Hayek's concealed conflict argument (and Foucault), and a bunch of other pro-market arguments

I have been reading more widely in Hayek, and also re-reading stuff I thought I was familiar with (in light of some of Foucault's stuff).. And I want to write about one of his arguments for markets -- I call it the 'concealed conflict argument' below --, and then I realized that it might be helpful to distinguish among his pro-market arguments. So, first I'll list seven of his arguments that one can encounter fairly frequently in his work. I won't scrutinize or evaluate these arguments. I hope to say just enough about them that even novice readers of Hayek have a sense of what I am talking about, and that those familiar with his work have a 'aha' moment. The list is not ranked in importance, and probably not exhaustive. In Hayek, the arguments tend to be contrastive with attempts at top-down planning or what he calls 'collectivism' (so this includes straight up Marxism, market socialism, and Keynesian kinds of planning).

A few more things before I start. Below the arguments are presented as kind of ideal types with a lot of implicit Ceteris paribus conditions; and I won't actually try to spell out or reconstruct Hayek's position as arguments. If that annoys you, you can read them not as 'arguments' but as 'commitments.'  In addition, in many cases the argument actually presupposes well functioning state institutions (connected to law and patents), and Hayek is actually surprisingly explicit about the limitations of each of the arguments (so don't treat my versions as his!) And, in practice, the arguments may be blended. Okay, here goes:

1. The efficiency argument. (See, chapter 7, of The Road to Serfdom, p. 102 in the 1944 edition reprinted by Routledge.) I am always a bit surprised to find this argument in Hayek because I tend to think it fits uneasily with his Austrian commitments. And it's not an argument he rolls out much. But it's pretty clear that he thinks that over time markets are more efficient than various alternatives, especially in the context of multiplicity of ends. This is also an argument attributed to defenders of markets by their critics and not infrequently conceded by the critics.
2. The (epistemic) Engine of discovery argument (recall). This is one of my favorites. And I love the version in his Hayek (1945) The Use of Knowledge in Society The American Economic Review. A well functioning "price system" is a "mechanism for communicating information." (527) In particular, the information is (i) dispersed, and (ii) often hidden from other market participants and spectators (in some versions even the agents principally concerned), (iii) and it may be costly to elicit it. And lurking in here is (iv) the idea that prices are effects of what may be the totality of salient-to-human-causes that relieve any agent from the need to keep track of all these causes, or at least their relative significance. I don't want to overstate what can be discovered according to Hayek because on his official view, prices also collapse a rich modal structure of possible causes ("anything that happens anywhere in the world that might not have an effect") into relatively coarse-grained dimensions. (And, in fact, today's post is also about the information that is occluded by the market.) Anyway, this argument is often presupposed in his other arguments, and some version of it got Hayek the Nobel.
3. The catallactic argument. (I think I first encountered the argument in The Fatal Conceit, but the most elaborate, clear version is probably in chapter ten of volume 2, The Mirage of Social Justice, of his trilogy Law, Legislation and Liberty.) Hayek tends to credit Whately with originating it, and it was especially influential on (recall) James Buchanan (and the Virginia school of public choice). It's the argument that in markets there is voluntary and pacific exchange. (I actually think the spirit of the argument is very Lockean.) And, in particular, that it allows enemies to be friends of a certain kind. (I don't know if Hayek ever mentions Schmitt in this context, but it's pretty clear that it is also part of a battery of different arguments directed against Schmitt one can find in Hayek.) The argument does not require that consumers are sovereign, but it does presuppose that within really competitive markets, agents can shape their own ends without being coerced to some degree. 
4. The coordination argument. (This argument and the following three can also be found in chapter ten of volume 2, The Mirage of Social Justice.) Competitive Markets are mechanism to coordinate the plans of people with very different, even conflicting ends especially in the context of division of labor and large population sizes. Prices act as signals or indicators that facilitate, even guide the coordination. 
5. The (cost-effective) want satisfaction argument. In markets strangers may discover that it's profitable for them to satisfy the needs of people they may never meet in person. 
6. The non-zero-sum argument. The idea that over time, dynamically markets create more wealth for everyone than counterfactually any other system of organization. Despite the fact that at a given time there may be winners and losers in the market-place, and that some people's expectations are necessarily disappointed, over time the pie gets enlarged (such that people who arrive later can benefit from progress) and all benefit.
7. The adaptation argument. Relative changes in supply and demand feed into price changes rather quickly. This means that markets allow one to start adjusting to changing circumstances rather quickly. Market societies are then rather capable of dealing with 'shocks' or sudden changes in external circumstances.

Okay, with those in place I want to get to the trigger of today's post. For, I want to show that in Hayek, there is also (8.) the concealed conflict argument, viz., that markets conceal the latent conflict in a pluralistic society with value conflict. I think that once one is aware of the concealed conflict argument one can probably discern it in the catallactic and coordination arguments, so I don't want to suggest it's entirely free-standing. Anyway, let me quote the passage in The Road to Serfdom that alerted me to it, and then I'll elaborate:

The illusion of the specialist that in a planned society he would secure more attention to the objectives for which he cares most is a more general phenomenon than the term of specialist at first suggests. In our predilections and interests we are all in some measure specialists. And we all think that our personal order of values is not merely personal, but that in a free discussion among rational people we would convince the others that ours is the right one. The lover of the country-side who wants above all that its traditional appearance should be preserved and that the blots already made by industry on its fair face should be removed, no less than the health enthusiast who wants all the picturesque but insanitary old cottages cleared away, or the motorist who wishes the country cut up by big motor roads, the efficiency fanatic who desires the maximum of specialisation and mechanisation no less than the idealist who for the development of personality wants to preserve as many independent craftsmen as possible, all know that their aim can be fully achieved only by planning-and they all want planning for that reason. But, of course, the adoption of the social planning for which they clamour can only bring out the concealed conflict between their aims.--Hayek (1944) The Road to Serfdom, Chapter 4 (The Inevitability of Planning), pp. 56-57. 

The wider context of this passage is a theme to which Hayek returns over and over again throughout his career: that it is the educated and, especially, those with technical knowledge (e.g., engineers, and skilled functionaries) that are likely to favor collective planning and collective or deliberative decision making by way of discussion (which also favors their discursive advantages). My own view is that In the Managerial Revolution (a book Hayek cites later in The Road to Serfdom and which he had reviewed respectfully in Economica in 1942), Burnham had nailed this wider point. 

But my interest here is really only in the final sentence of the quoted passage. For, it clearly implies that in a market economy our conflicting values can stay latent, and (crucially) can be hidden from each other and ourselves. 

Notice, by the way, that the argument can be agnostic on the source of the conflicting values. It can accommodate either the Weberian point that such value conflict is an effect of the advanced division of labor and the diversity of social interests, or the more Platonic point that it is the diversity of our natures and our unruly passions that causes such conflict. It can also accommodate the Marxist point that markets generate class conflict. 

And the mechanism that is lurking here is that the market order prevents certain conversations from happening that are required when there is collective decision-making. That is to say, somewhat jokingly, the market creates a veil of ignorance about other people's aims and so suppresses conflict about these.

To avoid confusion, the argument should not be conflated with the (Kantian) claim that trade generates peace because of shared interest in enrichment or the Doux Commerce thesis that suggests that trade softens or pacifies passions. Rather, it anticipates (as Stefan Kolev reminded) Milton Friedman's (and Rose Friedman's) point (1962) that "the market reduces the strain on the social fabric by rendering [mutual] conformity unnecessary with respect to any activities it encompasses" (Capitalism and Freedom, fortieth anniversary edition, Chicago: The University of Chicago Press, p. 24 (see also pp. 117-118)).

Let me close. The concealed conflict argument does not deny that competitive markets may produce conflict of their own. Hayek recognizes that they stimulate groups to seek protection against competition through the political process, and they may induce resentment over riches obtained through the market or fuel wider class conflict. 

Rather, the concealed conflict argument is a reminder that sometimes politics is well-served by -- and now I quote Hayek who in the postscript to The Constitution of Liberty (p. 354) tacitly quotes Walpole -- Quieta non movere (which I prefer to translate as 'let sleeping dogs lie'), that is, don't disturb settled things. Hayek recognizes that the maxim has little standing in (political) philosophy, but that it is often a wise maxim for, and a crucial part of the art of government of, the statesman.*

Foucault pretty much starts the Birth of Biopolitics with this quote (recall), and does name Walpole. And I think the concealed conflict argument helps explain one reason why Foucault treats Hayek and the ORDOs as providing a response to a problematic left to them by Max Weber (recall here), that is (what Foucault calls) 'irrational rationality of capitalist society.' For, part of its rationality is to find ways of non-politicizing what cannot or, perhaps, may not be resolved by politics (even if, in his account of neo-liberalism the market requires constitution by politics).

 

 

Comments

[Régis Servant]

I completely concur with you about this concealed conflict argument in Hayek’s thinking, which is not the most well-known – and thank you, and Stefan Kolev 🙂, for Friedman’s quote, in which the argument is well summarized indeed.
I remember that Hayek indeed talked about Carl Schmitt in Law, Legislation and Liberty’s vol. 2, on the notion of the “friend-enemy relation”.

You might also be interested to know that Buchanan often quoted Knight, saying:
“As Professor Frank Knight has suggested, much of the support for the market form of organization arises from the simple fact that it is the only form of organization upon which men seem able to agree”.
“Well, you remember our old friend Frank Knight used to say that one of the supports for the market is that people couldn’t agree on anything else, in terms of distribution”.
(But my knowledge of Knight’s writings is far too scant. Where and what he said exactly remains to be clarified.)

Please, allow me to recommend in addition four articles to you and the other readers interested in this concealed conflict argument:

• Sugden (1993), “Normative judgments and spontaneous order: the contractarian element in Hayek’s thought”, Constitutional Political Economy.
• Keizer (1994, Hayek’s critique of socialism, in Birner and van Zijp (eds), Hayek, Co-ordination and Evolution.
• Boettke and Leeson (2002), “Hayek, Arrow, and the problems of democratic decision-making”, Journal of Public Finance and Public Choice.
• Servant (2017), “Let’s agree not to agree: F. A. Hayek’s calculus of consent”, The Cambridge Journal of Economics. Where I present Hayek’s notion that markets guarantee the lack of compulsion to agree on particular ends – and for these reasons considerably enhance the prospects for mutual agreement.

I, for one, regret that there exists so little literature comparing Rawls and Hayek on this point. The issue is intriguing because Rawls shared with Hayek the concern for the possibility of disagreement between people in pluralistic societies, and yet he developed a kind of theory of distributive justice that Hayek suggested is not possible.

Thank you very much for your post,
Best wishes,
Régis Servant.