Friedrich Hayek teaching at the London School of Economics in 1948. Photo: Paul Popper/Popperfoto/Getty Images
It is possible to go through an entire
education to PhD level in the very best schools and universities in the
British system without any of your teachers or professors breathing the
words “Friedrich Hayek”. This is a pity.
Hayek died 25 years ago today, yet his
ideas are very relevant to the 21st century. He was the person who saw
most clearly that knowledge is held in the cloud, not the head, that
human intelligence is a collective phenomenon.
If Hayek is mentioned at all in academia,
it is usually as an alias for Voldemort. To admire Hayek is to advocate
selfishness and individualism. This could not be more wrong. What Hayek
argued is that human collaboration is necessary for society to work;
that the great feature of the market is that it enables us to work for
each other, not just for ourselves; and that authoritarian, top-down
rule is not the source of order or progress, but a hindrance.
I would go further, and add that the
individual human being is not – and had not been for 120,000 years –
able to support his lifestyle; and that there is nothing so anti-social
(or impoverishing) as the pursuit of self-sufficiency.
These are not conservative or reactionary
ideas: that society works best through egalitarian sharing and mutual
service, rather than through state control, hierarchy and planning, is
surely as liberal and egalitarian as it could possibly be.
Hayek’s point in his famous essay of 1945,
“The Uses of Knowledge in Society”, is that central planning cannot
work because it is trying to substitute an individual all-knowing
intelligence for a distributed and fragmented system of localised but
connected knowledge, much of which is tacit. It is the essence of
anti-elitism, of – dare I say it – populism, the prescient harbinger of
what is sometimes called “dot communism” – the flattening of human
society as a result of the internet.
In Hayek’s words, “how valuable an asset
in all walks of life is knowledge of people, of local conditions, and of
special circumstances…the method by which such knowledge can be made as
widely available as possible is precisely the problem to which we have
to find an answer.” His answer, of course, was the price mechanism.
A couple of artists have reinforced this
point recently by trying to make consumer goods from scratch. One tried
to make a suit from material sourced within 100 miles and failed. The
other tried to make a toaster of the kind he could buy for $5 in the
store. After many months and a large amount of money, he had a big,
unreliable, messy machine that just about scorched bread.
Self-sufficiency is another word for poverty.
By contrast, trade creates a collective
problem-solving brain as big as the trade network itself. It draws upon
dispersed and fragmented knowledge to create things that nobody can even
comprehend, wholes that are more complex than the sum of their
individual mental parts.
No other animal does this. There is
exchange and specialisation within families, even huge families such as
ant colonies, which gives an ant colony considerable collective
intelligence. But that’s among kin. Exchange between strangers is a
unique feature of us modern hominids. As Adam Smith said, “no man ever
saw a dog make fair and deliberate exchange of a bone with another dog”.
Exchange, as practised by people for about
the last 100,000 years (but possibly not by Neanderthals) is a fast
breeder, a chain reaction. The more you exchange, the more it pays to
specialise, and the more you specialise, the more it pays to exchange.
There’s a positive feedback loop.
As Hayek put it, “That the division of
labor has reached the extent which makes modern civilization possible we
owe to the fact that it did not have to be consciously created but that
man tumbled on a method by which the division of labor could be
extended far beyond the limits within which it could have been planned.”
The invention of exchange had the same
impact on human culture as sex had on biological evolution – it made it
cumulative. So human technological advancement depended not on
individual intelligence but on collective idea sharing.
The “cloud”, the crowd-sourced, wikinomic
cloud, is not a new idea at all. It has been the source of human
invention all along. That is why every technology you can think of is a
combination of other technologies, and why simultaneous invention is so
common as ideas come together to meet and mate when mature.
Which is, of course, why the internet is
such an exciting development. For the first time, humanity has not just
some big collective brains (called trade networks), but one truly vast
one in which almost everybody can share and in which distance is no
obstacle.
Instead of regretting this loss of
economic leadership, British consumers or patients should be thrilled
that they no longer have to rely only on their own citizens to discover
new consumer goods or cures for cancer: Asians, Africans, Americans are
now also eager to supply them.
Moreover, by contrast with the industrial
system, the internet allows us to contribute as producers rather than
just consumers. The internet is to radio as a conversation is to a
lecture.
Truly something very weird has happened to
the world when, for advocating this bottom-up, egalitarian,
collectivist idea, for advocating freedom for people to exchange ideas
and serve their fellow human beings thus encouraging social change,
Hayek is condemned by left-leaning commentators as a right-wing zealot.
His accusers demand more power for
Leviathan to control our lives, charge that free trade is bad for the
people who freely choose it and muse about the suspension of democracy
to advance the greater, greener good and prevent “populism”.
Hayek taught us to distrust the idea of
putting people in charge of other people. Given that government has been
the means by which people have committed unspeakable horrors again and
again and again, from Nero and Attila to Hitler and Mao, why are people
so forgiving of the state and so mistrustful of the market?
Visiting Auschwitz recently I was struck
not by the “industrialisation” of death – it is a surprisingly low-tech
place – but the “nationalisation” of death: the bureaucratic central
planning and meticulous hierarchical organisation of mass murder: it
takes a government to do an Auschwitz.
By contrast, free markets have generally
produced flowerings of prosperity, invention, cultural experimentation
and – yes – peace wherever they have been tried, from Song China to
Silicon Valley.
We live in a world richly furnished with
technological and cultural marvels, because we have networked our minds
as a collective brain. It was exchange and specialisation that enabled
us to do so. That’s Hayek’s great discovery.
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