The Fatal Conceit

The Fatal Conceit: The Errors of Socialism is a non-fiction book written by the economist and political philosopher Friedrich Hayek and edited by William Warren Bartley. There is much scholarly debate on how much influence William Warren Bartley had on writing the book.

Introduction: Was Socialism a Mistake?

 * 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 unwitting, reluctant, even painful adoption of these practices kept these groups together, increased their access to valuable information of all sorts, and enabled them to be 'fruitful, and multiply, and replenish the earth, and subdue it' (Genesis 1:28). This process is perhaps the least appreciated facet of human evolution.


 * 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.


 * I wish neither to deny reason the power to improve norms and institutions nor even to insist that it is incapable of recasting the whole of our moral system in the direction now commonly conceived as 'social justice'. We can do so, however, only by probing every part of a system of morals. If such a morality pretends to be able to do something that it cannot possibly do, e.g., to fulfill a knowledge-generating and organisational function that is impossible under its own rules and norms, then this impossibility itself provides a decisive rational criticism of that moral system. 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.


 * Our moral traditions, like many other aspects of our culture, developed concurrently with our reason, not as its product.

Ch. 1: Between Instinct and Reason

 * It is no accident that many abstract rules, such as those treating individual responsibility and several property, are associated with economics. Economics has from its origins been concerned with how an extended order of human interaction comes into existence through a process of variation, winnowing and sifting far surpassing our vision or our capacity to design.


 * Information-gathering institutions such as the market enable us to use such dispersed and unsurveyable knowledge to form super-individual patterns.


 * This evolution [of extended order] came about, then, through the spreading of new practices by a process of transmission of acquired habits analogous to, but also in important respects different from, biological evolution. I shall consider some of these analogies and differences below, but we might mention here that biological evolution would have been far too slow to alter or replace man's innate responses in the course of the ten or twenty thousand years during which civilisation has developed - not to speak of being too slow to have influenced the far greater numbers whose ancestors joined the process only a few hundred years ago.


 * Part of our present difficulty is that we must constantly adjust our lives, our thoughts and our emotions, in order to live simultaneously within the different kinds of orders according to different rules. If we were to apply the unmodified, uncurbed, rules of the micro-cosmos (i.e. of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilisation), as our instincts and sentimental yearnings often make us wish to do, we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of world at once.


 * 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.


 * The evolution of rules was far from unhindered, since the powers enforcing the rules generally resisted rather than assisted changes conflicting with traditional views about what was right or just.


 * 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. They are due neither to what is sometimes called the unconscious, nor to intuition, nor to rational understanding. Though in a sense based on human experience in that they were shaped in the course of cultural evolution, they were not formed by drawing reasoned conclusions from certain facts or from an awareness that things behaved in a particular way. Though governed in our conduct by what we have learnt, we often do not know why we do what we do.


 * No one who takes an evolutionary approach to the study of culture can, however, fail to be aware of the hostility often shown towards such approaches. Such hostility often stems from reactions to just those 'social scientists' who in the nineteenth century needed Darwin to recognise what they ought to have learnt from their own predecessors, and who did a lasting disservice to the advance of the theory of cultural evolution, which they indeed brought into discredit.

Ch. 2: The Origins of Liberty, Property and Justice

 * 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. This is not necessarily true.


 * An important aspect of this freedom - the freedom on the part of different individuals or sub-groups to pursue distinct aims, guided by their differing knowledge and skills - was made possible not only by the separate control of various means of production, but also by another practice, virtually inseparable from the first: the recognition of approved methods of transferring this control.


 * Nothing is more misleading, then, than the conventional formulae of historians who represent the achievement of a powerful state as the culmination of cultural evolution: it as often marked its end. In this respect students of early history were overly impressed and greatly misled by monuments and documents left by the holders of political power, whereas the true builders of the extended order, who as often as not created the wealth that made the monuments possible, left less tangible and ostentatious testimonies to their achievement.


 * Having written of the pretence of reason and the dangers of 'rational' interference with spontaneous order, I need to add yet another word of caution. My central aim has made it necessary to stress the spontaneous evolution of rules of conduct that assist the formation of self-organising structures. This emphasis on the spontaneous nature of the extended or macro-order could mislead if it conveyed the impression that, in the macro-order, deliberate organisation is never important.

Ch. 3: The Evolution of the Market: Trade and Civilisation

 * This 'chain reaction' sparked by new settlement and trade may be studied more closely. While some animals are adapted to particular and rather limited environmental 'niches' outside of which they can hardly exist, men and a few other animals such as rats have been able to adapt themselves almost everywhere on the surface of the earth. This is hardly due merely to adaptations by individuals.


 * To create such an order, such individuals had to be able to use information for purposes known only to themselves. They could not have done so without the benefit of certain practices, such as that of the xenos, shared in common with distant groups.

Ch. 4: The Revolt of Instinct and Reason

 * Indeed, by the nineteenth century, serious intellectual appreciation and discussion of the role of property in the development of civilisation would seem to have fallen under a kind of ban in many quarters. During this time property gradually became suspect among many of those who might have been expected to investigate it, a topic to be avoided by progressive believers in a rational reshaping of the structure of human cooperation.


 * I have just written that the study of traditional institutions such as property 'fell under a ban'. This is hardly an exaggeration, for it is highly curious that so interesting and important a process as the evolutionary selection of moral traditions has been so little studied, and the direction these traditions gave to the development of civilisation so largely ignored. Of course this will not seem so peculiar to a constructivist. If one suffers under the delusion of 'social engineering', the notion that man can consciously choose where he wants to go, it will not seem so important to discover how he reached his present situation.


 * 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.


 * Moreover, it is perhaps appropriate to remind readers in this place of my essay 'On Why I Am Not a Conservative' (1960: Postscript), lest they draw inaccurate conclusions. Although my argument is directed against socialism, I am as little a Tory-Conservative as was Edmund Burke. My conservatism, such as it is, is entirely confined to morals within certain limits. I am entirely in favour of experimentation - indeed for very much more freedom than conservative governments tend to allow.


 * Like other traditions, the tradition of reason is learnt, not innate. It too lies between instinct and reason; and the question of the real reasonableness and truth of this tradition of proclaimed reason and truth must now also scrupulously be examined.

Ch. 5: The Fatal Conceit

 * Hence I wish to concede forthwith that most tenets, institutions, and practices of traditional morality and of capitalism do not meet the requirements or criteria stated and are -from the perspective of this theory of reason and science - 'unreasonable' and 'unscientific'. Moreover, since, as we have also admitted, those who continue to follow traditional practices do not themselves usually understand how these practices were formed or how they endure, it is hardly surprising that alternative justifications', so-called, that traditionalists sometimes offer for their practices are often rather naive (and hence have provided fair game for our intellectuals), and have no connection with the real reasons for their success. Many traditionalists do not even bother with justifications that could not be provided anyway (thus allowing intellectuals to denounce them as anti-intellectual or dogmatic), but go on following their practices out of habit or religious faith. Nor is this in any way `news'.


 * There is the question of how our knowledge really does arise. Most knowledge - and I confess it took me some time to recognise this - is obtained not from immediate experience or observation, but in the continuous process of sifting a learnt tradition, which requires individual recognition and following of moral traditions that are not justifiable in terms of the canons of traditional theories of rationality.


 * 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.


 * Whereas, in fact, specialised students, even after generations of effort, find it exceedingly difficult to explain such matters, and cannot agree on what are the causes or what will be the effects of particular events. 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 whole process of calculating in terms of market prices was, indeed, sometimes even represented as part of a devious manoeuvre on the part of owners of capital to conceal how they exploited workers. But such retorts quite fail to address the arguments and facts already rehearsed: some hypothetical body of objective facts is no more available to capitalists for manipulating the whole than it is to the managers that the socialists would like to replace them. Such objective facts simply do not exist and are unavailable to anyone.


 * There is a difference between following rules of conduct, on the one hand, and knowledge about something, on the other. (...) The habit of following rules of conduct is an ability utterly different from the knowledge that one's actions will have certain kinds of effects.


 * 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.


 * Such an order, although far from perfect and often inefficient, can extend farther than any order men could create by deliberately putting countless elements into selected 'appropriate' places. Most defects and inefficiencies of such spontaneous orders result from attempting to interfere with or to prevent their mechanisms from operating, or to improve the details of their results. Such attempts to intervene in spontaneous order rarely result in anything closely corresponding to men's wishes, since these orders are determined by more particular facts than any such intervening agency can know.


 * Comprehending the role played by the transmission of information (or of factual knowledge) opens the door to understanding the extended order. Yet these issues are highly abstract, and are particularly hard to grasp for those schooled in the mechanistic, scientistic, constructivist canons of rationality that dominate our educational systems - and who consequently tend to be ignorant of biology, economics, and evolution.

Ch. 6: The Mysterious World of Trade and Money

 * There is an irony here: that precisely those who do not think of economic events in literally materialistic terms - that is, in terms of physical quantities of material substances - but are guided by calculations in terms of value, i.e., by the appreciation that men have for these objects, and particularly those differences between costs and price that are called profits, should habitually be denounced as materialists. Whereas it is precisely the striving for profit that makes it possible for those engaged in it not to think in terms of material quantities of particular concrete needs of known individuals, but of the best way in which they can contribute to an aggregate output that results from the similar separate efforts of countless unknown others.


 * Perhaps the main force behind the persistent dislike of commercial dealings is then no more than plain ignorance and conceptual difficulty. This is however compounded with preexisting fear of the unfamiliar: a fear of sorcery and the unnatural, and also a fear of knowledge itself harking back to our origins and indelibly memorialised in the first few chapters of the book of Genesis, in the story of man's expulsion from the Garden of Eden. All superstitions, including socialism, feed on such fear.


 * Some habits that have crept into mathematical analysis of the market process often mislead even trained economists.


 * 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.


 * Ignorance of the function of trade, which led initially to fear, and in the Middle Ages to uninformed regulation, and which only comparatively recently yielded to better understanding, has, then, now been revived in a new pseudo-scientific form.


 * Money, the very 'coin' of ordinary interaction, is hence of all things the least understood and - perhaps with sex - the object of greatest unreasoning fantasy; and like sex it simultaneously fascinates, puzzles and repels.


 * The disdain of profit is due to ignorance, and to an attitude that we may if we wish admire in the ascetic who has chosen to be content with a small share of the riches of this world, but which, when actualised in the form of restrictions on profits of others, is selfish to the extent that it imposes asceticism, and indeed deprivations of all sorts, on others.

Ch. 7: Our Poisoned Language

 * Language enables us not only to label objects given to our senses as distinct entities, but also to classify an infinite variety of combinations of distinguishing marks according to what we expect from them and what we may do with them. Such labelling, classification, and distinction is of course often vague. More importantly, all usage of language is laden with interpretations or theories about our surroundings. As Goethe recognised, all that we imagine to be factual is already theory: what we 'know' of our surroundings is our interpretation of them.


 * Even now, outside the scientific examination of law, language and the market, studies of human affairs continue to be dominated by a vocabulary chiefly derived from animistic thinking.


 * Much the worst use of 'social', one that wholly destroys the meaning of any word it qualifies, is in the almost universally used phrase 'social justice'.

Ch. 8: The Extended Order and Population Growth

 * Envy and ignorance lead people to regard possessing more than one needs for current consumption as a matter for censure rather than merit.


 * So far as we know, the extended order is probably the most complex structure in the universe - a structure in which biological organisms that are already highly complex have acquired the capacity to learn, to assimilate, parts of suprapersonal traditions enabling them to adapt themselves from moment to moment into an ever-changing structure possessing an order of a still higher level of complexity.


 * Yet if the market economy did indeed prevail over other types of order because it enabled those groups that adopted its basic rules the better to multiply, then the calculation in market values is a calculation in terms of lives: individuals guided by this calculation did what most helped to increase their numbers, although this could hardly have been their intention.

Ch. 9: Religion and the Guardians of Tradition
see also "The Presumption of Reason" (1986)
 * 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.

Quotes about The Fatal Conceit

 * An altogether amazing feat....It fully supports the recent characterization of Hayek by the Economist that he is our time’s preeminent social philosopher.
 * Peter Drucker; blurb in The Fatal Conceit


 * Bartley's approach to editing was perhaps best described in a Jan. 16, 1988, letter to Leif Wenar, another of Hayek's research assistants, who was to edit the latter two parts of "The Fatal Conceit." In this correspondence, also at the Hoover Institution, Bartley encouraged Wenar to edit Hayek's work on a massive scale: to compose introductions, conclusions, connective material, and summaries on Hayek's behalf, to link the second and third parts to the first part Bartley was working on, and to compose its conclusion. Hayek's essential message in "The Fatal Conceit" could be lost in the circumstances surrounding the work. This message was that people do not like capitalism because it relies on an unseen extended order over time to produce goods and services, and people instinctively like to see immediate, visible good. Similarly, the glamorous idea of what he termed "constructivist rationalism" (that individuals can design any sort of society they wish) is false. Rather, by following rules that enforce contracts, promote and preserve private property, and encourage exchange, mankind can produce the most and be freest and happiest.
 * Alan Ebenstein, "Investigation: The Fatal Deceit". Liberty 19:3 (March 2005)


 * I don’t think it’s one of Hayek’s better works. It’s awfully forced. It’s put into this form of, “I’m going to show you once and for all, by God, and after you hear this you’ll have no answer to me whatsoever.” It’s not up to Hayek at his best.
 * Milton Friedman, on The Fatal Conceit, Friedman-Ebenstein interview in 1995, quoted in Alan Ebenstein's Hayek's Journey: The Mind of Friedrich Hayek (2003) Ch. 18. “The Fatal Conceit”


 * While traditional economic theory is clearly wrong in treating individuals as immutable "tastes" no less than technology were the primitives of the model we have no scientific basis on which to judge one set of moral values, one set of personality types, as superior to others. Thus, while Hayek may have been right in stressing the moral dimension of markets — the kind of consequences in shaping human nature that I have just described — he fails to provide us with a systematic approach for addressing these issues (e.g., see his 1989 book).
 * Joseph E. Stiglitz, Whither Socialism?, Ch. 16: Philosophical Speculations.


 * The conservative critique of radical projects is not mainly that the emancipatory goals of radicals are morally indefensible – although some conservatives criticize the underlying values of such projects as well – but that the uncontrollable, and usually negative, unintended consequences of these efforts at massive social change inevitably swamp the  intended consequences. Radicals and revolutionaries suffer from what Frederick Hayek termed the “fatal conceit” – the belief that through rational calculation and political will,  society can be designed in ways that will significantly improve the human condition.
 * Erik Olin Wright, Envisioning Real Utopias