Using Hayek against free markets

by Henry on February 29, 2004

I’ve been re-reading James Scott’s Seeing Like a State: Why Certain Schemes to Improve the Human Condition Have Failed“. It’s a wonderful book; I especially recommend it to libertarians who find it hard to believe that lefties too can be opposed to big government. I hope to blog more about its relationship to Hernando de Soto’s proposals for property rights reform in the developing world (see here, here and here ) sometime in the next few weeks. For the moment, I just want to highlight one implication of Scott’s argument; that free markets may be flawed from a Hayekian point of view. Scott doesn’t pay as much attention to markets as he perhaps ought to, but it’s quite clear that he sees the process of state-building as going hand-in-hand with the creation of national and transnational markets. In particular, both states and markets need commonly agreed formal standards (of quality, measurement etc), which allow non-local exchange between people who don’t know each other. The historical evidence is emphatic – creating universal standards is an important part of the state-building process, not only in autocratic regimes, but also in more market-oriented societies (see, for example, John Brewer’s exemplary study of the building of the British state, The Sinews of Power).

But here’s the rub. Scott very clearly shows that national, written standards are going to be “thin.” By their very nature, they’re unavoidably going to leave out many of the important forms of tacit knowledge that local, consensual, unwritten standards and rules can incorporate. The Hayekian case for free markets, as I understand it, is based less on the ideal of competition, than the ideal of information exchange; i.e. that markets allow the transmission of tacit knowledge more effectively than formal organizations. But Scott’s argument suggests that Hayek on tacit knowledge contradicts Hayek on free markets.[1] If you want to have non-local exchange (i.e. properly competitive impersonal markets), you have to do so on the basis of universal standards. But these standards fail to live up to the Hayekian ideal. Ergo, you can construct a Hayekian case against the creation of competitive impersonal markets, insofar as these markets involve the destruction of the kinds of tacit knowledge that are embedded in informal local standards. I’m not a Hayek expert, so I’ll throw this out to the people who know Hayek better than I do (Dan for one), but I think that there’s a serious argument here to be fleshed out.

fn1. Cass Sunstein, in his review of Scott’s book, seems to suggest that Scott’s use of Hayek is self-contradictory. I suspect that the contradiction is in Hayek rather than in Scott.

{ 40 comments }

1

Senior Administration Official 03.01.04 at 12:01 am

Hey, is that first broken link to a review or commentary on the book?

2

roger 03.01.04 at 1:58 am

Hayek himself cheats when laying out his case against centrally planned economies by excluding the central planning that is involved in creating property law. So, for Hayek, the great period of liberalism in Britain, from the 1820s to the Conservative program of protective tariffs — around 1904 — is the golden age of capitalism as a self organizing entity. He refuses to notice that it was also a golden age of British colonial attempts to centrally re-orient the Irish and Indian economies to (british dominated) export and free exchange by means of massive and (for the peasants) catastrophic changes in terms of legal land tenure, and the uprooting of traditional in-kind exchanges. It is this blindness which gives The Road to Surfdom such a factitious air. A history of the Western economy in the nineteenth and twentieth centuries that resisted ideological temptation would show that it was just the generation of free marketers, the utilitarians that formed the backbone of the Indian Civil Service, the Gladstone intelligentsia, who generated the twentieth century’s central-planners. It is no coincidence that so many of the original Fabians worked for the colonial office.

The Hayekian idea of self organizing markets only gets off the ground once you artificially segregate law from economic activity. That’s why it needs a Marxist corrective.

3

tex 03.01.04 at 2:36 am

If you want to have non-local exchange (i.e. properly competitive impersonal markets), you have to do so on the basis of universal standards.

You’re losing me here – what do you mean by “tacit” knowledge? Hayek’s argument against socialism was about the impossibility of a central planner to incorporate the vast knowledge to which the free market responds fluidly and immediately.

Universal standards are a product of a free market, not a predecessor.

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Ian Whitchurch 03.01.04 at 3:06 am

Tex,

Nope. I’d suggest analysis of, say, medieval Germany (I’m thinking 16th C Nuremburg myself) as a case for standardisation allowing free- or semi-free markets to occur ; regulated Guild marks are a way of defining that someone has verified that the quality of the goods you are buying exceeds a certain level, thus reducing transaction costs to a manageable level.

The Internet, and IT more generally, is also another case of where standards came first, and then the free market followed.

I’d also argue about the free market reacting ‘fluidly and immediatly’ to tacit knowledge ; bubbles happen, and in both directions (theoretically, check 1984 Econometrica circa p1000 on Rationalisable Expectations).

Ian Whitchurch

5

Patrick Nielsen Hayden 03.01.04 at 3:37 am

“It is this blindness which gives The Road to Surfdom such a factitious air.”

Poor Tim Dunlop!

6

Kieran Healy 03.01.04 at 4:04 am

Universal standards are a product of a free market, not a predecessor.

Yes, I mean just compare the cell phone markets in Europe and the United States.

7

Rich Puchalsky 03.01.04 at 4:59 am

A lot of libertarian arguments depend on implicitly considering law to not be part of government. For instance, for pollution problems, libertarians often advocate ceasing to regulate and letting the courts handle pollution through torts and class actions. Of course, since *some* level of pollution is necessary, what you always end up with is a process of managing it, so all you get is a shift of the managerial burden from one set of governmental employees to another (and, of course, legislation and enforcement by judiciary).

Other common libertarian arguments depend on the creation of “property rights” to unreal property — often an overall expansion of government. If you create a tradeable market for pollution rights, say, there is no actual property being traded, there is just a communal decision about how much risk is acceptible and a regulatory scheme for setting the overall amount of pollution thought commensurate with that risk, and for running the system that sells permits to pollute. Of course, there must also be enforcement to make sure that people don’t pollute without a permit — it’s even worse than intellectual property enforcement, because the pollution just goes away, it doesn’t hang around in the form of copies. (Regulation often gets around this problem by regulating the type of equipment used.) Like many expansions of government to create markets, this actually lets people do some things more flexibly, so it’s a good approach in many cases. But there is no real philosophical difference between it and plain old regulation in terms of the size of government.

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tex 03.01.04 at 5:11 am

standardisation allowing free- or semi-free markets to occur
This is a nonsensical statement. How can free markets be allowed to occur? Who would be “allowing” markets to be free? As for the standardization of internet protocols, who decided what the standards would be? Yes. You see, either standards are imposed or they are a result of market forces. There is no other way.

This is one of Hayek’s points. To impose standards or attempt to coercively create or destroy institutions is to run straight into the brick wall of the information problem. Ask the communists.

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tex 03.01.04 at 5:14 am

Yes, I mean just compare the cell phone markets in Europe and the United States.

Yes, funny how they are different, isn’t it, when compatible systems would be so much better for consumers. I wonder how it came about that they were so incompatible?

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Chirag Kasbekar 03.01.04 at 5:47 am

Henry,

My first thought is that you’re getting Hayek’s case backwards.

I think he explicitly acknowledges this — that local face-to-face economies can be based on trust, etc. and that non-local interaction can sometimes undermine these local networks based on tacit understandings.

But I think you’re undermining the role of competition in his thought. Above all, he was for openness.

Knowledge of local circumstances (which, btw, should be differentiated from tacit agreements) isn’t the only important thing. So is competition between different ways of doing things. (Which also incorporate tacit knowledge.) And for competition to discover knowledge of the best ways/institutions/forms of organisations/etc., the pool of variations has to be as wide as possible.

And to the extent non-local interaction becomes necessary for this to happen, it is better have a non-local market system that can transmit information about tacit knowledge than one that doesn’t.

As you point out, the case is similar to the case for national representative government over local self-government.

Paradoxically, I think because he acknowledges that local interactions/rules incorporate a lot more tacit knowledge than can national or international ones, he recommends that non-local rules be as ‘general’ and open-ended and non-specific as possible.

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Henry 03.01.04 at 5:53 am

Tex – you’re wrong on a number of fronts here. Standardization precedes large scale impersonal markets – it’s more or less a necessary condition for them. Free markets don’t produce them, they’re produced by them. This is universally accepted by historians, including those who are sympathetic to the free market perspective (viz. Doug North. One of the major themes of late 18th/early 19th century economic thought was the need for the state to step in to set common national standards, so that markets could work more efficiently. In answer to your rhetorical question to Kieran, cellphone standards were incompatible (in the US) because the state didn’t step in; Europe did much better, at least in the first stage, because of government mandated standards.

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Chirag Kasbekar 03.01.04 at 6:05 am

BTW, I think Hayek can certainly be used against a full-blown libertarianism — for one, as most people know, he gave public action considerably more scope than libertarians do. Including the setting of standards (though he’d rather not prescribe methods) and the improvement of transparency in the market through the spread of information (yes!).

But I don’t think, Henry, that you’ve quite made the case.

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dsquared 03.01.04 at 7:07 am

I’m 99% sure that Hayek discusses this and 95% sure that he recognises it as a tension in his model. I know for a fact that Adam Smith’s version of free markets was based on a vision of local rather than multinational capitalism. I’ll look up a few things when I get home.

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Chris Bertram 03.01.04 at 8:22 am

Following the amazon link and then clicking on “See all customer reviews” will take you to contrasting reviews by myself and Brad DeLong. BDL argues that Scott is a mere rehash of Hayek and gives SLAS a mere 2 stars! I beg to differ (5 stars from me). All written long before blogging.

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david 03.01.04 at 2:24 pm

Can anyone offer a short account of what’s so good in Scott? I read it quickly awhile ago, from the perspective of early modern European statebuilding history, and thought it was pretty much crap, but I can’t for the life of me remember why I didn’t like it. Take notes take notes I know.

If possible, could you offer a compelling account of its strengths that still confirms that I think it is crap?

16

Steve Carr 03.01.04 at 2:24 pm

Henry, there’s standardization and then there’s standardization. Hayek might agree that universal standards are necessary for large-scale markets to function well, but those standards would be, as chirag puts it, as general and open-ended as possible — property rights, contract enforcement, and perhaps commonly accepted media of exchange. He certainly wouldn’t agree that you need universal standards of “quality” and “measurement.”

The cell phone market is an excellent example. Hayek would certainly not agree that the top-down-imposed standard made Europe better off, precisely because it kept potentially useful tacit knowledge (about better technologies, etc.) from being uncovered by destroying the incentive to uncover it.

Your assertion that Hayek saw competition as somehow secondary is also perplexing. Hayek was skeptical of the neoclassical model of pure price competition, because he thought it begged all the interesting questions about why market economies are so successful. But competition was central to his thought, because it was competition that pushed people to uncover tacit knowledge and bring it to bear on a problem. One of his most important essays, after all, was called “Competition as a Discovery Procedure.”

There is a tension between the local and the universal in Hayek’s thought (I think it’s around the problem of how markets aggregate knowledge, rather than simply produce it) but I don’t think it’s really about standards. In any case, the “destruction” — in your sense — of tacit knowledge that takes place in a standardized market is obviously far smaller than the destruction of tacit knowledge that takes place in a socialist planning system, which requires the imposition of much finer-grained rules. So I’m not really sure where you’re taking this argument.

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Julian Sanchez 03.01.04 at 3:14 pm

This has mostly been covered above, but I’ll just repeat that it’s scarcely as though Hayek opposed the kind of “standardization” you’re talking about, if you mean a framework of clear and neutral rules that provide a framework of market interaction. His argument, as I recall it, was that these were not hostile to but necessary for the transmission of local or tacit knowledge. To use a hackneyed analogy, a rule that establishes some signalling conventions for the highway (brake lights, turn signals) is obviously one form of standardization. But it preserves local knowledge in the way that wouldn’t be possible with, say, an elaborate walkie-talkie system with a batallion of operators at satellite-imaging consoles trying to coordinate the drivers.

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Henry 03.01.04 at 4:14 pm

Chirag, Steve, Julian – thank you all for the excellent comments. Exactly what I was hoping to get – some useful criticisms from libertarians (esp. as my Hayek is a bit rusty at this stage; haven’t read him properly in years). But it seems to me that the tension that Scott identifies withstands your rejoinders. To adapt an example from Scott, peasant systems of collective proprietorship usually rely on highly idiosyncratic measures of quality that reflect local knowledge. This big patch of land here is considered equivalent to that small patch of land there, because the big patch is on a slope, or stony, or tends to get badly flooded every ten years, or, or, or. All of this knowledge is encapsulated in the collective system of exchange (where one family gets one strip of land one year, and the next another year etc). The problem is that this system isn’t ‘legible’ to outsiders, either the state or non-local people who might buy or sell it. In order to tax it, and to create a national market for land, it’s necessary to create a unified system of land rights, with universally transparent standards (such as the acre). Some of the knowledge that was captured in the old system can be recaptured, but some of it is inevitably lost. Replacing local measurements with national standards means that some knowledge is no longer transmitted.

This isn’t the sort of knowledge that can be improved very much by wider competition (I can see some limited possibility for improvements, but so much of the knowledge is localized and idiosyncratic, that ‘competition’ with knowledge from other localities seems to me to be a non-starter). Nor is it the kind of knowledge that can easily be preserved ‘within’ open neutral rules (the very process of creating a market based on neutral transparent rules strips some of the local knowledge away, by replacing a purely local system of exchange that involves informal, idiosyncratic measures with a national one based on formal measures). I think that a Hayekian could very fairly acknowledge either that (a) this form of local knowledge is limited to a relatively small set of issues, or (b) that national markets create their own kind of tacit knowledge, which is of equal worth, or (c) some combination of the above. But I do think that there’s a tradeoff for Hayekians there, which should be properly acknowledged – for some kinds of tacit knowledge, the market is a second best solution, if it’s even that.

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Sebastian Holsclaw 03.01.04 at 4:52 pm

“In answer to your rhetorical question to Kieran, cellphone standards were incompatible (in the US) because the state didn’t step in; Europe did much better, at least in the first stage, because of government mandated standards.”

Isn’t it kind of funny to use European cell phone standards as an argument that governmental standards are a good thing? The European mandated cell phone standards are awful and horrifically inefficient compared to current American standards.

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Steve Carr 03.01.04 at 5:00 pm

Henry, I’d say (a) (that the kinds of local knowledge being lost would be relatively minor) would probably be the Hayekian response. I also think what you’ve identified isn’t so much a contradiction in Hayek as it is (if it exists) a point of undertheorization. In other words, I don’t think Hayek on tacit knowledge is contradicting Hayek on free markets because Hayek wrote little (if at all) on the role of standardization and universalization in the creation of markets. It might be more accurate to say that Hayek on tacit knowledge is in tension with Douglass North on markets.

One other minor, and probably unnecessary point: Hayek, at least through the 1950s, couldn’t really be called a libertarian, since he argues for things like environmental protection and health insurance on the grounds of market failure. (He did become more strident in his later years.) I see him as not so much as an absolutist as someone who is trying to limit as much as possible the role the state plays, because it lacks the on-the-ground knowledge that freely contracting individuals have.

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roger 03.01.04 at 5:35 pm

Steve,
I disagree that the Hayekian response would be a) “that the kinds of local knowledge being lost would be relatively minor.” Anyone who has read Sen or studied the imposition of new property laws knows that they created whole new classe — for instance, a class of lenders in India, a class of large Anglo landholders in Ireland, and a class of settlers in Canada and Australia — and a whole new system of food storage — and non-storage — that was implicated in millions of deaths from starvation that came in waves throughout the nineteenth century. To have the force to impose law led to the militarization of frontiers all over the world. Surely the Hayekian framework would, in some way, predict this — since the framework is very open to the idea that small changes in initial conditions can led to major changes in the system, a big Complexity Science trope.
So surely these aren’t minor changes. Freely contracting individuals gain that freedom on the ruins of previous cultures. That can be for the good or the bad — the destruction of the rural idiocy of peasant culture has realized the tremendous liberatory potential of those individuals — but Hayekians shouldn’t ignore the cost. It is a continuing cost. For instance: the idea that a cultural form might have value in itself — that, for instance, blue collar culture in the Midwest has a value such that the abracadabra of free traders, who urge individuals to become more mobile, entrepreneurial, and in general destroy the form of life that they have been raised in in order to realize an aggregate benefit from lower prices — brings out the contradictory impulses in the Hayekian scheme. Schumpeter, who begins with a similar premise to Hayek, recognized the possibility that capitalism might destroy the ethos of self sacrifice that makes it possible. A parallel logic of social action seems to be enacted in a lot of cases in which there are no constraints placed on the free contracting of individuals.

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Steve Carr 03.01.04 at 6:04 pm

Roger, it seems to me you’re bringing in problems that are at best tangential to the point Henry raised. The kind of “local knowledge” that Henry has argued market standards destroy is, in some specific sense, economic — in the case of the peasant proprietors, for instance, it’s knowledge of land quality. So the argument is that insofar as Hayek emphasizes the importance of local knowledge, his support of markets — which Henry, following North, argues require national or universal standards — creates a tension. I argued in response that the kinds of local knowledge market standards “destroy” are relatively minor, and certainly (I’ll add) not as important as the kinds of local/tacit knowledge that markets help uncover (by providing the right incentives).

What you’re talking about, in contrast, doesn’t seem to me to be knowledge in any economic sense. I don’t mean to downplay the importance of starvation and militarization (though clearly markets have done a far better job of alleviating starvation than any other economic system), but they’re not germane to this debate. Nor is the survival/destruction of blue-collar culture. Hayek — if I can be stupid enough to speak for him — wouldn’t have argued that markets never have bad effects. But they’re far outweighed by the economic advantages markets offer and by the fact that they allow individuals a greater scope of liberty. (As an aside, and only as an aside, I don’t understand the logic of talking about the survival of a particular culture as a good thing in and of itself –unless one were talking about a culture that was uniquely ethical and moral. People are valuable. Cultures aren’t.)

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Jim Henley 03.01.04 at 8:05 pm

Hm. Two dozen comments on this thread and I haven’t seen the word “price” show up yet, in a discussion of Hayek.

Now, I should be chary of discussing economics with my betters, but let me focus specifically on the example of plots of land in the village when the village comes into contact with the larger nation (or world). From a Hayekian perspective, doesn’t that very contact change the information set? Frex, in the context of Life As It Has Been in the village, the small flat patch of land is agreed to be worth the larger, hilly patch, because the arability of the flat patch is superior. Farmer Bob will exchange his small flat patch for the entirety of Farmer John’s large hilly tract, but not for only a portion of same. In a money economy, Farmer Bob will not sell his land for less than farmer John would get for his.

Comes Peter Riegert from Glasgow looking at plots of land. He offers Farmer John twice what he offers Farmer Bob – he wants a vacation house, and in addition to the bigger area, Farmer John’s patch offers a lovely view of the sunset behind the next ridge. Farmer Bob may initially be offended, but the price system has just led to the exchange of information, despite the fact that Peter Riegert is ignorant of the local customs and mores and the villagers have heretofore paid little mind to Glasgow. Now Farmer Bob has been informed, via prices, that there are uses for the local land that the locals have not incorporated into their value system. Farmer John’s neighbors on the hill have learned likewise. Peter Riegert may have discovered that there are – for the moment – bargains to be had in hillside real estate. (Theory tells us the locals will incorporate the new info and the “bargains” will decline, right?)

A few things: the above example is simplified. It can happen that Peter Riegert discovers that he can have Farmer John’s plot for the price of Farmer Bob’s. The initial exchange of information is from Village to City. When Cityfolk show up in increasing numbers bidding on hill properties, THEN the Villagers learn about the differential valuation Glaswegians put on their properties. The example could also work the other way. Perhaps Farmer Bob and Farmer John have plots the same size, on the level, but John’s spring is nearly played out and locals consider Bob’s plot to be worth twice John’s. Peter Riegert offers them both the same amount – hey, flat land, same size – and Bob rebuffs him. Information has still been exchanged via price, but it’s Peter Riegert who does the immediate learning.

Note also that I realize I am leaving aside all sorts of ethical conundra that vex liberals especially, having to do with “exploitation” and such, and the fact that the exchange of info via price takes time and during that time can produce relative losers. That strikes me as outside the scope of the immediate discussion, which, as I understand it, centers on whether markets can aggregate and exchange information in the absence of “thick” national and international standards and cultural agreement.

Also note that I might have constructed an example involving not real property but some good produced in the village or elsewhere, but the land example was out there.

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roger 03.01.04 at 10:36 pm

Steve, two points:

One, information is embedded in any economic system not only as random and indivdual data, but as the dynamic constituents of a horizon of expectation. If Bread goes up tomorrow by 2 dollars a loaf, I will panic and stack up on bread, before it goes to 4 dollars a loaf. No? So changes in a system that depends on in-kind food transfers, and keeps a common reserve of food, are going to be effected when the system changes to one of pure exchange — the food reserve, for instance, will be dispersed. Or can be. In any case, that is where the salience of my points about changing property laws comes in. And I think it comes in to amplify and to make more ambiguous the Hayekian point about information and planning.

2. Of course you don’t think culture itself has value — at least, as a follower of Hayek. I do. And actually I’m not alone — it would be hard to explain social action of all kinds without inferring that at least some social agents do find a value in a culture — in fact, enough value to die for. Or, less dramatically, to sing about. To make museums about. To teach to their kids. Etc.

An economist should be able to account for this –it is, after all, a matter of information, value, and transfers. But an economics that wants to make a libertarian ideological point would rule these values out.

25

Conrad Barwa 03.01.04 at 11:40 pm

If you want to have non-local exchange (i.e. properly competitive impersonal markets), you have to do so on the basis of universal standards. But these standards fail to live up to the Hayekian ideal. Ergo, you can construct a Hayekian case against the creation of competitive impersonal markets, insofar as these markets involve the destruction of the kinds of tacit knowledge that are embedded in informal local standards.

True, but the problem changes shape when it becomes transposed to the modern period. If I remember Scott’s argument correctly, the standardisation of units and the universalisation of exchange is very much part and parcel of state-building and the ability of the state to effectively marshal and order its resources in an efficient manner at a time when state-formation meant that such means were necessary for war-making purposes – which played an essential part in establishing the modern state. Hence lost of examples about professional forestry to allow a taxable lumber industry, raw material for heavy industry and supplies for the navy to be built up over time frex. So, in this sense there can said to be a contradiction but in our period of late Capitalism and where the Westphalian states-system is pretty much the geo-political standard the ability of the state and more TNCs to codify and collect such ‘local knowledge has increased – some of this motivated by the desire for increased differentiation (and ironically a move away from standardised products) in the consumer sector which creates an opening for exotic’ types of marketing for various commodities – maybe Bodyshop’s range of natural products can be an example to more corporatised and state-centred forms of knowledge collection and classification. The programmes of various IGOs and states in collecting and maintaining gene banks is an example; the Indian govt has launched a scheme which allows ‘bio-mapping’ of many diverse and relatively isolated communities, many of them farming based to allow users access via remote-computer centres to store various bits of local knowledge on inter-breeding of planted crops, medicinal herbs etc. Many TNCs have started gene-banks and collection systems which seek to investigate the different uses of plant and animal species for any commercial application. Some of this has led to charges of bio-piracy as with the attempts to patent the properties of the Neem tree, turmeric and one particular case involving the cell-linings of one member of a Central American Amerindian tribe. But the point is with the increased powers of surveillance and ability to process information and the lesser need for standardisation and universalisation to legitimise certain forms of exchange as well as alternative basis of legitimacy to conduct state-building; it has become easier to maintain more flexibility in utilising/exploiting local knowledges in this fashion. To use Scott’s Foucauldian terminology; the abilities of the state and other collective agents of Capital have become more ‘capillary’ rather than ‘arterial’ and so can reach places they could not before.

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Micha Ghertner 03.02.04 at 5:38 am

Roger,

Of course you don’t think culture itself has value — at least, as a follower of Hayek. I do. And actually I’m not alone — it would be hard to explain social action of all kinds without inferring that at least some social agents do find a value in a culture — in fact, enough value to die for. Or, less dramatically, to sing about. To make museums about. To teach to their kids. Etc.

This is not an argument for the claim that culture has value in and of itself. Rather, this is a claim that culture has value to both the individuals living within it and those living in other cultures. A culture is not valuable independant of the humans who receive value from it, just as a tree is not valuable except to those who place a value on it. Of course, you might have some mystical reasons for believing that trees have value independant of humans, but I think that is silly, and I think that most people, if they truly analyzed the reasons for believing so, would think it is silly too.

An economist should be able to account for this —it is, after all, a matter of information, value, and transfers. But an economics that wants to make a libertarian ideological point would rule these values out.

Your hostility towards economics and libertarianism is quite amusing. Travel over to the Volokh Conspiracy and read some of what Tyler Cowen writes. Cowen is both an economist and a libertarian, and has written two books and numerous articles on the economics of culture and why globalization is a net boon to culture, not a net cost.

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roger 03.02.04 at 5:34 pm

Micha, hmm – two points.

1. I don’t believe in arguments that project my beliefs onto “most people”, since there are a lot of people in the world. However, I do believe that if you discussed, with almost any scientist, whether trees have a value in themselves apart from their use to humans, the scientist would answer yes. In fact, the idea that there is no intrinsic value in nature is what is wrong with libertarianism tout court, if you ask me.

Besides, there is something philosophically vacuous and ultimately solipsistic in your talk of “humans.” Humans exist as articulate, intelligent presences in specific contexts. Is there any mortal use for the humans that existed in 1001 to humans now? So why study history, or keep the monuments of those critters? Do humans born in the year 2075 exist? No.
However, Humans don’t exist as such radically foreshortened utilitarians. They weave great webs of sentiment around their environment, and their language, and their ways of doing things, and their pasts and their futures. And this is what makes them interesting.

2. Although my hostility towards economics is amusing, and I do my best to please, when cocktail hour is over I set it aside. However, I do have hostility toward the logic of value as you articulate it. When you make the point that “individual cultures have no value in and of themselves” but have value “value to both the individuals living within it and those living in other cultures” — that’s a good point, and it is my point. However, the actual valuing by these individuals (who do not usually think of themselves as individuals — they think of themselves as family members, as sexually this way or that way, as having this or that religious belief, etc.) doesn’t proceed along this kind of logic: 1. this culture is actually neutral. We could be living in another; 2., but I’ll arbitrarily chose this culture over other cultures. Only Rawlsian cosmonauts think like that. It is an empty point that human beings are the ones who endow culture with value, since, after all, where do human beings GET the thought of value? From their cultures. In fact, I’d argue that that is the main reason human being evolve cultures — as value bearers. No one culture is valuable in itself, but cultures are lived as though they are valuable in themselves — that sums up the paradox.

Be that as it may, the libertarian neutrality with regard to culture is coy, but not convincing. There is a definite cultural impact that results from adopting certain economic policies. These impacts are not separate in everyday life from the political economy. Obviously, the economic choices any ideology favors is a small part of the shape of the cultures that they will also have to favor. It is easy not to see this, because there is no standpoint from which one can predict all of the effects of adopting x economic policy. But that doesn’t mean it won’t have any cultural effects. There’s a word for this in the Hayekian vocabulary — self-organization. To give an example: you will make very large changes in a culture if, over time, you augment the consumer power of the children in that culture. I’m not saying the changes are good or bad, but they will definitely occur. And those changes are, contra vous, definitely about the value of a culture, since they are changes that challenge the way a culture is set up. And they will occur just as Hayek expected — not as planned social projects, but as a set of operations to the results of which the operators are, to a certain extent, blind.

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Micha Ghertner 03.02.04 at 7:23 pm

Roger,

I find your claim that almost any scientist believes that trees have a value in themselves apart from their use to humans most surprising. What is this value? Why should we, as humans, care about the existance of a tree regardless of its value to us? Suppose a tree exists on some faraway planet – a planet so far away that we will never observe it or even realize it is there. Does this tree have value? I have yet to see a good argument that it does.

In fact, the idea that there is no intrinsic value in nature is what is wrong with libertarianism tout court, if you ask me.

Maybe you should do a bit more research. This idea is not an idea of libertarianism, but of economics. The idea that things have value in and of themselves does not conflict in any way whatsoever with libertariansm; it does with economics.

Besides, there is something philosophically vacuous and ultimately solipsistic in your talk of “humans.” Humans exist as articulate, intelligent presences in specific contexts. Is there any mortal use for the humans that existed in 1001 to humans now? So why study history, or keep the monuments of those critters? Do humans born in the year 2075 exist? No.
However, Humans don’t exist as such radically foreshortened utilitarians. They weave great webs of sentiment around their environment, and their language, and their ways of doing things, and their pasts and their futures. And this is what makes them interesting.

None of this is an argument for value independent of humans. We study history because we find it useful or interesting, or for any other reason that pleases us. We do not study history because hostory is valuable in and of itself, independent of any value we place on it.

Be that as it may, the libertarian neutrality with regard to culture is coy, but not convincing. There is a definite cultural impact that results from adopting certain economic policies.

I’m not sure where you got the idea that libertarians are neutral to culture or that we deny the role economics can play on cultural changes. This is exactly what Tyler Cowen has been writing about for the last few years, which is why I referred you to his work in my previous post.

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jimbo 03.02.04 at 9:09 pm

Roger –

Re: “value” – an interesting philosophical question, as Micha says: what exactly is “value” without reference to humans? Let’s say we’re talking about saving all the trees in a forest and walling it off so that no one, ever after, can go there – not even to look. Even in that extreme case, the “value” is a human one (for some people, at least) – they would value the mere knowledge that such a place exists. Animals and trees can’t “value” anything, simply becasue they can’t form the concept – or at least, they can’t express it to us, and since they can’t, any values they might theoretically have must be translated into human values.

Environmentalists might imagine themselves as Loraxes who “speak for the trees”, but it’s not as if the trees took a voteand elected them…

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Micha Ghertner 03.02.04 at 10:25 pm

Jimbo,

Exactly. Economists do recognize existence value – i.e. the value people place on the existence of things even if they get no other direct utility from them. But to say that something has value in and of itself is to say that the thing itself has the ability to make value judgements, or that God or some other mystical entity (“Mother Nature”) places value on it.

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roger 03.02.04 at 10:59 pm

Micha and Jimbo,
On value and use — the two shouldn’t be conflated. Surely, if I plant a tree, because I like to look at it, that tree has that “use.” But if one extends use to cover all human activity, than we have destroyed the usefulness of “use” as a term of art or science.

Michna’s argument seems to be:
1. humans create value
2. value is an function of use.
3. that value is a function of use is the way those terms are used among all economists. In fact, Michna is kind enough to prod me to do some research, since obviously I haven’t mastered the corpus, as she has. Well, let’s look at how one economist talks about use and value. Not Marx, but Adam Smith. In his lectures of 1762, which preceeded the Wealth of Nations, he ponders the difference between the cheapness of water and the dearness of diamonds and makes the parenthetical remark that “their real use seems not yet to be discovered.” Smith’s theory is that the difference in price is explained by supply, which explains the differential. If value and use were synonymous, Smith’s parentheses wouldn’t make sense. Smith expanded on this lecture in Wealth of Nations, where he writes:

“The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called “value in use”; the other, “value in exchange.” The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use.”

As to the value of trees in themselves? It is in their being trees. It would be an odd society that thought that the value of trees was simply in their being good for fuel and timber. Luckily, that society has not yet appeared.

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jimbo 03.02.04 at 11:37 pm

“It would be an odd society that thought that the value of trees was simply in their being good for fuel and timber.”

But note that that is not what I’m saying. As you say yourself: “society” values trees in many different ways, and different societies at different times value them in different ways. But that’s different than saying that they have “value” inherently, without any reference to anyone doing the valueing. After all, both “use value” and “exchange value” only make sense if there are people doing the useing or exchanging…

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Micha Ghertner 03.02.04 at 11:52 pm

Roger,

You have misread my argument. I never equated value and use. In fact, I specifically mentioned that economists recognize “existence value” as a legitimate value. And I also said, as an example, “We study history because we find it useful or interesting, or for any other reason that pleases us.”

Also, my name is spelled “Micha” and I am male.

As to the value of trees in themselves? It is in their being trees. It would be an odd society that thought that the value of trees was simply in their being good for fuel and timber. Luckily, that society has not yet appeared.

“In their being trees” is not an argument; it is simply a repetition of your claim. Trees are not only valuable for fuel and timber, but for asthetics, oxygen production, and so on. What trees are not valuable for is anything independant of human value.

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Rich Puchalsky 03.03.04 at 1:30 am

Perhaps there is an ambiguity about the word “value”. Trees have ecological value that is independent of their economic value or to the value that humans place on them; i.e. they are part of a natural system that would not run as well if they were not present.

Another note: saying that humans are the source of all value is implicitly an atheist or at least non-theist position. One that I agree with, but I just thought I’d mention it.

I once had a long argument with someone in the context of cost-benefit analysis. We were discussing how to handle the risk of events that could wipe out the human species. I argued that such events, by definition, had infinite cost, since humans were the source of all value. He suggested, if I remember rightly, a parameterization scheme such that a humanity-destroying event would always have a larger cost than any other event or combination of events, without being truly infinite.

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roger 03.03.04 at 2:01 am

Micha, sorry about the name misspelling.

It is true that saying we value trees because they are trees is not an argument. That is because it we don’t need an argument, here. We simply need to observe how people do their valuing. Long before there were tribes of utilitarians, there were tribes that worshipped trees. Societies appeal to transcendent entities all of the time — the Gods, or Liberty, or Efficiency, etc. etc. If, by saying all values are human values, you are saying all the values that we know about are the ones that are discussed in human language by humans, that is a position of respectable nominalism. As I say, I think “humans” don’t make the values, but humans in relation one with another – in cultures, institutions, societies – do. This is another form of nominalism, actually. However, it should be noted that this is a minority view – most humans think values come from insights into how the universe is. However, I don’t see all of this as immediately pertinent. To say that trees are valuable because they are trees is not to speak for trees, or to imply that trees mystically make up values in communion with a tree god, but to say that respect for trees should constrain human acts with regard to trees. As, for instance, creating a monoculture of a few trees by letting the variety of trees disappear via extinction, even if saving species of trees means a sacrifice of wealth by some humans. You can interpret this to mean, Roger, a human, not a Lorax, thinks there is a human value in having a variety of trees. Cool. As long as respect for trees is preserved, I could get down with your way of expressing it.

I do think that it is rather funny to start out with a nominalistic attitude towards values, and end up with an idealistic attitude towards social action – which is what you get when you say that humans really represent human values when saying things like, Woodman, spare that tree. I think they just mean, woodman, spare that tree. To use a term from old Adam Smith, I’d call it trans-species sympathy.

PS — Aristotle, to mention one person who had no time for the human being as supreme good argument, thought that it was a sign of a vulgar mind to be too concerned with human beings at all. Much better to contemplate the Gods.

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jimbo 03.03.04 at 2:24 am

“Trees have ecological value that is independent of their economic value or to the value that humans place on them”

Once again we are talking past each other. Any such “ecological value” must still be located within the human beings who are assigning it. I don’t dispute that such things exist – again, I’m not arguing that trees are only useful if they are cut down and turned into lumber. But other “uses” of trees – as preventers of erosion, as environment for animals that people want to preserve, as a “quiet place” for people to retreat from the city – are still located on the heirarchy of human values, and people – through both the political system and the market – need to decide how to balance competing values.

But by making airy statements about “ecological value” that has nothing to do with human beings at all, you are attempting to smuggle YOUR values into the debate as “objective” facts – as things that are not to be questioned, that have an absolute claim to the top of the hierarchy. And it just ain’t so. Preserving ecosystems is important – but not everywhere, and not at any cost.

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Micha Ghertner 03.03.04 at 2:29 am

Rich,

I wouldn’t go so far as saying that ecological value is separate from economic value. The question still remains: why are well-run natural systems valuable apart from the value humans recieve from them?

And you’re right that this is a non-theist position; whether or not the person doing a cost-benefit analysis believes in God, he cannot point to God as a source of additional value above and beyond humanistic value if he expects his analysis to be generally accepted and used by others. The same is true with scientific experiments.

As for the cost of wiping out the human species, this seems somewhat similar to the question of suicide. From a utilitarian perspective, suicide is not infinitely costly; we can easily imagine situations where it is more painful to remain alive than it is to end the pain. So too, if ever there came a point where there was no hope for the future and the entire human species was suffering untold misery, perhaps wiping out the human species would be a net benefit, and not a cost at all.

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Micha Ghertner 03.03.04 at 2:43 am

Roger,

Whether we accept the pragmatic conception of society or methodological individualism, the same questions remain. As you said, this isn’t relevant to this issue.

We simply need to observe how people do their valuing. Long before there were tribes of utilitarians, there were tribes that worshipped trees.

Neither of these examples contradict my claim. When we observe how people do their valuing, we are observing humans placing values on things. We are not observing values independent of humans. When a tribe worships a tree, that is a legitimate value to an economist (so long as the tribe is willing to give up other things in exchange for protecting that tree, such as the opportunity cost of alternative uses). But claiming that the tree is valuable apart from any value humans place on it is not.

Societies appeal to transcendent entities all of the time — the Gods, or Liberty, or Efficiency, etc. etc.

I don’t see how efficiency is a transcendent entity or value; if anything, it is a meta-value, a way of judging how we should go about allocating resources to maximize the desired consequences. Efficiency takes values as a given and goes from there.

To say that trees are valuable because they are trees is not to speak for trees, or to imply that trees mystically make up values in communion with a tree god, but to say that respect for trees should constrain human acts with regard to trees.

But unless we are willing to appeal to something mystical, I don’t see any reason for according trees with respect. I could understand why some might be willing to grant animals respect, because of their capacity to suffer. I happen to disagree with them, but at least they have an argument. What is the argument for respecting trees? What is the point of preserving trees above and beyond the amount of preservation necessary to meet our desired goals?

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Rich Puchalsky 03.03.04 at 4:26 am

jimbo, there was nothing “airy” about my statement about ecological value. I wrote that “Trees have ecological value that is independent of their economic value or to the value that humans place on them; i.e. they are part of a natural system that would not run as well if they were not present.”, to quote my full sentence. The statement that ecologies would not run as well as they do without trees is a simple statement of scientific fact. I didn’t mean that this necessarily implied economic value — though in reality it indirectly does, since we wouldn’t have an economy without an ecosystem — but that there is another meaning of the word “value” that might be confusing the discussion.

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roger 03.04.04 at 7:18 pm

Micha, I went to your site and read what you had to say about humans creating values.

I still don’t buy it. Your elevation of humans to a category separate from all the rest of nature is actually a reproduction of a deep Judeo-Christian belief. The shock of Darwinism is that that belief is bogus. We are primates, our values come out of animal behavior, and there is no reason, from an ethological point of view, to think that valuing behavior isn’t entirely common in the animal world — and, indeed, in the plant world. Because you have described values as those concepts created by humans in valuing behaviors, you have closed the definitional circle — it is like defining baldness as hair loss among humans. Then, indeed, one can only speak of human baldness. But if valuing behavior is about those patterns one can see enacted and embedded among any group of living things that sort behaviors — mechanically or not — according to some hierarchy of tasks — which is the naturalistic way of explaining behavior — then we would see expect to see it on the micro level.

Human values, indeed, are produced by humans and govern human behavior. Ant values are produced and govern ant behaviors. Humans highly value consciousness, and since their values enter into the web of social interactions that constitute consciousness, they have a tendency to dismiss as non-value those that don’t bear the impress of thought. But thought isn’t necessary to value behavior — at least in the naturalist position.

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