Hayek on Spontaneous Order and Constitutional Design

0:00I want to talk about a kind of little-noticed dimension of Friedrich Hayek's political thought, namely his constitutional theory. I have a paper coming out on this subject that's going to be published in the Independent Review this summer. It'll be the summer edition of the Independent Review, volume 15, that talks about some of the things I'm going to talk to you about today. I'm grateful to them for publishing my work, and I hope that you'll take a look at it and look at the other good articles that will appear in that edition. I'm going to go ahead and start with the punch line. Many of you are probably familiar to some extent or another with Hayek's economic and political writings. We all owe him a great intellectual debt, anybody who is interested in individual freedom. In volume three of Law, Legislation, and Liberty, his important three-volume work, he outlines, among other things, an ideal constitution. His ideal constitution is not intended to be a draft for a real-world

0:57Constitution. In this respect, it is supposed to be thought-provoking. It's supposed to tell us something. It's supposed to tell us something about ideas, much like his own intellectual forebearer, David Hume, wrote about in The Idea of a Perfect Commonwealth. It's supposed to tell us something about constitutionalism. It's not supposed to tell us what a real constitution necessarily ought to be like. And so that's my focus today. And as I say, I'm going to go ahead and tell you what the punchline is. The punchline is this. In Friedrich Hayek's political thought, and I'm absolutely I'm absolutely convinced that this is also the case, this is the truth, a political truth, that if you want to have a free society, it is really essential in the long run, a phrase as most of us know, Hayek believes to be an important perspective, right?

1:42That it really matters whether or not people in the society believe and want, believe in individual freedom as a value and want to live in a free society. If people don't really want that, they're not going to have it for long, even if it is bequeathed to them by their ancestors. So that's the punchline. Hayek, I think, manifests great political wisdom in his writings in saying this. And as I say, he outlines this in this ideal constitution. So I want to flesh that out for you and encourage everybody to read that book, too, if you haven't before, volume three of Law, Legislation, and Liberty. Okay. Opinion. Power ultimately rests on opinion. We learned this from David Hume. And we also hear this in Friedrich Hayek, constitutional design in Hayek's view is an appropriately designed constitution is a necessary, but not a sufficient condition to preserving a liberal or free society, spontaneous order in society is the linchpin of his economic and political thought.

2:49By spontaneous order, what we mean are self-organizing social phenomena. In the market, spontaneous order presents itself by means of market prices, which condense information that is widely dispersed among people in society about things that are available, about things that people want, and it gives us that information in an abstract form in terms of market prices. It congeals that information or condenses that information that really could not feasibly be gathered and put together in directions to people as to what they ought to do with their resources. This is part of the great magic, if you will, of the market.

3:34Now, cultural evolution is another instance of a self-organizing social process or form of spontaneous social order that we find in Hayek's writings. It is not the same as the market, but it uses the same kind of self-organizing principle to organize itself. With cultural evolution, the end products, rather than being market prices that give people direction as to how they should use their resources, resources. Instead, with cultural evolution, the end results are cultural rules or traditions that are similar to market prices in a couple of ways. One is they condense or congeal information that could not feasibly be brought together and given people instructions on this is what will work, this is what won't work. It is similar to cultural evolution in a second in a different way in that it's the product of the actions of a great many people over it can be over time in the case of cultural evolution.

4:39It is also similar to the spontaneous order of the market and that involves competition. Whereas market, the spontaneous order of the market is produced by competition among individuals and firms, the spontaneous order represented in cultural evolution is produced by competition among groups. With Hayek's theory of cultural evolution, the evolution of evolved rules that give us guidances to what would be the most effective ways to behave, these are produced by competition among groups following different social rules. Those rules that prove most effective, and I'll use scare quotes to say effective, will tend to produce a larger number of people following them.

5:24This is like Darwinian evolution in that the rule, the behavior that most effectively fits an ecological niche, that is, it works the best in reproducing itself by having a larger number of people following it, is one that will eventually become the dominant one in society. Rules that are followed by a lesser number of people will tend to die out and become characterized of a smaller part of society. So the end result of intergroup competition among social rules is that those which tend to reproduce themselves most effectively are going to be the ones that are most widely followed.

6:09What this means is rules that tend to produce greater amounts of wealth and prosperity for the individuals and for the families and for the communities that are following them. Over centuries, if you look historically, Hayek points out, this kind of process produced the division of labor, the belief in contracts as being obligating, Not just by law and so forth, but we believe that we're supposed to keep our promises to other people when we've entered into them with others in business and the like. And also a belief in the importance of private property, that we should respect the property that other people have and that other people should respect our property as well. Belief in contract, belief in private property, belief in individual responsibility, that each individual or each family is responsible for the things that happen to them.

7:00and also a willingness to accept a kind of society in which the rewards that people receive are dependent upon the value of the goods and the services that they provide to other people. Now, all these things are values. They're things that you can believe in or you cannot believe in. But one of the things that Hayek is telling us is that over the centuries in Western civilization, the centuries of intergroup competition have left us with these values. And these are the values that support what he calls the extended order, which is a modern industrial society, the kind of society that we live in, the kind that you find in Western Europe and North America and so on. So Hayek is presenting a factual argument, which is, you know, you could dispute whether or not it's a scientific argument, but he's saying factually this is where the moral traditions that we have came from, This kind of process.

7:58And he's also saying that the free society that we live in, the free societies that characterize the United States and North America, are the products of this kind of cultural evolution. So cultural evolution in that sense is what supports the freedom that we individually and collectively enjoy in the modern West. Now, the rule of law. This is a second part of what we're going to talk about in terms of Hayek's constitutional thought. By the rule of law, I was talking before I got started about what the group is like, and there's really no way to anticipate what the group is like. Probably a lot of you are as well-versed as I am in Hayek, and probably some of you it's relatively new to. So I'm going to go ahead and talk for a few minutes about Hayek's conception of the rule of law.

8:48Hayek describes the rule of law as a meta-legal doctrine. The Theory of Money and Credit

9:21It's a general rule. It applies across the board. And then secondly, it is universally applied. It applies to everyone whenever their conduct, depending on the content of the rule, comes under the scope of that rule. Hayek's idea of the rule of law means that the same rules apply to everybody in the same way. This embodies a conception of justice, but it's still not a specific, substantive idea of justice. It's just an idea about what justice is. Hayek's idea of the rule of law means that the same rules apply to everybody in the same way. It's not a specific, substantive idea of justice, it's just an idea about what justice should be like, or what rules should be like.

10:08Now we're going to talk a little bit more about what Hayek means when he talks about a sense of justice, or when he talks about what I call a sense of justice in his work. But the rule of law is supposed to operate as a limit on power, limit on governmental power, because if this is a rule about what the law can be, A normative constraint on what the law can be. There are some things government can't do. Government can't issue commands to particular individuals or groups saying you shall do this because that doesn't satisfy this normative criterion of the rule of law. This is very different than what we think of as being constraints on government's power, say in the United States. We have a written constitution that spells out certain things that the government can do and it says some things that they can't do.

10:58This is very different. It's important to note that this is actually quite different. This is a very general abstract idea about what laws can be. It doesn't say anything really about the content of the law. It just says about, you know, this is what laws are going to be like. And if it doesn't take this form, does not take this form, a general rule that applies to everyone in the same way, then it can't be a law. Now the problem Hayek is really concerned about when he comes up with this ideal constitution in volume three of Law, Legislation and Liberty is interest group politics. Parties in the modern West he sees quite correctly as consisting of coalitions of interest groups. There's a political scientist, Robert Dahl, wrote a long time ago. It's an old, old book now Over 40-some years old, he says that in modern democratic governments, what we have is what he called Minority's Rule.

11:57Minority's Rule. There are coalitions of interest groups that get together and form temporary majorities and enact public policy. And everybody gets something that they want. Nobody might like all of it, but everybody gets something that they want. That's what makes it democratic. That's what makes government responsive. Now, Dahl is a group theorist. This was a long time ago. But this represents kind of the common thinking among political scientists anyway, about what government in modern democracy should be like. Everybody gets something. They might not want all of it, but everybody gets something, right? Now, somebody here is going to be able to tell me. What do we call a result that you might like something about it, Nobody would choose the entire result.

12:45What would we call that? It's a suboptimal result, right? It's something that nobody actually wants. So what they're describing is, well, I got something I wanted, but what I'm getting overall is actually what I don't want. So in this vision of democratic government, what you get is actually what you don't want. This is a problem that Hayek sees with modern democratic governments. and it's a problem that he seeks to address by telling us something about what constitutional government ought to be like. So let's take a look at his ideal constitution. Now again, as I said, his ideal constitution is not something that we would actually sit down and draw up and act as a group to govern ourselves. It's more to tell us about what constitutional and limited government should be like.

13:36His constitution, again, is a formal idea. It consists primarily not of what we think of in the United States as a constitution, which is, you know, you have an article that sets out the powers of Congress, one of the presidents, and so forth. He does have that, although he doesn't actually have it all written out. But the key point of it is what he calls a basic clause in the constitution. And this is what describes the rule of law, okay? It describes what I talked about before as being the rule of law. Laws have to be general, rules, abstract, and that they don't apply to just particular people, but that they apply to everybody. So they're general or abstract rules, and second, that they apply to everybody equally. That's the basic clause of his Constitution. If a law, a proposed law, doesn't satisfy that description of a law, it's not going to be a law. It can't be a law.

14:25In our parlance, it would be unconstitutional. Hayek has a bicameral legislature, a word about bicameral legislature and separation of powers in the United States. Hayek has kind of an interesting twist on the idea of a bicameral legislature in the separation of powers. In the United States, we have a separation of powers, right? We have a judiciary, executive, and legislative branches of government. That's our separation of powers.

15:10We have checks and balances. That is, in order for one of the branches to accomplish something, it has to obtain the cooperation of the other branches. You know, Congress can pass a law, but then the president has to sign it into a law. Our separation of powers in the United States is of interest in that it was intended by the Framers to reflect differing social interests between larger states and smaller states. That's why they're elected in a different way. Hayek's Upper Chamber, which he calls the Legislative Assembly, is the part of government that enacts Rules of Conduct for Individuals, Firms, and so forth.

16:21The law that we think of. This is what you shall or shall not do. The lower chamber of his legislature, which he calls the governmental assembly, can formulate public policy, try to resolve or address social problems, but it has to do it subject to the constraints, legal constraints, that are established by the upper chamber. Now this is completely different than what we have here, right? Look at what they're doing or trying to do with healthcare, so-called reform, in the United States Congress. There is some give and take between the two bodies of Congress, the two chambers of Congress, but it's not at all like this. Here in Hayek's ideal constitution, the upper chamber establishes the scope of government.

17:10It says, this is how far government can go, and it can't go any farther than this. And then the lower chamber can try and address issues like maybe regulating insurance or whatever it wants to do but it has to do its subject to those limits on the scope of government that are established by the upper chamber. This is entirely different. I want to mention too that in thinking about comparing this to the United States Constitution, everybody to some extent will be familiar with the writings of James Madison in Federalist Papers about the separation of powers and federalism. The framers were convinced, and with great justification, that having a very diverse society, what Hayek calls the extended order, would help government to limit its own power.

17:55Because we have a diverse society, it's more difficult for people to agree about anything. Going back to democratic theory from a long time ago, the framers of our constitution, when they thought of democracy, they thought of the ancient democracies, especially that of Athens in which people directly ruled, they did whatever they wanted to, provided they had a majority to agree to it. That's what they thought of. Small communities could govern themselves like this. They said, you know, you could have a temporary majority to do all kinds of terrible things in a society like that. In a large diverse society, with a complex scheme of government like we have here, the separation of powers and federalism, it's more difficult to form a temporary majority to do anything, because if you have a diverse society, it's less likely that people are going to agree on things.

18:49That tends to limit the scope of government's power. Now, what Hayek has in mind again here is in fact quite different than that. Hayek, rather than saying we're going to have a, he does recognize that that's the case. He agrees certainly with Madison about that, about diversity tending to impose some limits on the ability of majorities to form. But one thing he's saying is very different, is that there has to be a limited consensus among most people in society. Hayek says, liberty to work well requires not merely the existence of strong moral convictions, but also the acceptance of particular moral convictions.

19:49I'm concerned rather with some more general conceptions which seem to me an essential condition of a free society and without which it cannot survive. The two crucial ones seem to me the belief in individual responsibility and the approval as just of an arrangement by which material rewards are made to correspond to the value which a person's particular services have to his fellows. Class warfare is out if we're going to have a free society, or class resentment is out if we're going to have a free society, and looking to somebody else to take care of our needs is out if we're going to have a free society. People have to believe that those are not appropriate social goals. People have to substantively actually believe that we don't want a government that does things like that.

20:41If we don't have a society in which most people believe those things, we're not going to have a free society for very long. This is the key message that I want to impart to you that Hayek is talking about in his ideal constitution. I'm going to run out of time, so I want to talk a little bit about the design of his constitution. In the upper chamber, there are some really interesting features of this. Nobody who's ever been a member of a political party can be a member of Hayek's upper chamber. There's no First Amendment, apparently, in Hayek's constitution. This is a speculative idea. No politicians is the idea. Nobody who's been a politician is going to be a member of his upper chamber. You're going to serve one term, the ultimate term limit. It's going to be a relatively long term.

21:28He suggests probably about 15 years, so they're not focused on re-election. He says they should be people who have reached a relatively mature age. People who vote for members of the upper chamber only do so once in their lives. So at one point in your life, when you two are at a relatively mature age, you're going to vote for one of your peers to represent you in the upper chamber. What does this tell us about this upper chamber? What Hayek has in mind is that members of the upper chamber are supposed to represent the dominant values in society. When I talked earlier about opinion, a sense of justice, what kinds of substantive values do we have about the scope of government, the appropriate power of government, how we ought to relate to each other individually and collectively in society.

22:20Broadly speaking, those traditional ideas or whatever, whether they're products of tradition or whatever, that's what Hayek wants to have represented in his upper chamber. This is the sense of justice that predominates in society. Now, I'm going to suggest to you that what Hayek has in mind is what political writers a long time ago used to think of as a natural aristocracy. You go back to the time of our founding and before when people talked about a mixed constitution. A mixed constitution meant a constitution that represented different social classes. Social classes, the aristocracy would be one, the people would be another, nobility would be another, different groups representing different amounts of wealth, whether they were wealthy, whether they were middle class, whether they were poor.

23:11This is an idea that goes way, way back. You find this in Aristotle, this idea of a mixed constitution in which different parts of the government represent different parts of the society in terms of status and prestige and so forth. Now, what Hayek has in mind here actually is kind of a natural aristocracy. Some of our forebears talked about a natural aristocracy, meaning people who had proven themselves successful in life or proven themselves to be virtuous as compared to their fellows. And this would be a natural aristocracy, not one that they had inherited by their family, you know, I'm the Duke of whatever, but because they had skills, they had intelligence, they This is what Hayek actually has in mind here. These are people, he says, who have proved, should be, people who have proved themselves in the ordinary business of life. These are people who are respected, who are admired by their peers. And so, presumably, these are going to be people who reflect their sense of what is fair, of what is right and wrong, and also their sense of what is right and wrong.

24:07These are people who are respected, who are admired by their peers, and so presumably these are going to be people who reflect their sense of what is fair, of what is right and wrong, and also their ideas about what the scope and the powers of government ought to be. Now remember, the upper chamber again is the chamber that limits the lower chamber. It limits the rest of the legislature. It really imposes limits on the entire government. Have you heard me say anything yet about an executive branch of government? No. Hayek doesn't talk about one. Now, he does have a constitutional court that has the power of judicial review. And guess who chooses the members of the court? They're appointed by retired members of the legislative assembly, the upper chamber.

24:52These are the people, again, who not only were they put there because they were respected by their peers and presumably reflected the dominant values of the society, of the Society, but now they have served the public in that capacity in their one 15-year term or so, they have retired, and now they're in a position to help select people who would sit on a court with the power of judicial review to review the acts of the legislative assembly and the lower assembly to see if they satisfy the basic clause of the Constitution, what the rule of law is, and whether the lower chamber has violated laws enacted by the upper to limit the scope of government. So what Hayek is trying to do is he's trying to put traditionally evolved opinion, a traditional sense of justice in really the ultimate governing seat in his ideal constitution.

25:47So it's not a president that governs, it's not a group of people, it's not a political party, and it's certainly not a coalition of interest groups. and interest groups. Rather, it is justice, the sense of justice that people have predominating in society that is to govern. Now, let me just, I'm going to, I don't know if we'll do questions after everybody has talked. I'm going to conclude and then if you have questions for me, I'll be happy to answer them later. Let me just point out, there's a couple of issues that I would like to point out. Now, I think the overall, the point Hayek makes here is one that's extremely important. And I'm a big fan of constitutional political economy, probably a lot of you are too, but I want to highlight that when we use economic man or egoistic behavior as the foundation, not only to describe what people do in self-interested activity in the marketplace, but also if we use that to say, here's how we can make a government work, you can come up with a good description like the framers of our constitution did and like James Buchanan and Gordon Dullock did.

26:50Hayek's overall point, which I'm convinced is correct, is that if you want, and again, as I said before, I think some other people will come in, in the long run, which is actually the important perspective, if you want liberal government to persist, it is essential that most people in society actually want that and believe in that. They actually accept those kind of values that I've talked about and that Hayek talks about. A couple of things I want to point out. One of them I already did, which is that this has implications for political theory, which is that if we're interested in constitutional political economy like I am, I think we also have to be interested in values, in normative political theory.

27:40I think that either one existing in a vacuum is probably missing something. Hayek recognized that, and that's why he comes up with an abstract constitution in his political writings. On the other side, people who are interested primarily in constitutional political economy and leave out values, defense of human freedom as being something that is morally valuable, not merely desirable in a utilitarian sense, Hayek recognizes that the values that support a free society can be fragile. Most of you have probably read Joseph Schumpeter's book, Capitalism, Socialism and Democracy.

28:27Hayek also recognizes that the growth of large firms, for example, where people work for big companies, big corporations and the like, can be something that can actually erode the kind of values that a free society depends on. People come to think of themselves as parts of a big machine, a big corporate machine. I'm owed what I get because this is my position in the organization and the like. And this actually can threaten the kind of values that people have, that people need in order to make a free society work. Throw this out as an example. If you work in a big corporate organization like that, That's who gives you your health insurance, right? Lots of people may not understand that it's a lot different to have the government do that than to have their employer do that. Lots of people may not understand that.

29:12If they worked for so-and-so Inc. for their whole lives, they may not get that. Hayek talks about this as a potential problem, but very large firms like that can arguably be the result of market competition, also of government regulation and the like. So he recognizes that there may be forces at work in a market that can threaten some of the moral underpinnings on which it depends. All right, but that's what I've got. Oh, one final thing, then I'm going to shut up. I'm afraid we're out of time. All right. I go for one point. Oh, I went for 30 minutes. My apologies.