[Another instalment of The Nature of the Beast has been posted, Chapters 5-8. Here is a sample from Chapter 6.]
In 1987 Margaret Thatcher said during an interview
“… they are casting their problems on society and who is society? There is no such thing! There are individual men and women and there are families and no government can do anything except through people … But it went too far. If children have a problem, it is society that is at fault. There is no such thing as society. There is a living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate.”36
This was the origin of an infamous quotation: “There is no such thing as society”. In the context of the interview it is clear Mrs. Thatcher is arguing that we should rely less on government supports and take more responsibility for our own lives. Most people would not disagree about the need for a balance, though there is a wide range of views as to where the appropriate balance is. So perhaps Mrs. Thatcher was just making the usual conservative argument that the balance was too far on the side of government supports and needed to be shifted back towards individual responsibility. We might also think she was urging us not to treat “society” just as an abstraction but to remember that it consists of real people. And yet she used such a bald expression, not once but twice: “There is no such thing.” Judged by her actions and by her sources of inspiration it seems Mrs. Thatcher may well have meant her assertion to be taken literally.
Modern economics manifests economists’ fundamentally conflicted attitudes towards social interactions and the society that results from them. On the one hand, our social behaviours are crucial to large sectors of the economy, notably advertising, and feature importantly in the more enlightened forms of management theory and practice. On the other hand social interactions are excluded from consideration in the neoclassical theory of free markets. One of the most influential progenitors of the modern ideological order, Friedrich Hayek, went so far as to regard our social responses as primitive hangovers from our past that we should quickly evolve beyond. Of course the latter attitudes conflict with the teachings of Christ, with the morals and ethics espoused by most religions and with most people’s sense of decency and morality.
The neglect of society has older origins than Hayek. As we saw in Chapter 3, the neoclassical theory was built assuming that the people in the idealised economy were extremely simple beings, otherwise the mathematics is too hard. Co-founder Leon Walras assumed people are rational, and in particular that they are materialists who want the greatest value for their money. He assumed they are cold and efficient calculators who can and will decide among the many ways they could spend their money by calculating the combination of goods that maximises the value they can obtain. He assumed that their choices would not be influenced by what anyone else was buying, except as other people’s decisions affected the market price. These creatures that populate Walras’ abstract world have been called rational economic man, or homo economicus. Nobody seems to have thought to call any of them economic woman.
As a scientist, I recognise that Walras was simplifying the problem to the point where it would be mathematically tractable. Scientists do this all the time, as a way to get a foothold on a problem. The key, however, is to remember that the simplifications you have made might have a large effect on the results of your calculations. The art is to find those simplifications or first approximations that preserve some essence of the behaviour of what you are trying to understand. If you simplify injudiciously you may throw the baby out with the bathwater. We have already seen this in previous chapters: if you change any one of several assumptions of the neoclassical theory you predict economic behaviour that is radically different from the general equilibrium that Walras came up with, although it better resembles the behaviour of real economies.
So it is with social interactions: excluding them excludes important features of our economy. If there are no social interactions, there can be no fashion industry. Homo economicus would rationally calculate what clothing would best serve his practical needs for covering and warmth and would find the best price for those items. That might approximate how a mountaineer buys his mountaineering clothes, but there are not too many women who shop that way. “Fashion” is commonly understood to refer to fashions in clothing, and that is a prominent and large segment of our economy, but fashion is not confined to the rag trade. Fashion plays a very prominent role in the car industry and a significant role in housing and household goods, and those are very large segments of our economies.
However the consequences of ignoring social interactions in economic theory run more broadly and deeply through our society even than failing to account for a big chunk of economic activity. When Margaret Thatcher said there is no such thing as society she was echoing the considered conclusion of one of her heroes, Friedrich Hayek. Thatcher’s other hero was Milton Friedman, who was also a disciple of Hayek. Hayek’s ideas fed powerfully into what became neoliberalism. This was no accident, because in 1947 he founded a forum for like-minded people called the Mount Pelerin Society (see McKnight37 p. 51). Over the next couple of decades ideas promoted by the Mount Pelerin Society gained ground among academic and professional economists and helped to lay the foundation for the neoliberal dominance of the past several decades.
The context of Hayek’s thinking was the contest between socialism (including communism) and capitalism. He adopted the neoclassical conclusion that free markets yield the best possible result, and he added to it the insight that markets are capable of processing vast amounts of information. This happens partly through the “price signals” that transactions send through a market, but even more so through the much larger amount of information to which participants refer before engaging in a transaction. The transaction distills each participant’s assessment of what they prefer, what else is available, whether the purchased item will fulfill its intended purpose, what was the cost of production of the item, what margin of profit will provide for the seller’s expenses and livelihood, and so on. The assessment of this information does not have to imply a massive rational calculation, regardless of how Hayek might have envisaged it. Rather we only have to acknowledge that people do routinely assess a great deal of information in the course of their daily lives by whatever means they might employ, intuitive, rational or by learned empirical rules. Such information processing, Hayek argued, is why the centrally planned economies of communism failed, because no bureaucracy could possibly process such a vast amount of information and reach sensible choices. With the benefit of hindsight, and with modern knowledge of self-organising systems that develop emergent behaviour from relatively simple interactions of components, we can only agree.
Having made a valid point about a strength of markets, Hayek did not just conclude that markets therefore have a very useful role to play in our societies. He had a much grander vision. Hayek proceeded to conclude that markets, and markets alone, should be the arbiters of all our interactions with each other.
Hayek’s central concern was personal liberty (McKnight37 p. 63-74). His conception of liberty was of a narrow and severe kind. He distinguished it, for example, from that of “social liberals”, who thought society or the state should cultivate conditions in which we can develop our individual potential to the maximum, for example by providing education and health services and ensuring access to an adequate livelihood. Hayek’s version of liberty was the liberty to be left alone, and to be free to pursue one’s inclinations so long as one does not intrude on another’s liberty. This sounds like libertarianism, but it goes further. The real distinctiveness of his ideas arises from his vision of how to implement such liberty. His perception was that human cultures are so diverse there is little one can find in common among them, with one exception, and that is the desire to acquire material goods. (This perception will be challenged below.) He perceived that societies with well-developed market systems had increased their material prosperity and their population, which he took as prime measures of success. He considered that becoming an agent in a market system was therefore an evolutionarily successful strategy, and that the future of humanity is to evolve beyond old social behaviours and into what he called the sponaneous market order. Put simply, our interactions with each other would reduce to material transactions in an unfettered market, and the market would spontaneously and efficiently bring about material prosperity without intruding on our liberty. Beyond the bounds of the family there would only be the market. There would be no such thing as society.
Hayek’s view of morality was entirely condition by this vision. Behaviours that promote the functioning of the market, like honesty in exchange and contract, respect for private property, trade, competition, gain and privacy are moral. Feelings of altruism and obligation are unnecessary, and in fact tend to interfere in the market, so they are immoral. “An order in which everyone treated his neighbour as himself would be one where comparatively few could be fruitful and multiply” (Hayek38 p.13). Hayek allowed altruism only in one context, that of the nuclear family, acknowledging that to impose the discipline of the market on the family would be to crush it. (This has not deterred some neoliberal theorists from intruding rational choice theory, derived from the neoclassical theory, into social contexts including the nature of the marriage relationship.)
Here we may suspect we are close to an important source of conspicuous modern phenomena. The increase in selfishness, the weakening of the social fabric, the stresses placed on relationships and families, the materialism and greed, the disposal of public assets, the attacks on public institutions, the ever-expanding material economy and consequent destruction of the natural environment, these, one might suspect, would be plausible consequences of attempts to impose Hayek’s vision.
There are various ways one might describe Hayek and his vision. Utopian and extremist come to mind. His vision of the perfectability of human beings into selfish individuals acting in the absence of society resembles nothing so much as the communist vision of the perfectability of human beings into selfless members of a mass society. One vision reduces human behaviour to pure competition and the other reduces it to pure cooperation, but they are equally utopian and absolutist. Neoliberals often accuse their perceived opponents of social engineering, but this is social engineering of the grandest and most brutal kind.
The evolutionary thread in Hayek’s thinking is notable. It is a raw form of social Darwinism, the survival of the fittest in a purely competitive world, with fitness judged by greater numbers of progeny, and thus by an increasing population of the group. Incidentally there is no basis for any implication that Charles Darwin would have approved of social Darwinism, as he was a moral man who was sorely troubled by the apparent inconsistency of his theory with the Biblical account of creation. Also the modern conception of natural selection is more sophisticated than the old image of “nature red in tooth and claw”, because it allows for cooperative alliances and attachments having survival benefit, as we have seen in Chapter 4.
Another description of Hayek and his vision might be sociopathic. Truly, this man had little appreciation of the value of social intercourse. Of course the economics profession seems to attract a disproportionate number of left-brain, linear-rational types. This is presumably why in 2001 the Parisian economics students, tired of their professors’ endless parade of sophisticated mathematical theory and pining for a more historically- and socially-based account of economies, called for the creation of post-autistic economics. Autistic is indeed not a bad description of Hayek and neoliberalism: impaired perception of social cues, disinterest in social interaction, restricted and obsessive behaviour.
Putting it in a larger perspective, all mammals are social. You have to go back to the reptiles to find an absence of social behaviour that compares to Hayek’s vision of our future. And by reptiles I don’t mean dinosaurs, for which there is evidence of herding and family care behaviours. Reptiles are the ancestors of both dinosaurs and mammals, so I’m talking about snakes, lizards and turtles.
Hayek’s morality is a complete inversion of traditional moralities. Central to most people’s perception of morality is consideration for others, as in the golden rule: do unto others as you would have them do unto you. This principle is a common thread throughout the world’s cultures and religions, in contradiction to Hayek’s claim that the only common thread is material acquisitiveness. Hayek derides the golden rule simply on the ground that it (allegedly) interferes with the maximisation of material gain and thus competitive and evolutionary advantage.