Adding all the sources and references that a meditation may contain is a legitimate and common practice. However, referencing the sources cited by the original work itself is not the primary purpose of a meditation, as this would ultimately lead us into an extensive chain of cross-references.
For this reason, I will take F. A. Hayek’s The Fatal Conceit as the primary material for this meditation. I will also use The Use of Knowledge in Society, by the same author, as a supplementary source, since it deals, at least in part, with issues related to the same problem and may therefore contribute to the development of the reflection.
In addition to these works, I will draw upon Aristotle, particularly the Nicomachean Ethics and Politics, as well as upon several quotations from other writers and thinkers that I have considered relevant to include (such as Adam Smith).
The substance of this meditation is therefore grounded in the problem and argument presented by Hayek. Its purpose, however, is not simply to reproduce or summarize them. The fruit of meditation lies in thinking with the author, conversing with his work, subjecting it to reflection, and testing it beyond its logical formulation, following, as far as possible, the paths toward which his own reasoning leads us.
Culture, reason, and man in the middle
When we analyze present-day society, it is easy to fall into the mistaken thought that things have always been this way — meaning that society merely modernized what already existed before — but, in truth, that was not always the case. If we accept human development as a society, we must accept at least one premise premises. One of them is that the man joined a group, and that this, in turn, allowed him to accept a leadership and, consequently, whatever proceeded from it. Even before the emergence of morality in man, or the understanding of what is factual or not, there already existed in him both instinct and reason, as Aristotle also asserts (Politics, written in 350 BC, translated by Benjamin Jowett) [].
“Now, that man is more of a political animal than bees or any other gregarious animals is evident. Nature, as we often say, makes nothing in vain, and man is the only animal whom she has endowed with the gift of speech. And whereas mere voice is but an indication of pleasure or pain, and is therefore found in other animals (for their nature attains to the perception of pleasure and pain and the intimation of them to one another, and no further), the power of speech is intended to set forth the expedient and inexpedient, and therefore likewise the just and the unjust. And it is a characteristic of man that he alone has any sense of good and evil, of just and unjust, and the like, and the association of living beings who have this sense makes a family and a state.” (Politics Aristotle Book I, Part II) []
“For we praise the rational principle of the continent man and of the incontinent, and the part of their soul that has such a principle, since it urges them aright and towards the best objects; but there is found in them also another element naturally opposed to the rational principle, which fights against and resists that principle.” (Nicomachean Ethics Aristotle Book I, Part XIII) []
It is common for man to know through reason, and reason, in turn, allows him to create arrangements and new arrangements out of previous arrangements; it is what allows us to make simulations, as well as insertions and deductions. However, not every system can simply be arranged, whether due to physical limitations or other forms of limitation — such as impossibility itself — with the individual having learned more through assimilation than through reason, as is the case with the act of speaking. This is because we consider it absurd to teach a child, for instance, the use of conditionals and invariants before instructing her in the alphabet, something she will not learn through reason but rather through imitation.
And reason, according to Hayek, does not occupy a position superior to the other faculties, such as morality, which is independent of reason.
“Yet it derives from a somewhat distinct development, so that we could never presuppose that our reason stands in the highest critical position, and that only the moral norms which reason endorses are valid.” []
In a certain way, there are indeed differentiations, and these can easily be verified, as Hayek points out, in subtle examples such as instinct and reason, or rational fear and irrational fear — by which I mean fear with reason to fear it, and fear without reason to have it.
Instinct, as stated, does not serve as an ultimate end to reason, but reason is at times the investigative method of instinct, as with the man who senses something and, from that, decides to investigate; thus, trying to rationalize instinct is to use the method meant for the beginning at the end, the end at the beginning. For instinct is the beginning and not the end; thus, no man rationalizes in order to then insist, but rather senses and only then investigates. And if instinct cannot be rationalized, as already discussed, then there are things that cannot be rationalized.
“To try to rationalize instinct requires reason to place itself in a position external to it, capable of judging it from the outside. But if instinct is that which makes reason itself possible, there is no such position external to reason — reason, in examining instinct, is already operating from within it — and it cannot audit its own condition of existence without presupposing it.”
Within the group that is formed, there is a need for communication and a need for cooperation; no group would form in a case of war of one against all — on the contrary, there would be dissolution. Therefore, instinct is suppressed in part, chiefly in favor of cooperation among individuals.
Here, however, I refer to reason in a more elementary sense: the capacity to reason about an act, grasp its outcome, and, from it, reflect upon the experience, as Hayek argues [].
For morality to be born in the individual, it is necessary that he first know culture, because we cannot claim beforehand that man is born fully moralized, but rather that he becomes moral, and this on some basis; and thus he learns it himself through observation, prediction, and transmission.
“From this it is also plain that none of the moral virtues arises in us by nature; for nothing that exists by nature can form a habit contrary to its nature.” (Nicomachean Ethics Aristotle Book II, Part I) []
Just as a child does not understand or explain morality to his parents, but rather receives from them sufficient material so that he may come to understand and, ultimately, to judge — and from that judgment, based on his own examination of conscience, he may judge his own culture, as with a man who, even having been born into a slaveholding culture, becomes an abolitionist. Thus, culture arises first, and afterward, on that basis, morality emerges, and morality, finally, can improve upon or even override a culture. The rules of morality do not arise from pure nothing; they arise from the containment of man’s own animalistic nature, for, as Hayek himself describes, it is these rules that allow cooperation within a group of individuals.
“Among the most important of these innate characteristics that contributed to replacing other instincts was a great capacity for learning from one’s fellows, chiefly through imitation.” []
Organizations and committees, the rumination of man
However, if the aforementioned culture and rules seem to work for everyone in the group, that same group, when small and centered, seems to make no sense when elevated to the macrocosm — perhaps because other groups have their own culture, or perhaps because they judge it superior, or still because of particularities — and, indeed, Aristotle calls it an error to believe that a way of governing a household will have the same effect as a way of governing a state. “But all this is a mistake; for governments differ in kind, as is evident to anyone who considers the matter according to the method which has hitherto guided us.” (Politics, Book I, Part I) []
This is also pointed out by Hayek, who qualifies it not merely as a logical error but as a destruction. This is because man acts so as to discipline his children and understands and provides the entire structure, beyond the mere transmission of culture itself.
“If we were to apply the unaltered, unrestricted norms of the microcosm (that is, of the small band or group, or, say, of our families) to the macrocosm (our wider civilization), as our instincts and sentimental aspirations frequently make us wish to do, we would destroy it.” (Between Instinct and Reason) []
The idea of an organization, or committee, that could, by its own means, apply the same administration of the “microcosm” — such as that of a family — to a “macrocosm,” such as that of a country, is impracticable. In the broadest sense, it amounts to defining a single form of social arrangement, without considering the distinct aspects of other arrangements, and suppressing — with the intent of rendering impossible — other formations of distinct arrangements, or perhaps even the very modification of an arrangement. I say impracticable because, for this, one would need full knowledge of all arrangements (all arrangements and their participants are dispersed), particularities known only to the members of the arrangement itself, which, separate and distinct, coexist, but which, when applied universally, contradict one another.
Beyond this, every assumption of such an arrangement inevitably leads to the dissolution of certain particular or local arrangements and, to some degree, to the dissolution of their private properties, whether intellectual or physical. As an example, assume a culture in which reading certain kinds of books, or merely possessing certain kinds of books, leads to their seizure or to the cessation of one’s freedom. There are countless known and documented examples of this practice by central socialist party committees, such as the Nazi party (the German 25-Point Program, 25-Punkte-Programm) [] and the USSR (Treaty on Creation): all proceed from the same premise — that there is an arrangement, and that it needs correction or alteration.
Where there is no private property, there is no justice
One might say that the first stage in the development of any people passes through delimiting and, so to speak, controlling man’s animalism, and that, through this, he may come to possess a sense of property: which artifact is his, which stone is his, which food is his, and so on. However, when this is denied, the result is a less developed and less just civilization.
It is precisely property that allows for the most rudimentary forms of market, such as barter, in which exchange took place of one good for another, of one property for another. If man had been denied access to such properties, barter would not have occurred, and, depending on the material desire some individual might have for a good, in his inability to obtain it through exchange, he would resort to the use of force [].
Thus, we cannot say that such a group, society, or arrangement is freer, more just, or even more developed, if the premise of development is justice and freedom. Such an arrangement would be exactly the opposite. It is, therefore, interesting to note that those who prize the non-accumulation of property, or its abolition, are, in sum, the very same people who defend at least one type of property, such as intellectual property over their own works, or at least their own property [].
It is clear, as reiterated earlier and by Hayek himself (The Origins of Liberty) [], that for groups to have an understanding of property and justice, it is first necessary for them to suppress their own animalistic instincts, because only then can they understand the difference between acquisition and taking by force.
For it is obvious that, for there to be justice regarding something, there must be a something, and there must be possession of that something; otherwise there can be no theft, no robbery, no corruption, no trespass, without there first being something and, for that something, an owner.
“Property is part of the household, and the art of acquiring property is part of the art of managing the household; for no man can live well, or indeed live at all, unless he is provided with necessities.” (Politics, Book I, Part IV) []
Private property is the basis of commerce
When I speak of private property, I speak of it under two conditions: physical property, as described by Hayek, and non-physical property. Aristotle, however, draws only the distinction between inanimate property and animate property. Nevertheless, both are the basis for the exchanges we consider equivalent. When an individual who owns sacks of wheat wants at least half a sheep, he can carry out an equivalent exchange. He may not, in fact, know how much half a sheep costs, and so he will try to obtain the best benefit. This is called negotiation. He may offer half a sack of wheat, one sack, or one and a half, until he satisfies the needs of the sheep’s owner, who may accept the first offer or reject the last.
If another party, however, offers a similar sheep at a cost that allows the first to keep more of his wheat while still obtaining the sheep, he will gain the advantage. We shall call this a sale, and a price.
The market is defined by the expression of many sales, at distinct prices. Naturally, arrangements evolved to the point where they no longer exchanged goods among themselves directly, owing in part to the complex pricing involved in such a system (how much of your property is my property worth?). Beyond this, there were less orthodox methods that were more widely accepted among different arrangements. Larger markets sometimes led the smaller ones in the process and manner of adoption, since the smaller ones aspire to the growth of the larger ones, which is good.
However, I would add that, although the structure of the market arrangement appears to be ordered by a central organization, it is in fact the complete opposite. There is no indication given to the man who sells his half sheep of how much he should charge, and, in truth, he will charge based on his own view of the value of his product and of its necessity to his own arrangement.
For example, he may live in a region with an abundance of sheep. There will be other sellers who offer more and who will accept lower payments, since wheat may be scarcer there. Or he may live in a region with much wheat and little sheep. Just as Adam Smith states, there is an invisible hand governing the market, and the central point that many “thinkers” seem not to recognize is that it is not a committee, but simply the interaction between buyers and sellers, between the fair price and the offered price, between what is wanted and what is had in abundance or not.
“Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” (Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations Book I, Part II) []
If private property did not exist, or had been abolished, there would be no incentive either for the wheat or for the half sheep to be exchanged, and, in fact, there would be no reason to plant wheat beyond what is consumed, nor even any wish to plant it at all for consumption, since planting presupposes that there is land and that it belongs to someone, or that the wheat is one’s own, for one’s own benefit. Otherwise, it would be the equivalent of planting wheat for others under conditions of slavery, which would also be absurd, since it presupposes belonging to someone, but that someone’s property has been abolished.
Knowledge is dispersed, like the market
It is a fact that, for the wheat grower to sell his wheat, there must exist, beyond the wheat itself, the necessary knowledge regarding the land, the seed, the particularities of irrigation, and other aspects. Thus, when the wheat producer goes to plant, he may use a sickle, a small scythe; however, he may not know how to make one, and it is true that he does not even need this knowledge — he need only find someone who possesses such knowledge so that a blacksmith may make him a sickle.
That blacksmith must possess knowledge of steel and alloy, must already have knowledge of molding and of the molds for the blade, and will need hematite. However, he too may not possess knowledge of extraction — how to extract hematite from the quarry — nor even where to find the quarry. But he, too, need not know such particularities; it is enough that there exists someone who possesses that knowledge and who, otherwise, knows nothing in particular about growing wheat.
Or, as Hayek says in The Use of Knowledge in Society:
“There is hardly anything that happens anywhere in the world that might not have an effect on the decision he ought to make. But he need not know of these events as such, nor of all their effects. It does not matter for him why at the particular moment more screws of one size than of another are wanted, why paper bags are more readily available than canvas bags, or why skilled labor, or particular machine tools, have for the moment become more difficult to obtain. All that is significant for him is how much more or less difficult to procure they have become compared with other things with which he is also concerned, or how much more or less urgently wanted are the alternative things he produces or uses.” (Chapter V, 1945) []
It is said that one spends a great part of one’s life learning to grow wheat, and another great part learning to do it well, and the same can be said of the particularities of the blacksmith, the miner, the lumberjack, and so many others who, knowing nothing of one another, nonetheless allow for efficient communication and, further, the transmission of the product among arrangements, even while remaining in distinct arrangements.
In any case, the wheat buyer knows little about the wheat grower, still less about the blacksmith, and probably nothing at all about the miner who sold the blacksmith the hematite needed for the iron. Likewise, his wheat was only made possible, in part, thanks to the miner and, in part, to the blacksmith. Thus, his acquisition carries countless pieces of knowledge that are not found within a single arrangement but are dispersed, and are so numerous that they could not be studied, learned, and developed by a single individual.
As the decades pass, knowledge tends naturally to increase, in step with the growing number of arrangements and individuals, and, above all, on the basis of what individuals already know, from which other products are then developed. Thus, if the wheat grower once wore sandals while planting, he now wears boots. That very boot depends on an industry with multiple agents, each with particular knowledge, and depends on other industries, which in turn depend on still others.
The dairy industry depends on the deworming-medicine industry, which depends on the chemical industry, which depends on the chemical-extraction industry, which depends on the chemical-protective-clothing industry, which depends on the rubber industry, which depends on the petroleum industry (for transport), which depends on the iron-ore industry, and this, in turn, will depend on hundreds or even thousands of other industries. The great issue lies beyond a single dependency. Yes, they depend on one another, but they depend on one another circularly, and are not limited to themselves or to the next in line. They depend on an ever-growing number, and depend both on those they know and those they do not know, on those they have heard of and on those which, for them, do not even exist, since they have not yet acquired the knowledge necessary to know of them.
In this way, it is undeniable that Hayek’s statement becomes indisputably true. “Almost all of us serve people whom we do not know, and whose very existence we are ignorant of; and, in turn, we live constantly off the services of other people about whom we know nothing.” []
Price and the dispersion of knowledge
The pricing of products is not centralized, as many people suppose, and whoever thinks that the sole factor is the greed of the seller, the owner of the product, or merely the particularities involved in the time needed to prepare the product, thinks mistakenly. These matters are not determinative. First, every product, as already explained, carries a great deal of information, information that is separate and dispersed (see previous chapter). Included within this information is, for example, the price of each subproduct (a fraction of a fraction, of an even smaller one). This price, though it may seem insignificant or merely negligible, is not, and is accounted for by the producer.
As described earlier, the wheat producer will bear as cost the antifungals for his crop, and their value will be transferred in fractions to the wheat, just as he himself has paid in fractions, when acquiring the antifungals, to the chemical industry benefited thereby. It is the cost of information and, of course, of raw material.
I draw this distinction because, if the information changes, the product may undergo changes, even though no change has occurred in the raw material composing the product. A clear example of this is that, if the antifungal industry were prevented from selling its fungicides, the product (wheat) would undergo changes in its value, even though it had not yet been materially affected. And the same occurs with all those dependent on the chain, for if wheat becomes scarce, not only flour will be affected, but also bread, cake, and all that depend on it. The market is, beyond being a static system, a living and dynamic system, and, what is more complex still, is in constant change, incorporating new knowledge, each with countless particularities.
Centralization of the arrangement, committee, and organization
Centralizing the chain and its many arrangements — known, unknown, those thought to exist when they do not, and those thought not to exist when they do — is a task beyond the unreal. All of this proceeds from the premise that rational man can rationalize and arrange all arrangements in such a way that all needs are met, whatever they may be, whether known or unknown to the central planner (see “Culture, reason, and man in the middle”).
Beyond the first point, this central planner could in no way guarantee the continuity of evolutions, for these occur chiefly under the hypothesis of altering the dynamic of an arrangement, as in the hypothesis of using cars instead of carriages. This, in turn, would not occur, first, because the car would not have available an industry suited to its needs, nor could it develop one, since it arises from a want and not from a proven necessity. I mention this because, although cars were indeed a necessity, the car did not have a consolidated industry behind it, being only the first experiment, the fruit of the will of its creator — but how could its creator have created such a work if he had not first been granted the freedom to do so?
And if this were permitted by the planner, then the great arrangement would become fragmented and no longer arranged for everyone, since everyone could then follow their own natural course. But, as stated, the arrangement requires a boundary between need and individual will. Thus, there would be no innovations, no cars, and electricity itself could not be what it is today, for it too arose from countless individual wills that intend to radically change the arrangement established by the planner or central committee.
“On the contrary, it seems that, time and again, powerful governments have so damaged spontaneous improvements that the process of cultural evolution was prematurely extinguished.” (Evolution of the Market) []
The supposed committee would still have to deal with possible shortages in certain areas. Knowing that there is a need for grain (rice and wheat), how to transfer, and from which sector to transfer, workers to that sector of agriculture — if the entire arrangement is planned, it must be assumed that agriculture is planned as well, and whether such workers even wish to work in it, and in what manner.
This is one of the central problems that the market economy had already solved millennia ago, even before Aristotle’s “mistakes” regarding the naturalness of the acquisition of profit.
“Thus, then, we regard the art of acquiring wealth which is unnecessary, and inquire why men want it; and we have also examined the necessary art of acquiring wealth, which we have seen to be different from the other, and to be a natural part of the art of managing a household, concerned with the provision of food, yet not unlimited like the former, but subject to a limit.” (Politics, Book I, Part IX) []
However, contrary to what Aristotle explains, there is no pursuit of wealth that is unnatural. The wheat producer does not produce wheat solely to supply his own household — which would be the only natural example conceived by Aristotle — but because it is commercially advantageous. And this is entirely natural: just as he would produce corn if it were more advantageous where he lives, there is no reason to plant apples where cacti are grown.
“Production for the sake of profit, which Aristotle denounced as unnatural, had already, long before his time, become the foundation of a spontaneous expansion that significantly transcended the known needs of other people.” (Evolution of the Market) []
For it is profit alone that determines whether the wheat grower will plant rice, or whether the blacksmith will have to learn to plant corn. It is the mechanism, or invisible hand, that conveys to the individual the information that a given activity is advantageous — and it is the only thing capable of doing so. Thus, when Aristotle buys anything at all, he buys not merely the surplus of a household, but buys from someone who produced it knowing that it was advantageous to him.
When a committee does the same, it does so presuming that only its own statistics are correct, and that the worker will act with the committee’s statistics in view. It happens, however, that if the blacksmith decides to plant corn, he does not do so thinking of who will benefit from his crops, but presuming the benefit it will bring to himself in doing so; on the contrary, he would never do it if he knew it would bring him only loss.
However, supposing such a committee possessed the capacity to reorganize all arrangements, suppress the smaller ones, seize all properties for itself, and thus acquire total control — greater even than that described by Orwell in 1984 [] — then its arrangement would not survive beyond the repressive machine that sustains it, for the planner (committee, organization, “Big Brother”) would need not only to be aware of every constructive chain, every particularity, every state and non-state of the system, of when they occur or are altered and at what moment, but would also need to know that which it does not yet know, to know that it does not know it, to distinguish what it knows from what remains relevant and still needs to be known, and further, that which it will yet come to need to know.
It happens that such knowledge is only fully produced while the system remains dispersed and dynamic. As the planner comes to know, there is more still to be known; and the moment the system ceases to be fragmented, changes arise concerning change itself: states change, but they change without prior notice. The planner, therefore, would need not only to know the state of the system, but also to continually track that which ceases to be relevant, that which becomes relevant, and that which has not yet even arisen as knowledge to be known — as I have postulated, that all state information from the periphery arrives at the center modified and fragmented [], where neither the one who possesses the greatest information about the periphery’s state, nor the one who possesses the greatest information about the center, holds the greatest fraction of the knowledge to be known, but rather the one who concentrates the largest part of both.
Conclusion
At the outset of this meditation, I proceeded from two foundations: the first, Aristotelian, so that we might understand that man is not capable of living alone, by himself, and, through it, we understand what forms a household, a city, and a state — parts of a larger aggregate — and that it would be an error to administer a state as one administers a household. We also explored the limit of Aristotelian knowledge regarding natural and unnatural economies. Hayek, in turn, shows us that it would not merely be an error, but that it would bring about the destruction of the aggregate whole itself; as an example, we have different cultures that, if they do not oppose one another when kept distinct, clearly oppose one another when treated as universal, and others that possess no equivalent at all for universalization. And finally, resting on both, I trace the dissection of the corpse with a postulated article, in which I demonstrate that all the information a committee, such as a state, possesses is, in itself, a fragment of the total information, and that, wherever the center may move to, it will still contain a fragment of a fragment.
I said, at the beginning, that man carries within himself both instinct and reason, and that neither suffices alone: instinct cannot be judged from outside itself, and reason, when it seeks to occupy that external position, feigns a place that does not exist. Just as there is no post from which reason may audit the instinct that makes it possible, there is likewise no post, within the arrangement, from which a single man (committee, organization, or otherwise) might possess the totality of what must be known in order to arrange it. In both cases, the error is the same: to suppose that there exists a place outside the system, when every place is within it.
The farmer who knows everything about his wheat knows nothing of the blacksmith; the general who orders the campaign knows nothing of the true state of all his soldiers. And just as morality is not born ready-made in man, but is formed by the culture that precedes it, so too the knowledge that sustains the market is not born ready-made in anyone, but is formed by the dispersion that precedes it — a dispersion no committee can gather without first destroying it — and, once destroyed, those within the system are destroyed as well, even if not immediately.
I wish, however, to note two points. The first concerns Hayek: it is said that Hayek is a conservative, but he is not; nor is he a positivist. His critique of positivism and of socialism runs throughout his book. Hayek is a genuine classical liberal, not because he called himself one, but because his ideas are closer to a classical conception of liberalism than to today’s liberals, who tend to admit a certain level of positivism as “normal” and no longer even see themselves as standing outside of it.
The second point concerns socialism. As has been established here, “classical” socialism possesses no capacity whatsoever for the general control of the market — not through simple ideology, “which is highly dysfunctional,” but by the very nature of the market and of individuals. Classical socialists tend, at times, to belittle individual capacities and to theorize that, once endowed with more “intellect” than a mere individual, they hold the bellicose mission of “saving him” from himself, and thereby fall into the fatal error — The Fatal Conceit — of failing to take into account individual wills, freedoms, and desires, regarding only their own desires and wills as just or sufficient.
Hayek calls this Arrogance; however, the term patocrat, or merely the famulus of a patocrat, may seem more fitting.