Mind the Economy/Justice 84

Friedrich von Hayek and the 'mirage' of social justice

It is not possible to ascribe to social outcomes resulting from the interaction of millions of joint actions of individuals seeking to pursue the satisfaction of their individual needs the same properties of right or wrong that could be ascribed to the actions of individuals

18 August 2024

Social justice together as a crowd of diverse people with a law symbol representing community legislation and equal rights or legal lawyer icon with 3D illustration elements.

9' min read

"Law, Legislation and Freedom", published in Italy in 1986 is the last important work by the Austrian economist and philosopher Friedrich von Hayek. It represents the summa of his intellectual project for the foundation of neoliberalism, which he builds around the defence of the spontaneous order of the market - 'the catallaxy' - and against government interference in the social and economic life of individuals. As we have seen in the Mind the Economy of 11 August the profound reasons behind the Hayekian position are first and foremost epistemological in nature. They have to do, that is, with the fallibility and incompleteness of human knowledge. Fallibility and incompleteness that make fanciful any ambition of centralised planning of the functioning of the economic system, which in concrete terms concerns the decentralised, free and autonomous choices of millions of different individuals pursuing different goals on the basis of fragments of a scattered and diffused knowledge. That knowledge that it would be necessary for a hypothetical central planner to possess in a unified and complete manner.

It is the market, on the other hand, the place where, through the process of 'catallaxy', that scattered knowledge is optimally exploited and, through the price system, is shared and organised to facilitate, through the emergence of a spontaneous order, the attainment of optimal objectives. In this framework, therefore, justice pertains, for Hayek, to the nature of the rules of conduct that the central authority must enforce in order for the market to carry out its coordinating operation. The only form of legitimate government interference in the private lives of citizens, therefore, is that which derives from the obligation of each individual to respect these rules of conduct that provide for the protection of the freedom of others, their property, the terms of contracts and all the other rules that govern the functioning of markets.

Unlawful and harmful interference

Any further form of interference, with a few minor exceptions related to compulsory education and insurance against natural and social risks, is to be considered illegitimate. Among these interferences we also find redistributive policies. Such policies are illegitimate and harmful because they are inspired, according to Hayek, by "a quasi-religious belief without any content", nothing more than an "empty and meaningless formula". The entire second volume of Law, Legislation and Liberty, significantly titled The Mirage of Social Justice, is in fact dedicated to demonstrating the futility and even dangerousness of such a political and economic objective. "Whereas in the previous chapter," Hayek writes, "I had to defend the conception of justice understood as the foundation and limitation of any law, I now want to criticise the misuse of this term, which threatens to destroy the concept of law as a bulwark of individual freedom" (1994, p. 262).

Hayek's defence is above all methodological, and is based on the bad science that would underlie the very claim to the existence of something like social justice. This, in fact, Hayek writes, 'was seen as an attribute that the 'actions' of society or the 'treatment' that individuals or groups suffered from it should possess. As primitive thought generally does when it first notices certain regular processes, the results of the spontaneous market order were interpreted as if they were directed by a rational mind or as if the particular benefits or harms that different people received from them were determined by acts of will and could thus be guided by moral rules (...) It is a sign of our immaturity that we have not yet abandoned these primitive concepts, and that we still expect from an impersonal process that produces a greater satisfaction of human desires than can be obtained from any deliberate arrangement, to conform to the moral precepts that men have developed as guides to their individual actions" (p. 262).

The point is simple: it is not possible to ascribe to the social outcomes resulting from the interaction of millions of joint actions of subjects seeking to pursue the satisfaction of their individual needs the same properties of right or wrong that could be ascribed to the actions of individuals. Since spontaneous order is the non-intentional fruit of all these individual actions, its consequences cannot be assessed through the moral principles we use to evaluate the intentional consequences of individual choices. But if we cannot ethically evaluate the market order, it is not even conceivable to implement corrective processes inspired, for example, by the idea of social justice.

Social Justice in Four Directions

In more detail, the Hayekian critique of the idea of social justice moves along four main lines; the first two concern the meaninglessness of the concept itself and its 'atavistic' nature, while the other two elements of criticism concern the concrete feasibility of redistributive policies on the one hand and their incompatibility with the market order on the other. Let us go in order. The first question is that of the very meaning of the idea of social justice. Hayek is perfectly willing to consider an allocation of resources as just or unjust. For example, one that is more egalitarian or one that gives more to those in greater need or to those most deserving may be more just than other possible alternative allocations. This, however, can only be true if such allocations were the result of a deliberate choice of some identifiable agent, a planner, a benevolent dictator, or other. If different distributional outcomes could be predicted and the precise ways of achieving them were known and there was someone with sufficient authority to implement these alternative states of the world then it would make sense to consider which of these alternative outcomes should be considered more just than the others. These outcomes would in fact turn out to be consequences of deliberate choices by an identifiable and therefore responsible decision-maker. But the market order does not work that way. The outcomes of 'catallaxy' are not predictable in this same sense and thus not attributable to the choices of individuals.

Hayek admits that in many cases 'the way in which goods and burdens are distributed by the market mechanism should in many cases be considered very unjust if it were [however] the result of a distribution deliberately determined by particular persons. This is not the case' (p. 272). Thus, it is not possible in practice for those who feel disadvantaged by the spontaneous order of the market to blame an individual or group of individuals for the condition in which they find themselves, because no one can be held directly responsible. A certain allocation cannot therefore be just or unjust 'since the results are neither intended nor foreseen, and depend on a multitude of circumstances which in their totality are not known to anyone' (ibid.).

But why do we continue to insist on reasoning according to such a misleading scheme? The reason, Hayek explains well, is historical. We continue to apply to a much changed social and economic context, conceptual categories that might have made sense in traditional societies characterised by frequent direct vis-à-vis interactions in which it was easy to identify a causal link between the action of an individual and the consequences of that action and thus to impute responsibility for it. In these societies, it is possible to speak meaningfully of aggregate economic results obtained deliberately and thus subject to the kind of ethical evaluation we attribute to the behaviour of individuals themselves.

Things change radically when we use the same categories to evaluate the aggregate outcome of a market process, as if there were a single agent capable of intentionally determining the outcome in question. This error is linked to primitive thinking and, therefore, the idea of social justice associated with it is nothing more than a residue of this atavistic vision. A persistent residue that is difficult to replace; a powerful idea that, despite everything, we continue to pursue and search for. Search in vain, Hayek tells us, because - and we are at the third dimension of his critique - social justice is an ideal impossible to realise in practice. Even if every individual, bar none, wished to direct their actions towards achieving a more just society, provided they had first reached unanimous agreement on what 'more just' means, they would not know what to do. For since they could not predict how their individual actions would determine aggregate outcomes, they would not know how to act.

"It sometimes seems to be believed," Hayek writes, "that a simple change in the norms of individual conduct can bring about 'social justice'. But there can be no set of such norms or principles by virtue of which individuals can direct their conduct within a Big Society in such a way that the joint effect of their activities is a distribution of benefits that could be defined as materially (...) In order to achieve any particular pattern of distribution through the market process, each producer would have to know not only those to whom he will do harm or benefit, but also how much he will improve the present or potential position of those affected by his activities as well as the results of the services they will receive from other members of society' (p. 290).

If this reasoning was still not convincing enough Hayek proposes another - his fourth critique - which is based on the incompatibility between the pursuit of social justice and the market economy. We concluded the previous point by stating that individuals making decentralised decisions, even if they were perfectly altruistic, would not be able to pursue socially just outcomes. This conclusion leaves another possibility open, however, and that is for a central authority, the state, to do so.

Here another difficulty arises. For even if the state were able to overcome all the problems of scattered and incomplete information - something that seems highly unlikely outside the order of catallaxy - it would have to intervene in individual choices, thereby violating those rules of justice that a liberal order lays down to safeguard the freedoms of individuals in order to allow them to act optimally in the process of generating spontaneous order. To try to overcome the problem posed by scattered and incomplete knowledge, the state should, therefore, frequently and heavily violate that 'protected individual domain' in which the very freedom of the individual is realised.. In this way, placing the albeit laudable ideal of social justice at the centre of political action will activate a process that 'must progressively lead ever closer to a totalitarian system' (p. 270).

As we have seen, Hayek's critique of the idea of social justice is radical, even if his positions appear more nuanced than those of the libertarians à la Nozick who, we will recall from the Mind the Economy dedicated to thetheme, see in every redistributive policy a form of slavery and robbery. Hayek, for his part, is willing to accept an active role for the state in areas of 'welfare' intervention, for example in the case of extreme poverty, social insurance and public education. This puts him in an original position that attracts criticism from the most intransigent liberals. Other criticisms also come from those who advocate the pursuit of social justice.

Puppet fallacy

In this respect, according to not a few authors, Hayek's reconstruction of the problem is, in fact, exaggeratedly naive. They accuse him, in other words, of the classic 'straw man fallacy' according to which one first constructs a deliberately caricatured version of the thesis one wants to criticise in order to be able to ridicule it more easily afterwards. The 'straw man' version of the idea of social justice assumes the existence of a set of individuals that make up a society, a fixed set of resources to be distributed, and an agency responsible for allocating resources. The problem would be solved by identifying the best distribution principle that the agency should use.

Represented in this way, the problem of social justice, as the British political scientist David Miller notes, is simply "a more complex version of the problem faced by a parent who on his child's birthday has to decide how to divide the cake among all the other little guests. Will the parent have to divide the cake equally? Will he or she have to take into account the hunger or merit or age of each guest? It is easy for critics of social justice to ridicule this view'. Because, in reality, Miller continues, there is no single distributing agency in society, no fixed stock of resources waiting to be distributed. Resources, in fact, and this is one of the main points of Hayek's critique, are continuously created, transferred and consumed and - as Miller notes in this regard - "this is particularly evident in societies in which the main economic mechanism is the free market and 'distribution' is the result of an enormous number of voluntary transactions between different individuals" (Principles of Social Justice, Harvard University Press, 1999, p. 109).

In a less naïve perspective than the Hayekian one would identify the purpose of a theory of social justice not so much in the elaboration of criteria through which to evaluate the possible allocations of resources, opportunities and rights but, rather, in the discussion of the way in which the main institutions and social practices of each community contribute directly and indirectly to determining those same distributions. From this perspective, therefore, Hayek's criticism based on the non-intentionality of market equilibria appears completely off target. Indeed, the market is also one of those institutions whose functioning should be subjected to the scrutiny of such a theory of social justice. And this is a terrain in which, as we shall see later, an interesting dialogue will develop, albeit at a distance, between John Rawls and the Austrian economist and philosopher.