The Libertarian Pretense of Knowledge

“The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.”

— Friedrich A. Hayek, “The Pretense of Knowledge.”

A strong libertarian case against centralized interventionism is that market orders are complex, too complex for a single mind to understand in its entirety, and therefore that interventionism is likely to lead to unintended consequences. But, few libertarians apply this same logic to the institutions of governance. Instead, many prefer to take a “hyper-rationalist” approach, believing they are capable of at least designing a pattern of governance, such as anarchy or “the minimal state,” that they think the world should move towards. Are these libertarians suffering from a fatal conceit?

I have made this point before. In “What is Limited Government,” I argue that an optimally limited government — that is, one limited to its comparative advantages — is probably not going to be the one envisioned by most minimal state libertarians (i.e. constrained to protecting property rights). Instead, we would probably see a complex bureaucracy providing for a set of public goods, where the specific elements of the set are contingent on the facts of that particular moment of reality. For example, in one moment the state may have the lowest opportunity cost in providing for roads, whereas in the next it may be the institutions of the market which better provide for roads. After making my principal argument, I posed a challenge: do libertarians suffer a fatal conceit? I want to expand on that challenge, and hopefully draw attention to it.

The institutions of governance arise out of a process of spontaneous order. It’s easy for us to lose sight of that, because, on the surface, the truth seems to be the opposite. Governments are toppled and they are replaced. The institutions that are most visible, such as the division of power at the Federal level, are planned in the sense that their organization is oftentimes deliberate. The United States’ bicameral legislature, for example, was not an accident. Rather, it was designed. Thus, it is not uncommon to see a dichotomy created between markets and government, where the former are “natural” — complex and spontaneous — and the latter are “artificial.” But, taken as a whole, institutions of governance are products of human action, but not of human design.

Even the most “obviously” planned features, such as the division of power in U.S. Congress, or between the executive and the judicial branches, are not so “obviously” designed. This is analogous to the argument that while some of our laws may be codified — hinting towards design —, the truth is that these rules were codified only once they spontaneously developed to a point where humans could communicate them (Hayek [1973]). In the case of our institutions of governance, democratic orders existed prior to the late 19th century; and, they probably existed before they were adopted at the Federal, or national, level. Democratic governance developed at a local level and once a basic democratic system of rules was understood enough to be communicated, the system was implemented on a larger scale. Of course, even institutions at the largest scale continue to develop, even without a plan, after they are created. Spanish democracy, for instance, is probably much more complex today than any of the politicians responsible for it originally intended. And, to a significant degree, “political planners” are aware that some of the holes in their plan will have to filled on their own, or through experience.

One piece of evidence, although I admit that the history of governance is not my area of expertise, is the difference in outcomes between what we can, for lack of alternative terms, call “bottom-up” and “top-down” democracies. Namely, compare the differences in welfare between democratic society in the United States and much of Western Europe and “democratic” societies in the developing world. Democratic institutions are much weaker in, for example, Venezuela and Ecuador than they are in the United States or Great Britain.  Venezuela did not go through the same process of political development that did the U.S.; democracy must filter down to the people in Venezuela — who have little experience with local democratic institutions —, rather than up. Even in parts of developed Europe, democratic institutions are not as strong in some countries (e.g. Greece and Spain) as they are in others, because they were largely imposed on local populations, rather than adopted from them. Consider, also, how difficult, to the point of being impossible, it is to build stable democracies in countries we invade.

Even where institutions are supposedly planned, they are often too complex for many or most people to grasp in their entirety. Take James Buchanan’s and Gordon Tullock’s The Calculus of Consent. Buchanan and Tullock, after providing a basic theoretical structure (of minimizing the joint costs of political externalities — when governance is less than perfectly plural — and decision-making — which increase as governments approach perfect pluralism), go on to describe some essentially basic features of U.S. representative democracy. They use game theory to analyze bicameral legislatures, finding that by establishing two houses to a congress, where (ideally) the voting base for each member of each house is different, a representative democracy can increase the number of people it includes, while decreasing decision-making costs. They show how vote trading can increase the efficiency of the democratic process, and how it leads to, at least, Kaldor-Hicks optimal outcomes. These features, however basic to our democracy they are, are non-obvious, and even Buchanan and Tullock must simplify. Now, imagine how complicated our governing system — not just at the Federal level, but also at local levels — is, and how difficult it is to understand as a whole. Knowing it in all its detail is probably impossible.

Theories of ideal democratic government are built on consent. Buchanan and Tullock (1962) imagine perfect pluralism at the time of deciding on a set of rules (a constitution) that governs decision-making (which may be less than perfectly plural). John Rawls (1971) uses the conceptual tool of the original position to argue that all members of society would choose a set of institutions that maximize the position of society’s worst off. Public reason political philosophers imagine a world where reasonable people can debate with each other, compromising over political differences. These are all abstract ideal types of how consensual government works, but none of them are actual representations of reality. The real world is more complex, and consent, especially explicit consent, amongst all members of a society is unlikely.

But, does complexity rule out implicit consent? If we were to understand the current system, and compare it to all other known systems, would we choose to dismantle and replace it? I don’t think so. And, I think that bottom-up, developed democracies, like that of the U.S., are closer to perfect pluralism than many libertarians realize. We feel that this is not the case, because we are so detached from the actual decision-making process. The division of labor is not only relevant for institutions of markets, but also institutions of governance. Those who make political decisions specialize, and the rest of us specialize in our own fields, and good political institutions accurately communicate this specialized, localized knowledge, including our preferences, between voters and representatives. In the same way that decentralized markets can harmonize interaction between heterogeneous and otherwise unconnected agents, so can decentralized political processes.

Do we prefer a system of explicit consent to one of implicit consent? Imagine how small of a community would be necessary for institutions of governance that are perfectly understood by members of that society? The larger the body of people who must be coordinated, the more complex these institutions and processes of coordination. If we were to choose institutions that we explicitly consent to, because they are simple enough for us to understand in their totality, we would have to accept living on a much lower indifference curve. That is, that society would be much poorer than larger, more complex societies. Note, this is the same problem that exists with planned economic orders. Planned economies are much poorer than non-planned economies, precisely because they do not benefit from the same level of complexity and harmonization. Why do we not extend this logic to governance?

An anarchist might respond by pointing out that what s(he) wants is not a planned society, but one where individuals are free to opt-out, or disassociate, so that they can form their own communities. But, anarchist societies are not libertarian societies. The world, taken as a whole, lives in a state of anarchy. There is no strong, binding level of political order above national governments, excepting limited international governing bodies, such as the European Union. This has been even more true historically. Yet, out of this anarchy rose territorially defined nations. The idea that we can wipe the slate clean, so to speak, and allow for small, local communities of largely homogenous agents is not just utopian, but completely detached from the real world. On some level, we already live in the “ideal” anarchic society.

Oh, but “true” anarchy would be governed by some set of meta-rules, such as Robert Nozick’s (1974) utopia or Murray Rothbard’s (1998) ruling ethic. But, remember, in a world of ethical and moral heterogeneity, these meta-rules are imposed (thus the attraction of public reason), and suffer from the same criticism of planning as do governments and markets.

Maybe my problem is with accounts of “what ought to be.” As orders become more complex, our minds become less able to understand these orders, and theories of “what ought to be” begin to suffer from problems of hyper-rationalism. What we think ought to be, once implemented, may turn out to be entirely dystopian, as is the case with socialism. We want to replace what we perceive — and undoubtedly is — a flawed world with an alternative that, in our models, corrects many of the flaws we perceive. But, maybe the real world is gradually moving closer to what we want, through a process of competitive planning — what spontaneous order really is (and distinctions of what is local and what is not tend to be arbitrary) —, and our grand, all-society-encompassing planning can only move us further away. Libertarians should drop their pretense of knowledge, their fatal conceit.

59 thoughts on “The Libertarian Pretense of Knowledge

  1. Ryan Long

    One point of countervailing anecdotal evidence – take it for what it’s worth – is this:

    I have had the opportunity to work closely with bureaucratic decision-makers, and while their thought process could be described as “spontaneous order,” there is a lot more spontaneity than order. By which I mean that I have literally seen people make up new regulations on the spot, just because somebody asked them a question.

    IMHO, it would be wrong to call this a “complex” phenomenon. There is nothing complex about it. In many cases, governance is established by people making up the rules as they go along. Everything gets kluged together – there is absolutely NO REASON to believe that this is the way things work best, or that a replication of the same scenario would ever result in a similar outcome. I would liken it to a horrible mistake, the result of putting ill-equipped people in charge of things that have a great impact on others.

    Attributing such things to “spontaneous order” or “emergence” does not really describe the extent to which bad things happen when you give too much responsibility to people too unprepared to make such far-reaching decisions.

    A true spontaneous order is one in which the rules of the game are vetted through trial-and-error, the bad rules weeded-out, and the good rules remain. All of my experience with American and Canadian bureaucracies suggest to me that the first rule on the books is the one that remains. Spontaneous, yes. Orderly, no.

    1. Alexi

      Not to mention, these people face no real profit and loss signal, and have huge power over those governed. What this results in is a populace ignorant of the plethora of laws coming out of the government, arcane and contrived as many of them are, and in which interested groups, which can funnel money into the process, can make a fortune at the expense of everyone else, on alleged “public interest” arguments. Trying to analogise the voluntary interaction of countless individuals with the very non-voluntary relationship they face with the government, on the basis of Hayek’s arguments against planning, is bound to fail.

      I doubt many libertarians would deny that governments adapt and ‘evolve’ spontaneously. So do most of nature’s parasites.

    2. JCatalan

      But, rules have definitely improved over a range of 1,000 years. And, what individual rules affect now is much more limited than what individual rules affected 1,000 years ago. Meaning, that political institutions have evolved to reduce the damage of decision-making beyond the limits of what our knowledge allows us — even if these constraints are not as evolved of those of the market (although, maybe the market is of a less complex order; or, maybe we take our faith in markets for granted — agents can externalize a lot of damage through markets, too).

      I can’t deny the large swath of unproductive government activity. I’ve never wanted to. It’s what originally drove me to anarchism. I continue to think that we should expose it and criticize it, but ultimately for the purpose of strengthening our institutions, not demolishing them. In the grand scheme of things, in any case, governments have become more inclusive, becoming more exchange-intense (more about exchange between members of society, than extraction by some members from others). I want to continue in that direction, but I don’t think dismantling government has anything to do with it.

      1. Ryan Long

        Part of what’s throwing me off here is your use of words like “evolved” and “institutions.” The strength of what you’re saying lies in keeping these terms as ambiguous as possible.

        So, when I contrast “evolution” or “spontaneous order” to what I have actually observed – which is little more than ad hoc whim – it’s hard to make any sense of what it means to say that “institutions” are the product of an “evolution.”

        Concrete things have happened to make conditions exactly as they are. The state of every “institution” is what it is because someone did something that made it that way.

        I think I either don’t understand what you mean when you say that our “institutions” have “evolved,” or they are extremely ambiguous phrases that wouldn’t resonate with me even if I did understood what they meant.

        Can you give me some idea of what it means to “strengthen an institution?” Can you cite a specific example of when an “institution” was “strengthened?” (Or even weakened?) What was the institution, what strengthened it, and in exactly what way did that particular institution become strengthened by that particular event? And also, in what way was that event spontaneous or evolutionary?

        You see what I mean?

        1. JCatalan

          Why don’t you require this much scrutiny when people throw these terms around when they discuss markets? It’s not as if the theory of spontaneous order, as applied to markets, is really any less ambiguous. The reason these terms are abstract is because the details of complex phenomena are hard to make out. In fact, if you could describe something in detail — all of the details of the various processes that make it up — it wouldn’t be very complex.

          I don’t think, in any case, that political decision-making is as easy as politicians making decisions willy-nilly, as much as it might seem that that’s the case. I’m not even sure it was like that when governments were very primitive. But, like I said, the constraints on modern political agents are much stronger than those on political agents 1,000 years ago, let alone 1,000+ years ago, which seems to confirm the idea that there are such things as institutions which improve over time (institutions being rules, in a very general sense — the things that bind our range of choice). Politicians today are more likely to benefit us than politicians 1,000+ years ago. Today, for example, the ideology and intentions of the politician matter less than it has ever before.

          You ask what it means for something to evolve. It means the same thing with respect to political institutions and is does with respect to market institutions. Everything requires planning on some level. We plan our actions. But, we also want some degree of competition, so that bad plans are replaced by good plans, et cetera and so forth. And we want institutions to constrain the scope of choice. We don’t see the same degree of competition and constraint in political institutions that we see in market institutions. Like I said, maybe market institutions are more evolved, or maybe what market institutions are trying to govern is of a simpler order. It doesn’t mean, in any case, that competitive change hasn’t taken place in institutions of governance (and the evidence suggest that I’m right).

          1. Ryan Long

            Why don’t you require this much scrutiny when people throw these terms around when they discuss markets?

            Simply stated, I do. I don’t think “spontaneous order” is a compelling market phenomenon any more than it is a compelling governmental phenomenon. It’s a vague term that seems to equate to “hard to explain.” But I’m really not sure how much more insight it offers into any problem. That’s what I’m saying.

            I don’t prefer freedom to government under any doctrine of “spontaneous order.” I think order is overrated. It offers predictability at the cost of innovation. I don’t see that as a benefit. Hence, I like markets a lot and dislike government a lot.

            I don’t think, in any case, that political decision-making is as easy as politicians making decisions willy-nilly, as much as it might seem that that’s the case.

            No, not politicians. Bureaucrats. Politicians make laws that say “There will be X.” Bureaucrats are left to devise ways to ensure that there is X. There are plenty of constraints on politicians, but almost none on bureaucrats, particularly the ones I work with. When you design a new policy enforcement program from the ground up, your ONLY constraint is that there will be X at the end of the process. How you get there is entirely up to the 1-5 member team of bureaucrats who cook it up, very often willy-nilly. At least, that’s been my experience working with them.

            Everything requires planning on some level. We plan our actions. But, we also want some degree of competition, so that bad plans are replaced by good plans, et cetera and so forth. And we want institutions to constrain the scope of choice.

            Firstly, I’m not sure competition is required for bad plans to be replaced with good plans, but that can often be an effective way to ensure it happens.

            Secondly, I am not sure that the replacements are measurably better than the plans they are replacing.

            Thirdly, I am not sure I want anything to constrain the scope of choice, but I am especially not sure what “institutions” mean in this case. It might well be that “institutions” are precisely the wrong entities to be constraining anything – but again, it depends on exactly what we mean by “institutions” for me to say for certain where I stand on that.

          2. JCatalan

            This is how I think of institutions. Think of a board game, especially one that requires interaction with other players. There are certain rules you have to keep in mind, certain ways that other players constrain your choice (which are implicit rules), and all that will narrow the range of possible choices you’ll make. It, in a sense, helps funnel action. In markets, institutions are important, because order — equilibrium, if you will — requires converging expectations, and if there weren’t institutions (rules of the game) then cooperation isn’t possible.

            Take, for example, the implicit rule that a store expects a delivery of product on a certain day, maybe at a certain time. This is a rule, or an institution, that helps the store coordinate with its customers and with its supply chain. These types of rules exist everywhere, including in government. Politicians are constrained by explicit and implicit rules. So are bureaucrats. Maybe the rules aren’t strong enough by our standards, but that’s not reason to eliminate all institutions of governance, that’s reason for improving them. You can improve bureaucracy without getting rid of the state. In fact, our ability to monitor bureaucrats has improved vastly over the past 200 years.

            Another example of an institution are prices. There are certain implicit rules bound with prices; they can’t just be ignored, they are factored into (constrain) the decision-making process.

            Bureaucracy. Gordon Tullock has a book with that title, arguing that government bureaucracies are incomparable with firm management. I haven’t read it; I probably should. But, my dad is a bureaucrat — and this is anecdotal —, he is a public high school teacher. He has tenure. Most people would think that the constraints are loose on him. In some senses that’s true (and, I agree, maybe the constraints aren’t good enough), but there are definitely rules that bind his range of choice. And many of these rules make for better teachers, as bad as the public school system is.

            You’re right that new institutions that replaced the old aren’t necessarily going to be better. They could be worse. There’s no law that says spontaneous order is always positive.

          3. Seth MacLeod

            Regarding the board game analogy, here is Lachmann on Weber on Stammler:

            The second statement by Weber which is of interest to us we find in the context of his criticism of the work of the legal philosopher Stammler in 1907, in the ‘Paradigm of the Skat game’ (a German card game). Stammler, not given to a very careful use of terms, held that the outstanding characteristic of social life was its being governed by rules, and had spoken of the analogy of ‘rules of the game’. Since a game may be regarded as an institution, what Weber says in the context of his polemic against Stammler throws some light on his general view on institutions.

            His main point against Stammler is that though the players’ action is of course oriented towards the rules of the game they are playing, and though we might therefore call the rules a ‘presuppostion’ of any concrete game, this tells us nothing about the actual happenings in a concrete game. In our terminology, the rules of the game constitute a set of orientation points, limiting the range of action of each player but also permitting him, because his rivals’ actions are equally subject to limitation, to guess with greater confidence what they will do. Within these limits human action here as elsewhere remains free. Weber’s argument thus follows the general line of anti-determinism. Norms as such cannot determine a concrete outcome. But nothing has as yet been said about the origin of the rules of the game. (The Legacy of Max Weber 61)

          4. Ryan Long

            I don’t understand the benefit of calling an agreement between two people an “institution.” I accept your terminology, but where does it get me?

            I bought a coffee this morning. I paid a price, in money, at a cash register, for a timely cup of coffee. Sure, we can call the price, the money, the cash register, and the timely delivery of the purchased good “institutions,” but how does that improve our understanding of the situation.

            I’m really questioning the usefulness of these concepts. They are not particularly descriptive terms, so what analytic advantages do they offer?

            I feel like you are calling things “spontaneous” that are anything but. It’s no emergent byproduct of evolution that the cash register was where it was or that in order to sell me a cup of coffee the shop has to arrive at a selling price. There might be a lot of factors worth considering in any decision, but that doesn’t mean our decisions are “spontaneous” or “emergent” or “governed by institutions.”

            From what I can see, the principle advantage of calling something an “institution” is to declare it too complex for anyone to pretend to understand it (“pretense of knowledge”). But unless we can reliably delineate between what is an institution is and isn’t, then all you’re really doing is begging the question.

            You’re essentially remarking that if you can call something an “institution,” then anyone who claims any sort of knowledge about its behavior suffers from a pretense of knowledge. So the natural follow-up questions are:

            1 – Can you tell me how to know when I am looking at an institution and when I am not?

            2 – If I can demonstrate that I have knowledge of something, will that negate its status as an “institution?”

            In essence, I’m trying to get at how to know whether you’re right or wrong. The way you’re describing it, you seem to be correct whenever you can say something is an “institution,” and the term is being applied so broadly that you are able to criticize anyone of any knowledge of anything, because pretty much everything is an institution.

            All you really appear to be saying is that no one can know anything about anything. That position is defensible, but it poisons the well.

          5. Seth MacLeod

            I highly recommend reading ‘The Legacy of Max Weber’ by Ludwig Lachmann if you want an in depth understanding of institutions. But I think I can lay out the basic idea:

            Institutions serve as orientation points to guide our expectations of others’ actions. In other words, the future is uncertain and we can’t predict with absolute certainty what others will do in any given situation, but institutions give us a way to let us guess with greater confidence what others will do.

            Example: Money, a generally accepted medium of exchange, is an institution. We can expect with great confidence that any given person in our society will accept the thing we call money in an exchange.

            Example: Laws (and norms generally) are institutions. While of course any given person can break the law or not follow a norm, we can expect with great confidence that people will adhere to these ‘rules’.

            Example: Marriage is an institution. When someone is married to another, we can expect certain legal relationships, such as joint ownership. We can also expect certain social relationships too. The specifics of these legal and social relationships of course varies from society to society (or sometimes even community to community).

            Does that help or make sense?

          6. Ryan Long

            To clarify: It’s not that I understand the concept of institutions, it’s that I haven’t yet seen the value of calling something an institution.

            What greater insight does the phrase “money is an institution” offer over and above the phrase “money is” ?

            What am I supposed to know about money in light of the fact that you have called it an “institution?” That’s the real question. It seems to be the case that calling something an “institution” declares it immune to human understanding, which is certainly not a useful declaration from a scientific or analytical perspective. So if the idea of an “institution” is useful at all, it has to be for some other reason. Right?

          7. Seth MacLeod

            Calling something an institution does not mean it is immune to understanding. The point of calling something an institution is to increase understanding! And referring to something as an institution highlights that it has particular characteristics that are not found in non-institutions.

            ‘Money is an institution’ means that money has characteristics that institutions have. In the case of money, that means that you can expect with great confidence that any given person will accept it in an exchange.

          8. Seth MacLeod

            So? Money is not the only institution. I gave examples of three different institutions. They all have a certain thing in common that makes them institutions. So we can refer to them in that way, and we can make generalizations about them in that way.

            Humans are both animals and mammals. We can say things about humans as animals and humans as mammals. We can even say things about humans as humans. We can say different things about humans depending upon different things.

          9. Ryan Long

            Humans is a more specific word than mammals.
            Institutions is a less specific word than money.

            If I said, “I am going to spend some of my institutions on a new tennis racket, and specifically I’m going to spend money on it,” you would look at me like I’m an idiot – and rightly so.

            But if I said, “I am going to spend some money on a new racket, and specifically I am going to spend my allowance on it,” you would have no such reaction.

            This is because more specific terminology elucidates, whereas more general terminology obfuscates. This is my whole point. By calling things “institutions,” we gain no greater insight than we already had. All we accomplish is to speak in generalities about things that require more specific understanding.

          10. Seth MacLeod

            So then I can expect that you never refer to animals, always preferring to enumerate each individual animal that has existed and is currently existing when you want to refer to claims regarding the category known as ‘animal’.

            After all, more general terminology obfuscates, and we gain no greater insight when we make claims about animals as a group.

          11. Seth MacLeod

            Then you can expect that when people refer to institutions, they are referring to institutions and their characteristics. If someone refers to money in the context of institutions, that means they are referring to the characteristics that money shares with other institutions.

            If I refer to humans as animals, then you can be sure I am referring to the characteristics that humans share with other animals.

            Some categories reside within other categories, and we can refer to the larger categories when we are referring to the shared qualities.

          12. Seth MacLeod

            That link about emergence is a good one. Many people do use that word poorly. But some people use it a bit better in the social sciences when they try to highlight the difference between designed outcomes and undesigned outcomes. That is a technical use in social sciences (though not all social scientists use it that way), and other sciences use it even more broadly when they use it to describe a complex system that arises from less complex (or relatively simple) phenomena.

          13. Ryan Long

            So my very dubious “contribution” to this discussion is to apply the same line of reasoning to the term “institutions.” When Jonathan writes something like this:

            The institutions of governance arise out of a process of spontaneous order.

            …it is difficult for me to understand what new piece of information he has just conveyed to me. Replacing the offending words with his own clarifications does not help:

            The rules of governance arise out of a process of rules that were planned, in a sense, individually, but then adopted almost “spontaneously” on a “macro” level.

            What Jonathan is telling us is that “institutions” are “planned, in a sense, individually” but that through some additional process they become “emergent.” I’m not sure anyone could really clarify that concept. Hayek certainly didn’t. It sounds like a theory, but it doesn’t feel like a theory. It’s nothing that I could use to predict any outcome, for example (if I were to apply a Less Wrong paradigm here).

          14. Seth MacLeod

            Not all institutions are rules. Money is not a rule, nor is the family a rule. Institutions can be rules, but this does not mean that people will necessarily follow them.

            As I said earlier, institutions are signals, they serve as orientation points that serve to guide expectations so that people can guess with greater confidence what others will do; and institutions are a part of the structure of a society or community.

            And I don’t think I have any (significant) issues with Jon’s clarifications. Here is Lachmann on this:

            On the other hand, Menger’s praxeological theory of the origin of undesigned (‘organic’) institutions is much better suited to our analytical needs. Here we have a theory which explains the origin of such institutions in the same way as other innovations. Some men realize that it is possible to pursue their interests more effectively than they have done so far and that an existing situation offers opportunities not so far exploited. In concert with others they do exploit them. If they are successful their example will find ready imitators, at first a few, later on many.

            Successful plans thus gradually crystallize into institutions. Within the sphere of freedom of action new institutions arise as additional orientation points, which may take the place of older institutions that became obsolete. Imitation of the successful is, here as elsewhere, the most important form by which the ways of the elite become the property of the masses. Once an idea originally grasped by an eager mind has been ‘tested’ and found successful, it can be safely employed as a means to success by minds less eager and lacking originality. Institutions are the relics of the pioneering efforts of former generations from which we are still drawing benefit. Drawing once more on the analogy of the market, we may say that the theory of institutions is the sociological counterpart of the theory of competition in economics. In both cases innovation and imitation are the complementary elements of what is virtually the same social process. (The Legacy of Max Weber 68)

          15. Seth MacLeod

            Your paragraph in your OP:

            A true spontaneous order is one in which the rules of the game are vetted through trial-and-error, the bad rules weeded-out, and the good rules remain. All of my experience with American and Canadian bureaucracies suggest to me that the first rule on the books is the one that remains. Spontaneous, yes. Orderly, no.

            I think this is very close to what Lachmann is describing, but the difference is that Lachmann uses the term ‘successful’ instead of ‘good’. Using the term successful instead of good puts the focus on whether the plans realize the desired end and pulls our attention away from judging if the plan is better than others (in terms of morality or efficiency).

            Regarding law made by states, in a very strong sense even they don’t really make laws; they can only heavily incentivize people to follow their rules. Sometimes when the public considers a law to be unjust, the state stops enforcing it well before it is overturned officially in the legislature (and sometimes the state doesn’t even bother to do that). It’s not really until the state starts enforcing its rules in the court system that it then becomes law. I don’t mean that to be a semantic game, so here is an analogy: if you are playing Monopoly and every time someone passes ‘Go’ they do *not* collect $200, then it really can’t meaningfully be said to be a rule, even though it is written down in the rule book. It’s the same with the law. The state can enact whatever rules it wants, but if the court system does not actually resolve disputes in accordance with those rules, then the actual law is really something else.

            To tie that back in with emergence, even the laws of the state emerge. The difference between state laws and a polycentric legal order is that the courts exist to serve the state’s interest in a statist society while in a polycentric legal order the courts exist to serve the interests of people who want to resolve their disputes.

            In terms of Jon’s blog post, I think he holds a similar viewpoint, as he does say:

            The institutions of governance arise out of a process of spontaneous order. It’s easy for us to lose sight of that, because, on the surface, the truth seems to be the opposite..But, taken as a whole, institutions of governance are products of human action, but not of human design.

            I can’t be sure if he agrees with how I come to a similar (or even the same) conclusion, but I think he’s right about (state) governance also being emergent but that it is just not obviously the case.

          16. Alexi

            Good point on the bureaucrats, ultimately they wield far more power than the salesmen of the system. I think we sometimes put too much blame on them, rather than those who keep the system going.

          17. Ryan Long

            I don’t think you’re looking at it practically enough. The state says “we must regulate oil storage tanks.” The bureaucrats say, “You must submit a 5-year history of tank safety inspections and pay a $1500 licensing fee.”

            So who do we blame for the fees and paperwork? I’m not an anarchist, so I couldn’t care less that Congress decided to regulate oil storage tanks. What I care about is whether those regulations become an impediment to my life as an owner of an oil tank.

            In that sense, I’m very close to Jonathan’s point of view here. Where I might disagree with you is in seeing that the creation of a regulation is automatically a bad thing. But where I disagree with Jonathan is in viewing any of these things as evolutionary or emergent. The bureaucrats I’m talking about (i.e. not high school teachers) tend to be drunk on whatever scraps of power they have. When you see steep licensing fees and lots of red tape, that is not a problem with democracy or “the state.” It’s a problem with bureaucracy.

            Remember, the Founding Fathers opposed a strong Executive Branch. It’s not the laws that impede us, it is the enforcement of the laws. See also: Obamacare, the drug war, etc.

          18. JCatalan

            The reasons institutions, as a whole, matter is because institutions — the rules of the game — are directly relevant to those “games'” outcomes. Think about the economy in a Hayekian sense: the convergence of expectations. Bad institutions can make that convergence impossible; good institutions make that convergence more accurate.

            Another, separate (and I think equally valid), way of looking at it is that not all equilibria are made equal. Imagine a world with extractive political institutions. Expectations might converge, such as the expectation that your political leaders will take 50 percent of your income and use it to invade the neighboring duchy — but, because of this expectational equilibrium, you decide to produce less than in an alternative expectational equilibrium (where you’re not taxed at all, or where your taxes go towards ends that you rank relatively highly).

            Sometimes institutions is an ambiguous word, because many institutions are themselves ambiguous. Some of them are difficult to communicate; some rules are even difficult to distinguish as rules. The rules that govern languages, and how we learn languages, for example, are often difficult to make out and therefore difficult to communicate. But, that doesn’t make the concept of institutions any less useful, and it doesn’t mean we can’t understand some very general, very abstract patterns.

            What do emergent institutions refer to? (This part of my comment might be copy and pasted into a post.) Imagine a society where there are no banks. One day, someone comes up with the idea of protecting people’s money. Over a short period of time, where the banker interacts with his customers, he develops certain ways of doing business. He needs to develop trust with his clientele, and this leads to several institutions, such as self-enforcing contracts and ways of acting that communicate trust. Over an even longer period of time, the good institutions tend to be adopted by rival bankers. And, even these rival bankers begin to interact with each other, establishing rules of conduct (implicit or explicit), and these turn into a set of rules that govern (part of) the banking system. These rules may one day be understood enough for them to be communicated by a clearinghouse, for instance, and this clearinghouse becomes an explicit form of banking governance. But then these clearinghouses need to develop rules of conduct.

            But, the order as a whole — the entire web composed of clients, individual banks, clearinghouses, et cetera — isn’t planned by any one person. Instead, it is governed by a set of institutions that were planned, in a sense, individually, but then adopted almost “spontaneously” on a “macro” level. And the structure of institutions as whole, clearly, was developed by a majority of the people involved in that part of the division of labor, and, in a sense, accidentally. Nobody had the structure as a whole in mind when they were acting on implicit rules.

          19. JCatalan

            @sethmacleod:disqus: Wrt to that quote from Lachmann. Where to the rules come from? They are endogenous to that society; they emerge from the day-to-day activity of members of that society.

          20. Ryan Long

            I’m not claiming that institutions don’t matter, I’m claiming that calling something an institution doesn’t tell us what matters any more than referring to it by its actual name. If money matters, then money matters. If prices matter, then prices matter. Etc. But we already know that, so I’m trying to figure out what additional insight we have now that we know that both money and prices are “institutions.”

            Regarding your banking example, I consider the perfect illustration of my criticism. Specific things happened to make the world the way it is. People established businesses. Businesses created rules. Business agreements created conventions. This stuff is very specific. It happened because people – individuals – did it. We gain nothing by calling it “emergent.”

            What is the practical difference between the following statements:

            1 – Some business owners devised some business practices to facilitate their business.

            2 – Business practices “emerged.”

            3 – Business practices are “emergent institutions” because some business owners devised some business practices to facilitate their business.


          21. Alexi

            But I agree with your overarching point. I just don’t think you can easily disentangle democracy or the state from the bureaucrats, who are required to administer it for any sizeable state with any considerable scope of power.

  2. Alexi

    Other than bankrupting already bankrupt governments, what harm would allowing individuals to secede from them do? I don’t see the problem with “imposing” non-imposition, whatever that means.

    1. JCatalan

      If a government is extractive, it’s less likely to allow freedom of exit. Liberal, pluralistic governments are more likely to allow it. Anarchy can’t control it, because that’s ultimately something you decide to enforce. If, in a state of anarchy, there is an opportunity for inequality of power, extractive states might arise — and this is pretty much what history tells us. It makes more sense to improve liberal institutions of governance than to revert back to anarchy.

      1. Alexi

        I don’t know what you mean by “anarchy” here. All I am referring to is a state that allows secession down to the individual level. What follows from this may be anarcho-capitalism, it may be city-states, it may be minimal governments etc. This isn’t a “privilege” that the government is allowing, it is a right we’re taking back from it. Anarchism, as put forward by libertarians, does include a polycentric form of governance. You may disagree with it but it isn’t a power vacuum. Minarchists have no reason not to agree with anarchists on the right to secession. If governments are indeed the best means of providing governance, let them prove it openly.

          1. Alexi

            I don’t think it’s that strong. E.g., do you believe actions like rape etc. would be any more justifiable outside of a social context? And how would you consider a society to be more evolved, anyway, without some criterion to judge it by, that isn’t essentially a set of external rules?

            But lets focus it on the legal system, which is what really matters for judging the legitimacy of actions in the eyes of a given society. We can agree, at least, that it should be based on logical consistency, I hope? And can we further agree that, to an extent that a state allows for secession, the better the claim it has to its legitimacy, as those who consent to it are ultimately those who choose to remain attached to it?

          2. Alexi

            PS: I am aware I am using the term ‘evolved’ with its positive connotation.

            Strictly speaking, all social orders are evolutions in that they are adaptations to fundamentals at the given time period. E.g. feudalism was an evolutionary adaptation to the Roman Empire’s collapse, even though it did not necessarily involve the same degree of economic and social development that the Roman Empire experienced at its peak. Or, indeed, the development of sweatshops in Victorian England, and in some areas of the developing world. They’re ugly things, but arguably a step in economic development.

          3. JCatalan

            I don’t think you can explain the immorality of rape without referencing where these views on morality come from — they are subjective. I don’t think you can talk about the morality of rape outside of the context of a given society. Views on rape are very different, for example, in Southeast Asia than they are in the United States. (Much like how opinions on slavery were different in 1800 than they are today.)

            And, for the purposes of the points made in the post, we can judge how ‘evolved’ a society is by how well its institutions coordinate exchange between members of its societies, and how well those institutions minimize unproductive action.

          4. Alexi

            You can, at the very least, extrapolate from one’s own desire to not be raped that others would not desire it either, and apply the golden rule, i.e. don’t do unto others what you wouldn’t want done to yourself. Or just basic moral consistency. If one stuck to this notion that society defines morality, we’d be berating anti-slavery advocates for expressing views that have no bearing on the mores of their own social background. What if social sentiment in these societies had not shifted and they had chosen to go on with slavery?

            People’s views on some things may be different but we’re not discussing just any views but those that can be coherently expressed in legal contexts. I.e. can a rapist put up a defence consistent with their own desire not to be raped (assuming they have this; if they don’t then they’re fair game anyway for punishment, on their own moral premises) in a court?

            Our species is generally extending empathy in ever greater social circles, however I think this is mirrored by a desire for basic consistency in arguments. The two go hand in hand. Moral rules that treat individuals consistently are ones that recognise that if you do not want to be harmed, you should recognise that desire in others and respect it, which at its core is based on empathy.

            “And, for the purposes of the points made in the post, we can judge how ‘evolved’ a society is by how well its institutions coordinate exchange between members of its societies, and how well those institutions minimize unproductive action.”

            Very well but again, why be productive and not profligate? Or coordinated and not chaotic?

          5. Alexi


            Also I think a reasonable, acceptable answer to my question would be ‘because most people desire peace, order and prosperity’ in regards to the social order.

            Two points about this. It constrains the applicable set of rules that achieve these ends, which is where economics and political theory come into play. It also assumes people’s desires should be given due regard. Here we can say that at the very least one person – the ruler – would think their desires should hold sway, and thence we can employ arguments from moral consistency.

      2. dude

        what if the liberal institutions of governance lead to what would essentially be called anarchy?

        I see four conceptions of anarchy: one as this mythical ‘chaos’ of no order and no rules, ie the mainstream depiction, one as a polycentric legal order desired by social anarchists (libertarian socialists, mutualists, syndicalists) which would likely consist of a large communal infrastructure and essentially a decentralized planned economy (to the chagrin of the anarcho-capitalists), the sort of Hoppean/Rothbardian anarcho-capitalist ‘voluntaryism’ that what most right-libertarians mean when they discuss anarchy, and the ‘clean slate’ revolution and planned economy envisioned by anarcho-communists.

  3. Seth MacLeod

    But, anarchist societies are not libertarian societies.

    I don’t have time to comment much now, but I just wanted to say that I wish more libertarians would realize this. Anarcho-capitalism is not synonymous with libertarianism. I agree with David Friedman that an anarcho-capitalist society will tend towards libertarian ideals (liberty yay!), but the two are not the same. This is also one major reason I really appreciate John Hasnas’ writings, because while he is a libertarian, he seeks to understand how law could and would actually form in a stateless society.

  4. Jim Caton

    The ability to exit puts a constraint on governance. Thus expansion of one’s freedom of movement should be correlated with expansion of freedom more generally. This encourages governments to adopt policies that encourage their citizens to stay and operate within the government’s rule set. By this principle, we should expect enough variation between governments to allow spontaneous order to occur within them.

    1. JCatalan

      But, that logic can be a little circular, because freedom of exit is more likely to exist with inclusive political institutions than with the extractive kind. Take, for example, East Germany, and the Soviet Union/Warsaw Pact more generally. I’m sure that if there were freedom of exit, those governments would have had more pressure to reform. But, they enforced a restriction on emigration because of that.

      I agree that freedom of exist can be a very good thing. But, it seems more of a symptom of liberal institutions, rather than a cause of them.

      1. Jim Caton

        There is an important de jure, de facto distinction here. If citizens can leave (as opposed to being allowed to leave), then this serves as a threat to government revenue, respect for the law, and more generally, the present social order that the government helps to enforce. I don’t mean to suggest a sufficient condition for liberal institutions, but it is a necessary one. And there often exists a positive feedback loop between an increase in this freedom, and liberalization more generally.

        1. JCatalan

          I’m not sure that’s a practical distinction. There is always, to some degree, the ability to leave a country. So, if we’re talking abstractly, that ability exists with or without liberal institutions. And, there are liberal institutions that don’t allow full freedom of exit; and I can conceive of a voluntary society where freedom of exit is restricted by agreement. But, it’s usually with liberal institutions that we see a recognized benefit to the freedom of exit, and it’s with liberal institutions where this freedom is beneficial to those institutions, rather than undermining (which is the case with extractive institutions).

          I think the distribution of power has more to do with liberal and non-liberal institutions than with the ability of exit.

          1. Jim Caton

            Except for you’re final conclusion, I’m not sure that we disagree. We are discussing the cost of exit. Exit is not costless in any society, and there are barriers to exit in every society that I am aware of. In liberal societies, this cost tends to be much smaller. And, according to my understanding of common law, a relatively low cost of exit from lower level political systems in Britain played a role in constraining power and spreading the rights that Lords had afforded themselves with the Magna Carta.

  5. Seth MacLeod

    I think your argument here is strongest against Hoppe’s idea of covenant communities, but I don’t think it addresses much about the ideas of people like Hasnas or Friedman. I’m not advocating for this, but are you familiar with Amish law? Basically, the bishop is installed for life, and ‘legal’ decisions must be unanimous in the community. Congregations typically vote in line with the bishop’s proposals (after all, why vote someone into a permanent position if you think you are going to disagree with his decisions?). But here’s the thing, when congregations are unhappy with the bishop (or parts of congregations), the people who are dissatisfied leave the congregation and form another one, and they don’t necessarily have to even move their homes. Source:

    The relevance here is that we don’t have to demolish all or most existing institutions in order to have stateless governance. Hoppe’s covenant communities might very well have a fatal conceit, but a polycentric legal order is a very different beast, and I don’t think that your argument here sufficiently addresses the differences between a covenant community and a polycentric legal order.

    1. Alexi

      In the context of my earlier comment, just remember that what Hoppe is trying to do is to show conservatives that the state does not reach the outcomes they desire and that they are better off attempting voluntary means. But he also states an anarchist society would be polycentric, with some institutions operating with different legal codes. He is trying to proselytise conservatives, no doubt, but he isn’t too far off from Friedman in some respects. More so than Rothbard in this case.

      1. Alexi

        Also, provided they are not taken as a catch-all solution, covenants are useful and effective, for instance within a HOA. The key is we must be allowed to experiment with non-state forms of social organisation. Various libertarians propose their envisioned institutions but then they are also for the most part not going to impose those on society at large. They want other people to stop imposing their vision of society on them through the state. And I think both Hoppe and Caplan go a long way in demonstrating the deficiencies of so-called democratic choice. Without secession coupled to it, anyway.

        1. Seth MacLeod

          The thing about a homeowner association is that your house is fixed to a governmental body. This can be entirely legitimate, and they may be more common in a stateless society, but I also think that Jon’s argument has a fair amount of relevance to this. Essentially the difference between a state government and a HOA government is that the HOA is consensual in nature. But when it comes to the actual structure of the governmental body, they could be, if not identical, then very similar.

          If I’m understanding Jon correctly, his point is that libertarians could be said to be suffering a fatal conceit if they just simply claim that a HOA government would function better than a state government.

          I don’t quite agree with Jon; I think Bob Murphy’s position is accurate, that ceteris paribus, a society would be better off with stateless governance than with state governance.

          1. Alexi

            Yes, agreed on all the above.

            “If I’m understanding Jon correctly, his point is that libertarians could be said to be suffering a fatal conceit if they just simply claim that a HOA government would function better than a state government.”

            Yes, but they don’t just state it would, just because. The reason is because of the constrains a voluntaryist system puts on governance.

    2. JCatalan

      My argument is relevant for anything that imagines a radical departure from existing order, especially anything that imagines a society with a large state.

      1. Seth MacLeod

        Oh, but “true” anarchy would be governed by some set of meta-rules, such as Robert Nozick’s (1974) utopia or Murray Rothbard’s (1998) ruling ethic. But, remember, in a world of ethical and moral heterogeneity, these meta-rules are imposed (thus the attraction of public reason), and suffer from the same criticism of planning as do governments and markets.

        This section is why I think it has less relevance to Hasnas’ position. Hasnas is a libertarian, but he does not make arguments for an unhampered market in law based on people generally agreeing to a libertarian ethic of sorts. And it’s the same with David Friedman. Hasnas argues that stateless law would be better and tend towards libertarian ideals, but that it doesn’t require the general population to hold libertarian ideals in order for this to happen. If I remember correctly, Friedman has a similar viewpoint.

  6. Alexi

    Also I think a reasonable, acceptable answer to my question would be ‘because most people desire peace, order and prosperity’ in regards to the social order.

    Two points about this. It constrains the applicable set of rules that achieve these ends, which is where economics and political theory come into play. It also assumes people’s desires should be given due regard. Here we can say that at the very least one person – the ruler – would think their desires should hold sway, and thence we can employ arguments from moral consistency.


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