Freeman

BOOK REVIEW

Discovering a Good Society Through Evolution and Design

The Best Social, Legal, and Political Institutions Must Be Discovered

DECEMBER 01, 1995 by KYLE S. SWAN

Filed Under : Spontaneous Order

Martti Vihanto’s Discovering a Good Society Through Evolution and Design, is an interesting and new approach to Austrian welfare economics and social philosophy. Vihanto’s treatment consists of first, an extended essay explaining the main tenets of Austrian economics and their historical development. He reviews the Austrians on methodology, how theorists in the Austrian school have historically approached economics, and introduces the concepts of human ignorance and entrepreneurial discovery.

The six remaining previously published essays elaborate on the various elements introduced in the first by bringing into the picture contributions from different disciplines. For example, Vihanto borrows from public choice theory for his critique of contemporary welfare economists who develop fancy social welfare functions to justify the unlimited government action they recommend. These economists’ models assume benevolence in government officials when James Buchanan, among others, has demonstrated that people in government are self-interested like everybody else and tend to misuse public power for personal gain. Abandoning the assumption of benevolence paints a more realistic picture of political phenomena and strengthens Vihanto’s criticism of the use of unrestrained government action to enhance welfare.

Discovering a Good Society’s strongest area is the discussion of the spontaneous order. The pursuit of one’s own interests results in an unplanned harmony of interests. As spelled out by the Physiocrats of eighteenth-century France and echoed by Classical economists such as Adam Smith, the spontaneous order always referred to a state of affairs where individuals utilized given information to coordinate their ends, clearly a static concept. The subtle refinements made by Austrian economists Ludwig von Mises and F. A. Hayek implied a spontaneous ordering and evolution of the market highlighting the inevitable possibility that competitive forces would push individuals to discover as yet unforeseen possibilities with unknown results. Such are the workings of a truly spontaneous order.

Vihanto broadens this analysis to apply to social theory in general. He explains that deliberate search for unforeseeable discoveries is impossible. The best social, political, and legal institutions for the maintenance of society must be discovered. Says Vihanto, in a liberal order “we should create favorable conditions for such discoveries rather than be content with the institutions we currently happen to know.”

These institutions affect all members of society and thus must in the minds of all members be agreeable not to just a few privileged members of society, a majority of elected officials, or a bureau of planners. Unanimity is a necessity. Austrian economists have shown that you can only know individual subjective preferences through a person’s actions. As Mises said, preferences cannot even be said to exist outside individual acts of choice. By rational reconstruction of their actions we interpret their goals, desires, preferences, etc. Vihanto argues that there are only two ways for individuals to reveal their preferences for or against institutions. First, by popular referendum. However, the unanimity criterion makes this option unlikely. Second, by moving to or remaining in a society where the institution exists. Vihanto calls this group competition and argues that good institutions will be discovered as an unintended consequence of this process. Moreover, as individuals move from societies with “bad” institutions to those with “good” ones, these latter societies will have survived the natural selection process and potentially prosper. The process may also lead societies with “bad” institutions to adopt the institutions that have proved successful for more prosperous societies.

Vihanto’s discussion is really teaching us the importance and benefits of decentralization, by echoing the classical liberal stance on toleration and experiments in living. His seems an excellent argument for states’ rights advocates or even secessionist movements. The impetus for change lies in these decentralized units. The United States potentially has 50 different models to discover the best ways of doing things. Further investigation into the implications of Vihanto’s study may yet bear fruit. []

Mr. Swan is a member of FEE’s staff and a graduate student at New York University.

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December 1995

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Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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