which individuals found great opportunities that people came to imagine that they could deliberately design the whole as well as some of its parts, and that the mere existence of such extended structures shows that they can be deliberately designed. Although this is an error, it is a noble one, one that is, in Mises’s words, ‘grandiose . . . ambitious . . . magnificent . . . daring’.

Our earlier claim, that acquired traditions serve as ‘adaptations to the unknown’, must then be taken literally. Adaptation to the unknown is the key in all evolution, and the totality of events to which the modern market order constantly adapts itself is indeed unknown to anybody. The information that individuals or organisations can use to adapt to the unknown is necessarily partial, and is conveyed by signals (e.g., prices) through long chains of individuals, each person passing on in modified form a combination of streams of abstract market signals. Nonetheless, the whole structure of activities tends to adapt, through these partial and fragmentary signals, to conditions foreseen by and known to no individual, even if this adaptation is never perfect. That is why this structure survives, and why those who use it also survive and prosper.

To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralising decisions, and that a division of authority will actually extend the possibility of overall order. Yet that decentralisation actually leads to more information being taken into account.

Nobody can communicate to another all that he knows, because much of the information he can make use of he himself will elicit only in the process of making plans for action. Such information will be evoked as he works upon the particular task he has undertaken in the conditions in which he finds himself, such as the relative scarcity of various materials to which he has access. Only thus can the individual find out what to look for, and what helps him to do this in the market is the responses others make to what they find in their own environments

Fourth, there is the important point that an order arising from the separate decisions of many individuals on the basis of different information cannot be determined by a common scale of the relative importance of different ends.

Though biologically determined differences among individual men are probably smaller than those of some domesticated animals (especially dogs), this long learning period after birth allows individuals more time to adapt themselves to particular environments and to absorb the different streams of tradition into which they are born. The varieties of skills that make division of labour possible, and with it the extended order, are largely due to these different streams of tradition, encouraged by underlying dissimilarities in natural gifts and preferences. The whole of tradition is, moreover, so incomparably more complex than what any individual mind can command that it can be transmitted at all only if there are many different individuals to absorb different portions of it. The advantage of individual differentiation is all the greater in that it makes large groups more efficient.

Thus, differences among individuals increase the power of the collaborating group beyond the sum of individual efforts. Synergetic collaboration brings into play distinctive talents that would have been left unused had their possessors been forced to strive alone for sustenance. Specialisation releases and encourages the development of a few individuals whose distinctive contributions may suffice to provide them a living or even to exceed the contributions others make to the total.

The importance and value of order will grow with the variety of the elements, while greater order in turn enhances the value of variety, and thus the order of human cooperation becomes indefinitely extensible. If things were otherwise, if for example all men were alike and could not make themselves different from one another, there would be little point in division of labour (except perhaps among people in different localities), little advantage from coordinating efforts, and little prospect of creating order of any power or magnitude. Thus individuals had to become different before they could be free to combine into complex structures of cooperation. Moreover, they had to combine into entities of a distinct character: not merely a sum but a structure in some manner analogous to, and in some important respects differing from, an organism.

But if wealth generated by such ‘rearrangements’ bewildered folk, the information-searching activities of tradesmen evoked truly great distrust. The transport involved in trade can usually be at least partly understood by the layman, at least after some patient explanation and argument, to be productive. For example, the view that trade only shifts about already existing things can be readily corrected by pointing out that many things can be made only by assembling substances from widely distant places. The relative value of these substances will depend not on the attributes of the individual material components of which they consist but on relative quantities available together at the locations required. Thus trade in raw materials and semi-finished products is a precondition for increase in the physical quantities of many final products that could only be manufactured at all thanks to the availability of (perhaps small quantities of) materials fetched from far away. The quantity of a particular product that can be produced from resources found at a particular place may depend on the availability of a very much smaller quantity of another substance (such as mercury or phosphor, or perhaps even a catalyst) that can be obtained only at the other end of the earth. Trade thus creates the very possibility of physical production. The idea that such productivity, and even such bringing together of supplies, also depends on a continuous successful search for widely dispersed and constantly changing information remains harder to grasp, however obvious it may seem to those who have understood the process by which trade creates and guides physical production when steered by information about the relative scarcity of different things at different places.

one of the important insights that John Stuart Mill had gained in his youth: namely, that ‘the demand for commodities is not a demand for labour’.

Production for use’ means here the kind of work which, in the small group, is guided by anticipating for whose use the product is intended. But this sentiment fails to take into account the sorts of considerations advanced in the foregoing chapters, and to be argued again in the following: only the differences between expected prices for different commodities and services and their costs, in the self-generating order of the market, tell the individual how best to contribute to the pool from which we all draw in proportion to our contribution.

only calculation and distribution in terms of market prices make it possible to utilise our discoverable resources intensively, to guide production to serve ends lying beyond the range of the producer’s perception, and to enable the individual to participate usefully in productive exchange (first, by serving people, mostly unknown to him, to the gratification of whose needs he can nonetheless effectively contribute; and second, by himself being supplied as well as he is only because people who know nothing about his existence are induced, also by market signals, to provide for his needs: see the previous chapter).

When words lose their meaning people will lose their liberty. Confucius

An increase of value – crucial in exchange and trade – is indeed different from increases in quantity observable by our senses. Increase in value is something for which laws governing physical events, at least as understood within materialist and mechanistic models, do not account. Value indicates the potential capacities of an object or action to satisfy human needs, and can be ascertained only by the mutual adjustment through exchange of the respective (marginal) rates of substitution (or equivalence) which different goods or services have for various individuals. Value is not an attribute or physical property possessed by things themselves, irrespective of their relations to men, but solely an aspect of these relations that enables men to take account, in their decisions about the use of such things, of the better opportunities others might have for their use. Increase

not one of them shows any awareness that there might be limits to our knowledge or reason in certain areas, or considers that, in such circumstances, the most important task of science might be to discover what these limits are.

Some rationalists would want to advance an additional complaint that we have hardly considered: namely, that the morality and institutions of capitalism not only fail to meet the logical, methodological, and epistemological requirements reviewed already, but also impose a crippling burden on our freedom – as, for example, our freedom to ‘express’ ourselves unrestrainedly. This complaint cannot be met by denying the obvious, a truth with which we opened this book – that moral tradition does seem burdensome to many – but can only be answered by observing again, here and in subsequent chapters, what we derive from bearing this burden, and what the alternative would be. Virtually all the benefits of civilisation, and indeed our very existence, rest, I believe, on our continuing willingness to shoulder the burden of tradition. These benefits in no way ‘justify’ the burden. But the alternative is poverty and famine.

Freedom requires that the individual be allowed to pursue his own ends: one who is free is in peacetime no longer bound by the common concrete ends of his community. Such freedom of individual decision is made possible by delimiting distinct individual rights (the rights of property, for example) and designating domains within which each can dispose over means known to him for his own ends. That is, a recognisable free sphere is determined for each person. This is all-important. For to have something of one’s own, however little, is also the foundation on which a distinctive personality can be formed and a distinctive environment created within which particular individual aims can be pursued.

General freedom in this sense is nevertheless impossible, for the freedom of each would founder on the unlimited freedom, i.e., the lack of restraint, of all others.

The question then is how to secure the greatest possible freedom for all. This can be secured by uniformly restricting the freedom of all by abstract rules that preclude arbitrary or discriminatory coercion by or of other people, that prevent any from invading the free sphere of any other (see Hayek 1960 and 1973, and chapter two above). In short, common concrete ends are replaced by common abstract rules.

The slogan that ‘in the long run we are all dead’ is also a characteristic manifestation of an unwillingness to recognise that morals are concerned with effects in the long run – effects beyond our possible perception – and of a tendency to spurn the learnt discipline of the long view. Keynes also argued against the moral tradition of the ‘virtue of saving’, refusing, along with thousands of crank economists, to admit that a reduction of the demand for consumers’ goods is generally required to make an increase of the production of capital goods (i.e., investment) possible. And this in turn led him to devote his formidable intellectual powers to develop his ‘general’ theory of economics – to which we owe the unique world-wide inflation of the third quarter of our century and the inevitable consequence of severe unemployment that has followed it (Hayek, 1972/1978).

To call by the same name such completely different formations as the companionship of individuals in constant personal contact and the structure formed by millions who are connected only by signals resulting from long and infinitely ramified chains of trade is not only factually misleading but also almost always contains a concealed desire to model this extended order on the intimate fellowship for which our emotions long.

To call by the same name such completely different formations as the companionship of individuals in constant personal contact and the structure formed by millions who are connected only by signals resulting from long and infinitely ramified chains of trade is not only factually misleading but also almost always contains a concealed desire to model this extended order on the intimate fellowship for which our emotions long. Bertrand de Jouvenel has well described this instinctive nostalgia for the small group – ‘the milieu in which man is first found, which retains for him an infinite attraction: but any attempt to graft the same features on a large society is utopian and leads to tyranny

the Mediterranean region was the first to see the acceptance of a person’s right to dispose over a recognised private domain, thus allowing individuals to develop a dense network of commercial relations among different communities.

What is more important is that in order for a custom or innovation to be preserved, there were two distinct prerequisites. Firstly, there must have existed some conditions that made possible the preservation through generations of certain practices whose benefits were not necessarily understood or appreciated. Secondly, there must have been the acquisition of distinct advantages by those groups that kept to such customs, thereby enabling them to expand more rapidly than others and ultimately to supersede (or absorb) those not possessing similar customs.

The more one learns about economic history, the more misleading then seems the belief that the achievement of a highly organised state constituted the culmination of the early development of civilisation. The role played by governments is greatly exaggerated in historical accounts because we necessarily know so much more about what organised government did than about what the spontaneous coordination of individual efforts accomplished.