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Wikipedia and Hayekian Philosophy: Spontaneous Order

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Over the course of human history, information, and thus knowledge, has been more or less controlled by those in power. This is, obviously, a dangerous precedent as the guarding of knowledge means that a central authority is in charge of determining who has access to that knowledge.

But in our digital age, information is becoming decentralized and more accessible than at any other time in history. Much of this is largely thanks to Wikipedia, which has become the first place most people look for information.

In a previous article, I wrote about the influence economist F.A. Hayek had on Jimmy Wales, the founder of Wikipedia. While the last article addressed the concept of the knowledge problem and how Wales had specifically set out to solve this problem. But in addition to making information accessible to all those who seek it, Wales also incorporated another aspect of Hayekian economics when he created Wikipedia: spontaneous order.

Spontaneous Order

Spontaneous order is the belief that market order emerges when individuals are free to voluntarily exchange with each other and create value. But when governments interfere with this process and impose regulations on the market, this order is inhibited and value creation stifled. 

As Lawrence Reed from the Foundation of Economic Education said, “Spontaneous order is what happens when you leave people alone—when entrepreneurs… see the desires of people… and then provide for them.” And this is exactly how Wikipedia came to fruition.

Jimmy Wales recognized that there was indeed a knowledge problem, as Hayek has pointed out in his essay, “The Use of Knowledge in Society.” Seeing a void in the market, he created an online encyclopedia that was accessible to anyone with the internet. But he didn’t stop there.

The internet has made so much information readily available to its users, but that does not mean that this information is always true. The era of “fake news” has made this problem even worse, as many have even called on the government to take an active role in censoring any information thought to be false. So how do you ensure that your users are getting the most reliable information when there is so much information available online? You create your own voluntary community and practice self-regulation. 

Self-Regulating

There is no governing body controlling the information that is available on Wikipedia. And with so many internet trolls roaming the web, this sounds like it would yield nothing but chaos. However, the opposite is true.

When it comes to the rules for posting content, Wikipedia does have its own form of rule of law. As Wales told Wired during an interview:

“Yeah, so there are general principles that do get written down and in certain cases the general principles are so widely and immediately obviously accepted that, you know, upon being written down it becomes pretty firmly entrenched.”

If, for example, someone added someone’s address or telephone number to a Wikipedia page, this would break the general rules. There would be no need to discuss what type of action to take since this was a clear violation. But when it comes to disputes over the information itself, the community comes together to self-regulate using a system of common law.

As Wales says:

“…In other words, you can take some principle and apply it fairly mechanically and have precedence that you set for your previous cases that you follow repeatedly, mechanically, and that’s you know, consistency is a good thing.”

When a conflict arises, the community comes together to discuss the problem and put it in terms of the existing common law. This helps the community make consistent, just decisions when dealing with disputes. But what makes this dispute resolution so interesting is that it is transparent and available for all to see. This makes the whole process open to everyone viewing the site. 

There are also incentives for Wikipedia users to provide the most accurate information as possible. Since there is clout associated with being a reliable source, it is in each users self-interest to only provide accurate information. 

Those who eagerly call for government regulation do so because they do not believe individuals are capable of regulating themselves. But Wikipedia shows us that the opposite is true. While there are examples of spontaneous order naturally occurring in real life, it is interesting that Wikipedia actually set out to be a manifestation of Hayek’s economic philosophy.

And thanks to Wales and his Hayekian vision, the world has access to more information than at any other time in history… and the government has had absolutely nothing to do with it.

The English Language Is the Product of Spontaneous Order

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No matter how many examples there are of spontaneous order emerging out of chaos, there are still those who cannot bring themselves to believe that such a system, or lack thereof, is possible. In previous essays, I have shown that spontaneous order is not only possible but that it is already happening all around us. And while previous articles touched on dancing, roads, and survival instincts in nature, this essay focuses on something we use every day: language.

The ability to form complex languages is what separates humans from all other living species.  And language, like markets, spontaneously derive from necessity, whether of a good or service or of communication. And just as humans are anxious to exchange money for desired goods and services, so are they eager to communicate with others to facilitate the exchange of ideas. But neither scenario requires any action from any central authority.

The English we speak today is different than the English used by our Founding Fathers. But these organic changes occurred in the absence of a central authority controlling and dictating the terms. And yet, considering all this, somehow we are still able to communicate with each other.

The English Language

The English language is unique. Younger than many others, there really is no “pure” English language. Instead, it borrows from a variety of different languages to form something completely new altogether. As American Enterprise Institute’s (AEI) Mark Perry points out, “If you speak English, you know words from at least a hundred different languages. That’s because English has borrowed words from languages everywhere, and continues to do so.”

But while this may seem like a chaotic way to form a language, human beings have managed to adjust adopt new words without the need for government mandates. And as a result, the English language is a free-flowing exchange of ideas.

Perry writes:

“Nobody is in charge! Human languages in general, and English in particular are perfect examples of “spontaneous order,” the spontaneous emergence of self-organization and order out of seeming chaos. And perhaps it’s because English has been the language most open to borrowing words from other languages that is has developed the most extensive and richest vocabulary.”

An Abundance of Choice

But the same cannot be said of other languages. Unlike America, which prides itself on the exchange of different cultural ideas, France is homogeneous by nature. The French government prefers to keep its culture rooted in French tradition, and language is no exception to this rule.

As Perry says:

“The opposite approach to allowing a language to develop according to spontaneous order, is  that of the French Academy, which actively tries to limit the French vocabulary and prevent the “anglicisation” of the French language.”

In fact, France is so controlling over its language, it even controls what you are allowed to name your children. Parents looking to bestow an untraditional name upon their children must first prove that the name has been previously established elsewhere. In many instances, this means having to use contemporary literature to justify “untraditional” names.

This type of central control serves only to limit the exchange of ideas within the country because spontaneous action cannot occur. It must first be sanctioned by the French government. And just like government regulation inhibits market innovation, so does it also inhibit individual freedom by restricting language.

But France is not alone in this. In another article, Perry writes:

“Number of words in the English language:500,000 according to the number of words in the Oxford English Dictionary. There are supposedly another 500,000 uncataloged technical and scientific terms. By comparison, most estimates indicate that German has a vocabulary of about 185,000 words and French and Spanish have fewer than 100,000 words.”

With such an abundance of words, the English language allows us the opportunity to better communicate our thoughts and feelings with others. Along those same lines, allowing for more options in a free and spontaneous marketplace allows consumers more options to better suit their personalized needs. But like language, the only thing that stands in the way of consumers and seemingly unlimited options is government regulation.

Independent Minds Discover The Flexible Fabric of Reality.

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“When I’m playful I use the meridians of longitude and parallels of latitude for a seine, drag the Atlantic Ocean for whales.” These words are from Mark Twain’s 1883 memoir Life on the Mississippi, and at that time – a whimsical daydream. But according to author Dava Sobel in her book Longitude, “Anyone alive in the 18th century would have known that the longitude problem was the thorniest scientific dilemma of the day – and had been for centuries.”

For all of mankind’s seafaring history, cartography and navigation involved a baffling and complex system – an orbiting and rotating planet. It was a global challenge for the most complex of systems, the neurons and synapses of the human mind.

The Space-Time Continuum

The imaginary fabric of Twain’s net was first presented graphically by the Greco-Roman mathematician and astronomer Ptolemy in 150 AD. And determining latitude was relative child’s play, the laws of nature had revealed the equator as the zero-degree parallel. Yet as Sobel describes, “the zero-degree meridian of longitude shifts like the sands of time.” Ptolemy could put it wherever he liked, and he did, and in the following centuries it became a purely political decision.

It was mathematician and astronomer Galileo, whose land based method using Jupiter’s moons, finally gained acceptance in 1650. As Sobel writes “Renowned astronomers approached the longitude challenge by appealing to the clockwork universe. Palatial observatories were founded in Paris, London, and Berlin for the express purpose of determining longitude by the heavens.” But it was another observation of Galileo’s that changed the course of mankind, despite the political and scientific elites.

While a young medical student sitting in church, Galileo observed the motion of a swinging lamp. He timed its arcs with his own pulse, and discovered that its rate of speed was a function of the length its chain. According to Galileo’s protégé Vincenzo Viviani, “Galileo always intended to put this remarkable observation to work in a pendulum clock, but he never got around to building one.”

What he did, according to Sobel in her book Galileo’s Daughter, while a professor at Pisa in 1589, “he measured the swinging of pendulums; and he rolled bronze balls down inclined planes to derive the rate of acceleration in free fall.” This was a breakthrough discovery. As Galileo was stitching together the flexible fabric of space and time, he was also scratching the surface of the anti-Copernican Edict of 1616. For his efforts he was awarded a conviction by the Holy Offices of the Inquisition in 1633.

The World Wide Web

A century before the Copernican Edict there lived another renegade. His countrymen referred to him as a traitor, but today Lisbon proclaims: He is ours! In middle age this maverick renounced his native land. He then received a commission from King Carlos I of Spain to venture west. His Anglicized name is Ferdinand Magellan, and according to historian William Manchester in his book A World Lit Only by Fire, “he couldn’t even be certain of what he was looking for until he found it, and the fact that he had no clear view of his target makes the fact that he hit it squarely all the more remarkable.”

Like his contemporaries during the Age of Explorers, he was almost always lost. According to Magellan’s scribe Pigafetta, “The captain spends many hours studying the problem of the longitude but the pilots content themselves with the knowledge of the latitude.” A singularity among 16th century men, he rewarded those who performed well and was respected for his supreme competence.

According to Manchester, he was “meticulous, fiercely ambitious, stubborn, driven, secretive, and iron-willed. Magellan possessed an inner vision he shared with no one. He was a man of boundless curiosity, and found reality equally enthralling.” His sense of mission was adventure, but his political sponsors had a different sense of mission – property. He used them to eventually stitch together the world wide web, our flexible fabric of meridians and parallels that cover mountain tops and oceans floors.

Connecting the Dots

Ptolemy defined the problem of longitude, and in 1519 Magellan studied it as if his life depended on it, and it did. Galileo’s celestial solution was useless to navigators, but his idea of pendulums as time pieces was lightning in a bottle. The dilemma, “one that stumped the wisest minds of the world for the better part of human history,” instead led to “accurate determinations of the weight of the earth, the distance to the stars, and the speed of light.” As Sobel continues in Longitude, “what Newton had feared as impossible,” required not a celestial clock, but a mechanical one.

In 1714 the British Parliament passed the Longitude Act. It established prize money for a reliable and repeatable solution, and was worth millions of dollars in today’s money. It was finally awarded to a man “with no formal education or apprenticeship to any watchmaker, he nevertheless constructed a series of virtually friction-free clocks that required no lubrication or cleaning, made from materials impervious to rust.”

In 1773, John Harrison finally collected his prize, despite “decades of political intrigue, the backbiting of academic elites, and scientific revolution.” Sobel concludes Longitude saying “With his marine clocks, John Harrison tested the waters of space-time. He succeeded against all odds, in using the fourth dimension to link points on the three dimensional globe. He wrested the world’s whereabouts from the stars, and locked the secret in a pocket watch.”

The Flexible Fabric of Reality

Ptolemy, Magellan, Galileo, and Harrison shared qualities that make them shining hubs among the countless nodes of the creative human network. Among them are curiosity, reason, vision, ambition, and will. In that order. Hierarchies are only in the way. The rotation of the earth is a concrete. The dark matter of gravity is a concrete. They are everywhere. They are complex systems to be understood and appreciated. The flexible fabric of reality discovered by these renegades belongs to all of us. And like them, the flexible fabric of human action is everywhere, and it is called spontaneous order. It is the incomprehensible network of human activity we call economics.

It’s nodes are countless scientists, entrepreneurs, investors, inventors, artists, and consumers; all engaged in life affirming activity, trading value for value. And they stand ready to defend the only concrete it requires, economic freedom. As economic scientist Ludwig von Mises has discovered, “In a system where there is no market, where the government directs everything, all freedoms are illusory, even if they are made in to laws, and written up in constitutions.”

 

Expert Planning Takes On Bike Sharing And Blows A Tire.

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Around sunrise this July 22ndin Onawa Iowa, near the Missouri River, more than 10,000 individuals from all over the world will swing a leg over a bicycle, clip into their pedals, and venture eastward. One week later the grand tour will end in Davenport, on the Mississippi. The cyclists arrive in all ages, shapes, and sizes; and it’s been going on every year since 1973. No one planned that.

Spontaneous Order Meets The Field Of Dreams.

The idea was hatched by two avid riders, a reporter and editor at the Des Moines Register. Their goal was to finagle a week long bike vacation to be paid by their employer. The pitch was to write a column every day about the people, communities, and scenes of Iowa they would discover from the seat of a bicycle. The original trek began in Sioux City, and after 6 days would also end in Davenport. In between it would be rolling hills, water towers, grain elevators, corn, and soybeans.

A few weeks earlier writer Don Kaul announced the journey in his ‘Over the Coffee’ column and invited readers to join them, no amenities provided. It’s estimated that 300 cyclists showed up, as many as 500 rode on the more populated stretches, and over 100 finished. A few thousand more complained that the notice was too short, school had started, and there was the Iowa State Fair. One of those who showed up and completed the ride was an 83 year old farmer by the name of Clarence Pickard. His gear included an old Schwinn, long pants, long sleeved shirt, woolen long johns – “they keep me cool”, and a duct-taped pith helmet.

From Landscapes To Cityscapes.

Now known as the Register’s Annual Great Bicycle Ride Across Iowa, its immense popularity has inspired similar week long bicycle adventures across many other states. The healthful benefits of cycling have also inspired the construction of bike paths in many American communities. And as a pollution free mode of transportation, urban bike-sharing projects have sprung up around the world. According to a recent Wall Street Journal article, Paris is considered the urban bike-sharing paradise, their service is named Velib. And per the city’s transportation deputy, bike-sharing is an important part the city’s identity.

At its recent peak, there were 1,200 Velib stations, and it averaged 100,000 bike rides per day. In celebration of the system’s success, a new contract has now been awarded to upgrade the network at a cost of only $734 million. Assuming peak usage every day, this works out to a mere $20 per bike ride over a full year, not including the untold millions already spent. And to improve upon the healthful benefits of cycling, or promote green transportation, or increase profitability, take your pick, electric powered bikes were added to the system.

Expert Planning Blows A Tire.

The actual results of this socialism inspired program were predictable. The newly installed bike stations are not compatible with the old system, so they aren’t connected to the power grid. The batteries that allow users to unlock bikes become dead trying to connect to power. The workers assigned to replace the batteries have gone on strike. The City of Light now has holes in the pavement lining the streets where the old stations have been ripped out. The new ones can’t be installed because of problems with the soil under Paris’ streets.

French media now refer to their bike-sharing paradise as an “industrial catastrophe.” Sadly, this is undermining the popularity of their Socialist mayor and her reputation for competence. Really? As is typical, the accusations have started flying. The mayor’s office is blaming the new contractor. The contractor is blaming the electric utility company and the previous operator. Also blamed is the “impossible to predict” centuries of construction in Paris that left behind gravel filled earth. Next, Quasimodo will be summoned before a tribunal, Esmeralda defending, to fight off the Parisian power structure.

A bike-sharing blogger calls it “a shame.” An entrepreneur would call it hubris and waste. Socialists are never accountable, capitalists always are. Those in need of a real ride-sharing service while visiting Paris should try Lyft or Uber. It would be cheap, faster, and more reliable except for one fat nail in the road, the National Union of Taxis. The same hierarchy behind Velib is also behind its chauffeur licensing requirements.

Personal Ownership And Government Ownership.

Comparing recreational bike touring with its urban transportation cousin may be a link short of a chain, but their creation offers valid lessons. The urban bike-sharer is entitled to the first 30 minutes for free, on the same unit everyone gets, if it works. If not, they’re dependent on the government hierarchy. The cross-state cyclist is also entitled: to the wind, hills, heat, and rain atop their favorite chariot. They enjoy this self-reliance with a cast of thousands, all looking out for each other. And a network of entrepreneurs is everywhere. Bike mechanics, pork chop hustlers, and smoothie purveyors; all anticipating the needs of the riders, and serving them cheerfully, trading value for value.

Velib has earned a lot of detractors and will get more expert planning. Iowa has earned a lot of fans for its hospitality, rolling terrain, and network of two lane paved roads. They were never planned for cycling and no one complains. I’ll take the old farmer from Indianola over the mayor of Paris all day long.

Spontaneous Order Is Optimism, Central Planning Is Pessimism.

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Optimism, how perfectly human. It’s the attitude that tomorrow will be better, and that the outcome of a specific endeavor, or outcomes in general, can be positive and desirable. But there’s also pessimism, the anticipation of undesirable outcomes from a given situation. Perhaps Voltaire was thinking of both extremes in his classic novella Candide, when he wrote “If this is the best of possible worlds, what then are the others?”

Pessimism and optimism display themselves in economics, irrespective of whether you believe it is a science or not. Pessimists dismiss economics as the dismal science. Thomas Carlyle coined the term, and said economics was dismal in “finding the secret of the Universe in “supply and demand”, and reducing the duty of human governors to that of letting men alone”.

The optimists say that “letting men alone” is the whole point. They embrace economics as the science of human achievement, the science of life. In supply and demand terms, optimists are the supply siders and pessimists are the demand siders. Optimists favor free markets, have faith in individuals, get excited about the future, and in times of crisis: stay out of the way. Pessimists get excited about catastrophe because it gives them the chance to intervene to fix things. Never letting a crisis go to waste means confiscate, spend, and grow power.

Spontaneous Order Versus Crisis Management.

The difference between the two sides can be summed up as spontaneous order versus crisis management. As social researcher Peter Saunders explains:

Nobody planned the global capitalist system, nobody runs it, and nobody really comprehends it. This particularly offends intellectuals, for capitalism renders them redundant. It gets on perfectly well without them.

The crisis management folks remain nonplussed. They refuse to acknowledge spontaneous order or the sheer complexity of economic systems. So who’s right?

A great place to observe economic complexity is the financial markets. There are historical data sets available that detail trillions of transactions effected by millions of people. Financial scientists have analyzed the data and their groundbreaking research has earned Nobel Prize recognition. We now know the research as Modern Portfolio Theory, the Capital Asset Pricing Model, and the Efficient Market Hypothesis. These theories embrace the spontaneous order idea that all the information in markets is embedded in prices, and that analysis of prices and price trends and price relationships can point to where value creation will occur. Understanding markets comes from such analyses.

Traditional investment managers however were skeptical; they didn’t buy the efficient market theory. They are stock pickers after all; their job is to find value in so-called mispriced assets, and outsmart the market’s perceived inefficiencies. If they bought in to efficient market theories, it would render them redundant. Their value is their forecasting acumen and company research. They present themselves as smart guys and gals delivering an information advantage to their clients, as they are expected to do. And for those that do it well, it works a little more than half the time, hopefully net of fees.

Entrepreneurial Initiative Tests Who’s Right.

To prove their point, some of the academic researchers decided to put their spontaneous order theories to the test. They became entrepreneurs. They tested their ideas in the real world of competition, transactions, and liquidity. They created an investment company and deployed real capital from real investors in real time. Competitive pressure would mean relentless scrutiny; success and failure would be rewarded accordingly. They were successful – business was good, very good. The industry was finally forced to sit up and take notice. Many firms have since introduced similar strategies known as smart beta and factor based investing. The optimists were proven right in the marketplace, and consumers won via greater choice and lower prices for investment services.

These innovative analysts were focused on the price mechanism, not forecasts. They knew that everything worth knowing about a stock is built in to its price. The goal is to identify the dimensions of return that are baked into financial markets, that can be easily harnessed, and get out of the way. They don’t waste money making predictions or buying advertising. They are advocates for complexity and its spontaneous order. Here economist Donald Boudreaux compares complex economies to the natural world:

The same wisdom that guides our understanding of biology all too often abandons us when we contemplate the economy. Attempts to intervene into market economies are very much like humans’ attempts to fly by dressing like birds and flapping fake wings.

Pessimists Beg To Differ.

Yet pessimists refuse to permit the free operation of markets. They regard free people trading value for value, and their resulting prosperity, as materialism and greed. Like Carlyle, they see an undesirable outcome:  plunder scammed from the disadvantaged. Redistribution is their moral undertaking. They promote the pessimistic idea that the future would be catastrophic without their wise intervention. But their real fear is being rendered redundant. There is no place for them in the optimistic world of spontaneous order.Their economist with the loudest megaphone is Paul Krugman. To him, if all-out war is necessary to stimulate demand, so be it. We “needed Hitler and Hirohito” to get us out of depression, he said. Talk about a dismal science.

On the bright side, economist Brian Wesbury reminds us that optimists are concerned with what people can produce, how inventions raise productivity, and how the world works. And as economist Friedrich Hayek observes about human betterment, “society arose through the discovery that men can live together in peace and mutually benefiting each other without agreeing on the particular aims which they severally pursue.” The optimist only asks, just please get out of our way.

Five Real World Examples of Spontaneous Order

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Commenting on spontaneous order, Hunter Hastings once wrote:

“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 going forward. The outcome has been beneficial for the entire species.”

This concept of spontaneous order, or emergent order as it is sometimes called, was made popular by economist F.A. Hayek who believed that the economy was far too complex for one single individual to comprehend. But this concept often frightens those who think that governments should be regulating and controlling the market.

What many fail to recognize is that spontaneous order not only exists in the marketplace, examples of it exist all around us in the real world. The following are five examples of spontaneous order appearing in everyday situations.

Music Festivals

At music festivals, where alcohol is sold in abundance, predators come in the form of rowdy dancers who may not be completely aware of their surroundings. But again, without any preplanning, the crowd is able to swerve and sway and hold space in order to protect themselves. And while it appears to be done as a group it is not. As Strogatz says, “Even though it looks like they’re thinking as a group, they’re not.” Read more about spontaneous order existing all around us here. 

Ridesharing

When the sharing economy began rising to prominence in the marketplace, it was virtually unregulated. Its existence was born of the consumer’s desire for higher quality transportation.

Prior to Uber and Lyft, consumers were not left with many choices when it came to hailing a taxi. Cabs had been the only game in town for over 80 years. The traditional cab companies had not had to deal with competition before, therefore, they had no real reason to innovate.

But this void in the market left a natural opening for spontaneous order to occur. Without asking for permission, companies like Uber and Lyft were able to grow their own free market legacies. And the consumers were grateful. Read the full article here. 

Band Practice

During my formative years, I had a front row seat to many “jam” sessions as they were called, where spontaneous order was all around me.  

Without planning or structure, I would watch my friends make incredible music. The drummer would be keeping the rhythm while the two guitarists wailed on their instruments. The bass player keeping harmony while the singer made up lyrics on the spot. Each session lacked order and structure, and it was absolutely fabulous.

It always fascinated me that five individuals come together without a plan, and still manage to make incredibly sounding music. The answer for this, I would later discover, came from the economic principle of specialization. Read more about bands and specialization here. 

Language


The ability to form complex languages is what separates humans from all other living species.  And language, like markets, spontaneously derive from necessity, whether of a good or service or of communication. And just as humans are anxious to exchange money for desired goods and services, so are they eager to communicate with others to facilitate the exchange of ideas. But neither scenario requires any action from any central authority.

The English we speak today is different than the English used by our Founding Fathers. But these organic changes occurred in the absence of a central authority controlling and dictating the terms. And yet, considering all this, somehow we are still able to communicate with each other. Read more about the English language and spontaneous order. 

Ants

Just as humans have spontaneously created language as a means of guiding our actions in cooperation with others, so have ants learned to communicate with each other to achieve the most productive possible results. Rather than obeying some central authority, as is often believed, ants rely on pheromones and hydrocarbons— described by the dictionary as being “a compound of hydrogen and carbon, such as any of those that are the chief components of petroleum and natural gas.” In short, these signals serve as a language used between these ants to communicate with each other.

It is this system, or lack thereof, that has allowed these resilient creatures to survive, albeit to the dismay of many annoyed humans. Since each ant is armed with its own knowledge of the environment surrounding them, they are best suited to warn others. If there were a leader of an ant colony, this survival system would crumble to the ground because one ant, just like one single person, is incapable of knowing everything.

It seems almost silly, then, that the animal kingdom is wiser than humans when it comes to emergent order.

Read the full article here. 

How Fifth Grade Soccer Taught Me about Spontaneous Order

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When I was in the fifth grade, my public school in Orange County, California attempted to teach us a lesson about why we need rules. And what the faculty had hoped would end in chaos actually turned out to be a perfect example of emergent order.

Each day after the students had finished their lunches, we were permitted to play on the playground. For those who didn’t want to use the playground equipment or sit and talk with friends, we also had the option to go play soccer on the field.

Orange County is a haven for soccer players. Almost all of my friends belonged to a team and spent their weekends and after school hours training. I, on the other hand, was not born with the skills of an athlete, so I avoided soccer like the plague.

On one spring afternoon, the adults who were responsible for watching the students during recess asked us to huddle around them for an announcement. Today, they were going to try something new. The usually heavily regulated soccer field would be free from rules for one afternoon.

The students erupted in loud cheers. Our lives were constantly being dictated by rules adults set for us. Most of the time, we didn’t understand what these rules were trying to protect. But we obeyed because to disregard the rules meant punishment.

The Great Soccer Experiment

Hundreds of children ran for the field, anxious to live out this dream of soccer anarchy. As someone with little interest in sports, but a great interest in observing human action, I took myself to the outskirts of the field where I could watch from a safe distance.

Since soccer was a major component of many of these students’ lives, there was no real chaos in the beginning. Students selected their team captains and begin to split up into teams. The only real difference between this day and any other day was the fact that students were permitted to talk and laugh while doing so. Usually, any attempt at small talk during the team selection would warrant a whistle being blown in your face as the adults reminded you to be quiet.

But oddly enough, in the absence of the whistle, things still went smoothly and quickly. The students knew that recess time was limited, they wanted to get on the field and start playing just as much as the adults in charge wanted to control our behavior.

After the teams were selected the real test began: Could a bunch of elementary school students play “lawless soccer” without killing each other? And as it turned out, they could.

I remember standing on the sidelines, waiting for chaos to breakout but instead, noticing how polite and cordial things were. As it turned out, when my classmates were left to their own devices, without fear of having the authoritarian whistle blown in their direction, they were happier because they were free. But this did not bode well for the school’s administration.

After twenty minutes of incident-free playtime, the whistles were back and the students were being rounded up.

The adult on duty cried, “This was a disaster!” All the students looked at each other in surprise. Had we missed something? Was there some bloody student sitting in some corner after being trampled?

“See what happens when there are no rules? This is why you need to trust in the adults to make set guidelines that will keep you safe.”

Again, we all sat perplexed wondering what had just happened. As someone who was not actually playing soccer, I had been watching the entire time. The only difference between today and any other day was the fact that my classmates seemed genuinely happy, instead of constantly looking over their shoulder worrying that an adult would yell at them.

This entire debacle warranted an assembly in which the adults were praised for thinking of such a brilliant lesson to teach us about why rules were needed. All the while, me and my classmates sat utterly confused as to what had really happened. But being accustomed to the “adults always know best” rhetoric, we simply shrugged this off and assumed we had missed something.

What Really Happened on the Field?

I have never been able to fully forget this incident. Even as an adult it has bothered me. The supposedly lawless soccer field was not chaotic at all. It wasn’t until I began studying free market economics that I realized what had really happened on the soccer field that day.

Like all humans, young and old, my classmates were fueled by one of the most powerful motivators of all time: self-interest. Since so many of them were soccer players outside of school, they cared a great deal about the sport. Lunchtime soccer was just another chance to practice their skills and improve. They had no interest in wasting this time. But there is even more to it than that.

The adults had expected the soccer field to turn into a Lord of the Flies fiasco simply because it could. But that never happened. Even as young children we knew enough about life to know that we wanted to avoid getting hurt, which also meant avoiding hurting others. For those who did belong to a soccer team, which was the majority of the students on the field that day, an injury would mean they might have to potentially miss their next soccer game.

On that same train of thought, any attempt to hurt another student would not help you when it came to social capital. No one wants to be friends with a bully. If a student had gone on a rampage and attempted to hurt other players, no one would want him or her on their team. And since we were all stuck together for 12 years of compulsory education, it was not in anyone’s best interest to ruin it for everyone else. Self-interest is a great incentive.

This led to an unspoken understanding on the field: You don’t intentionally hurt me and I won’t intentionally hurt you.

Spontaneous Market Order

This same lesson translates to the market. There is a belief that without rules, all market producers would be trying to poison the food they sell or hurt consumers with their products in some other way. But this rarely happens. Why? Because consumers need the producers and the producers need consumers. To inflict pain or inconvenience on each other would serve no one. This understanding is, in itself, an organic law that keeps the market working for all its players.

When the government gets involved and places unnecessary restriction on the market, they do little more than act like the adults with whistles on the playground, making everyone uncomfortable for no real reason. But even worse, sometimes those in charge partner with producers and protect bad behavior.

When the state gets in the business of protecting certain industries, it disrupts natural responses. Government sanctioned monopolies, for example, are allowed to do whatever they want without responding to consumer feedback, because they have the backing of the state. In truly free markets, consumers could shun a company with bad practices, just like school children could shun a bully acting rudely on the soccer field.

But protecting certain businesses is akin to a school bully being given the authority to hurt other students on the field, with the assurance that the faculty would still force other students to interact with them. This seems outrageous, but it happens all the time. Think of utility companies that enjoy partnerships with local governments. If you are dissatisfied with your gas company, you cannot just switch to another.

When humans are left to their own devices amazing things happen. We need to trust in our ability to work together without government interference, just like my classmates trusted their ability to play a soccer without ushering in the end of the world.

Music, Specialization, and the Beauty of Emergent Order

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I had the fortunate pleasure of growing up surrounded by supremely talented musicians. Raised in a community where music was highly valued, I was exposed to a wide variety of instruments and genres. But what was most exciting about this in hindsight, was the lessons music taught me about spontaneous order.

Jam Sessions

While my family was inherently musical, I learned the most about music from my friends.  During my formative years, I had a front row seat to many “jam” sessions as they were called, where spontaneous order was all around me.  Without planning or structure, I would watch my friends make incredible music. The drummer would be keeping the rhythm while the two guitarists wailed on their instruments. The bass player keeping harmony while the singer made up lyrics on the spot. Each session lacked order and structure, and it was absolutely fabulous.

It always fascinated me that five individuals come together without a plan, and still manage to make incredibly sounding music. The answer for this, I would later discover, came from the economic principle of specialization.

The Division of Labor

Specialization makes the world go round. It is what allows me to be a writer, while someone else is a farmer, and another is a lawyer. Imagine a world without specialization.

Before 19th-century liberalism made the concepts of the division of labor and specialization commonplace, many people were self-sufficient. But this meant doing almost everything for themselves. From planting and harvesting crops to making clothing and constructing homes, individual households were stuck having to do almost everything for themselves. This, of course, leaves little room for much of anything else like hobbies or self-improvement.

But by specializing in a very specific skill, while others did the same, the division of labor was organically created and spontaneous order able to provide consumers with more than they could have dreamed. And we each rely on this system heavily.

As Mises writes in Liberalism:

In order to provide the family of an English worker with all it consumes and desires, every nation of the five continents cooperates. Tea for the breakfast table is provided by Japan or Ceylon, coffee by Brazil or Java, sugar by the West Indies, meat by Australia or Argentina, cotton from America or Egypt, hides for leather from India or Russia, and so on.

And while this system has given us a robust market, it is also seen in other facets of life, such as music, for example.

Specialization and Spontaneous Order

Each musician in a band has specialized in one unique set of skills. The talented drummer has learned to keep perfect time, which in many ways, keeps the rest of the band on track. The guitarists set the tone and the melody of the band, creating those catchy riffs that make us all want to replay a song in our heads over and over again. Meanwhile, the bass provides the harmony while the singer gives the music a relatable story.

Each is doing their own thing, yet they are each pulled together by an unseen force, weaving the music together. And as a result, amazing music is able to occur.

But even when the music sounds balanced and united, no one has given up their specialized task. The drummer is still in his own world doing his own thing, while one guitarist seems to be trying to outperform the other in a “power stance” duel. But this individuality only seems to add to the chaotic yet harmonious music being made.

Anyone who has ever seen a jazz band play will understand this instantly. Each player seems to be marching to the beat of his or her own drummer, and yet the music sounds amazing and united in a common theme. It is almost as if a magical force is keeping everything in perfect order without any one person needed to assume the power to do such.

And the magical force holding the music together is the same that allows the market to flourish when it is untouched by regulation. It is emergent order at its finest.

If each musician was being regulated by an authority telling them how fast they can play or which style they can play in, music would be boring. It’s that simple. Every single performance would be similar to watching a high school band performance where each artist is only subpar at their instrument and terrified of originality.

Likewise, a market where things were uniform and unoriginal would be boring. But when spontaneity is encouraged and individuals are left to their own devices, an amazing form of order emerges.

What a Colony of Ants Can Teach Us About Emergent Order

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Anyone observing a colony of ants will notice that these creatures appear to be among the most organized of the animal kingdom. Never failing to stay in formation, these ants seem to be heeding the call of some unseen authority. So widely held is this observation, that ants are usually seen as the epitome of conformity, thinking not for themselves but steadfastly following a central authority.

But what if our observations are incorrect. What if instead of being the perfect example of submission to power, ants represent something vastly different than blind obedience. Perhaps, ants are actually a manifestation of what F.A. Hayek called, spontaneous order.

Individuals are each armed with knowledge specific to their own unique lives. But as much as each person knows or thinks they know, it can never be enough to plan for society as a whole. It is for this very reason that planned societies are so dangerous. It claims to have a perfect knowledge of things when such an act would be completely impossible.

And yet, popular opinion has arrived at an opposite conclusion. The idea of leaving the market to its own devices is seen not only as risky but dangerous. Without laws, who would be there to protect consumers from tyrannical capitalists? Without regulations, how would we ensure that the world would not dissent into a chaotic free-for-all in which every man was out only to protect themselves? Many cling to this belief structure and use it as a justification for why we need more government in almost every area of our lives.

But, as has been discussed before, nature has been a prime example of showing us that there is actually more order born out of this “chaos” than has ever existed as a result of man-made laws. And for anyone doubting this fact, they need only take a closer look at our small ant friends.

Market Signals

Just as humans have spontaneously created language as a means of guiding our actions in cooperation with others, so have ants learned to communicate with each other to achieve the most productive possible results. Rather than obeying some central authority, as is often believed, ants rely on pheromones and hydrocarbons— described by the dictionary as being “a compound of hydrogen and carbon, such as any of those that are the chief components of petroleum and natural gas.” In short, these signals serve as a language used between these ants to communicate with each other.

It is this signaling system that informs the other ants where to dig and where to forage, so that they may not waste their time on fruitless endeavors. It also warns of the danger that may be lurking ahead. This organic signalling helps maintain natural order for the entire colony while combining the individual knowledge held by each ant. It is a remedy to the knowledge problem because it recognizes that no one single ant has all the information needed for survival. They must rely on their joint knowledge to achieve the greatest results because relying on one sole ant would simply be dangerous and illogical.

Think of it as a bunch of drivers on the road. When there is a long patch of road without lights or stop signs, drivers rely on hand signals and gestures to communicate with each other so as to prevent dangerous situations from arising. And somehow, without central authority, this communication structure is able to happen seamlessly most of the time.

But instead of using hand signals, the ants secrete pheromones and hydrocarbons and help give feedback to the others in their colony. If there is danger in a surrounding area, the ants will send out the signal and others will know to avoid the chaos. It is the ant version of Yelp, giving feedback and telling consumers which products or companies to avoid. And again, this happens without anyone calling the shots. As pheromones change and ants pick up on the scents of their brothers and sisters, they adjust their actions accordingly. The very same thing happens in the market.

It is this system, or lack thereof, that has allowed these resilient creatures to survive, albeit to the dismay of many annoyed humans. Since each ant is armed with its own knowledge of the environment surrounding them, they are best suited to warn others. If there were a leader of an ant colony, this survival system would crumble to the ground because one ant, just like one single person, is incapable of knowing everything.

It seems almost silly, then, that the animal kingdom is wiser than humans when it comes to emergent order.

Rules, Rules, Rules

Humans are scared to put their trust in market order because they have been trained not to. We have been taught from birth to rely on central authority to tell us what to do. In school, we are taught that we cannot do any action unless condoned by a teacher because, they must know better than we do.

We do not trust our own instincts, or our own judgement, as a result of these rules. But it only serves to our own dismay. But the internet is changing the way we communicate. Social media and the wonders of technology are allowing us to benefit from the knowledge of others. None of us will ever have all the information needed to make fully informed decisions when it comes to the rest of the world, but by sharing this knowledge we bridge the gap. Just like the ants communicate with each other for the best possible outcomes, so can individuals share their personal knowledge with others for the best possible outcomes. And the real beauty of this is that it doesn’t require a central authority.

Indeed, humans could learn a lot from paying more attention to the emergent order of the animal kingdom, and less attention to arbitrary and uninformed central authority.

Economic Concepts That Everyone Needs to Understand

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As the new year gets underway, why not make a goal to read more about the essential economic principles. While there are many aspects of free market capitalism that are integral to understanding the field, these are a few concepts that will be most helpful to know as you continue to study free market economics. 

Subjective Value: Only individuals can determine the value of good or service.

Sunk cost fallacy: The misconception that one must continue an endeavor because of the time and resources already invested.

Spontaneous order: The belief that when individuals are left to their own devices without a central authority the will create organic order out of chaos without any coordinated effort. 

Knowledge problem: It is impossible for one person or group to have enough knowledge to plan entire economies. This can never be possible since the information necessary for this to occur is decentralized among individuals.

Broken window fallacy: Is the misconception that destruction stimulates the economy.

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