Tuesday, June 05, 2012

The Government of Evolutionary Liberalism: Smith, Darwin, Hayek, and Ridley

Matt Ridley's The Rational Optimist: How Prosperity Evolves (HarperCollins, 2010) is a brilliant exposition of the evolutionary history of human society as arising from the spontaneous order of exchange and specialization.  This makes it an essential contribution to the tradition of evolutionary liberalism that stretches from David Hume and Adam Smith to Charles Darwin and Friedrich Hayek.  It's appropriate, therefore, that in 2011 Ridley's book received the Hayek Prize of the Manhattan Institute, which "honors the book published within the last two years that best reflects Hayek's vision of economic and individual liberty." 

In receiving his award, Ridley's lecture summarized the main Hayekian idea of his book--that all human accomplishments arise not from individual intelligence, but from the social networking of our minds into a collective brain.  Moreover, he argued, "that the key feature of trade is that it enables us to work for each other, not just for ourselves; that attempts at self-sufficiency are the true form of selfishness, as well as the quick road to poverty; and that authoritarian, top-down rule is not the source of order or progress."

And yet, Ridley's version of evolutionary liberalism suffers from one fundamental flaw--an almost anarchistic scorn for government.  Unlike Hume, Smith, Darwin, and Hayek, Ridley fails to see that although governmental power is dangerous when it is unlimited and undivided, the spontaneous order of human civilization can arise only within a framework of general rules deliberately designed and enforced by government. 

In his Hayek Lecture, Ridley says:
"Politically, I still see myself as a liberal, even a radical one, whose distrust of putting people in charge of other people is born of knowledge that government has been the means by which people have committed unspeakable horrors again and again and again: under Sargon, Rameses, Nero, Attila, Genghis, Tamerlane, Akbar, Charles V, Napoleon, Hitler, Stalin, Mao, Pol Pot, Idi Amin, Kim Jong Il, and Muammar Gaddafi.  Not one of them used the market to repress and murder their people; their tool was government."
Of course, we should agree with him about the "unspeakable horrors" that come from government.  But his mistake is in leaving his readers with the implied conclusion--that he never quite makes explicit--that we would be better off with no government at all.  Without saying so openly, he hints at anarchism.

Adam Smith would not agree with this.  In The Wealth of Nations, Smith defended the "simple system of natural liberty," in which "every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring his industry and capital into competition with those of any other man, or order of men" (IV.ix.51).  Consequently, a government securing natural liberty would be released from any duty to supervise the industry of private people to serve some conception of the public interest, which would falsely assume a knowledge in the central planners that they could never have.  And yet, in this system of natural liberty, government still has three important duties: the military defense of society against foreign threats, the administration of justice to protect each individual of the society against unjust injuries from other individuals, and the establishment and maintenance of certain public works and institutions that could not be well provided by private individuals.  Thus, in a society of natural liberty, the power of government is limited but still essential.

Could there be a human society without any government at all?  In The Wealth of Nations, Smith sees the history of society as moving through four stages--the age of hunters, the age of shepherds, the age of agriculture, and the age of commerce.  Government first arises in the second stage, when disputes over property make government necessary; but when human beings live by foraging--hunting wild animals and gathering wild plants--there is no need for government, since disputes can be settled by informal social authority (V.i.a.1-2, V.i.b.1-12).  But in at least one passage of The Wealth of Nations, Smith suggests that even among hunters, there is a need for "chiefs" to act as judges in peace and leaders in war (V.i.f.51).

The reason for this confusion is that while foragers can live in "stateless societies," as anthropologists would say today, because there is no formal structure of authority that would constitute a "state," there is, nonetheless, some informal and episodic social ranking in which some individuals act as leaders in arbitrating disputes or fighting in war.  In any case, any civilized society clearly requires government.

Similarly, Darwin thought that the primitive foragers he saw at Tierra del Fuego had no structure of leadership, and yet he believed that any animals who live in groups need leaders to resolve disputes or to organize fighting with other groups.  And certainly in the more civilized human societies, there will be a political ranking in which ambitious individuals will compete for dominance (Voyage of the Beagle, chap. 10; Descent of Man, Penguin ed., 2004, 124, 127, 130, 133, 142, 157-58, 629-30, 683).

Like Smith and Darwin, Hayek saw that no large human society--or "Great Society"--could exist without government.  Only in very small primitive groups was it conceivable to have society without government.  Any civilized human society requires governmental organizations to provide central direction for common purposes.  Even in the most free societies--those that liberals like Hayek wanted to promote--there would always be some need for governmental coercion to manage military defense, to enforce general rules of justice, and to provide the economic and social security of a welfare state (The Constitution of Liberty, 133-61, 253-394; Law, Legislation, and Liberty, vol. 1: Rules and Order, 13-14, 32, 46-54). 

And while general rules of law can evolve spontaneously ("grown law"), Hayek thought, these rules will often need to be corrected by the deliberate decisions of judges and legislators ("made law") (Rules and Order, 51, 88, 100).  Furthermore, in times of emergency--war, rebellion, or natural catastrophe--the spontaneous order of society might need to be temporarily suspended, and powers of compulsory organization must be given to someone in government exercising supreme command (Law, Legislation, and Liberty, vol. 3: The Political Order of a Free People, 109, 111, 124-26, 130-33).

In contrast to Smith, Darwin, and Hayek, Ridley tells a story of human civilization in which government is denigrated as unproductive exploitation.  "Merchants and craftsmen make prosperity; chiefs, priests, and thieves fritter it away" (161).  "Merchants make wealth; chiefs nationalize it" (160). 

He admits that markets cannot function well without institutions and rules that might come from government--such as the rule against revenge killing: "handling the matter of revenge over to the state to pursue on your behalf through due process would be of general benefit to all."  But he immediately suggests that this does not have to be done by government.  "I see these rules and institutions as evolutionary phenomena, too, emerging bottom-up in society rather than being imposed top-down by fortuitously Solomonic rulers" (118).  He cites the examples of medieval merchant law and British common law.  But he says nothing about Hayek's point that spontaneously evolved rules often need correction by the deliberate decisions of judges and legislators.

Despite Ridley's anarchistic sentiments, he is quick to call for the help of government when he needs it.  He was the non-executive chairman of the Northern Rock bank from 2004 to 2007, having joined the board of the bank in 1994.  The bank fell into crisis in 2007 after making risky investments with money borrowed from other banks, and it became the first British bank since 1878 to face failure from a run of withdrawals by depositors.  The bank was forced to petition the Bank of England for a bailout.  Ridley was forced to resign.  In response to this scandal, some of Ridley's critics accused him of hypocrisy. 

In The Rational Optimist, Ridley writes one passage about this.  He expresses his regret, and explains: "The experience has left me mistrustful of markets in capital and assets, yet passionately in favour of markets in goods and services. . . . Speculation, herd exuberance, irrational optimism, rent-seeking and the temptation of fraud drive asset markets to overshoot and plunge--which is why they need regulation, something I always supported. (Markets in goods and services need less regulation.)" (9).

In one other passage of his book, Ridley comes close to agreeing with Smith about the three duties of government even in a system of natural liberty.  "Not all of the hangers-on were bad: there were rulers and public servants who lived off the traders and producers but dispensed justice and defence, or built roads and canals and schools and hospitals, making the lives of the specialise-and-exchange folk easier, not harder.  These behaved like symbionts, rather than parasites (government can do good, after all)" (351).

This reluctant concession to the need for government in this one brief passage near the end of the book is as far as Ridley is willing to go.  But nowhere does he indicate to his reader how his leaning towards anarchism separates him from the liberal tradition of Smith, Darwin, and Hayek.

Posts on related topics can be found here, here, here, here, and here.


Anonymous said...

I think this is exactly right. Keep in mind that one of Hayek's most vociferous critics was the anarcho-capitalist Murray Rothbard.

Larry Arnhart said...

Rothbard was also a fervent critic of Adam Smith.