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The Fight Continues: Keynes and Hayek on Planned Economies

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As touched upon briefly in the first part of this series, 20th-century economists F.A. Hayek and John Maynard Keynes did not agree on much. And while a lot has happened since these two men were alive and actively writing and speaking about economic philosophy, the two men’s influence on the national economy can still be seen and felt today.

It cannot be denied that both men have been influential in the field of economics–whether for better or for worse depending on which philosophy you are more inclined to accept. But their disagreements with each other offer a fascinating comparison specifically between those who believe in government intervention in the economy, and those who do not.

Keynes and Intervention

In order for an economy to be planned, it must have some sort of central authority at its helm directing it in a given direction. And, as is always the case, this governing authority is placed in the hands of the state.

For John Maynard Keynes, the government’s involvement in the national economy was integral. Keynes is primarily responsible for the rise of macroeconomics, which treats the entire economy as one whole entity, rather than several individual moving parts. And of course, in order to control a creature as vast as the U.S. economy, you would have to control almost every aspect of it in order to reach your goals.

This type of central economic planning usually comes in the form of policies that restrict almost all aspects of a given sector. From setting prices and wages to controlling which companies are allocated scarce resources and even barring entrance into employment sectors, the Keynesian model seeks full and complete regulation from the state.

And while it may be difficult for many to understand why so many Americans eagerly subscribed to Keynesian economics even though totalitarianism had just destroyed Europe, it is important to understand one of Keynes’ main focuses: full employment.

For military members returning home from war, transitioning back into the workforce was of the utmost importance. And while “full employment” was easy to obtain while many of your countrymen are drafted and forced into war, finding places for all these men in the post-war economy was not so simple. It is for this reason that so many fell victim to the belief that the government should be in control of the economy and especially the workforce.

But viewing the economy as something that can be tamed and mastered does not take into account all the individual factors that make the marketplace so great in the first place.

Hayek and Planned Economies

Hayek believed that planned economies are the greatest enemy of free market competition. After all, when the government is responsible for controlling what the market can and cannot do, the market ceases to be “free” at all. And since free markets were comprised of individual efforts, inhibiting market innovation is a direct threat to the individual. And above all, Hayek’s economic philosophies are centered around the importance of individualism.

One of the biggest problems with Keynesian macroeconomics is its utter and complete lack of recognition of the importance of the individual. In fact, since the individual usually serves as an obstacle for governments seeking complete control over the economy, the individual is the only real threat to planned economies.

For Keynes to achieve his economic goals, including full employment, the government would have to commandeer the entire economy, trampling on individuals along the way. While some may not see this as being as terrifying as it truly is, Hayek reminds us in The Road to Serfdom that without economic freedom there can be no freedom at all. And in Keynes’s ideal world, the government would be running the entire show, leaving very little room for individual dissent.

As Hayek so passionately expresses throughout his classic Road to Serfdom, this failure to understand the individual’s role in the economy is one of the major shortcomings of Keynesian economics. As soon as economists stop viewing the economy in terms of individual entities and instead view it only as a collective unit, innovation is stifled and the individual suffers.

When the government controls wages, for example, the individual loses out on the opportunity to negotiate the terms of payment based on his or her own set of skills. Instead, these types of policies treat all members of the workforce the same.

Additionally, when the government determines which companies are worthy of certain resources, it demeans the innovation process by not allowing individuals to experiment with burgeoning ideas that may come with a risk.

Overall these differences between the two men come down to the individual versus the collective, and for Hayek, the individual should always be protected and placed above the desire for a planned economy riddled with government oversight.

The Road to Serfdom Shows Us That What Is past Is Prologue

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When I decided to read and live-blog The Road to Serfdom by F.A. Hayek, I will admit I did not fully understand what I had signed up to do. Reading excerpts from the book is one thing, but endeavoring to read the book in its entirety and also write my accompanying thoughts was an entirely different feat altogether.

Even though I knew ahead of time that I would not always agree with Hayek, I was well aware of his incomparable intellect. And I knew I needed to do my due diligence to pay his prize-winning work the respect it deserved. As it turns out, doing so took a lot of effort not only through reading Hayek’s work, but through understanding the historical setting in which it was written.

But understanding the economic and political factors of the two World Wars alone wasn’t enough because Hayek doesn’t limit his economic perspective to only that of the recent events of his own day. Instead, he briefly but concisely explains the very foundations of liberalism and how the modern political trajectory was threatening to undo all the progress of the 19th-century.

Hayek takes the reader on a historical journey that traces the roots of free market economics along with the rise of totalitarian governments. Both topics of course not being mutually exclusive to Hayek’s primary cause of writing the book.

While the bulk of Hayek’s work is contained within 15 chapters, in the final sixteenth chapter, Hayek concludes his work and spells out his final message to the reader: Do not let history repeat itself.

What Is Past Is Prologue

Hayek is quick to point out that, “The purpose of this book has not been to sketch a detailed program of a desirable future order of society.” And while he may not have painted a picture of what his ideal society may look like, he does tell the reader what types of government coercion we should avoid at all costs.

Above all things, this book presents an opportunity for the reader to have a positive impact on history by first learning from it. Hayek has taken a justifiably ominous tone while explaining how totalitarians rise to power and then devastate the economies and people they oppress.

Yet, as hopeless and frustrated as Hayek may seem at times, the book is at its core a beacon of hope that, if used correctly, illuminate the future path toward freedom.

As Hayek says:

A great deal will depend on how we use the opportunity we shall then have. But, whatever we do, it can only be the beginning of a new, long, and arduous process in which we all hope we shall gradually create a world very different from that which we knew during the last quarter of a century.

Continuing, Hayek says:

The important thing now is that we shall come to agree on certain principles and free ourselves from some of the errors which have governed us in the recent past.

Hayek’s ultimate hope is that each reader of his book will understand the important role they play as individuals. As Hayek has demonstrated in his book, the individual is the greatest threat to the totalitarians and the collectivists of the world. The individual has been a thorn in the state’s side that has prevented it from total abuse of power since the beginning of time.

But it is up to each reader of the book to heed Hayek’s warnings and prevent the past from occurring once again.

As Hayek writes:

If we are to build a better world, we must have the courage to make a new start—even if that means some reculer pour mieux sauter [strategic withdrawals]. It is not those who believe in inevitable tendencies who show this courage, not those who preach a “New Order” which is no more than a projection of the tendencies of the last forty years, and who can think of nothing better than to imitate Hitler.

So as I finish this book, I would implore others to read it and take a lesson from F.A. Hayek. If he believed the country was in grave economic danger in 1944, the stakes are even higher in our present day.

Hayek Warns of the International Road to Serfdom

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In the previous chapter of The Road to Serfdom, F.A. Hayek spelled out his concerns for the problems facing America in the aftermath of WWII. Moving away from discussing domestic policy, in chapter 15, “The Prospects of International Order” Hayek discusses the grave problems associated with global governance.

Making no effort to downplay the topic of foreign policy, Hayek says:

In no other field has the world yet paid so dearly for the abandonment of nineteenth-century liberalism as in the field where the retreat began: in international relations.”

Hayek has dedicated the majority of his book to explaining why planned economies on a national scale are bound to fail. You can understand his frustration then, when in the wake of World War II there was a bigger push for international governance.

Global Governance Is Not the Answer

As is understandable, there was an overwhelming desire to make sure the atrocities of WWII were never allowed to happen again. Since Germany’s nationalist sentiment had isolated it from the rest of the world prior to WWII, there was a sense that forced globalization would provide the necessary safeguard.

Hayek writes:

That there is little hope of international order or lasting peace so long as every country is free to employ whatever measures it thinks desirable in its own immediate interest, however damaging they may be to others, needs little emphasis now.

It was easy, after all, for the Third Reich to take full control of the Germany’s economy when all outside influences were cut off.

Many kinds of economic planning are indeed practicable only if the planning authority can effectively shut out all extraneous influences; the result of such planning is therefore inevitably the piling-up of restrictions on the movements of men and goods.

But international planning was not the answer to the problem facing the world after WWII. By assuming to treat each nation as an actor in the global economy, instead of realizing that each nation was comprised of individual actors, the world now faced new issues.

As Hayek explains:

Less obvious but by no means less real are the dangers to peace arising out of the artificially fostered economic solidarity of all the inhabitants of any one country and from the new blocs of opposed interests created by planning on a national scale. It is neither necessary nor desirable that national boundaries should mark sharp differences in standards of living, that membership of a national group should entitle one to a share in a cake altogether different from that in which members of other groups share.

Continuing to point out the dangers associated with this line of thinking, Hayek writes:

If the resources of different nations are treated as exclusive properties of these nations as wholes, if international economic relations, instead of being relations between individuals, become increasingly relations between whole nations organized as trading bodies, they inevitably become the source of friction and envy between whole nations.

But still, there remained this belief that a global authority was needed in order to foster the transactions between different nations all in the name of maintaining the peace and reducing instances of disagreement. But this is just not the case, as Hayek explains.

It is one of the most fatal illusions that, by substituting negotiations between states or organized groups for competition for markets or for raw materials, international friction would be reduced.

When a global governing body is the ultimate authority, rather than multiple sovereign nations serving as checks and balances to each other the opportunity for abuse is ripe. You effectively leave the world vulnerable to totalitarianism on a grander scale than has been seen before. And where there is totalitarianism, there will exist perpetual conflict as the scales of power attempt to balance themselves.

Hayek writes:

Economic transactions between national bodies who are at the same time the supreme judges of their own behavior, who bow to no superior law, and whose representatives cannot be bound by any considerations but the immediate interest of their respective nations, must end in clashes of power.

Hayek even hypothesized that if this push towards international authority was taken more seriously in the years leading up to WWI, as Wilson had hoped for his League of Nations, we may have found ourselves in an even worse situation than reality provided.

He says:

If we were to make no better use of victory than to countenance existing trends in this direction, only too visible before 1939, we might indeed find that we have defeated National Socialism merely to create a world of many national socialisms, differing in detail, but all equally totalitarian, nationalistic, and in recurrent conflict with each other.

The Bigger the Jurisdiction, the Harder to Plan

Planning economies for small entities comes with its own set of challenges and economic fallacies. But imagine how these would be magnified on a global scale. It is for this reason that Hayek and other free market economists believe that the individual is the only entity capable of planning his or her financial futures.

If there must be governance, as Hayek would argue, it would need to be as small and contained as possible. Much of the reason for this is because as smaller units, like families and communities, there are certain mutual goals and traditions that unite us and make it easier to agree on economic outcomes.

There need be little difficulty in planning the economic life of a family, comparatively little in a small community. But, as the scale increases, the amount of agreement on the order of ends decreases and the necessity to rely on force and compulsion grows. In a small community common views on the relative importance of the main tasks, agreed standards of value, will exist on a great many subjects. But their number will become less and less the wider we throw the net; and, as there is less community of views, the necessity to rely on force and coercion increases.

The individual is already a threatened entity easily swallowed up by the collective. Imagine what would happen if that individual was one among many on an international scale.

When in wartime Americans were asked to make sacrifices in the name of national security, it was easier to enforce these rationing policies because the of the guise of national solitude. But when asked to make sacrifices in the for unnamed people in a foreign country whose name you cannot even pronounce, this becomes a much harder task.

Hayek writes:

The people of any one country may easily be persuaded to make a sacrifice in order to assist what they regard as “their” iron industry or “their” agriculture, or in order that in their country nobody should sink below a certain level. So long as it is a question of helping people whose habits of life and ways of thinking are familiar to us, of correcting the distribution of incomes among, or the working conditions of, people we can well imagine and whose views on their appropriate status are fundamentally similar to ours, we are usually ready to make some sacrifices.

Brilliantly expanding on this, Hayek says:

Who imagines that there exist any common ideals of distributive justice such as will make the Norwegian fisherman consent to forgo the prospect of economic improvement in order to help his Portuguese fellow, or the Dutch worker to pay more for his bicycle to help the Coventry mechanic, or the French peasant to pay more taxes to assist the industrialization of Italy?

And to those who most fervently supported the idea of an international order in spite of its many obstacles, Hayek explains that these sympathies usually arise because they see themselves as calling the shots in this new order:

If most people are not willing to see the difficulty, this is mainly because, consciously or unconsciously, they assume that it will be they who will settle these questions for the others, and because they are convinced of their own capacity to do this justly and equitably.

And given the fact that most individuals would not agree with the sacrifices they are being asked to make for the good of global order, it would leave those in authority no choice but to rule by force.

Hayek writes:

To imagine that the economic life of a vast area comprising many different people can be directed or planned by democratic procedure betrays a complete lack of awareness of the problems such planning would raise. Planning on an international scale, even more than is true on a national scale, cannot be anything but a naked rule of force, an imposition by a small group on all the rest of that sort of standard and employment which the planners think suitable for the rest.

But as history had so recently shown the world in Hayek’s day, the Germans were not uniquely evil. But, they had adopted a system that opened its arms to a “by any means necessary” policy, which in itself was evil.

Hayek says:

It is a mistake to regard the brutality and the disregard of all the wishes and ideals of the smaller people shown by the Germans simply as a sign of their special wickedness; it is the nature of the task they have assumed which makes these things inevitable.

But even if you believe your path to be the right one, as many Germans undoubtedly did, once you have crossed the line between consent and coercion, morality in your quest cannot exist:

To undertake the direction of the economic life of people with widely divergent ideals and values is to assume responsibilities which commit one to the use of force; it is to assume a position where the best intentions cannot prevent one from being forced to act in a way which to some of those affected must appear highly immoral…This is true even if we assume the dominant power to be as idealistic and unselfish as we can possibly conceive. But how small is the likelihood that it will be unselfish, and how great are the temptations!

Individualism Is the Answer

But as is so typical of Hayek, he concludes this chapter by explaining that the only substantial alternative capable of effectively curbing authoritarianism is the individual. Without recognizing the role individual actors play in limiting power Hayek says, “We shall never prevent the abuse of power if we are not prepared to limit power in a way which occasionally may also prevent its use for desirable purposes.”

While the state’s ends may sometimes include prospects that might benefit us, consistency is of the utmost importance. We cannot condemn the state only when it acts in ways contrary to our own benefits. Because once we let the state in on one issue, they will soon invade as many as they can feasibly get away with.

It is for this reason that Hayek implores readers to consider the options ahead of us and realize that the path is clear:

Neither an omnipotent superstate nor a loose association of ‘free nations’ but a community of nations of free men must be our goal.

In a world comprised of individual actors certain occurrences are inevitable. We can do our best to follow the golden rule and do all that we have promised to do, but we may never be able to prevent wars and instances of great violence from occurring. But as Hayek warns:

While we must aim at preventing future wars as much as possible, we must not believe that we can at one stroke create a permanent organization which will make all war in any part of the world entirely impossible.

Hayek Was Right, Welfare Is False Philanthropy at Its Finest

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In chapter 14 of The Road to Serfdom, “Material Conditions and Ideal Ends,” Hayek focuses on the path forward now that the Second World War was coming to an end. Specifically, he explains that calling on the state to coercively act in the name of the “greater good” is not a moral act worthy of praise.

Employment

When the book was written in 1944, the country was anxious to see what America’s post-war economy would look like. One of the primary concerns in this regard was the issue of employment. Two million soldiers were returning from war. They needed work. What would be the effect on wages and growth?

Hayek writes:

That no single purpose must be allowed in peace to have absolute preference over all others applies even to the one aim which everybody now agrees comes in the front rank: the conquest of unemployment.

Keynesian economists claim that war is actually supremely beneficial to the national rate of employment. And on paper, this might appear to be true.

In times of war, and especially when a draft is instituted, employment does tend to rise. But this is due largely to the fact that when a draft forces many into military service, they are now considered “employed.” For many young adults who were otherwise unemployed prior to the war, being drafted bumped these men up to “employed” status.

Similarly, WWII saw an influx of working women. The Rosie the Riveter era of women entering the workforce also had significant impacts on the rate of employment. There was also a higher demand for jobs in the sectors that were part of what Eisenhower called the Military Industrial Complex.

As Hayek says:

One of the dominant features of the immediate postwar situation will be that the special needs of war have drawn hundreds of thousands of men and women into specialized jobs where during the war they have been able to earn relatively high wages. There will, in many instances, be no possibility of employing the same numbers in these particular trades.

But now that the war was coming to an end employment was going to once again become an issue. The soldiers coming back from war who were not mentally or physically fatigued would be looking to re-enter the workforce immediately. With less of a demand for weaponry and other war-related products, the employer’s demand for jobs would decrease at the same time the workforce market was increasing. Not only were veterans looking for work, but there were now also more women competing for some of these same jobs in the workforce.

This caused many to turn to the government to provide enough jobs to keep the employment rates high. Books like William Beveridge’s Full Employment in a Free Society asserted that the free market was not capable of creating full employment and so it was the state’s job to provide this to all individuals.

Hayek comments on this belief of “full employment” saying:

It is, in fact, in this field that the fascination of vague but popular phrases like “full employment” may well lead to extremely shortsighted measures, and where the categorical and irresponsible “it must be done at all cost” of the single-minded idealist is likely to do the greatest harm.

And while the answer for the country’s unemployment woes was not to be found within state bureaucracies, the prospect of massive unemployment was still a major problem in the post-WWII era, as Hayek explains:

There will be an urgent need for the transfer of large numbers to other jobs, and many of them will find that the work they can then get is less favorably remunerated than was true of their war job. Even retraining, which certainly ought to be provided on a liberal scale, cannot entirely overcome this problem. There will still be many people who, if they are to be paid according to what their services will then be worth to society, would under any system have to be content with a lowering of their material position relative to that of others.

But, most people do not want to lower their material positions, even after surviving a war. And as we see happen today, when this material status is in any way threatened, labor unions and activists began calling for a raising of wages to help correct this great “injustice.” But this can not be done with coercion threatening our liberties.

Hayek says:

If, then, the trade unions successfully resist any lowering of the wages of the particular groups in question, there will be only two alternatives open: either coercion will have to be used (i.e., certain individuals will have to be selected for compulsory transfer to other and relatively less well paid positions) or those who can no longer be employed at the relatively high wages they have earned during the war must be allowed to remain unemployed until they are willing to accept work at a relatively lower wage.

And, as many free market economists have tried to warn in our current day, there is the failure on the part of many of these labor activists to recognize that by artificial raising wages, other inflationary measures must be taken as well.

Yet to raise all other wages and incomes to an extent sufficient to adjust the position of the group in question would involve an inflationary expansion on such a scale that the disturbances, hardships, and injustices caused would be much greater than those to be cured.

And while the state could use its power to waive its proverbial magic wand and do its best to force full employment, it does not usually turn out as many would hope:

There will always be a possible maximum of employment in the short run which can be achieved by giving all people employment where they happen to be and which can be achieved by monetary expansion. But not only can this maximum be maintained solely by progressive inflationary expansion and with the effect of holding up those redistributions of labor between industries made necessary by the changed circumstances, and which so long as workmen are free to choose their jobs will always come about only with some delays and thereby cause some unemployment: to aim always at the maximum of employment achievable by monetary means is a policy which is certain in the end to defeat its own purposes.

False Philanthropy

Those calling on the state to provide jobs and higher wages to all individuals have a tendency to believe that they are standing on moral high ground. These people believe that forcing individuals to meet their “charitable” expectations is only right. Nothing could be further from the truth. Forcing “ideal” behavior through coercion does not make people moral. People will do almost anything when forced.

Touching on this, Hayek writes:

What our generation is in danger of forgetting is not only that morals are of necessity a phenomenon of individual conduct but also that they can exist only in the sphere in which the individual is free to decide for himself and is called upon voluntarily to sacrifice personal advantage to the observance of a moral rule.

An individual is not acting out of personal responsibility when he or she is forced to do something. Instead, whatever act is being forced is neutral, serving only the ends of the state and no moral ends that will serve to benefit the individual in any way. If someone held you at gunpoint and demanded that you give five dollars to a homeless individual, that would not make your “donation” moral, but it would make the gun holder’s actions immoral.

Hayek says:

Outside the sphere of individual responsibility there is neither goodness nor badness, neither opportunity for moral merit nor the chance of proving one’s conviction by sacrificing one’s desires to what one thinks right. Only where we ourselves are responsible for our own interests and are free to sacrifice them has our decision moral value.

When acting out of fear of state retribution, we are not acting of our own volition, we are simply doing what we have to do to stay out of a prison cell.

Hayek writes:

Responsibility, not to a superior, but to one’s conscience, the awareness of a duty not exacted by compulsion, the necessity to decide which of the things one values are to be sacrificed to others, and to bear the consequences of one’s own decision, are the very essence of any morals which deserve the name.

And after explaining that coercion is not on par with authentic philanthropy, Hayek laments the direction society is headed. As has been the theme throughout the last few chapters of this book, Hayek worries that by abandoning the English concepts of liberalism, we are quickly approaching collectivism.

That in this sphere of individual conduct the effect of collectivism has been almost entirely destructive is both inevitable and undeniable. A movement whose main promise is the relief from responsibility cannot but be antimoral in its effect, however lofty the ideals to which it owes its birth.

One of the primary elements of classical liberalism is the focus on self-reliance and personal responsibility, without which, a free society cannot truly exist.

It is true that the virtues which are less esteemed and practiced now—independence, self-reliance, and the willingness to bear risks, the readiness to back one’s own conviction against a majority, and the willingness to voluntary cooperation with one’s neighbors—are essentially those on which the working of an individualist society rests. Collectivism has nothing to put in their place, and in so far as it already has destroyed them it has left a void filled by nothing but the demand for obedience and the compulsion of the individual to do what is collectively decided to be good.

Looking to the Future

Hayek always tries to end his chapters on somewhat of a hopeful note. But at the end of this chapter, you can sense the sadness in his writing. Hayek, who as we have seen was a bit of an anglophile was sad to see the English liberal traditions fading from popular opinion.

Hayek has continuously written about his deep respect for the classical liberal tradition that derived from England. He truly believed that holding vigorously to these ideas was the right antidote to economic servitude.

If we are to succeed in the war of ideologies and to win over the decent elements in the enemy countries, we must, first of all, regain the belief in the traditional values for which we have stood in the past and must have the moral courage stoutly to defend the ideals which our enemies attack.

And closing the chapter with a rather frank statement that reflects the political rhetoric of the day, Hayek says:

Not by shamefaced apologies and by assurances that we are rapidly reforming, not by explaining that we are seeking some compromise between the traditional liberal values and the new totalitarian ideas, shall we win confidence and support. Not the latest improvements we may have effected in our social institutions, which count but little compared with the basic differences of two opposed ways of life, but our unwavering faith in those traditions which have made England and America countries of free and upright, tolerant and independent people is the thing that counts.

Perhaps Liberty Is No Longer The Right Word

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Liberty is one of our unalienable rights, enshrined in the Declaration of Independence. Yet there doesn’t seem to be much demand for it these days.

In politics, the Libertarian Party, which supposedly stands for more liberty and less government, gets very few votes. Virtually all of the votes go to the two wings of the Ever-Bigger Government Party, the Democrats and Republicans.

In Economics – the essence of civilization and of man’s human existence, according to Ludwig von Mises – we also seem to reject liberty. There is a well-established science of the role of free markets in raising the quality of everyone’s lives, and of the role of creative and ethical entrepreneurship in promoting justice and well-being. Yet we hamper free markets and shackle our entrepreneurs in regulations and legislative interference.

Where Are The Heroes Of Liberty?

It’s hard for most people to identify heroes of liberty today. Ron Paul made a strong splash but now ploughs a lone furrow. Inspiring individuals like Tom Woods have a following, but it’s small compared to mainstream media and late-night comedians. There are magnificent institutions like Mises Institute and the Foundation For Economic Education; they do great work for liberty and free markets and individual freedom, but they are hardly prominent in the grand scheme of Americans’ awareness.

If we look at this situation through a marketing lens, we would conclude that the product, liberty, lacks demand. It’s not persuasive. It doesn’t meet a compelling need on the part of target consumers.

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Let’s Use Language That Reflects What People Want.

So what do these target consumers want? A 2013 Pew Research Center report told us (among other things) that “Polls show they just want a better chance of achieving success themselves – they do not want redistributive government policies, they want ones that give everyone a fair shot at success, reflecting bedrock American belief in the individual’s ability to succeed through hard work.”

This is a highly revealing and encouraging insight from one of America’s truly non-partisan think tanks. It is highly consistent with our Hayekian bent at Center For Individualism, favoring rules of just conduct that provide inducements for all to try to identify their chance at success and work, through trial and error and long term effort, to seize the opportunity they are able to identify. There are no guaranteed outcomes, but there is the assurance that everyone has an equal likelihood to benefit from their own hard work. Skill and luck also play a part, and so there is no sense in calling the outcome either just or unjust. It’s the equal opportunity to try. The fact that Americans embrace this idea, making it a “bedrock belief”, is what makes America great.

What Americans are able to achieve via this bedrock belief is a spontaneous order that delivers the best result to the most people via the fairest shot at success, as opposed to the destructive and vindictive central planning wars that politicians promote. Should we place the word “liberty” on this system of social order? It might have had that meaning in 1776, when linked to the pursuit of happiness, but the word seems to have lost its attraction for people.

Our Word Is Individualism.

We prefer the term Individualism – “Individualism True” as Hayek wrote – to capture the idea of the individual’s ability to succeed through hard work. You can check out our manifesto for Individualism here. We hope you will join us.

Spontaneous Order: The Beautiful System That Emerges From Individualism.

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As humans, we are a product of spontaneous order, specifically of a version of spontaneous order that we call evolution. With no plan and no planner, innovations (genetic mutations) occur randomly, are tested in the marketplace of survival, and the most successful go forward. The outcome has been beneficial for the entire species.

Spontaneous order is a concept with a long history in economics and sociology. Steven Horwitz has traced the spontaneous order tradition from Adam Smith to Carl Menger to Hayek. It is F. A. Hayek who is viewed as the primary champion of the idea that the spontaneous collaboration of free people “creates things which are greater than their individual minds can ever fully comprehend.” Allowing spontaneous orders to flourish is the essence of a free society.

Why are we not more open to the idea of spontaneous order?

Why, then, is spontaneous order repressed in modern societies and economies? Why do we insist upon, and seem to prefer, hierarchies, authority, designed institutions and planned economies?

Our human brains do not seem to be able to understand or conceive of a system of emergent order for the social organization of the species. We insist on a linear vision of cause and effect, on hubristic processes of design, and on rigid authoritarian and hierarchical social structures.

If, instead, we could recognize the beneficial outcomes of spontaneous order and embrace a future characterized by conditions that favor spontaneous order, we’d all live better and more fulfilled lives.

Sync is everywhere.

Steven Strogatz can help to open our minds to this possibility with a book called Sync: How Order Emerges From Chaos In The Universe, Nature and Daily Life. Dr. Strogatz is a Professor of Applied Mathematics who has focused on a science of Synchrony, Sync for short.

He starts the reader of his book on a journey of explanation with a seemingly simple example. Fireflies are known flash in synchrony, each flashing on and off at the same time. How do they orchestrate themselves? At this point he introduces us to an important concept: coupled oscillators.

These are pairs of biological phenomena that can influence each other. If one firefly fires early, it can influence its coupled oscillator neighbor to speed up. If one fires late, it can influence its coupled oscillator to slow down. Eventually, each pair gets in sync and an entire neighborhood of fireflies can become synchronized. How do they do it? Dr. Strogatz reveals the big idea: they self-organize.

He then gives us additional examples of coupled oscillators synchronizing, including crickets chirping, the firing of pacemaker cells in the human heart, and stock market booms and crashes. The richness of the world is due, in large part, he says, to the miracle of self-organization.

But he observes, “Unfortunately, our minds are bad at grasping these kinds of problems. We’re accustomed to thinking in terms of centralized control, clear chains of command, and the straightforward logic of cause and effect. But in huge, interconnected systems, where every player ultimately affects every other, our standard ways of thinking fall apart.”

Free Markets In Sync.

In fact, he has given us our first clue to the acceptance of spontaneous order. We can think of individuals in unhampered economic markets engaging in mutually voluntary exchange as coupled oscillators. Buyers and sellers. Producers and consumers. Each aligns with the other through market feedback (when the producer observes what the consumer does and does not buy) and the pricing mechanism (when the producer discovers what value the consumer assigns to different choices available to them). These coupled oscillators can achieve sync if there are no restrictions on their mutual communication.

Sympathy Begets Sync.

Another chapter is entitled “The Sympathetic Universe”. Dr. Strogatz tells the story of the seventeenth century Dutch physicist Christian Huygens, who observed two pendulum clocks hanging close to each other in his room whose pendulum swings started out unsynchronized but, over time, synchronized themselves. He attributed the phenomenon to “a kind of sympathy” between them. In fact, Strogatz demonstrates that the effect springs from the laws of mathematics and physics.

Yet the word “sympathy” resonates, because Adam Smith told us (in Theory Of Moral Sentiments) that sympathy is the basis for the synchronized working of markets and societies.

We are each endowed with a natural sympathy towards others. When we see others distressed or happy, we feel for them. In markets, this sympathy results in entrepreneurs developing new offerings designed to alleviate others’ dissatisfactions and improve their lives. The feedback loop from customer to entrepreneur, indicating whether the new offering is accepted and valuable, is sympathy operating in the reverse direction. The entrepreneur and the customer are coupled oscillators synchronizing via sympathetic connection.

Small-world Networks

In the final section of Sync, Dr. Strogatz tells us about “small-world networks.” In studying the networks in which oscillators are connected, scientists have identified some conditions under which sync and the rapid, sometimes explosive, spread of information and ideas are most likely to emerge. The pattern of connections between individuals – “the architecture of relationships” – is what matters.

Structure always affects function. The structure of social networks, for example, affects the spread of information. The “small-world” structure refers to a complex network which includes a tight knit set of “local connections” (think family, friends, neighborhood, work colleagues) and a widely flung set of global connections (think people all over the world whom we correspond with on e-mail, our LinkedIn network of connections, globally distributed connections in a professional association, and so on).

The internet is one simple example of a small-world network. Most web pages link to others on the same topic, but occasionally may veer off onto idiosyncratic byways. To use the example of infectious diseases, “Ebola demonstrated that infectious diseases spread mainly within tight-knit communities, but also hitch rides on airplanes.”

Simple Rules.

Simple general rules determine how sync emerges in vast networked populations. In a separate TED talk, Strogatz explained the general rules for a flock of starlings or a school of fish to move in incredibly beautiful synchronized motions.

“There are just three simple rules. First, all the individuals are only aware of their nearest neighbors. Second, all the individuals have a tendency to line up. And third, they’re all attracted to each other, but they try to keep a small distance apart. And when you build those three rules in, automatically you start to see swarms that look very much like fish schools or bird flocks. Now, fish like to stay close together, about a body length apart. Birds try to stay about three or four body lengths apart. But except for that difference, the rules are the same for both.”

This brings us neatly back to F.A. Hayek and his sociology of spontaneous order. He proposed that all individuals be free to act and to innovate in a system of general rules that apply to all, and do not favor one individual or group over another, or favor a predetermined outcome. They connect with each other through knowledge and information sharing, and provide feedback to each other through the price system.

Today, individuals can share and express their sympathy for each other both locally and globally, in what Dr. Strogatz would call a small-world network. And, as Brittany Hunter has pointed out, if we look, we find spontaneous order all around us.

Conditions are ideal for sync and spontaneous order – if we let it emerge.

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