Using Hayek against free markets

by Henry Farrell 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.

Did someone say..

by Eszter Hargittai on February 29, 2004

.. Jewish conspiracy?

Sweezy dies

by Chris Bertram on February 29, 2004

Over at The Virtual Stoa, “Chris Brooke reports”: that Paul M. Sweezy, author of _The Theory of Capitalist Development_ and editor of the Monthly Review for many decades has died. Chris will be posting links to obituaries as they appear.

Don’t be Misled

by Brian on February 29, 2004

This is what I need more of – theoretical justifications for __not__ reading things.

bq. “Neil Levy”:, “Open-Mindedness and the Duty to Gather Evidence; Or, Reflections Upon Not Reading the Volokh Conspiracy (For Instance)”: (PDF)

At times Neil comes perilously close to endorsing Kripke’s paradox. Assume __p__ is something I know. So any evidence against __p__ is evidence for something false. Evidence for something false is misleading evidence. It’s bad to attend to misleading evidence. So I shouldn’t attend to evidence against __p__. So more generally I should ignore evidence that tells against things I know.

But Neil’s main point is more subtle than that. It’s that it can be a bad idea to approach a topic as an expert when in fact you’re not one. And that seems like good advice, even if you really should be reading “the Volokh Conspiracy”: (for instance).

Nietzsche and Gibson, Locke and Pasolini

by Chris Bertram on February 29, 2004

I recently read Nietzsche’s “The Genealogy of Morality”: with a group of colleagues. To the extent to which I understood the book (and despite the book’s brevity I’m feeling somewhat sympathetic to those snakes who have to sit around whilst they digest a large mammal), my comprehension was greatly assisted by Brian Leiter’s excellent “Nietzsche on Morality”: . Reading the reviews and commentary on Mel Gibson’s Passion, I was immediately reminded of a passage from the second essay, where Nietzsche is writing about the genesis of guilt from the sense of indebtedness (at first to ancestors) and remarks on the further excruciating twist that Christianity brings: on the pretext of having their debts forgiven, believers are put in a postition of psychological indebtedness from which they can _never_ recover (He sent his only son, and we _killed_ Him):

bq. …. we confront the paradoxical and horrifying expedient with which a martyred humanity found temporary relief, that stroke of genius of Christianity—God’s sacrifice of himself for the guilt of human beings, God paying himself back with himself, God as the only one who can redeem man from what for human beings has become impossible to redeem—the creditor sacrifices himself for the debtor, out of love (can people believe that?), out of love for his debtor! (sec. 21)

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Reading from left to right

by John Q on February 29, 2004

Valdis Krebs presents this map of purchasing habits for political books, using the techniques of cluster analysis. leftright
Krebs’ main point is that the books divide readers into two sharply separate clusters, color-coded on the assumption that one group of readers are Democrats and the other are Republicans. The diagram also coincides with the standard left-right coding.

I have a couple of observations on this. The first is the trivial one that this color-coding is the exact opposite of the one that would naturally be used in Australia or the UK (back in my days as a folksinger, one of my more successful pieces (this is a highly relative term) was about a Labour leader who “went in [to office] Red and came out Blue”.) Without wanting to load too much on to arbitrary signifiers, this does seem to me to support my view that there’s a bigger gulf between liberals and the radical left in the US than elsewhere. Even if the mainstream left party in other countries does not adopt the red banner of Marxism there’s sufficient continuity along the political spectrum to make it’s adoption by the right unlikely.

The second thing that’s striking is that, on the left-right orientation, I come out as a centrist. I’ve read nearly all the blue books that are within one or two links of the red zone, and none of those on the far left of the diagram. On the right, I’ve read only Letters to a Young Conservative .

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Game Theory on the Spot

by Brian on February 29, 2004

I’ve never understood a lot of the attraction behind game theory. In particular, I’ve never heard a convincing argument for why Nash equilibria should be considered especially interesting. The only argument I know of for choosing your side of a Nas equilibria in a one-shot game involves assuming, while deciding what to do, that the other guy knows what decision you will make. This doesn’t even make sense as an idealisation. There’s a better chance of defending the importance of Nash equilibria in repeated games, and I think this is what evolutionary game theorists make a living from. But even there it doesn’t make a lot of sense. In the most famous game of all, Prisoner’s Dilemma, we know that the best strategy in repeated games is __not__ to choose the equilbrium option, but instead to uphold mutual cooperation for as long as possible.

The only time Nash equilibria even look like being important is in repeated zero-sum games. In that case I can almost understand the argument for choosing an equilibrium option. (At least, I can see why that’s a not altogether ridiculous heuristic.) One of the many benefits of the existence of professional sports is that we get a large sample of repeated zero-sum games. And in one relatively easy to model game, penalty kicks, it turns out players really do act like they are playing their side of the equilibrium position, even in surprising ways.

bq. Testing Mixed Strategy Equilibria When Players Are Heterogeneous: The Case of Penalty Kicks in Soccer (P.A. Chiappori, S. Levitt, T. Groseclose). (paper, tables) (Hat tip: Tangotiger)

Some of you will have seen this before, because it was published in __American Economic Review__, but I think it will be news to enough people to post here. The results are interesting, but mostly I’m just jealous that those guys got to spend research time talking to footballers and watching game video. I haven’t heard any work that sounded less like research since I heard about that UC Davis prof whose research consists in part of making porn movies.

New Paltz

by Jon Mandle on February 29, 2004

As you no doubt know, on Friday, Feb.27, the mayor of the village of New Paltz, New York, conducted marriage ceremonies for 21 gay couples in front of a cheering crowd. (Click here and then click again to enlarge the glorious picture.) He was quoted as saying, “Absolutely, I’ll be doing this again.” (For more on the mayor, look here – tip to Kevin Drum.)

So, today (Saturday, Feb.28), my wife and I packed up our 3-1/2 year old to drive the hour south, hoping to be part of the celebration. We were going to have our daughter pass out flowers. Alas, the village offices were quiet. Still, we had a pleasant day – the town seemed to be buzzing, and we overheard bits of several conversations along the lines of: “Wasn’t it great how everybody turned out together in support.”

The legality of the marriages is not obvious – the New York State Consolidated Laws on Domestic Relations are surprisingly unclear on the issue of gender. I found what I would consider to be an implicit assumption that marriages are between a man and a woman in several places, such as article 4, section 50: “Property, real or personal … owned by a woman at the time of her marriage … shall not be subject to her husband’s control or disposal nor liable for his debts.” I’m no lawyer, but this hardly seems definitive.

Stonewall was over 30 years ago. I don’t know how these particular cases will eventually be decided, but here’s hoping that in 30 more years, we’ll look back at these past few weeks as another turning point.