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Tuesday, April 28, 2015

Obamacare and Hayek’s Crystal

Social order can be induced but never designed

Speaking on the fifth anniversary of the passage of the Affordable Care Act, President Obama declared: “We have been promised a lot of things in these past five years that didn’t turn out to be the case… Death panels, doom, a serious alternative from Republicans in Congress.”

Never mind the plethora of unintended consequences sprung from attempting such a high-wire act as reengineering the healthcare market.  The interesting assumption held by Obama, as well as the majority on both sides of the debate, is that there must be an alternative, flowing from the top down.  To repeal government interventions and then replace them with absolutely nothing does not exist as a viable option for these politicians.  With more side-effects manifesting after each intervention, instead of repeal, they will continue to pile on more legislation as a quick-fix.

This seems to be a case study in Ludwig von Mises’ dictum that interventionism begets ever more interventionism. But for an intervention as massive as the ACA, this shouldn’t be too surprising.  So why do legislators seem to never take the lesson to heart, and repeat the futile process?  Each intervention produces an outward ripple of unintended consequences, and leaves these legislators with a choice to either escalate the legislative output to deal with the unintended consequences, or give up the entire enterprise and let the market clean up the mess.

One would think that the myriad bureaucrats and politicians would first seek to understand the type of social order they are attempting to influence before they proceed with their plan.  But if they did, they would soon realize that all their endeavors to positively engineer the market order are in vain and that continuous attempts, via legislative fiat, to force their will upon the market will result in escalating chaos.

A book worth these planners’ time would be the first volume of Friedrich Hayek’s three-volume work, Law, Legislation, and Liberty.  In chapter two of this work, Hayek distinguishes between two types of order: a made, exogenous order, which he refers to as an organization, and a self-generating, endogenous order, which he refers to as a spontaneous order.  

Government interventionists make the fatal error of treating the spontaneous market order as if it were an organization that, hence, could be reorganized at will. Organizations are designed, top down, for a specific purpose.  The market order, in contrast, has no designer, no single purpose, and is sustained by forces that no planner could possibly control or direct.  Any attempt to superimpose an exogenous design on some part of the spontaneous order will result in failure.  

Society is a web, a network, an undesigned order that forms without our being aware of the process.  When we buy and sell, go to work, and make day-to-day plans in society, we are utilizing this undesigned order, and at the same time contributing, in our small way, to this order.  Only later do we see the fruits of this spontaneous order: money, language, moral intuitions, law, cultural and market evolution.  The engine of its creation is the free, voluntary interaction we engage in each day.  We plan our lives, and unknowingly contribute to the evolution of that order we are embedded within.

This is the type of social order that central planners believe they can successfully direct, control, and plan.  But any action that tries to coerce the order of society towards a specific goal will be met with unstoppable resistance by the very process that creates the order: the millions of individuals spontaneously pursuing their own ends.  The forces unleashed will quickly break apart the attempted intervention, leading to unforeseeable side effects.

Hayek analogizes the emergence of a spontaneous order with that of the formation of a crystal.  If you want a crystal, should you try to construct the crystal, atom by atom?  Or should you endeavor to create conditions conducive to the formation of a crystal?  And how much harder would it be if each atom had the will and ability to resist your plan?

In the same way, how should we strive to perfect society?  Should planners seek to place each individual where they believe they should be, as though individuals had no will or desires of their own?  Or would it be far wiser to create the environment that will better allow individuals to choose for themselves?  By creating a few simple rules that safeguard voluntary interaction, all of society will produce the grown order that could not have been designed from the top down.

Instead of fretting over the future, it would be far wiser to ask ourselves to what degree we are helping or hindering the evolution of the spontaneous order of which we are a part.  Our attention should be on perfecting our institutions of liberty, rather than trying our hand at prediction and intervention.  Liberty is fertile soil, indeed the only soil, for the formation and evolution of spontaneous human cooperation.  Forced order, either through prohibition or regulation, creates vast chasms in the social structure where there could exist myriad strands of cooperation and information dispersion.

A state of liberty provides the ideal environment for the spontaneous formation of those social institutions that provide the anchor we use to orient ourselves in society and plan successfully.  Voluntary interaction provides the foundation for the growth of the emergent order that is so crucial to human civilization.

The penchant to plan society will never die, so that means that libertarians must continually endeavor to show not only that this will fail but why.  We must also present a positive alternative that relies on freedom and human cooperation and show the only way to improve society is to allow the emergence of a sustainable, prosperous market order.  As long as we focus on removing the barriers to greater voluntary interaction, there is no need to worry about controlling the future. It will emerge.

  • Shane Smith is an accountant working in Norman, Oklahoma. He is a writer for Red Dirt Report and holds a Bachelors degree in Economics.