Cardiff University

Law and Spontaneous Order: Hayek's Contribution to Legal Theory

Author(s): A. I. Ogus
Reviewed work(s):
Source: Journal of Law and Society, Vol. 16, No. 4 (Winter, 1989), pp. 393-409
Published by: Wiley-Blackwell on behalf of Cardiff University
Stable URL: http://www.jstor.org/stable/1410327 .
Accessed: 24/10/2012 09:48
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .
http://www.jstor.org/page/info/about/policies/terms.jsp

.
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of
content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms
of scholarship. For more information about JSTOR, please contact support@jstor.org.

Wiley-Blackwell and Cardiff University are collaborating with JSTOR to digitize, preserve and extend access to
Journal of Law and Society.

http://www.jstor.org

JOURNALOF LAW AND SOCIETY

VOLUME16,NUMBER 4, WINTER 1989

0263-323X$3.00

LawAndSpontaneousOrder:Hayek'sContribution
to Legal
Theory
A. I. OGUS*
Ten years ago, I observedthat the work of Friedrichvon Hayek had been
unjustifiablyneglectedby legalwritersin this country.1Notwithstandingthe
impactand influenceof New Right theoristsin the period since then,2the
Thisis all themoresurprisingbecause,
situationhasnot alteredsignificantly.3
in
issuescentralto legaltheory:
his
later
addresses
works,Hayek
particularly
the natureof law and the state,justice,constitutionalstructures,and the rival
meritsof commonlaw and legislation.
Of course, Hayek'sexplorationof law has been, in no sense, a separate
enterprise;rather,it is but one part of an overarchingunifiedrestatementof
liberalism,having at its base a theory of knowledgeand scientificinquiry,
which is developed systematicallyfirst in relation to economic decision
makingand systemsand thento the politicalorderas a whole.In this paperI
shallfocus on Hayek'scontributionto legaltheoryas expoundedprincipally
in his lastmajorworkLaw,LegislationandLiberty4but will attemptto place
that in the context of his general theory of society, as it was developed
throughouthis intellectualcareer.Aftera shortaccountof Hayek'sapproach
to socialsciencemethodology,I show how he uses an epistemologicaltheory
to developtwo models of social organization:spontaneousorder,which he
identifieswiththemarketandwithcommonlaw,andrationalconstructivism,
whichis associatedwitha plannedeconomyandregulatorylaw.Hayek'smain
thesisis thatit is onlythefirstof thesewhich,by preservinglibertysubjectonly
to universalrules of just conduct, can guaranteethe progressof human
civilization. I argue that the normative dimension of this assertion is
flawedbutthat,as an explanatorymodelof thedevelopmentof
fundamentally
law, Hayek'stheorymeritsseriousattention.

Professor of Law, The University,Manchester M13 9PL, England.

This paperis the secondin a seriesdealingwith the work of theoristswho have substantially
influencedcontemporary
of lawandsociety.(SeepreviouslyH. Collins,'Roberto
understanding
Ungerand the CriticalLegalStudiesMovement'(1987)13J. of LawandSociety387.)

393

I. THE METHODSOF SOCIALSCIENCE

Hayek'smethodof analysingsocietyhas its originin the Kantianconception
thatindividualscannotobservephenomena'externally';thehumanmindis as
much a part of the naturaland social environmentas that which is being
studied.5Social reality,then, cannot be 'explained'by an objective,intellectualprocess.The subjectivisttheorywas centralto the Austrianschool of
economics,in whichHayekwas trainedand fromwhichhe derivedmuchof
his earlyinspiration.6In contrastto the classicaleconomists,the Austrians
concludedthat resourceshad no objective'value',determinableby reference
to, for example,labourand capitalinput. 'Value'was, instead,a matterof
individualsubjectivepreferencesand choice. Hayekdevelopedthe notion in
his own economicwork7but, more significantly,appliedit to the whole of
of thelatterwascomposedentirelyof
socialsciences.8 Sincethesubject-matter
humanactionandinteractionwhichwas,in turn,theresultof attitudes,beliefs,
and motives,objectiveanalysiswas impossibleand therefore'scientistic':
Not onlyman's[sic]actiontowardsexternalobjectsbutalsoall therelationsbetweenmen
andall socialinstitutionscan be understoodonlyin termsof whatmenthinkaboutthem.
Societyas we knowit is, as it were,builtup fromtheconceptsandideasheldby thepeople;
and socialphenomenacan be recognizedby us and havemeaningto us only as they are
reflectedin the mindsof men.9

How, then,is the socialscientistto derivean understandingof societyand

social institutions?Hayek'sansweris by means of a 'compositive'method:
groupsof structurallyconnectedelementscan be selectedout of the totalityof
observedphenomena,revealingthe regularities,pattern,or generalorderof
humanbehaviour.10A strict Austrianwould argue that the complexityof
variables inherent in human behaviour and motivation precludes the
possibility.No doubtawareof the riskof underminingthe importanceof his
own essayin prophesy(in the highlyinfluentialRoadto Freedomhe had spelt
out whathe sawas the implicationsfor the futureof currenttrendsin political
institutions),11Hayekin his laterwritingreacheda different,andperhapsnot
entirelysatisfactory,conclusion.While specificpredictionsabout complex
phenomena(such as the price of a particularproductat a particulartime)
cannotbe made,neverthelessa theoryderivedfromobservingbroadpatterns
of behaviourundercertainconditionsmay enableus to expectthosepatterns
to recurif theconditionsprevail- andin principlethehypothesisis testable,or
at leastfalsifiablein the Popperiansense.12 Hayek'ssweepinggeneralizations
aboutthehumanconditionstandor fallwiththismethodologicalassumption;
some wouldarguethat its inherentvaguenessmakesit difficultto distinguish
betweenscientificpredictionand purespeculation.13
II. TWOMODELSOF SOCIALORGANIZATION
The anti-rationalist thrust of Hayek's approach to social science methodology
applies to action as well as thought and is at the heart of his social theory.
394

Knowledgeof the innumerablefacts whichmake up the humanconditionis

necessarilywidelydispersedand fragmentary.Individualsmakingdecisions
about courses of action can at best rely on limited informationnormally
pertainingto localized environments.Interactionand co-operationwith
othersare, of course,essential,but this does not implya plannedor directive
form of social organization.The spontaneousorderwhich emergesis selfgeneratingor endogenous:14 it is not deliberatelybroughtabout and has no
explicit purpose;ratherit results from the instinctiveadoption of certain
(oftenunformulated)rules.Thisideaof unplannedorderis exemplifiedby the
developmentof humanlanguagebut also by animallife, for examplein the
insectsocietiesof bees,ants, and termites.15
For societyto exist, the rulesmust be habituallyobeyed,but to overcome
the Hobbesiandilemmawhich arises when self-interestconflicts with the
commongoal compulsionmay be necessary:
Some such rulesall individualsof a societywill obey becauseof the similarmannerin
which their environmentrepresentsitself to their minds. Others they will follow
spontaneouslybecausetheywillbe partof theircommonculturaltradition.Buttherewill
be stillotherswhichtheymusthaveto be madeto obey,since,althoughit wouldbe in the
interestsof eachto disregardthem,the overallorderon whichthe successof theiractions
dependswill ariseonly if theserulesaregenerallyfollowed.16

of the communitymighthaveto enforce

Although,therefore,representatives
the rules, under a spontaneousorder their specific content is not to be
designed.Becausethe relationshipbetweenindividualrulesand the overall
order is so complex, no individualis able to predictwhat will or will not
succeed.Rulesarebestleft, by a processof evolutionaryselection,to adaptto
changesin the environment.
Thespontaneousordermodelof socialorganizationis to be contrastedwith
whichassumesthat humaninstitutionsarecapableof
rationalconstructivism
servinghumanpurposes,andin thepasthavesuccessfullydoneso, onlyif they
aredeliberatelydesigned.17For Hayek,thisview,whichhasinfusedsocialand
politicalthoughtsinceDescartes,is deeplyfallacious:it failsto recognizethat
the humanmind is a part of, and thereforecannot transcend,spontaneous
order;andit resultsfromthesynopticdelusion:'thefictionthatall therelevant
factsareknownto someonemind,andthatit is possibleto constructfromthis
knowledgeof the particularsa desirablesocialorder'.18
1. The Market as Spontaneous Order

Theearlierpartof Hayek'scareerwasdevotedto pureeconomictheory 9 - he

heldtheTookeChairin EconomicScienceat LondonUniversityfrom 1931to
1950- and his notion of spontaneousorderwas developedfirstin relationto
the market.20 The latteris an unplannedprocesswherebyindividualsmake
use of decentralizedandfragmentedknowledge,limitednormallyto localized
information about prices and costs, to advance their own interests in
competition with others. The basis of the competitive market order is, then, a
system for communicating information: individuals respond to signals, the
395

prices which reflect peoples' needs for products (demand), with profits
rewardingthose whose skill, or perhapsluck, enablesthem to adaptbest to
thosesignals.Theyneedknownothingof whydemandchanges,stilllessof the
economy as a whole. The 'marvel'of prices is: 'how little the individual
participantsneed to know in order to be able to take the right action. In
abbreviatedform,by a kindof symbol,only the most essentialinformationis
passedon and passedon only to those concerned.'21
Plannedeconomic systems fail simply because no individual,or set of
individuals,can have the knowledgerequiredto co-ordinatethe activitiesof
producersandconsumers;and, in any event,economicprogressis dependent
on individualsbeing rewardedfor successfulexperimentationwith what is
whollyor partiallyunknown.22
Whiletheseideasmaybe largelysharedby neo-classicaleconomists,Hayek
divergesfromtheirtraditionaltheoryby not relyingon assumptionseitherof
the perfectknowledgeof economic actors, or of perfectcompetition.The
phenomenaof the marketprocessare alwaysin a stateof flux.An individual
entrepreneurmay, for example, offer a new product, guessing from
informationaboutotherproductsthattherewill be sufficientdemandfor it;if
her or his guessworkis good, she or he will enjoyan initialmonopolypower
but,unlesstherearebarriersto entry,thatwillnot last.Thisviewof themarket
as a dynamicprocess led Hayek to be highly criticalof the neo-classical
obsessionwith supplyand demandequilibriumand allocativeefficiency:23
a
model in which, respondingto stable preferences,resourcesare assumedto
gravitate towards such an equilibriumdistorts the reality of economic
behaviour,becausethereis an inherenttendencyfor agents, in the light of
newly-acquiredknowledge,to move away from this state. Since Hayek's
approachdoes not lenditselfto econometricmodellingof the kindwhichnow
dominatesthe economicsdiscipline,it is perhapsnot surprisingthathis work
is neglectedby contemporaryeconomists.24
2. CommonLaw as Spontaneous Order

The germsof Hayek'sidentificationof the common law with spontaneous

order may be found in The Road to Serfdom"2 and The Constitution of

Liberty26wherehe views 'genuine'law as possessinga generalityand thus

abstractedfrom particularcircumstancesof time and place. Further,and in
sharp opposition to Austinianjurisprudence,'law' is distinguishedfrom
'command'in thatit does not presupposea sovereignwho issuesit; as such,it
is a partof the unplannedorder.
The subject is explored in considerabledepth in Law, Legislationand
Liberty,the largerpartof the firstvolumebeingdevotedto it.27Law-making
is hereportrayedas a continuous,adaptativeprocessdealingwithunforeseen
consequences:
Thepartsof a legalsystemarenot so muchadjustedto eachotheraccordingto a comprehensiveoverallview,as graduallyadaptedto eachotherby the successiveapplicationof
generalprinciplesto particularproblems- principles,that is, whichare often not even
explicitlyknownbut merelyimplicitin the particularmeasureswhicharetaken.28

396

Theindividualjudgefunctioningwithinthisprocessis morean 'unwittingtool

. . than a conscious initiator'.The judge's task is to apply the general
principlesof law, not to questionthem.Stabilityensuesbecause,in applying
the generalto the particular,the judge will interpretit in such a way as to
render it consistent with other general principles and thus generate
coherence.29
The principlesthemselvesare 'universalrules of just conduct'.30 This
means, in the first place, that there is an equalitybefore the law, in that
particulargroupswithinsocietyarenot the subjectof specificprescriptionor
specificdispensation.Secondly,the principlesdo not purportto providea
concretesolutionto all the many(andunknowable)contingencieswhichmay
arise.Thirdly,they are purpose-independent;
theirapplicationin particular
instancesis not designed to achieve particularsocial or economic ends.
Rather,theyreflectthepracticeswhichhaveevolvedin the spontaneousorder
and,as such,should,in general,conformto theexpectationswhichthe parties
wouldhave'reasonablyformedbecausetheycorrespondedto thepracticeson
which the everydayconduct of the membersof the group was based'.31
Granted, however, the fact that in an ever-changingenvironmentsome
individualswill be exploiting new knowledge,it will be impossible(and
inappropriate)to protectall expectations.The aim, then,is to maximizethe
possibilityof expectationsin generalbeing fulfilledand, as we shall see, for
Hayek this implies laying down for each individuala range of permitted
actions(liberty)by designatingrangesof objectsoverwhichtheindividualhas
controlandrightsof disposal(property).32
Legislationis frequently,though not always, used as an instrumentof
rationalconstructivism.It performsthis function when it lays down rules
designed to achieve particularends or supplementspositive orders that
somethingshouldbe done,or creates,or conferspowerson, an agencyfor this
purpose.33Hayek is here referringto what we would call regulatorylaw,34
thoughconfusinglyhe usesthe term'publiclaw',therebyfailingto appreciate
that part of public law, for example that governingjudicial review of
administrative
action,contains'universalrulesof just conduct'.In contrastto
therulesevolvingunderspontaneousorder,regulatorymeasuresarepurposespecific,often by means of targetingrules (or exemptionsfrom rules) on
specific groups, thus infringing equality before the law, and typically
attemptingto lay down a comprehensiveset of solutionsfor all foreseeable
contingencies,impliedlyassumingomnisciencein the sovereignruler.
Hayek's concern to identify law under the spontaneousorder with the
common law does not, however,lead him to the position that legislation
shouldbe dispensedwithaltogether.35Ofcourse,statutelawmay,in part,be a
codificationof the principlesof private law which have evolved through
judicialdecisions.36Morethanthis,Hayekrecognizesthatlegislationmay be
necessaryto correctjudge-madelaw wherethe latteris too slow to adapt to
wholly new circumstances;this can occur becausedevelopmentscannot be
reversedif judges are not to disappointreasonableexpectationscreatedby
earlierdecisions.Most significantlyof all, in a passagewhich is frequently
397

overlooked, he concedes that judicial error, and thereforethe need for

legislation,mayresultfromthefactthat'thedevelopmentof thelawhaslainin
thehandsof membersof a particularclasswhosetraditionalviewsmadethem
regardas just what could not meet the more generalrequirementof justice';
law
andhe instanceslabourlaw,landlordandtenantlaw,andcreditor/debtor
as fieldswherejudgesweredrawnalmostexclusivelyfromthe class of one of
the interestedgroups.37
III. BLUEPRINTFOR THE 'GREATSOCIETY'
As we have seen, Hayek'sapproachto social science,while preventinghim
fromformulatingspecificpredictionsabouthumanbehaviourby inductiveor
deductivemeans, neverthelessenableshim to make broad generalizations,
derivedfrom observationsof 'patterns'of events. The main thesis of Law,
LegislationandLibertyinvolvessucha generalization:
... that a conditionof libertyin whichall are allowedto use theirknowledgefor their
purposes,restrainedonly by rulesof just conductof universalapplication,is likelyto
producefor themthe best conditionsfor achievingtheiraims;and that sucha systemis
likelyto be achievedandmaintainedonlyif all authority,includingthatof themajorityof
the people,is limitedin the exerciseof coercivepowerby generalprinciplesto whichthe
communityhas committeditself.38

Hayek's blueprintfor the Great Society39is drawn, of course, from the

spontaneousordermodel.Its constituentpartsnow call for examination.
1. Liberty
Libertyis not viewedby Hayekas an endin itself,butas the meansto an endhuman progress.40Whether or not civilizationis 'better' as a result of
increasedwealth,thereis an overwhelmingdemandfor materialprogressof
this kindand it cannotbe achievedwithoutliberty.For socialprogress,each
individualshouldbe ableto act on heror his ownparticularknowledgefor her
or his ownparticularpurpose.Sincethereis inevitableignoranceas to manyof
the factors on which the pursuit of individualpurposes rests, 'liberty is
essentialin orderto leave room for the unforeseeableand unpredictable'.41
Thegoal shduldbe the maximizationof opportunitiesfor individualsto learn
of facts hithertounknown,even though, of course,this involvesthe risk of
failureas well as of success.
The concept of libertyemployedhere is, it should be noted, a restricted
one.42 It means freedomfrom coercion by others but does not extend to
freedom in the political sense of people participatingin the choice of
government.It insists that individualshave some privatesphereprotected
against interferenceby others, but this does not imply that society is to
guaranteethateachindividualhas accessto a minimumamountof resources.
In this respectHayek differsfrom those libertarianswho argue that some
materialsupportfor disadvantagedpersonsmay be necessaryif they are to
398

exercisepoliticalrights.43It is truethat he acceptsas inevitablegovernment

actionto dealwithextremesof povertybutthejustificationis not 'liberty',still
less 'citizenship';ratherit is in the interestsof those 'who requireprotection
againstacts of desperationon the partof the needy'44- an explanationwhich
is more fully exploredin Marxist analsysis.45The essence of the 'private
sphere',therefore,is not thepossessionof property('freedommaybe enjoyed
by a personwith practicallyno propertyof his own'46)but the rightto use
assetswhichare possessed,for whichpurposefreedomand enforceabilityof
contractsarevital.Assetsareacquiredas rewardsfor merit,as determinedby
the market.Inheritanceis defendedsimplybecauseit arisesfromthe natural
instincts of parents and if it is prevented those instincts will manifest
themselvesin less attractiveways,for examplenepotismand corruption.47It
follows that Hayekacceptshistoricalpatternsof entitlementsas a givenand
makesno attempt,in the mannerof Nozick,48to justifythem.
Clearly there must be some exceptions to freedom from coercion. We have

alreadyseenthat compulsionto obey the rulesof the spontaneousorder,the

common law, is necessary.Defence of a society againstexternalenemiesis
another uncontroversial justification for governmental control. But it may

come as a surpriseto Hayek'scriticsto learn that he is, by no means, an

advocateof the 'minimalstate' and that thereis a wide rangeof regulatory
measures that he is prepared to tolerate.49 Most cases arise as a result of

marketfailure,notably externalities,that is, wheresome of the adverseor

beneficial consequences of an activity are not reflected in the prices which
agents charge, thus leading to an overproduction, or underproduction, of the

activityin question.50It is on this groundthat he rationalizes,for example,

centralized provision of roads51 and the public financing of education. More
generally, since information is a commodity not easily supplied by the market

but facilitatesthe workingof that process,he recognizesthe appropriateness

of building regulations, pure food law, the certification of certain professions,
and some safety and health regulations - intervention of this kind 'certainly
assistsintelligentchoiceand sometimesmay be indispensablefor it'.52
Nevertheless, he is quick to point out important limitations. First, while
regulatory legislation inevitably involves some departure from the ideal of

universalrulesof conduct,to mitigatethe evil certaingeneralrequirementsof

justice, such asthe avoidance of arbitrarydiscrimination,ought to be observed.
Secondly, though the public financing of some services may be justified, it does

not followthatgovernmentshouldnecessarilyitselfprovidethem- hencethe

argumentfor publicly funded education vouchers valid for private institutions.

In short, it should be recognized that the adoption of collective measures

involvesresortingto an inferiormethod of provisionand the spontaneous

mechanism of the market should be relied on as much as possible.53
2. The Rule of Law
A continual theme in Hayek's work from Road to Serfdom through to Law,

LegislationandLibertyhas beenthatlibertyis not a naturalstatebut is rather

399

createdand preservedby the 'rule of law'. The latter mirrorsclosely the

conceptfamiliarfromDicey'swork54and assertsas meta-legalrequirements
thatlawsshouldbe universal,knownandcertain,andshouldapplyequallyto
all.55Viewedas such, the rule of law has suffereda markeddeclinein the
twentiethcentury.Theoriginalconceptof Rechtsstaat,a productof theliberal
movement, which demandedsubservienceof the state to the meta-legal
principlesof the rule of law was displacedby a purelyformalinterpretation
which requiredonly that all state action be authorizedby the legislature.
Hayek is ruthlessin his criticismof developmentsin legal thoughtwhichhe
considers contributedto this decline: the overwhelmingsuccess of legal
positivism- 'the "puretheoryof law" ... expoundedby ProfessorH. Kelsen
signalledthe definiteeclipse of all traditionsof limited goverment';56the
violent attackson the certaintyof law by JeromeFrank- 'it was the young
men broughtup on such ideas who becausethe ready instrumentsof the
paternalistpolicies of the New Deal';57 and the literatureoutlining an
antirule-of-lawdoctrinepromulgatedby a group of 'socialistlawyersand
politicalscientists'includingIvorJenningsand W. A. Robson.58
ForHayek,theinstitutionsandpracticesof theadministrative/welfare
state
infringethe meta-legalprinciplesin severalimportantrespects.Collectivist
economic measurescannot be accommodatedto generalprincipleswhich
preventarbitrariness:
The planningauthority... mustprovidefor the actualneedsof peopleas theyariseand
thenchoosedeliberatelybetweenthem.It mustconstantlydecidequestionswhichcannot
be answeredby formalprinciplesonly, and in makingthese decisionsit must set up
distinctionsof meritbetweenthe needsof differentpeople.59

In making these decisions, the authorityand its subordinateagents must

inevitablypossessandexerciseconsiderablediscretionarypowers.Theruleof
law would insist that such discretion be constrained by a system of
administrativelaw whichenablesthejudiciaryto reviewthe substanceof the
actionby referenceto generalprinciples;butthe courts'concernis, in general,
limitedto the questionwhetherthe particularactionwas formallyauthorized
by legislation.60
Theseargumentsfamiliarto, andmuchdebatedby, administrativelawyers
do not call for detailedconsiderationhere;sufficeit to observethat Hayek
would probablyfind unpersuasivethe view that the principlesof judicial
review developed in our legal system - particularlythe 'Wednesbury'61
principleof reasonableness- fit his model,62and wouldbe evenmorehostile
to the opinion which casts doubt on the alleged superiorwisdom of the
ordinarycourtsand, therefore,on extensivejudicialactivism.63
3. ConstitutionalConstraints

The need to impose constraintson governmentaction arises nor merely

because such action inevitably infringes the meta-legal principles of the rule of
law. As Hayek has argued in his later work, it is a consequence also of the
weaknesses of traditional democratic structures. If, as we have seen,64 power
400

must be conferredon representatives

of the communityin orderto avoid the
Hobbesiandilemmacreatedby conflictsof self-interest,it doesnot followthat
the existenceof democraticinstitutionsrepresentingmajorityopinionis able
to solvethatdilemma.Giventhe unlimitedpowerof legislativebodiesto enact
regulatorymeasuresconferringbenefitson particulargroups,a government
commandingthe majorityof votes in those bodies will need to offer such
measuresto those on whose supportit relies.Groupswith commoninterests
will, then,co-ordinateand organizethemselvesto demandbenefits.Thus:
... in thecourseof thiscenturyan enormousandexceedinglywastefulapparatusof paragovernmenthasgrownup,consistingof tradeassociations,tradesunionsandprofessional
organizations,designed primarilyto divert as much as possible of the stream of
governmentalfavourto theirmembers.65

The concept of parliamentarysovereignty,particularlythe Westminister

model,is the root causeof the problem.Theclassicaltheoryof representative
governmenttook the wrong direction: the equal claims of democratic
governmentand democraticlegislationled to a situationin whichthe powers
of the two brancheswere effectivelycombined and to a revival of the
'monstrous'establishmentof an absolutepowernot restrictedby any rules.66
Democracyin thisformis a sham;it is 'increasinglybecomingthenameforthe
very process of vote-buying,for placatingand remuneratingthose special
interestswhichin morenaivetimesweredescribedas the"sinisterinterests"'.67
At the same time as Hayek was formulating these ideas, a highly
sophisticatedand influentialversion of them was being developedby the
public choice school of economics.68Because most of this analysis is
predictive- whatconsequencesflowfromdifferentinstitutionalarrangements
- the economistsinvolvedhave tendedto fight shy of adumbratingreform
proposals.Hayekis not so cautious.In the thirdvolumeof Law,Legislation
andLibertyhe outlinesan idealconstitutionwhich,in hisview,wouldsolvethe
problems.69The key to his model is the establishmentof two representative
bodieswith differentfunctions.The LegislativeAssemblywould be charged
with maintainingand developing'proper'law which,throughoutthis work,
Hayek identifieswith spontaneousorder,that is the universalrules of just
conduct. As such, its role would be sharplycontrastedwith that of the
GovernmentAssembly which would be concerned with organizing the
apparatusof governmentand makingdecisionsabout the use of resources
entrustedto the government.Crucially,the secondbody wouldbe boundby
the rulesof just conductlaid down by the first,so that it could not issueany
ordersto privatecitizenswhichdid not follow 'directlyand necessarily'from
the rules emanating from the latter.70Consistentlywith the theory of
spontaneous order that the rules of just conduct should be purposeindependent,they shouldbe determinedby opinion(whatis rightor wrong)
andnot by interests.To achievethis,it is obviouslydesirablethatthemembers
of the LegislativeAssemblyshouldbe insulatedfromthe demandsof pressure
groups.Hayekthereforesuggeststhattheyshouldbe electedfor long periods,
for examplefifteenyears.Afterthis period,they wouldnot be eligiblefor reelection,norindeedforcedto earna livingin themarket;rather,theywouldbe
401

assured of continuous public employment as lay judges. To reflect

contemporarystandardsof rightandwrong,thememberswouldbe electedby
all personsin thecommunityof the sameage, say forty-fiveyearsold. Finally,
a constitutionalcourtwouldbe entrustedwith the task of resolvingdisputes
about the propercompetenceof each of the two assembliesand, to preserve
independencefromgovernment,itsjudgeswouldbe electedby a committeeof
formermembersof the LegislativeAssembly.
4. Justice
If, for Hayek, law properly so called comprises 'universalrules of just
conduct', such as evolve through common law decisions or, in his ideal
constitution,by the LegislativeAssembly,whatis theircontent?Whatmakes
them 'right' or 'wrong'?What is 'justice'?Since justice is a part of the
constantlyevolvingspontaneousorder,we cannot expect,and certainlydo
not receive,concretizedanswersto these questions;to providesuch would
smackof rationalconstructivism.In the secondvolumeof Law, Legislation
andLiberty,appropriatelytitledTheMirageof SocialJustice,Hayektherefore
concentrateson howjust rulesshouldbe 'discovered'andwhatis not'justice'.
The rules of just conductare abstractguides to behaviourin a world in
whichmost of the particularsareunknown.71Theycommandgeneralassent
sincethey correspondto generalusage.Internalconsistencyand application
over a reasonablylong periodare importantqualities,becausethey become
the basis of planningby individuals.The functionof the rulesis to protect
ascertainabledomainswithinwhichthe individualis freeto act, ratherthanto
determineparticularcourses of action; consequently,they are typically
negative in character." Likewise, since knowledgeof the importanceof
particularends for particularindividualsis lacking,the test of justiceis also
negative:
... justiceis ... emphaticallynot a balancingof particularinterestsat stakein a concrete
classesof persons,nordoesit aimat bringing
case,or evenof theinterestsof determinable
abouta particularstateof affairswhichis regardedas just.73

Utilitarian evaluations are therefore dismissed as being constructivist

fallacies.74
Hayekwouldpreferhis conceptof justicenot to be identifiedwith 'natural
law', which as typically used denotes some deontological theory.75
Nevertheless,the mannerin whichthe rules,andnotionsofjustice,developis
the result of a 'natural'process, in the anti-positivistsense of that being
independentof deliberatechoice by sovereignwills:it is 'naturalselection'
throughevolutionwhichdeterminesthe successand thejusticeof the rules.(I
shallreturnto this crucialpropositionin the next sectionof the paper.)
Onlyhumanconduct,and thatwhichaffectsothers,can be consideredjust
or unjust. The action of governmentsand other organizationscan be so
qualifiedbutnot the order(or situation)of societyas a wholesince,in termsof
Hayek's theory, a state of affairs,the particularsof a spontaneousorder,
cannot be the intended aim of individual actions.'7 This leads to the
402

enormouslyimportant,andalso highlycontroversial,rejectionof conceptsof

social,or distributive,justice:
'[S]ocialjustice'willultimatelybe recognizedas a will-o'-thewispwhichhas luredmento
abandon many of the values which in the past have inspiredthe developmentof
civilization."

For Hayek, the term has no meaningexcept undersystemswhererulers

arrogateto themselvespowerto determinetheimpossible- whatis good- and
in whichindividualsare orderedwhat to do. In a social orderunderwhich
peopleare free to experimentby extendingknowledgeand therebyenabling
improvementsto be madeto the generalwealthof all, the inevitablepriceis
that individualsand groups risk unmeritedfailure.To replacea systemof
rewardsdeterminedby the marketwould halt progress.Further,'rational
constructivist'attemptsto distributeresourceson the basis of 'justice'are
doomed to failure becausewe lack objectivecriteriafor determiningand
comparing'merit'or 'need'.As the failureof medievalsystemsto locatejust
pricesand just wages reveals,'value to society' is immeasurableexcept by
marketmethods;nor can the need of one individual,for example,to decent
housing,be comparedwith that of another,for example,to relieffrompain.
Decisionson suchmattersinevitablyleadto arbitrariness.
Theyalso resultin
infringementof the universalrules of just conduct since people would be
treateddifferentlyaccordingto theirapparentmaterialsituation:
Thedistributive
withthe ruleof law,
justiceat whichsocialismaimsis thusirreconcilable
andwiththat freedomunderthe law whichthe ruleof lawis intendedto secure.7"

IV. CRITIQUE:THE NORMATIVEDIMENSION

1. TheProblemof ValuesandEvolution
In my accountof Hayek'sworkI haveattemptedto showhow he developshis
evaluativeframeworkfor socialinstitutions,and hencealso his highlycritical
judgementsof some forms of social and political arrangements,from an
epistemologicalbase. What is good for mankindcannot be known and
rationalplansfor the futurecannotbe made;institutionsshouldthereforebe
appraisedin termsof theircapacityto fosterexplorationsinto the unknown
and to disseminatethe findings.But a crucialquestion is raisedas to the
normativecontentof this theory.It is throughaddressingthis questionthat
we can locate what I believeto be the fundamentalweaknessesin Hayek's
work.
Hayek arguesthat the spontaneousorder is value-neutral.Values are a
productof, and may be alteredby, evolutionaryprocesses:
It is not only in his knowledge,but also in his aimsandvaluesthatmanis thecreatureof
civilization;in the last resort, it is the relevanceof these individualwishes to the
perpetuationof the groupor the speciesthat will determinewhetherthey will persistor
change.79

403

What is 'good' or 'bad' is thus a questionof what provesto be effectivein

terms of survival. Within any given society there will be competition
between differentgroups and individualswith differentsets of aims and
values:
Whethera groupwill prosperor be extinguisheddependsas muchon the ethicalcode it
obeys,or the idealsof beautyor well-beingthatguideit, as on the degreeto whichit has
learnedto satisfyits materialneeds.80

Culturaldevelopmentis thusseenas involvingconflictsof norms,withnatural

selectionoperatingto resolvethe conflicts.
This Darwinianapproachis paralleledby the currentfashion to apply
socio-biologicalmodelsof evolutionto legalandeconomicinstitutions"8and
by the well-knownthesisof Priest,82amongothers,that thelitigationprocess
generates a natural tendency for common law rules to evolve towards
efficiency,as thosedisadvantagedby inefficientruleswill havethe incentiveto
challenge then until they are overturned.83These other exponents of
evolutionarymodelstypicallyuse themas explanatoryor descriptivedevices.
In contrast,Hayek'scentralpurposeis to arguethat the libertyinherentin
spontaneousordershouldbe preservedby the universalrulesof just conduct
which constitutethe rule of law. Clearlythis propositionhas a normative
characterand thusmustbe positedon some moralvalue,presumablythatof
liberty.But this opens the door to a numberof powerfulobjections,which
may be consideredin increasingorderof importance.
First, it has been arguedthat the rule of law, even under Hayek's own
definition,'universalrulesof just conduct',is compatiblewith a systemthat
does not upholdlibertybut ratherpermitshighlyoppressivepolicies.84This
objectionmay perhapsbe overriddenif, as has been suggested,the test of
'universalizability'
implies not merely a consistencyof treatmentbetween
similarcasesbut also that the rulesshouldbe impartialas to the interestsand
preferencesof all concerned.85Secondly,libertycannotstandby itselfas the
sole moral value being invoked. Hayek, it will be recalled, regards liberty as

essentialfor the progressof civilization.Inevitably,he postulatesas a goal the

maximizingof the welfareof mankindas a whole,86thus renderinghimself
vulnerableto the manywell-knowncriticismsof utilitarianism.87 Thirdly,the
implicitnotion thatrulesaremorallyappropriatesimplybecausetheyarethe
result of undesignedevolutionaryprocessesis, to say the least, extremely
dubious.88Survivalis no test of moralworth and the theorycan be used to
justifyany set of ruleswhichdevelopovertime.In so far as the evolutionaryutilitariancriterionis identifiedwith the capacityto sustain the maximum
humanpopulation,it leads to the absurdpropositionthat the systemwhich
can support the largest population is also the best."9 The outcome of
competitionbetweengroups with differentsets of aims and interestsmay
be determinedby accident, local factors, and also less morally-neutral
conditions,such as the exploitationof poweror use of force;90and, wereit
otherwise, how can the considerable differencesbetween the rules operating in

differingsocietiesbe explained? Given these difficulties,it would seem that

404

Hayek,if he wishesto adhereto his 'Blueprintfor the GreatSociety',is forced

to arguefor the 'rational'adoptionof his idealorder,a courseof actionwhich
he would,of course,wholeheartedlyhaveto condemnas beingitself'rational
constructivism'.91
2. Social Justice and UniversalRules of Just Conduct

Many - I count myselfamong them- must find morallyoffensiveHayek's

rejectionof anynotionof social,or distributional,
justice92andthearguments
he marshalsin supportof the thesisarenot his strongest.Thepropositionthat
'justice'can apply only to humanconduct(and not states of affairs)would
seem to be a semanticone, becauseit rests on his own definitionof justice
which does not accordwith common usage.93The fact that it may not be
possibleobjectivelyto determineneedotherwisethanaccordingto themarket
criterionof abilityto payshouldnot leadto theconclusionthatthatmethodof
allocationis necessarilymorejust. The pricesthat individualsare willingto
pay areas mucha reflectionof theirwealthpositionas of the intensityof their
desirefor the goods in questionand,as such,constitutean imperfectmeasure
of socialwelfare.As Calabresiand Bobbitthaveso eloquentlydemonstrated,
allocationpurelyby referenceto the marketmethodmay be acceptablefor
washingpowdersbutis intolerablefor the 'tragicchoices'forcedon societyby
the scarcityof some resources,for examplekidneymachines;94and perhaps
the argumentholds for manychoiceswhichareless thantragic.In a moral,if
not a formal,sensemarket-baseddecisionson suchresourcesareas arbitrary
as thosegroundedin othercriteria.
Evenif we wereto accedeto Hayek'smeta-legalrequirementthatlegislation
shouldaccordwiththe 'universalrulesofjust conduct',it is farfromclearwhy
redistributivemineasures
should be regardedas necessarilyinfringingthose
To
that
rules.95 prescribe all citizensmustbe guaranteedaccessto a minimum
amountof resources,sufficientto enablethem to participateactivelyin the
communityor thatall thosewithincomeabovea certainthresholdshouldpay
taxeswould seemto be no less 'universal'than to insist that all occupiersof
premisesowe a commondutyto lawfulvisitorsto see thattheyarereasonably
safe in using the premises.96Thereis an evidentdifficultyin reachingfirm
conclusionson this mattersimplybecauseHayek is vague on the degreeof
generalityrequiredfor his universalrules and, indeed,is loth even to offer
examples." But, froman historicalperspective,one maylegitimatelyinquire
how the principlesof commonlaw couldproperlysatisfythe test of 'equality'
when in practicethey were formulatedin relation only to the claims of
individualswho hadthemeansandwillingnessto takelegalproceedingsin the
highercourts.Conversely,as in more recenttimesaccessto those courtshas
been facilitatedby legal aid and other developments,judges have clearly
alloweddistributionalgoalsto influencethe formulationof generalprinciples,
for example, the broadening of tort liability to accord with loss-distributing
techniques such as insurance"9 and the attempts to modify contract
obligations in the light of fairness considerations.99
405

Hayek's unqualifiedpreferencefor generaljudicial principlesprovokes

more criticism.These principlesare, of course,intendedto fostereconomic
growth by meeting the parties' reasonable expectations but the very
of the applicationof a generalprincipleto specificfacts will
unpredictability
often hinder planningwhich is so essential for that growth. It has been
demonstratedthat the economicallyoptimal precision of rules typically
requiresa much greaterdegree of specificitythan Hayek's model would
allow.100Moreseriously,perhaps,in an age whenfast-expandingtechnology
posesimmensethreatsto theenvironmentandhumanwelfare,universalrules
of just conductcan hardlyprovidethe protectionwhichmembersof society
will demandagainstuncontrolledexperimentation.
V. CONCLUSION
For the reasons outlined in the last section, my conclusion is that the
normativedimensionof Hayek'sworkis untenable.As an explanatorymodel
of the developmentof politicaland legal institutions,his epistemologicallybased theoryof spontaneousorder,,while weakenedby a tendencyto push
argumentstoo far,representsanimportantcontributionto ourunderstanding
of law and certainlydoes not deserveits neglect by legal theorists.The
insistenceon the limits to humanknowledgeand hence on the constrained
ability'rationally'to controlbehaviour,particularlyby regulatorymeasures,
provides a powerful antidote to the more optimisticviews expressedby
Weberiansand others.We might not agreewith the specificcharacteristics
which Hayek attributesto the common law in his 'universalrules of just
conduct',notablythe unduefocus on a restrictivenotion of liberty,but these
very assertionsforce us to reflecton, and explorefurther,the sets of values
whichgive integrityto thatlaw. Indeed,once liberatedfromthe stranglehold
resultingfrom that insistenceon liberty,those retainingfaith in regulatory
systems of law should accept the challengeand attempt to articulatethe
principlesand valuesaroundwhichsuchsystemsmightplausiblycohere.
NOTESAND REFERENCES
1 A. I. Ogus, 'Economics,Libertyand the CommonLaw' (1980) 15 J. Societyof Public
Teachersof Law 55.

2 N. P. Barry,TheNewRight(1987).
3 The only leadinglegal theoristwho appearsto have grappledseriouslywith Hayek's
writings is Professor Neil MacCormick.See, particularly,Legal Right and Social
Democracy(1982),ch.1and'SpontaneousOrderandRuleof Law:SomeProblems'(1986)
35 Jahrbuch des Offentlichen Rechts der Gegenwart 1. The literature on Hayek of other

disciplesis, in contrast,voluminous:a usefulbibliographyis to be foundin J. Gray,Hayek

on Liberty(2nded. 1986)210-49.
4

F. A. Hayek, three volumes: Rules and Order (1973); The Mirage of Social Justice (1976);
and The Political Order of a Free People (1979).

5 Hayek,op. cit., n. 4 (1973),p. 17.

406

T. C. Taylor, The Fundamentalsof Austrian Economics (2nd ed. 1980).

7 For example,'Economicsand Knowledge'(1937) 4 Economica33, reprintedin F. A.

8

Hayek, Individualismand Economic Order(1949) ch. 2.

F. A. Hayek, The Counter-Revolutionof Science (1952).

9 id., pp. 34-5.

10 id., p. 39.
11 'Althoughhistoryneverquiterepeatsitself,... we canin a measurelearnfromthepastto
avoida repetitionof the sameprocess':F. A. Hayek,TheRoadto Serfdom(1944)1.
12

F. A. Hayek, Studies in Philosophy, Politics and Economics (1967) 17, 28.

13
14
15
16
17
18

cf. E. Butler,Hayek(1983)147.
Hayek,op. cit., n. 4 (1973),ch. 2.
Hayek,op. cit., n. 12,p. 69.
Hayek,op. cit., n. 4 (1973),p. 45.
Hayek,op. cit., n. 12,ch. 5; op. cit., n. 4 (1973)ch. 1.
Hayek,op. cit., n. 4 (1973),p. 14.

19

His major pre-war publications were: Prices and Production (1931); Monetary Theoryand
the Trade Cycle (1933); Profits, Interest and Investment(1939). I am not concerned in this

25

workon money,credit,andtradecycles;on this,seeF.

paperwithHayek'santi-Keynesian
Machlup,'Hayek'sContributionto Economics'in EssaysonHayek,ed. F. Machlup(1977)
19-33.
Hayek,op. cit., n. 7, chs. 2, 4; see also op. cit., n. 4 (1976),ch. 10.
Hayek,op. cit., n. 7, p. 86.
id. chs. 7-9; Hayek,op. cit., n. 4 (1976),pp. 1-5.
Hayek,op. cit., n. 7, ch. 5.
Economics'in TheBoundaries
J. Gray,'Hayek,the ScottishSchoolandContemporary
of
Economics,eds. G. C. Winstonand R. F. Teichgraeber
(1988)66-8.
Hayek,op. cit., n. 11,p. 57.

26

F. A. Hayek, The Constitutionof Liberty (1960) ch. 10.

20
21
22
23
24

27 Hayek,op. cit., n. 4 (1973),chs. 3-6.

28 id.,p. 65.
29 Thereis an obviousparallelherewithDworkin's'lawas integrity'(R. M. Dworkin,Law's
Empire(1986)),thoughunderthe latter,the Herculeanjudgeis expectedto interpretthe
generalprinciplesin the lightof his perceptionsof changingviewsof justice.
30 Hayek,op. cit., n. 4 (1973),p. 131.
31 id., pp. 96-7.
32 id., p. 107.
33 id., p. 125.
34 cf. Ogus,op. cit., n. 1, p. 56.
35 Using Hayekianarguments,this extremepositionis takenin B. Leoni,Freedomandthe
Law(1961).
36 Hayekadmitsthat legislationcan increasethe certaintyof the law but 'thisadvantageis
that onlywhat has thus been
morethan offsetif its recognitionleadsto the requirement
expressedin statutesshouldhavethe forceof law'[hisitalics]:op. cit., n. 4 (1973),p. 116.
37 id., p. 89.
38 id., p. 55.
39 Deliberatelyadoptingthis term,as usedby AdamSmith,amongothers:cf. op. cit., n. 4
(1973),p. 138,n. 11.
40 Hayek,op. cit., n. 26, chs. 2-3.
41 id.,p. 29.
42 id., pp. 11-13.
43

A. E. Buchanan, Deriving WelfareRightsfrom LibertarianRights (1979). See also C. Bay,

'Hayek'sLiberalism:The Constitutionof PerpetualPrivilege'(1971) 1 PoliticalScience

Rev. 110-23.

44 Hayek,op. cit., n. 26, p. 285:hencethe case forcompulsorysocialinsurance.

45 V. Georgeand P. Wilding,IdeologyandSocial Welfare(1976)ch. 5.

407

46 Hayek,op. cit., n. 26, p. 141.

47 id.,p. 91.
48

R. Nozick, Anarchy, State and Utopia (1974).

49 Hayek,op. cit., n. 4 (1979),ch. 14.

50

cf. A. I. Ogus and C. Veljanovski, Readings in the Economics of Law and Regulation (1984)

64-5.
51 Exceptwhere,as in long-distancehighways,tolls are practicable:Hayek, op. cit., n. 4
(1979),p. 44.
52 id., p. 62.
53 id., p. 46.
54

A. V. Dicey, Law of the Constitution(10th ed. 1961).

55 Hayek,op. cit., n. 11,ch. 6; Hayek,op. cit., n. 26, ch. 14.

56 Hayek,op. cit., n. 26, p. 238. For an extendedcriticismof Kelsenandlegalpositivism,see
op. cit., n. 4 (1976),pp. 44-56.
57 Hayek,op. cit., n. 26, p. 247.
58 id., p. 241, referring,in particularto the former'sTheLawandtheConstitution
(1933)and
Law (3rd ed. 1951).
the latter's Justice and Admninistrative

59 Hayek,op. cit., n. 11,p. 55. See also op. cit., n. 26, pp. 227-8.
60 id., pp.213-4.
61

Associated Provincial Picture Houses Ltd. v WednesburyCorp. [1948] 1 K. B. 223.

Law(6thed. 1988)33-4 andch. 12.

62 H. W. R. Wade,Administrative
63
64

P. Craig, AdministrativeLaw (1983) 30-1.

Supra.

65 Hayek,op. cit., n. 4 (1979),p. 13.

66 id., pp. 36-7.
67 id., p. 32.
68

Notably, J. M. Buchanan and G. Tullock, The Calculusof Consent:Logical Foundationsof

a Constitutional Democracy (1962) and J. M. Buchanan, The Limits of Liberty: Between

AnarchyandLeviathan(1975).For a reviewof the literature,see D. C. Mueller,Public

Choice(1979),and for its applicationto Britishinstitutionssee R. C. O. Matthews(ed.),
Economy and Democracy (1985).

69 Hayek,op. cit., n. 4 (1979),ch. 17.He is, however,reluctantto proposethata countrywith

a 'firmlyestablishedconstitutionaltradition'shouldadopthis model:p. 107.
70 id.,p. 119.
71 Hayek,op. cit.,n. 4 (1976),p. 1.
whereindividualsareplacedin closecommunitywithothers,positiveduties
72 Exceptionally,
mayarise,the mostprominentexamplebeingfamilylaw:op. cit., n. 4 (1976),p. 36.
73 id., p. 39.
74 id., pp. 17-23.
75

cf. J. M. Finnis, Natural Law and Natural Rights (1980).

76
77
78
79
80

Hayek,op. cit., n. 4 (1976),p. 33.

id., p. 67.
id., p. 86.
Hayek,op. cit., n. 26, p. 36.
id., p. 36.

81

See, generally, R. O. Zerbe (ed.), Evolutionary Models in Economics and Law; (1982) 4
Research in Law and Economics.

82 G. L. Priest,'TheCommonLawProcessand the Selectionof EfficientRules'(1977)6 J.

Legal Studies 65.

83 In an interestingextensionto thistheory,P. H. Rubinhasarguedthatstatutelawwillhave

a similarproperty,sinceundercertainconditionsthosedisadvantagedby inefficientrules
may find it cheaperto lobby the legislaturethan to litigate:'CommonLaw and Statute
Law' (1982) 11 L. Legal Studies 205.

84 J. Raz, 'TheRuleof Lawand Its Virtues'(1977)93 LawQuarterlyRev. 185.

85 Gray,op. cit., n. 3, pp. 61-8.

408

86 More specificallymaximizingthe chancesof membersof society to achieveunknown

purposes:Hayek,op. cit., n. 12,pp. 173-5.It shouldbe notedthatthoughHayekdescribes
utilitarianismas a 'constructivistfallacy'(op. cit., n. 4 (1976), pp. 17-23), he is there
referringto theuseof hedonisticcalculusto evaluateparticularrules,ratherthansystemsas
a whole.
87 Usefullysummarized
in J. L. Coleman,Markets,MoralsandtheLaw(1988)ch. 4.
88 cf. S. Gordon,'ThePoliticalEconomyof F. A. Hayek'(1981) 14 CanadianJ. Economics
470.
89 Gray,op. cit., n. 3, p. 141.
90 Bay,op. cit., n. 43.
91 cf. MacCormick,op. cit., n. 3 (1986).
92 A reactionwhichhe anticipated:op. cit., n. 26, p. 306.
93 D. Miller,SocialJustice(1976)17-20.
94 G. CalabresiandP. Bobbitt,TragicChoices(1978).
95

D. Miller, 'Review of Law, Legislation and Liberty, vol. II: The Mirage of Social Justice'

(1977)4 Br.J. LawandSociety142;MacCormick,op. cit., n. 3 (1986)p. 13.

96 Occupiers'LiabilityAct 1957s. 2.
97 Thoughat one point he notes that freedomof contract,inviolabilityof property,and the
dutyto compensateanotherfordamagecausedby faultinvariablyfeaturein contemporary
systemsof privatelaw:op. cit., n. 4 (1976),p. 40.
98

P. Cane, Atiyah's Accident Compensationand the Law (4th ed. 1987) p. 234. For a striking

exampleof distributionalinfluenceson negligenceclaims,see the recentHouse of Lords

decisionSmithv EricBush[1989]2 All E.R. 514, wherein formulatingthe dutyowed by
surveyorsto house purchasersthe judges drawa clear distinctionbetweeninexpensive
housesandotherproperty.
99

H. Collins, The Law of Contract (1986) ch. 9.

100 I. Ehrlichand R. Posner,'An EconomicAnalysisof LegalRulemaking'(1974)3 J. Legal

Studies;A. I. Ogus,'QuantitativeRulesand JudicialDecisionMaking'in TheEconomic
Approachto Law,eds. P. Burrowsand C. Veljanovski(1981)ch. 9.

409