Today is F.A. Hayek's birthday. To celebrate, I'd like to briefly comment on particular facet of Hayek's thought that has influenced the way I see the world — his view of individualism "true."
In his brilliant essay "Individualism: True and False," Hayek lays out the distinguishing features of the ideas of individualism stemming from Mandeville, Hume, Smith, and the Scottish Enlightenment.
First, and foremost, individualism is a theory of society.
This fact should by itself be sufficient to refute the silliest of the common misunderstandings: the belief that individualism postulates (or bases its arguments on the assumption of) the existence of isolated or self-contained individuals, instead of starting from men whose whole nature and character is determined by their existence in society. (pg 6).
Individualism starts with a rich understanding of the human character (think both Mandeville and Smith here) — not an atomistic idea of man in a bubble. From this, individualism begins with the premise that there is no other way to understand social phenomena but through our understanding of individual actions and choices directed toward other people and guided by their expected behaviour.
In other words, individualism "true" is a choice-focused theory of social behaviour, populated by often irrational and fallible humans. The individualism handed down from the Scottish Enlightenment was concerned with finding a social system that "does not depend for its functioning on our finding good men for running it, or on all men becoming better than they now are, but which makes use of men in all their given variety and complexity, sometimes good and sometimes bad, sometimes intelligent and more often stupid."
It is only through the course of a social process (like Smithian sympathy or commercial interaction under particular institutions) that individual mistakes come to be corrected through trial and error. Thus, the second step in this theoretical orientation is the recognition that much of the orderliness of social life is often the result of human action but not of human design.
The distinguishing feature of this brand of individualism is that it takes the self-interest of the individual (which includes caring for one's friends and family) as a psychological fact of human action, not as endorsing the unattractive characteristic of selfishness or greed. For Hayek, the intellectual confusion that leads to the belief that individualism approves and encourages human selfishness (which it does not) is one of the main reasons why so many people dislike it.
Instead, the second pillar of individualism is the fundamental limitation of man's knowledge.
All the possible differences in men's moral attitudes amount to little, so far as their significance for social organization is concerned, compared with the fact that all man's mind can effectively comprehend are the facts of the narrow circle of which he is the center; that, whether he is completely selfish or the most perfect altruist, the human needs for which he can effectively care are an almost negligible fraction of the needs, of all members of society.
The real question, therefore, is not the morality that guides human motives but whether the rules in which his actions are embedded are suited to allow him to act on his own knowledge. This contrasts with the basic idea that fallible people need to be directed by someone who supposedly has better knowledge or "fuller comprehension of the significance of these actions to society as a whole."
Examples abound of public policy predicated on the idea that bureaus and policy makers know what's best for regular people. Here in the UK, we actually have a "behavioural insights team" or "Nudge Unit." This is a group of "experts" tasked with designing policies to "encourage people to make better choices for themselves and society."
Hayek clarifies this point further. It's not that every person actually knows his or her best interest. For Hayek, that is "neither plausible nor necessary for the individualist's conclusions." The argument is that "nobody can know who knows best and that the only way by which we can find out is through a social process in which everybody is allowed to try and see what he can do."
It is from this theory of social life that the normative propositions of individualism are derived. The limitations of individual knowledge crucially provide the foundation for the desirability of limiting all coercive power. Hayek elaborates further on what he calls the "pretence of knowledge" in his Nobel Speech. For those who have tried to read this work with difficulty or have never approached the ideas, here is a nice attempt at summarizing and simplifying the argument.