Archive for July, 2011

The Road to Serfdom: Chapter 6

“The Rule of Law thus implies limits to the scope of legislation: it restricts it to the kind of general rules known as formal law and excludes legislation either directly aimed at particular people or at enabling anybody to use the coercive power of the state for the purpose of such discrimination. It means, not that everything is regulated by law, but, on the contrary, that the coercive power of the state can be used only in cases defined in advance by the law and in such a way that it can be foreseen how it will be used. A particular enactment can thus infringe on the Rule of Law.” – pg120

Planning and the Rule of Law

This chapter is rather short as it only deals with a single topic, the rule of law. The rule of law is the idea that the government has set up before hand the rules that individuals must follow when seeking the particular ends they wish to commit their efforts to. This leads to the rules being applied to all individuals equally and no individual or group of people getting special exemptions in the event of undesirable economic outcomes.

Collective economic planning requires that the government ignore any rule of law that has been set up as it must arbitrarily decide between the end use of resources regardless of whether or not they conflict with previously established customs. If the state is created specifically to deal with the unpredictable economic hardships faced by individuals then it is practically guaranteed that the state will come into conflict with the rule of law as it chooses particular priorities over others.

The benefit for laying down formal rules before hand is that we do not know exactly how they will be used. This leaves the door open for people to come up with innovative uses of resources in ways in which the central authority could not predict with its limited view of the economy and its limited entrepreneurial ability. It seems paradoxical that a system whose ends are less predictable would be the more superior system but Hayek resolves this paradox by putting forth two arguments.

The first argument that Hayek lays down revolves around the socialist calculation problem that he was so famous for. Since the government is limited in the amount of information it can collect and analyze, only individuals will have the necessary information of the particular economic circumstance that they are facing. Therefore, only individuals should have the freedom, as set up by the general rules, to act in light of unforeseen economic conditions. If the individuals are to be able to use their knowledge effectively in making plans, they must be able to predict the actions of the state which might affect these plans. But if the state plans in response to unpredictable economic circumstances faced then the actions of the state are unpredictable which makes it more difficult for individuals to produce plans that allow them to overcome the economic hardships that they face.

The second argument is that if the state is unable to properly calculate the net costs of the legislation then it is very likely that the unforeseen costs will place a burden on the opportunities available to individuals to discover their own solutions to the problems they face. If the state is able to calculate the costs and benefits more accurately than those affected by the legislation then the affected parties will still bear the cost of having their preferred solutions stymied by the enforcement of the state solutions onto those individuals. The legislator will be put into a position where he must determine whose interests are more important to society since this can be the only justification in choosing one group’s preferences over another group’s.

If the legislator attempts to rise above his particular prejudice and rule in a manner that is fair, it is most likely the he will appeal to what is commonly perceived as fair in his society. The problem with this is that what the legislator perceives to be the general consensus arises mostly among those whose interests are directly affected by the particular ruling. The general consensus will likely be most vocally argued for by the concentrated minority at the expense of the unconcerned distributed majority. If this is the case then the legislator has simply replaced his uninformed prejudice with the desired ends of the special interest groups.

Ethics and the Rule of Law

While Hayek does very little in this chapter to discuss what determines the rule of law we can see that the rule of law must be based primarily off of a system of ethics. I think it will be beneficial for our understanding of what Hayek is trying to get at to lay down some initial definitions and construct a useful system of ethics. Hayek provides essentially no argument in this chapter as to why we should choose certain laws over others to which all individuals should be submitted to equally. Just because there is uniformity among individuals to the submission of society’s laws does not necessarily mean those laws are not arbitrary or unjust.

What does it mean to determine a system of ethics? Solving one of the eternal problems of philosophy in one blog post would be impossible but a simplistic sketch will suffice for now and assist us in understanding what Hayek was discussing. I will argue that a rationally determined system of ethics is one which facilitates the voluntary relations between people and where actions between individuals are to be coercive they are to be allowed only on the basis on the net facilitation of voluntary relations and not simply for irrational or arbitrary reasons.

Voluntary relations are those where all individuals involved are able to act towards their preferred goals and which include both mutually beneficial transactions and individual pursuits free from the interference of others. When the goals of individuals come into conflict the only way to resolve the conflict is either through negotiation and agreement to new goals or through coercively drawing a concession from one of the parties. As we can see from these definitions, a system of ethics is produced to reduce conflict within society thereby freeing up resources that would otherwise be spent on attempting to resolve these conflicts.

At this point we could easily fall into one of the greatest traps faced by philosophers and that is to determine what is ethical. The reason that this trap is so easily sprung is that people want to determine how they should act as an individual without taking into account how their individual moral beliefs will unfold as they are developed into a system of ethics held by a majority within society. It becomes very tempting to come up with an ethical system that simply justifies the goals that you wish to pursue without taking into account the conflicts that your preferred goals create with others. The problem with these systems of ethics is that they do nothing to resolve the conflicts that we initially set out to eliminate and in fact make us feel more justified in our actions which make us less likely to compromise with others, leading to more conflict within society. Therefore the first goal of ethics should be to determine which systems can be applied universally between all individuals.

In addition to the reduced costs that accrue to universal systems of ethics we must also have an understanding of those systems that have been established for the sole purpose of taking advantage of the compliance of others to a system of ethics. Throughout history irrational ethical systems have been maintained purely on the majority’s belief in the value of the ethical exceptions that benefit particular individuals. The belief in the monarchy, the dictator, gods, elders and the will of the majority have all been used to justify exceptions to the ethical systems that individuals within those societies were expected to follow.

When I argue for a rational system of ethics I mean that we should look for an empirical basis for our ethical systems. The problem with this is that empirical analysis cannot objectively determine what our subjective system of ethics should be, the famous is-ought problem first discussed by Hume. While we cannot determine empirically what ought to be we can determine empirically what ought not to be. We can do this because the goal of an empirical system of ethics is not just to determine what ought to be but how to universalize the system of ethics between all individuals. Keeping this in mind we can distil empiricism down to a simple statement; things are not true simply because people say they are true. A completely trivial and banal statement on the surface but a statement which can hold a lot of power against those who which to create exceptions to universal systems of ethics simply by creating words that denote the exception based on nothing other than the fact that the word exists.

These irrational exceptions are created because it is seen as the only way to achieve the goals of those that are exempt. This could be beneficial if the goals are noble, but by solving one problem we have created another. Without a rational system of ethics how do we determine objectively what goals are beneficial for society and if the only way to determine this is based off the subjective preferences of an elite group of individuals then we are just back to where we started. Whatever power structure has been allowed an exemption from the ethical system will be fought over by those that wish to promote their agenda, thereby creating more conflict within society and all the costs that come with it.

Having laid out the problem I have to admit that I can provide no solution. My belief that an objective system of ethics will reduce conflict and produce a more prosperous society rests on little more than faith at this point. However, I do believe that once we frame the question in a manner that allows us to consciously determine the costs and benefits of particular exemptions we can begin to move towards eliminating the most egregious examples of individual profit.


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