Source: An essay in Toward Liberty: Essays in Honor of Ludwig von Mises on the Occasion of his 90th Birthday, September 29, 1971, vol. 1, ed. F.A. Hayek, Henry Hazlitt, Leonrad R. Read, Gustavo Velasco, and F.A. Harper (Menlo Park: Institute for Humane Studies, 1971).
1. A condition of liberty in which all are allowed to use their own knowledge for their own purposes, restrained only by rules of just conduct of universal application, is likely to produce for them the best conditions for achieving their respective aims. Such a system is likely to be achieved and maintained only if all authority, including that of the majority of the people, is limited in the exercise of coercive power by general principles to which the community has committed itself. Individual freedom, wherever it has existed, has been largely the product of a prevailing respect for such principles which, however, have never been fully articulated in constitutional documents. Freedom has been preserved for prolonged periods because such principles, vaguely and dimly perceived, have governed public opinion. The institutions by which the countries of the Western World have attempted to protect individual freedom against progressive encroachment by government have always proved inadequate when transferred to conditions where such traditions did not prevail. And they have not provided sufficient protection against the effects of new desires which even among the peoples of the West now often loom larger than the older conceptions——conceptions that made possible the periods of freedom when these peoples gained their present positions.
I will not attempt here a fuller definition of the term “freedom” or enlarge upon why we regard freedom as so important. That I have attempted elsewhere. But a few words should be said about why I prefer the short formula by which I have above described the condition of freedom as a state in which each can use his knowledge for his own purposes to the classical phrase of Adam Smith of “every man, so long as he does not violate the laws of justice, [being] left perfectly free to pursue his own interests in his own way.” The reason for my preference is that the latter formula unnecessarily and unfortunately suggests, without intending to, a connection of the argument for individual freedom with egotism or selfishness. The freedom to pursue his own aims is in fact at least as important for the complete altruist as for the most selfish. Altruism, to be a virtue, certainly does not presuppose that one has to follow another person's will. But it is true that much pretended altruism consists in a desire to make others serve the ends which the “altruist” regards as important.
We need not consider here again the undeniable fact that the beneficial effects on others of one's efforts will often become visible to him only if he acts as part of a concerted effort of many in accordance with a coherent plan, and that it may often be difficult for the isolated individual to do much about evils that deeply concern him. It is of course part of his freedom that for such purposes he can join, or create, organizations which will enable him to take part in concerted action. And though some of the ends of the altruist will be achievable only by collective action, purely selfish ends will as often be achieved through it. There is no necessary connection between altruism and collective action, or between egotism and individual action.
2. From the insight that the benefits of civilization rest on the use of more knowledge than can be used in any deliberately concerted effort, it follows that it is not in our power to build a desirable society by simply putting together the particular elements that by themselves appear desirable. Though probably all beneficial improvements must be piecemeal, if the separate steps are not guided by a body of coherent principles, the outcome is likely to be a suppression of individual freedom.
The reason for this is very simple though not generally understood. Since the value of freedom rests on the opportunities it provides for unforeseen and unpredictable actions, we will rarely know what we lose through a particular restriction of freedom. Any such restriction, any coercion other than the enforcement of general rules, will aim at the achievement of some foreseeable particular result, but what is prevented by it will usually not be known. The indirect effects of any interference with the market order will be near and clearly visible in most cases, while the more indirect and remote effects will mostly be unknown and will therefore be disregarded. We shall never be aware of all the costs of achieving particular results by such interference.
And so, when we decide each issue solely on what appears to be its individual merits, we always overestimate the advantages of central direction. Our choice will regularly appear to be one between a certain known and tangible gain and the mere probability of the prevention of some unknown beneficial action by unknown persons. If the choice between freedom and coercion is thus treated as a matter of expediency, freedom is bound to be sacrificed in almost every instance. As in the particular instance we hardly ever know what would be the consequences of allowing people to make their own choice, to make the decision in each instance depending only on the foreseeable particular results must lead to the progressive destruction of freedom. There are probably few restrictions on freedom which could not be justified on the ground that we do not know the particular loss it will cause.
That freedom can be preserved only if it is treated as a supreme principle which must not be sacrificed for particular advantages was fully understood by the leading liberal thinkers of the nineteenth century, one of whom (B. Constant) described liberalism as “the system of principles.” Such also is the burden of the warnings concerning “What is Seen and What is Not Seen in Political Economy” (F. Bastiat) and of the “pragmatism that contrary to intentions of its representatives inexorably leads to socialism” (C. Menger).
All these warnings were, however, thrown to the wind, and the progressive discarding of principles and the increasing determination during the last hundred years to proceed pragmatically is one of the most important innovations in social and economic policy. That we should foreswear all principles of “isms” in order to achieve greater mastery over our fate is even now proclaimed as the new wisdom of our age. Applying to each task the “social techniques” most appropriate to its solution, unfettered by any dogmatic belief, seems to some the only manner of proceeding worthy of a rational and scientific age. “Ideologies,” i.e., sets of principles, have become generally as unpopular as they have always been with aspiring dictators such as Napoleon or Karl Marx, the two men who gave the word its modern derogatory meaning.
If I am not mistaken this fashionable contempt for “ideology,” or for all general principles or “isms,” is a characteristic attitude of the disillusioned socialists who, because they have been forced by the inherent contradictions of their own ideology to discard it, have concluded that all ideologies must be erroneous and that in order to be rational one must do without one. But to be guided only, as they imagine it to be possible, by explicit particular purposes which one consciously accepts, and to reject all general values whose conduciveness to particular desirable results cannot be demonstrated (or to be guided only by what Max Weber called “purposive rationality”) is an impossibility. Though admittedly, ideology is something which cannot be “proved” (or demonstrated to be true), it may well be something whose widespread acceptance is the indispensible condition for most of the particular things we strive for.
Those self-styled modern “realists” have only contempt for the old-fashioned reminder that if one starts unsystematically to interfere with the spontaneous order of the market there is no practicable halting point, and that it is therefore necessary to choose between alternative systems. They are pleased to think that by proceeding experimentally and therefore “scientifically” they will succeed in fitting together in piecemeal fashion a desirable order by choosing for each particular desired result what science shows them to be the most appropriate means of achieving it.
Since warnings against this sort of procedure have often been misunderstood, as one of my earlier books has, a few more words about their intention may be appropriate. What I meant to argue in The Road to Serfdom was certainly not that whenever we depart, however slightly, from what I regard as the principles of a free society, we shall ineluctably be driven to go the whole way to a totalitarian system. It was rather what in more homely language is expressed when we say: “If you do not mend your principles you will go to the devil.” That this has often been understood to describe a necessary process over which we have no power once we have embarked upon it, is merely an indication of how little the importance of principles for the determination of policy is understood, and particularly how completely overlooked is the fundamental fact that by our political actions we unintentionally produce the acceptance of principles which will make further action necessary.
What those unrealistic modern “realists” who pride themselves on the modernity of their view overlook, is that they are advocating something which most of the Western world has indeed been doing for the past two or three generations and which is responsible for the conditions of present politics. The end of the liberal era of principles might will be dated at the time (1882) when W. S. Jevons pronounced that in economic and social policy “we can lay down no hard and fast rules, but must treat every case in detail upon its merits.” Ten years later Herbert Spencer could already speak of “the reigning school of politics” by whom “nothing less than scorn is shown for every doctrine which implies restraints on the doings of immediate expediency” or which relies on “abstract principles.”
This “realistic” view which has now dominated politics for so long has hardly produced the results which its advocates desired. Instead of having achieved greater mastery over our fate we find ourselves more and more frequently committed to a path which we have not deliberately chosen, and faced with “inevitable necessities” of further action which, though never intended, are the results of what we have already done.
3. The contention often advanced that certain political measures were inevitable has a curious double aspect. With regard to developments that are approved by those who employ this argument, it is readily accepted and used in justification of the actions. But when developments take an undesirable turn, the suggestion that this is not the effect of circumstances beyond our control but the consequence of earlier decisions is rejected with scorn. The idea that we are not fully free to pick and choose whatever combination of features we wish our society to possess, or to fit them together into a viable whole, that is, that we cannot build a desirable social order like a mosaic by selecting whatever particular parts we like best, and that many well-intentioned measures may have a long train of unforeseeable and undesirable consequences, seem to be intolerable to modern man. He has been taught that what he has made he can also alter at will to suit his wishes, and conversely, that what he can alter he must also have deliberately made in the first instance. He has not yet learnt that this naive belief derives from an ambiguity of the word “made” which may include not only deliberate products but also unintended effects of human action.
In fact, of course, the chief circumstance which will make some measures seem unavoidable is usually the result of our past actions and of the opinions which are now being held. Most of the “necessities” of policy are of our own creation. I am myself now old enough to have been told more than once by my elders that certain consequences of their policy which I foresaw would never occur, and later, when they did appear, to have been told by younger men that these were in any case inevitable and quite independent of what had been done.
The reason why we cannot achieve a coherent whole by just fitting together any elements we like is that the appropriateness of any particular arrangement within a spontaneous order will depend on all the rest of it, and that any particular change we make in it will influence the effects of any further steps. Experience with a particular arrangement in one institutional setting will tell us little about how it would operate in a different setting. An experiment can tell us only whether any innovation does or does not fit into a given framework. But to hope that we can build a coherent order by random experimentation with particular solutions of individual problems and without following guiding principles is an illusion. Experience tells us much about the effectiveness of different social and economic systems as a whole. But an order of the complexity of modern society can neither be designed as a whole, nor by shaping each particular part separately without regard to the rest, but only by consistently adhering to certain principles throughout a process of evolution.
This is not to say that these “principles” must necessarily take the form of articulated rules. Principles are often more effective guides for action when they appear as no more than unreasoned prejudice, a general feeling that certain things simply “are not done”; while as soon as they are explicitly stated speculation begins about their correctness and their validity. It is probably true that in the eighteenth century the English, little given to speculation about general principles, were for this reason more firmly guided by strong opinions about what kind of political actions were permissible, than the French who tried so hard to discover and adopt such principles. Once the instinctive certainty is lost, perhaps as a result of unsuccessful attempts to put into words what had been done “intuitively”, there is no way of regaining such guidance other than to search for a correct statement of what before had been known implicitly.
The impression that the English in the 17th and 18th centuries, through their gift of “muddling through” and their “genius for compromise”, succeeded in building up a viable system without talking much about principles, while the French, with all their concern about explicit assumptions and clear formulations, never did so may thus be misleading. The truth seems to be that while they talked little about principles, the English were much more surely guided by principles, while in France the very speculation about basic principles prevented any one set of principles from taking a firm hold.
4. The preservation of a free system is so difficult because it requires a constant rejection of measures which appear to be required to secure particular results, on no stronger grounds than that they conflict with a general rule, and frequently without our knowing what will be the costs of not observing the rule in the particular instance. A successful defense of freedom must therefore be dogmatic and make no concessions to expediency, even where it is not possible to show that besides the known beneficial effects, some particular harmful result also would follow from its infringement. Freedom will prevail only if it is accepted as a general principle whose application to particular instances requires no justification. It is thus a misunderstanding to blame classical liberalism for having been too doctrinaire. Its defect was not that it adhered too stubbornly to principles, but that it lacked principles sufficiently definite to provide clear guidance, and that it often appeared simply to accept the traditional functions of government and to oppose all new ones. Consistency is only possible if definite principles are accepted. But the concept of liberty with which the liberals of the 19th century operated was in many respects so vague that it did not provide clear guidance.
People will not refrain from those restrictions on individual liberty that appear to them the simplest and most direct remedy of a recognized evil if there does not prevail a strong belief in definite principles. The loss of such belief and the preference for expediency is in part the result of the fact that we no longer know any principles which can be rationally defended. The rules of thumb which at one time were accepted are not adequate to decide what is and what is not permissible in a free system. We have no longer even a generally understood name for what the term “free system” only vaguely describes. Certainly neither “capitalism” nor “laissez faire” properly describe it; and both terms are understandably more popular with the enemies than with the defenders of a free system. “Capitalism” is an appropriate name perhaps for the partial realization of such a system in a certain historical phase, but always misleading because it suggests a system which mainly benefits the capitalists, while in fact it is a system which imposes upon enterprise a discipline under which the managers often chafe and which each endeavors to escape. “Laissez faire” was never more than a rule of thumb. It indeed expressed protest against abuses of governmental power, but never provided a criterion by which one could decide what were the proper functions of government. Much the same applies to the terms “free enterprise” or “market economy” which, without a definition of the free sphere of the individual, say little. The expression “liberty under the law”, which at one time perhaps conveyed the essential point better than any other, has become almost meaningless because both “liberty” and “law” no longer have a clear meaning. And the only term that in the past was widely and correctly understood, namely “liberalism” has, in Schumpeter's words, “as a supreme but unintended compliment been appropriated by the opponents of this ideal.”
The lay reader may not be fully aware how far we have already moved away from the ideals expressed in these terms. While the lawyer or political scientist will at once see that what I am espousing is an ideal that has largely vanished and has never been fully realized, it is probably true that the majority of people still believe that something like it still governs public affairs. It is because we have departed from the ideal so much further than most people are aware of, and because, unless this development is soon checked, it will by its own momentum transform society from a free into a totalitarian one, we must reconsider the general principles guiding our political action. We are still as free as we are because certain traditional but rapidly vanishing prejudices have impeded the process by which the inherent logic of the changes we have already made tends to assert itself in an ever widening field. In the present state of opinion the ultimate victory of totalitarianism would indeed be no more than the final victory of ideas already dominant in the intellectual sphere over a mere traditionalist resistance.
5. With respect to policy, the methodological insight that in the case of complex spontaneous orders we will never know more than the general principles on which they operate or predict the particular changes that any event in the environment will bring about, has far-reaching consequences. It means that where we rely on spontaneous ordering forces we shall often not be able to foresee the particular changes by which the necessary adaptation to altered external circumstances will be brought about, and sometimes perhaps not even be able to conceive in what manner the restoration of a disturbed “equilibrium” or “balance” can be accomplished. This ignorance of how the mechanism of the spontaneous order will solve such a “problem” which we know must be solved somehow if the overall order is not to disintegrate, often produces a panic-like alarm and the demand for government action for the restoration of the disturbed balance. Often it is even a partial insight into the character of the spontaneous overall order that becomes the cause of the demands for deliberate control. So long as the balance of trade, or the correspondence of demand and supply of a particular commodity, adjusted itself spontaneously after any disturbance, men rarely asked themselves how this happened. But once they became aware of the necessity of such constant readjustments, they felt that somebody must be made responsible for deliberately bringing them about. The economist, from the very nature of his schematic picture of the spontaneous order, could counter such apprehensions only by the confident assertion that the required new balance would establish itself somehow if we did not interfere with the spontaneous forces; but as he is usually unable to predict precisely how this would happen, his assertions were not very convincing.
Yet when it is possible to foresee how the spontaneous forces are likely to restore the disturbed balance, the situation becomes even worse. The necessity of adaptation to unforeseen events will always mean that someone is going to be hurt, that someone's expectations will be disappointed or his efforts frustrated. This leads to the demand that the required adjustment be brought about by deliberate guidance, which in practice must mean that authority is to decide who is to be hurt. The effect of this commonly is that the necessary adjustments will be prevented whenever they can be foreseen.
What helpful insight science can provide for the guidance of policy consists in an understanding of the general nature of the spontaneous order, and not in any knowledge of the particulars of a concrete situation, which it does not and cannot possess. The true appreciation of what science can contribute to the solution of our political tasks, which in the nineteenth century was fairly general, has been obscured by the new tendency derived from the now fashionable misconception of scientific method: the belief that science consists of a collection of particular observed facts, which is erroneous so far as science in general is concerned, but doubly misleading where we have to deal with the parts of a complex spontaneous order. Since all the events in any part of such an order are interdependent, and an abstract order of this sort has not necessarily any recurrent concrete parts which can be identified by individual attributes, it is necessarily vain to try to discover by observation regularities in its parts. The only theory which in this field can claim scientific status is the theory of the order as a whole; and such a theory (though it has of course to be tested on the facts) can never be achieved inductively by observation but only through constructing mental models made up from the observable elements.
It is not to be denied that to some extent the guiding model of the overall order will always be an utopia, something to which the existing situation will be only a distant approximation and which many people will regard as wholly impractical. Yet it is only by constantly holding up the guiding conception of an internally consistent model which could be realized by consistent application of the same principles, that anything like an effective framework for a functioning spontaneous order will be achieved. Adam Smith thought that “to expect, indeed, that freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that an Oceana or Utopia should ever be established in it.” Yet seventy years later, largely as a result of his work, it was achieved.
Utopia, like ideology, is a bad word today; and it is true that most utopias aim at radically redesigning society and suffer from internal contradictions which make their realization impossible. But an ideal picture of a society which may not be wholly achievable, or of a guiding conception of the overall order to be aimed at, is nevertheless not only the indispensible precondition of any rational policy, but also the chief contribution that science can make to the solution of the problems of practical policy.
6. The chief instrument of deliberate change in modern society is legislation. But however carefully we may think out beforehand every single act of law-making, we are never free to redesign completely the legal system as a whole, or to remake it out of the whole cloth according to a coherent design. Law-making is necessarily a continuous process in which every step produces hitherto unforeseen consequences for what we can or must do next. The parts of a legal system are not so much adjusted to each other according to a comprehensive overall view, as gradually adapted to each other by the successive application of general principles to particular problems—principles, that is, which are often not even explicitly known but merely implicit in the particular measures taken. For those who imagine it possible to arrange deliberately all the particular activities of a Great Society according to a coherent plan, it should indeed be a sobering reflection that this has not proved possible even for such a part of the whole as the system of law. Few facts show more clearly how prevailing conceptions will bring about a continuous change, producing measures that in the beginning nobody had desired or foreseen but appear inevitable in due course, than the process of the change of law. Every single step in that process is determined by problems that arise when the principles laid down by (or implicit in) earlier decisions are applied to circumstances which were then not foreseen. There is nothing mysterious about this “inner dynamics of the law”, as it has been called, which produces changes not willed as a whole by anybody.
In this process the individual lawyer is necessarily more an unwitting tool, a link in a chain of events that he does not see as a whole, than a conscious initiator. Whether he acts as a judge or as the drafter of a statute, the framework of general conceptions into which he must fit his decision is given to him, and his task is to apply these general principles of the law, not to question them. However much he may be concerned about the future implications of his decisions, he can judge them only in terms of all the other recognized principles of the law that are given to him. This is, of course, as it ought to be: it is of the essence of legal thinking and of just decisions that the lawyer strives to make the whole system consistent.
It is often said that the professional bias of the lawyer is conservative. In certain conditions, namely when some basic principles of the law have been accepted for a long time, they will indeed govern the whole system of law, its general spirit as well as every single rule and application within it. At such times it will possess great inherent stability. Every lawyer will, when he has to interpret or apply a rule which is not in accord with the rest of the system, endeavor so to bend it as to make it conform with the others. The legal profession as a whole may thus occasionally in effect even nullify the intention of the legislator, not out of disrespect for the law, but, on the contrary, because their technique leads them to give preference to what is still the predominant part of the law and to fit an alien element into it by so transforming it as to make it harmonize with the whole.
The situation is entirely different, however, when a general philosophy of law which is not in accord with the greater part of the existing law has recently gained ascendancy. The same lawyers will, through the same habits and techniques, and generally as unwittingly, become a revolutionary force, as effective in transforming the law down to every detail as they were before in preserving it. The same forces which in the first condition make for stationariness, will in the second tend to accelerate change until it has transformed the whole body of law much beyond the point that anyone had foreseen or desired. Whether this process will lead to a new equilibrium or to a disintegration of the whole body of law in the sense in which we still chiefly understand the word, will depend on the character of the new philosophy.
We live in such a period of transformation of the law by inner forces and it is submitted that, if the principles which at present guide that process are allowed to work themselves out to their logical consequences, law as we know it as the chief protection of freedom of the individual is bound to disappear. Already the lawyers in many fields have, as the instruments of general conceptions which they have not made, become the tools, not of principles of justice, but of an apparatus in which the individual is made to serve the ends of his rulers. Legal thinking appears already to be governed to such an extent by new conceptions of the functions of law that, if these conceptions were consistently applied, the whole system of rules of individual conduct would be transformed into a system of rules of organization.
These developments have indeed been noticed with apprehension by many professional lawyers whose chief concern is still with what is sometimes described as “lawyers' law”, i.e. those rules of just conduct which at one time were regarded as the law. But the leadership in jurisprudence, in the course of the process we have considered, has shifted from the practitioners of private law to the public lawyer, with the result that today the philosophical preconceptions which govern the development of all law, including private law, are almost entirely fashioned by men whose main concern is the public law or the rules of organization of government.
7. It would, however, be unjust to blame the lawyers for this state of affairs more than the economists. The practicing lawyer will indeed in general best perform his task if he just applies the general principles of law which he has learnt and which it is his duty consistently to apply. It is only in the theory of law, in the formulation and application of those general principles, that the basic problem of their relation to a viable order of actions arises. For such a formulation and elaboration an understanding of this order is absolutely essential if any intelligent choice between alternative principles is to be made. During the last two or three generations, however, a misunderstanding rather than an understanding of the character of this order has guided legal philosophy.
The economists in their turn, at least after the time of David Hume and Adam Smith who were also philosophers of law, generally showed no more appreciation of the significance of the system of legal rules, the existence of which was tacitly presupposed by their argument. They rarely put their account of the determination of the spontaneous order in a form which could be of much use to the legal theorist. But they probably contributed unknowingly as much to the transformation of the whole social order as the lawyers have done.
This becomes evident when we examine the reasons regularly given by the lawyers for the great change that the character of law has undergone during the last hundred years. Everywhere, whether it be the English or American, French or German legal literature, we find alleged economic necessities given as the reasons for these changes. To the economist the accounts by which the lawyers explain that transformation of the law is a somewhat melancholy experience: he finds all the sins of his predecessors visited upon him. Accounts of the modern development of law are full of references to “irreversible compelling forces”, of “inevitable tendencies” which are alleged to have imperatively called for the particular changes. The fact that “all modern democracies” did this or that is adduced as proof of the wisdom or necessity of such changes.
These accounts invariably speak of a past laissez-faire period, as if there had been a time when no efforts were made to improve the legal framework so as to make the market operate more beneficially or to supplement its results. Almost without exception they base their argument on the fable convenue that free enterprise has operated to the disadvantage of the manual workers, and allege that “early capitalism” or “liberalism” had brought about a decline in the standard of the working class. The legend, though wholly untrue, has become part of the folklore of our time. The fact is, of course, that as the result of the growth of free markets the reward of manual labor has during the past hundred and fifty years experienced an increase unknown in any earlier period of history. Most contemporary works on legal philosophy are full also of outdated cliches about the alleged self-destructive tendencies of competition, or the need for “planning” created by the increased complexity of the modern world, cliches deriving from the high tide of enthusiasm for “planning” of thirty or forty years ago, when it was widely accepted and its totalitarian implication not yet understood.
It is indeed doubtful whether as much false economics has been spread during the last hundred years by any other means than by the teaching of the young lawyers by their elders that “it was necessary” this or that should have been done, or that such and such circumstances “made it inevitable” that certain measures be taken. It seems almost a habit of thought of the lawyer to regard the fact that legislature has decided on something as evidence of the wisdom of that decision. This means, however, that his efforts will be beneficial or pernicious according as to the wisdom or foolishness of the precedent by which he is guided, and that he is as likely to become the perpetuator of the errors as of the wisdom of the past. If he accepts as mandatory for him the observable trend of development, he is as likely to become simply the instrument through which changes he does not understand work themselves out as the conscious creator of a new order. In such a condition it will be necessary to seek for criteria of the developments elsewhere than within the science of law.
This is not to say that the economist alone can provide the principles that ought to guide legislation—though considering the influence that economic conceptions inevitably exercise, one must wish that such influence would come from good economics and not from that collection of myths and fables about economic development which seems today to govern legal thinking. Our contention is rather that the principles and preconceptions which guide the development of law inevitably come in part from outside the law and can be beneficial only if they are based on a true conception about how the activities in a Great Society can be effectively ordered.
The role of the lawyer in social evolution and the manner in which his actions are determined are indeed the best illustration of a truth of fundamental importance: namely that, whether we want it or not, the decisive factors which will determine that evolution will always be highly abstract and often unconsciously held ideas about what is right, and not particular purposes or concrete desires. It is not so much what men consciously aim at, but their opinions about permissible methods which determine not only what will be done but also whether anyone should have power of doing it. This is the message which David Hume meant to stress when he wrote that “though men be much governed by interest yet even interest itself, and all human affairs, are entirely governed by opinion.”
Last modified April 10, 2014