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(UFABC) Abstract: This paper studies the concept of spontaneous order, its development through many schools of economic thought and its importance for the society of our days. We begin to discuss this idea looking at the work of Friedrich Hayek, since he proposed the most well-known conceptualization of spontaneous order, which came out of the economic calculation debate of the 1930s; this led to his research about the role of the information on the economy, which is dispersed through the economy. The most mature version of his work can be found in “Law, Legislation and Liberty”, in which he also discusses practical applications. As a counterpoint to the Hayekian perspective, we include some criticisms of this concept, and accordingly we look at the contributions of Karl Polanyi on this issue. Polanyi diverged from Hayek about the role of the market in the society, as he proposed that societies protect themselves from the invasion of the market in the other social spheres, through the process he called “double movement”. For the last part, we conclude that, despite some relevant objections, it is fruitful to maintain the concept of spontaneous order, stressing that Polanyi´s double movement itself can be considered a manifestation of the spontaneous order. On the other hand, we emphasize that this spontaneous order at some moment needs to be institutionalized with some rules, so we consider that anarchism, in its libertarian or its leftist perspectives, are self-defeating proposals. Keywords: spontaneous order, double movement, Friedrich Hayek, Karl Polanyi, invisible hand JEL: B25 – B31
Samuel Bowles wrote that “one of the great challenges in the social sciences is to understand how aggregate outcomes are [almost] often different from anyone’s intent” (BOWLES, 2003, p. 57). One of the explanations used to give an answer to this question involves the concept of spontaneous order. This concept is fundamental in many discussions about social phenomena, being utilized to explain the working of the market, the emergence of diverse habits, et cetera. The main objective of this paper is to discuss the importance of this concept to understand the workings of different societies, by comparing the perspectives of Friedrich Hayek and Karl Polanyi. This paper is divided in five sections: the first is a historical introduction, covering the precursors of the concept in the Medieval Ages, the Scottish Enlightenment, and the Austrian School; in the second, we discuss Hayek’s vision and the role of the spontaneous order in his thought; in the third, we appraise criticism to the concept of spontaneous order, especially to the Hayekian one, formulated by different
authors; in the fourth, we discuss the importance of Karl Polanyi’s work for this debate; in the last one, the conclusions are given.
1. The notion of spontaneous order
Firstly, it must be given a brief definition of spontaneous order. The New Palgrave Dictionary of Economics defines ‘spontaneous order’ as “a recognizable pattern that is produced by a process that is neither directed by deliberate design nor created for a specific purpose, though it may produce useful results” (BOETTKE & DIRMEYER, 2008). Thus, processes that can be considered as originated by spontaneous order happen every day, and the market is the most known example of this kind of process, as it is the place where most people consider that the invisible hand makes its movement. The notion of spontaneous order can be traced to some philosophers in Antiquity. Boehm (1994) affirms that there are vestiges of similar ideas in Aristotle and, centuries later, in Aquinas. But the first drafts of a more defined theory were advanced in the XVI century Spain, thanks to the School of Salamanca, an important center of the philosophical thought during the XVI and XVII centuries. This school aligned itself with the flourishing commercial practices in the epoch; it contrasted with the Medieval Catholic thought, in which the businessman was seen as an inferior worker1; the School of Salamanca provided a way to legitimize the commercial practices in the Catholic context when they affirmed that commerce could organize itself, without the necessity of continuous State interventions, which were seen with a skepticism similar to the modern Austrians. During the XVII century, Barry (1982) affirms that there occurred two very important developments for the spontaneous order tradition: the first was the acknowledgement of the Common Law as the basis of the British legal system, thanks to the efforts of the jurist sir Matthew Hale; the Common Law based its jurisprudence on customs and practical rules. The second was the scientific revolution, whose progresses allowed a better comprehension of the physical world, among those progresses Newtonian physics being the most significant. An important trait of the Newtonian model is that it allowed a rational explanation of Nature, without any intervention of man, as Bianchi (1988) wrote:
In the Protestant countries, there already was a legitimization of their practices, when they elevated the social status of the businessman, as it was classically studied by Weber (1967).
475). defends in his work An Essay on Civil Society Basically.The great dissemination of the Newtonian physics made Nature to be seen as a system of plainly articulated forces. 76. but where the natural vices of each one contribute to the global prosperity of the hive. In 1705. accessible to the senses and capable of being measured. p. moral mechanism failed. 1988. The polemic rests in the fact that Mandeville tells us the story of a hive in which its winged inhabitants were selfish. it reaffirmed its power and would authorize the political intervention to reestablish the order (DUMONT. (BIANCHI. in which each part executes an irreplaceable function among the whole. our translation). the society will prosper. It is the machine-universe. but. although Machiavelli was the first to do that (BOWLES. for him. a Dutch physician residing in England. mensuration and manipulation […] Dr. p. 1977 p. 79)2. considered one of the precursors of Sociology and a member of the Scottish Enlightenment. But Mandeville alerted to the abuse of this selforganization. when everyone minds its own life. jealous. separable in elements of extreme complexity. knaves indeed. though. It must be observed. Quesnay’s Tableau Economique. at the same times. 61-81). 2 . there was an automatic mechanism that conducts to a reorganization of the public order so that only when this tacit. Mathemathics is kept as the great working tool in the practice of empirical sciences. the economic domain is represented as a harmonic set. Bernard de Mandeville. pp. although inspired on the movement of the blood flow. Thus the conclusion was that. from 1758. explains in an unequivocal way a mechanistic conception of the economy. 2003. shocked the public opinion with his poem named The Grumbling Hive. but later he wrote a piece explaining with more detail his thought (see DUMONT. capable of understanding. it did not had any pretense of being a scientific work. a thing that intelligent rulers can and must use to their own favor. that this is not a work to be easily interpreted because it was conceived as a satire to the moralist campaigns of the time. be by vices or virtues. 1987. Mandeville challenged the Aristotelian supposition that “good laws make good citizens”. in principle. Adam Ferguson. the clock-universe of impeccable working. The Medieval pretension of knowing essences and causes is abandoned at last while. In a diagram of three columns. with six starting and finishing points.
(CAMARGOS. Adam Smith is another great representative of this current. like public spirit and chivalry. 134. the consensus is that Adam Smith supported the generation of national welfare by decentralized means. Grampp (2000) counts nine different interpretations (among them. he would. is a duty of the State to make institutional adjustments and improvements necessary to lessen and correct them. we see that it only could be a good thing if the State could calibrate it.. But still. differently from Hobbes. . p. first. but at the same time he was not ignoring it entirely. to have the historic knowledge of his own nation to understand the behavior of the population. a theory that the invisible hand was just a joke from Adam Smith). not one4. after all. the invisible hand of the markets explains the good social result. but. to the point of being considered a research sub-program of the spontaneous orders. in response to its motivation and take in consideration that: 1) the good social result is essentially selfregulated by the forces of the market and social institutions. only proposes that this order is achieved by interchange and combination of interests. What Adam Smith meant by “invisible hand” still is subject of heated discussion. before enunciating his own (p. without the State intervention. presupposes that order is created. when a more accurate analysis of his work is done. independently of the will of statesmen or merchants.(FERGUSON. but. and 2) in eventual market failures. a body. from the barbarian stage to the commercial society. named The history of political establishments. 450). Camargos (2001) comments that: If the statesmen would opt by Smith’s approach. and soon self-interest alone could not hold any society together. for him. thus it will be treated superficially in this work. 1819) that the commercial society would emerge spontaneously from the adjustment of people to the circumstances. He seeks to describe how societies evolve. all this terms must be apprehended according to what was exposed by Smith. but with the help of the good and fair hand of the State. The “invisible hand”. His description is on the second section of the third book. i. visible or invisible. Ferguson was skeptical over the social result of this process. has two hands. 2001. Although there exist uncountable interpretations. e. and it fits very well in the modern definitions of spontaneous order. of course. In other others. he believed the commercial society could alienate man from ethical values. he does not emphasize the existence of a social contract. 3 4 We thank Pedro Limeira for pointing us this reference.our translation3). And.
375). in the late XIX century. see Rothbard (1973). Hayek and the Austrian School In his work Problems in Sociology and Economics. “only the individual is real. 6 As a classic example. showing little concern for the spontaneous results of the human interaction. Carl Menger said that “the behavior [of the social aggregates] can be explained only individualist terms… Language. 34)5. religion. contrary to the current thought. which preaches the elimination of the State for the efficient working of the market society6 One of the most influential members of the Austrian school. that renewed the interest for the perspective. In their vision. p. in other words. during the pinnacle of the utilitarianism. 1982. law. The utilitarianism. even the state itself […] we cannot properly speak of purposeful activity of the community as such directed at establishing them. the State should not continuously interfere in the process of decision of the individual. like the Esperanto. and thus. Herbert Spencer and their followers (Barry.During the entire XIX century. were Fréderic Bastiat. the actions of the individual cannot suffer interference. proposed an interpretation of the working of society in which the concept of spontaneous order was crucial to its functioning. it is the individual who can contribute the better for the social result. 5 . but. and. One favorable point to consider the language as emerging from a spontaneous order process is the practical failure of a built language to develop. 1993. nor coerce him. Carl Menger founded the Austrian School. the Austrians see the State with a lot of suspicion. 1982).” (apud BARRY. consequentially. For this reason. p. because the social result will be sub-optimal. considered that the objective of the government was to increase the welfare of the society through the elaboration of laws and institutions. as systematized by Jeremy Bentham and the two Mills. the aggregate result will be beneficial. if every individual acts on his own advantage. a group of thinkers even more radical seceded from the Austrian school to found the anarcho-capitalist school. Their focus is the individual. Nowadays. For them. society is the net result of the individual actions” (CLARK. the spontaneous order research program was ignored. Friedrich Hayek. Among the few who still believe in the spontaneous self-organization as the best answer to social problems. 2.
of whom he would become disciple. But the economist that advanced the most profound and well-known socialist argument was Oskar Lange. without classes. von Mises affirmed that “Where there is no free market. In his article On the 7 The argument of a moneyless economy did not please other socialists either. money would be dispensable and the economy could work without money. So. Since von Mises was a monetary theorist. in which he suggests a mechanism that coordinates economic activity that was not invented or planned. 1920). the agents can freely establish prices. and one of the beliefs of the Austrian school is that money emerged through a process of spontaneous order. through the Walrasian model. through a “national accounts” system (no relation with today’s term) that would serve every need of each person or firm. 171) his stub of an idea on spontaneous order appeared for the first time in a lecture titled “The Trend of Economic Thinking”. something that a socialist central planner could ever do. 1997). who had said that the economic planning of the wartimes could be taken forward in peaceful times. but he was attracted to the Austrian school by Ludwig von Mises. there is no pricing mechanism. in such a situation. p. Henry Dickinson believed that. either socialist or capitalist. he rejected this argument7. without a pricing mechanism. Initially. he considered himself as a Fabian socialist. make transactions and attain stability. it is necessary to consider his intellectual development. there is no economic calculation” (MISES. theoretically. His main motivation to study Economics was the contrast between the opulence of the Austrian elites and the abundant poverty after the First World War. This debate started when Ludwig von Mises published in 1920 an article in which he bluntly affirmed that it is impossible for a centrally-planned economy to work efficiently. the problem was to build the adequate model (apud CALDWELL. but it was the socialist calculation debate that helped Hayek to cement his position. to understand the origins of this perspective. The argument of the socialists was that the socialist government could emulate the qualities that they considered positives from the market using the power of the state to promote welfare in a society.Hayek was without doubt the greatest exponent of the concept of spontaneous order in the 20th century. Although. . Caldwell (1997) affirmed that Mises had in mind one of the proposes of Otto Neurath. But. according to Caldwell (2006. optimal quantities and prices could be calculated in any economy. On the contrary. only in a market that was not controlled by a power like the State. in other words.
developed during the presidency of Salvador Allende. and the entry and exit mechanism would be emulated by expansion or contraction of the activity. Lange devoted his efforts to the study of Statistics8 and Cybernetics. Lately he became one of the fathers of the Econometrics. 36)10. because he believed that advances in Computer Science would allow the planner to elaborate a computational equation system that. The problems lies within the expression “given data”. Thus. Economics and knowledge (1937) and The use of knowledge in society (1945) he argues that no central planner has sufficient information to decide what is better to society. he pointed out the difficulties to formulate the equation. later. firms would not exist to maximize profits. According to Hayek. but the market for capital goods would be controlled. it would be a useless effort to try to create a complete Walrasian model of the economy to build an artificial fair price system for the nation. Hayek started to develop a theory without the possibility of a general equilibrium in the economy. written in 1936. because “the concept of [general] equilibrium is of no significance” (HAYEK. p. 1937. following the criteria “to each one his needs”. in a socialist economy. It is interesting to note that. that is a concept relevant for the theoretical model. For a more recent defense of the Marxist point of view. Hayek purported to show how difficult it is to obtain the necessary information for such undertaking. In two articles. the fixation of prices would not be a peculiarity only of the capitalist system (idem). it would lack to the central planner not only the knowledge of the necessary information to make the calculation. With this. to summarize. 10 It must be considered that in the same article Hayek said that the only equilibrium that could work in an economy was the individual equilibrium from which the individual could make his consumption choice and that Lange did believe that the Walrasian model was an accurate representation of the society 8 . prices would be given by a “central planning board”. in Chile in the early 1970s9. he argued that if the prices could be understood as opportunity costs. see COTTRELL & COCKSHOTT (1993).economic theory of socialism. but to furnish goods to the society. and emphasized how incapable such system would be to adapt to unexpected changes. A free market for consumption goods would exist. Problems in the price fixation would be corrected by trial-and-error. In his reply to Lange and the socialists. see MEDINA (2006). to eliminate the source of inequality. to put in simple terms. but that cannot be applied to reality. would solve the “system of equations of an economy.” An attempt to put this idea to work was the Cybersyn project. “terms in which alternatives are provided”. but besides he would not know how to determine which of those possible calculations would be effectively useful. Thus. 9 For more information.
12 It must be said that The road to serfdom was a book of its time. as when he says that competition is a method to coordinate efforts without coercive intervention. 11 . The market is the result of an order that does not need a planner. as Medina.The most well-known of his endeavors against the socialist thought was the book The road to serfdom (1944). individual liberty is non-negotiable11. 158). this decision would lead to the loss of individual liberties and to the domination of the statist ideology. and that would lead to the withering of the individual capacity of decision. it would be capable of regulating itself. even in perfectly democratic conditions. in other words. Among other problems. 1967. p. in 1967 he wrote that it was simply required to “put the simultaneous equations on an electronic computer and we shall obtain the solution in less than a second” (LANGE. it would work better than a planned economy. However. For him. that he would develop some years after the end of the Second World War. Legislation and Liberty (1973) and represents his attempt to create guidelines for a For Hayek. 2006. 604) that “[L]abour. did not behave as just another factor of production. and concludes that “the term laissez-faire is a highly ambiguous and misleading description of the principles on which a liberal policy is based” (HAYEK. launching the basis for the concept of spontaneous order. but its presuppositions are implicit. in particular. This solution may look easy.12 The aftermath of the debate was that Lange proved that a planned socialist economy could work with the Walrasian framework. impede the formation of monopolies. but rather as a corpus of self-conscious individuals able to criticize and resist state operations”. and because of this. commenting the failure of Cybersyn. Different from what many Austrian economists argue. one of the main functions of the State to guarantee individual freedom when. in this book he did not touch the question of the knowledge. his fears however seem not to become true with the Welfare States in Europe. p. Hayek admitted that monopolies could form during the competitive process. But Hayek’s critique goes further. The Hayekian concept of spontaneous order is better developed in Law. reminds us (2006. p. According to him. 84). since Lange believe that it was an accurate model of the economy (BURCZAK. the market is a system in which the individuals would be more prepared to react to unpredicted shocks. because only a society with a competitive market could flourish. p. but Hayek’s critique is still valid in the age of the digital economy. effort cannot be easily included in a production function. Caldwell (2003) suggests that Hayek would not approve events like the illfated post-Soviet privatization in Russia. 32). something Marxian economists should know better. for example. The main thesis of the book is that if the society delegates the control of the means of production to the State. The people that Hayek quoted in his book proposed policies that he considered too interventionist.
and the permanence of an This term was created by Hayek as an umbrella term and is apparently used only by his followers. the conditions are given by the environment and by the development of norms. he explains that many social institutions are actually the result of “customs. 10) Thus. 14 13 . Remembering that Descartes was also a mathematic and it is credited by elaborating the Cartesian plan in the analytic geometry. In the age of polymaths. 15 Or. because of this. habits or practices which have been neither invented nor are observed with any such purpose in view” (p. although Hayek referred to the Darwinian one. it is impossible to have control of all relevant facts. transmitted from individual to individual. Bresser-Pereira (2009. as Caldwell (2002) would say. from generation to generation. but its intellectual ascendance can be traced back to the ancient Greek philosophy. derived from customs and traditions. would be excluded if they could not be rationally preserved. To Descartes “reason was defined as logical deduction from explicit premises. Lamarckian. In the society. taking to Politics his advances in the mathematical area would be a mere logical stop of his philosophy. Hayek adapted this concept to explain the characteristics of the culture and institutions of the different human societies. it would be impossible to predict the direction of the evolutionary line. there are two ways to evaluate the structure of human activities: the constructivist rationalism and the social evolutionism. Hayek rejects this idea by criticizing exactly this point. p. It must be noted that this series of books was the answer to a challenge that Keynes had proposed him. Keynes said him that he agreed with the overall philosophy of The road to serfdom. he goes to the Darwinian theory of evolution15 as a model to explain cultural evolution. and probably outdated. planning. 2012). rational action also came to mean only such action as was determined entirely by known and demonstrable truth” (HAYEK. He considers the first perspective as improper for social analyses. The rational and intentional action of the human being could create better institutions and replace the ancient ones that. 11). an institution elaborated with an explicit mathematical planning14 should be superior. For Hayek. p. and suggested that these criteria should be applied to all sciences”. Having understood that organisms evolved according to unique and complex environmental conditions and that. but he warned that Hayek underestimated the practicality of the middle term between economic planning and market (LOPES & ALMEIDA. Due to the fact that society is ruled by complex phenomena. because they also would be derived from an ancient.liberal society. The rationalist constructivism13 has its origin in Descartes. 496-497) reminds that he “observed that mathematics is the only discipline that is endowed with evidence and certitude. To build a better explanation of the development of the institutions.
“result of human action. Hayek concludes that there is a false dichotomy between the “artificial” and the “natural” that exists since the Greek philosophers16. Ever since Adam Smith (and before) worked out his invisible hand principle. called by us “spontaneous order” or even “organism”18. if soldiers acted independent of each other. in his book Principles of Political Economy. they would suffer great losses. 27. The norms that rule over society can or cannot be true in the Cartesian sense. 17 Actually. that meant. On the other hand. the concept of order can be divided in two types. the organizations are integrated in a bigger and more complex spontaneous order that gives form to the society and it is this complexity that condemns the rationalist constructivism to fail in producing a free society. Besides. The importance of the concept resides in the fact that. called by us “organization”. It will be exposed in this section the counterpoint to this perspective: the vision that institutions emerge fundamentally as a result of a process administered by the human beings themselves.institution is justified by the utility that generates to the group. respectively. But. Ferguson attributed this phrase to Cardinal Jean Gondi de Retz (1612-1679). this order is obtained by individual interaction of millions of independent individual. borrowing some Greek terms: taxis. to Hayek. 1819. With this. But this dichotomy is false in the sense that there exists a third category of phenomena that. but not the execution of any human design” (ibid. because it would impossible to determine in an exact way (p. there have existed some criticisms addressed to this concept. The organizations would be created by human intervention and planning and would exogenous to social interactions. as explained through the paper. Malthus. without restrains. wrote that it is impossible for a government to let things follow their own way. he also argued that existence of events like excess of supply or general gluts. An example would be the organization of an army. . without creating anarchy. p. 18 Since Hayek prefers to see the society as an organism. “by nature” and “by convention”. and kosmos. p. a noun which refers to the planned order. using Adam Ferguson’s words. original17. Opposition to the concept of “Spontaneous Order” The spontaneous order is an overarching concept and its meaning cannot be completely consensual. the spontaneous order is Hayek’s focus. FERGUSON. 16 The Greek terms were physis and thesis (or nomó). For Hayek. 222). 25). 3.
2011). Anyway. that the concept of spontaneous orders is nothing but a “fairy tale mechanism” (p. For this reason. In this vision. and changes in the parameters of that construct – new institutional arrangements – are also human creations” (p. Bromley (2006) considers institutions as being the architecture of the social existence and argues. at least ex post. but also can expand them. as the bourgeoisie dominates the government. at its rise. the individual freedom.. but occurs through the imposition of capitalist mechanisms. Differently from the usual argument. 67). This is an essential element of the so-called primitive accumulation.” (MARX. p. 40). 20 Bowles (2003) built a model that opens the hypothesis that property rights can have emerged spontaneously. This is so real that the author does not stop to analyze the concept and its implications. Marx (2011) affirms that. treating it as something unimportant to the economic science. it is necessary to create a specific legislation. 33). “The bourgeoisie. the managerial and the rationing ones (according to Commons’ classification). with active participation of the government.evidenced the limitations of the auto regulation of the market (apud HODGSON. “the lot of the labourer. in a way akin to Hayek. “We would say that the economy is always in the process of becoming” (p. to force them within the limits suitable for surplus-value making. and he also rejects the general equilibrium approach. to guarantee that this accord be respected.e. more the laws will turn the society to the capitalist image. instead of diminish. For him. in which. 41)19. the collective action is also important to the relations between market and society. to create institutions to deal with them20. “Institutions constitute that constructed order” (p. for the primitive accumulation process can be effective and expand the capitalist production. Bromley’s point is that government is always necessary. without government interference. creating a new field of human action. Bromley suggests that institutions do not only constrain human actions. they can increase. “Any market is a social construct. be his payment high or low. to lengthen the working-day and to keep the labourer himself in the normal degree of dependence. 1996. 19 . the economic institutions do not emerge from a spontaneous order process. i. But the collective action can only flourish in a legal regime. 41). in other words. with a tone of hostility. Due to the inherent complexity and the existence of other types of transactions beyond the bargain. must grow worse” (idem). the government must interfere. wants and uses the power of the state to ‘regulate’ wages. to guarantee rights and to create new economic institutions. in general. just an error in the best of the hypothesis.
but because freedom is a good. p. the second on the original institutionalism and the third on the American classical conservatism. but an architect basing his philosophy on Hayekian principles would wait a year to observe where the grass would be more stomped by the spontaneous trampling down on the grass and then he would pour down the concrete. For Polanyi. For him. in spite of the millennial existence of the markets. in which he delineates his thought. But he argues that. as Adam Smith suggested. not because it interferes in a supposed spontaneous order21. 4. so. 2009b). The first writes with basis on the socialist political economy. in rationalist constructivism terms. 2000. no society had its economy controlled by the market up to the Industrial Revolution. 45). in spite of being an excellent descriptive concepts. Bromley and Sandefur. “The reason centralized planning and government coercion is wrong is not because it disrupts spontaneous order. Sandefur (2009a) concludes that there is no way to actually distinguish a constructed order. Normally an architect would plan the sidewalks according to what he believes that is better. The exchange between the societies would have started mainly by means of war and piracy and they would have Curiously. there would have a social preoccupation with the situation of all its members. the ideological vision of these three authors. He gives us an example: a school must construct sidewalks in the grass fields to make easier the circulation of students. because this evaluations depends in the eye of the beholder. 21 . in spite of the search for profits. he can be considered a “rationalist constructivist” that interferes in the spontaneously created order.In a similar vein. something to which all people are justly entitled” (SANDEFUR. in the moment he does this. and a spontaneous order. The problem is that the architect has to pour down the concrete someday and. Karl Polanyi’s thought Karl Polanyi’s main work was The Great Transformation. interventions in the market are wrong because they can impede the consumer to exercise his right of choice. the great problem with the concept of spontaneous order is that. The economy was part of the society. Marx. because coercion can be present in supposedly spontaneous arrangements. in this perspective it would not be correct to say that there exists a natural propensity to barter. a market economy “is an economy directed by market prices and nothing but market prices” (POLANYI. are very different. For Sandefur. has no normative power and there is no way to condemn coercion.
whatever it might be. 35).” (POLANYI. “Fired by an emotional faith in spontaneity. because they separated the economy from the society. the phenomena inverted “instead of the economy being embedded in social relations. started in the XVI century. From the XVI century. which allowed it to endure the transition process started by the enclosures. promoted a big reorganization of the English society. ones that Polanyi defines as fictitious. the seeds of the process arose and they would grow in the Industrial Revolution. the modern commercial society did not emerge from an evolutionary process. This would lead to an increase in the supply of wool. because they were not made to be bought and sold. helping the families and imposing legislation (and even disrespecting it) to allow a level of control of the process. The argument of the spontaneity of the market is utilized to justify those who have the power in the market (CLARK. wiping out the common lands. Polanyi points that the enclosure process. with the development of a market society. a more pacific form to acquire goods in many cases. which would be used in the textile sector. The self-regulated market would emerge when the economic sphere separated from the society. because it was the incubatory of the commercial society and because it was the place where the Industrial Revolution happened. with the first wave of enclosures. Polanyi did not hesitate to say how much the liberal economic theory failed to understand the Industrial Revolution. but from an imposition from the wealthy classes. This also emphasizes the artificiality of the market economy. which could be attained through institutional changes drove by the government. In the end. as said in the last paragraph. since the peasants lost their land to the wool production. He argues that the English society did not destroy itself thanks to the intervention of the State. creating the Revolution at the cost of the dismantlement of the previous system. the self-regulated market mechanism would be an “offence to human freedom and dignity” (THOMASBERGER. social relations are embedded in the economic system” (p. 60). P. who needed the free . This was only possible thanks to the transformation of land. the common-sense attitude toward change was discarded in a favor of mystical readiness to accept the social consequences of economic improvement. and the social cost of this reorganization was too high. But. But those actions of the Crown harmed the capitalist. 2006). after. 1993) and to have an excuse to justify the excess of social inequalities. as the enclosures advanced. work and money into commodities.evolved to the market. He turns to the British history. To Polanyi.
Karl Polanyi on Ethics and Economics. subsequent restrictions on laissez-faire started in a spontaneous way. but later it hit the entire economy. but also am enormous increase in the administrative functions of the state” (POLANYI. and they rose to the power with Cromwell. together with the development of the national and international commerce happened during this time and can always happen. this is what allowed the ascension of fascism and Obviously. there were registers of social agitation in XIX century England. 98). It started as a simple attempt to eliminate some laws and regulations. to protect people and land against the disintegrating forces of the market system” (Gregory Baum. Slowly. but in any moment there was menace of a civil war. but for this author the capitalist society would weaken and fall due to his internal contradiction.trade. “The thirties and the forties saw not only an outburst of legislation repealing restrictive regulations. there was “a network of measures and policies was integrated into powerful institutions designed to check the action of the market relative to labor. “the self-organization of the society. History showed that the capitalist reaction was much more efficient to serve the social demands because. Polanyi concluded that the liberals had to turn against the liberalism. none of this evolved naturally. This process is named ‘double movement’. already damaged during the First World War and crushed during the Great Depression. with or without the State presence. There was a clear contradiction between economic progress and social disarticulation. the transition imposed a considerable cost over the English society by the dismantlement of old institutions and creation of new ones. Definitely a paradox. Laissez-faire was planned. which would not need to involve the society in a conflagration. like a civil war or other kind of social crisis22. p. “while laissez-faire economy was the product of deliberate State action. There was a firm participation of the State to attain some level of regulation to allow the laissez-faire to become an active principle of the economy. 2007). Polanyi argues that this process of double movement was what destroyed the society created in the XIX century. sometimes with the help of the government and sometimes in spite of it. planning was not” (p. society did not remain passive in face of the changes. again. the social cost of transition could attain supportable levels. to the market of fictitious goods. And through the double movement. at least in some countries. But. of the double movement. In the end. During the process. 22 . that allowed the capitalist society and a relatively open market exist. apud ÖZEL. This process. land and money” (p. liberalism became a creed. In the end. as Polanyi demonstrates in the beginning of the book. exactly. to impose restriction. either by the regulation or other instruments. The concept of double movement could have some influence from Marx. 145). 147).
Both of them embraced the German Expressivism that. studies the institutions as realizations of the social expressions25. It would be funny if it were not. they accepted the most harsh consequences of their theories without making concession. with the inclusion of all individuals in the society molded by human will and wishes. Both published their masterpieces in 1944. it is possible to preserve all the freedoms. and both started to study Economics to try to provide solutions to the poverty of the Viennese people. it was exactly to this what Polanyi referred to. the market ideology. even considering that their methodological approaches differ from each other. made possible to open ways for fascism and socialism. according to Özel (2007). because both of them recognized the reality of the society. as in Vienna. we arrive at the thrilling conclusion and again it could be asked to us: why can it be worthwhile to compare the ideas of two authors whose ideas are so different? Firstly. later. It is likely to conclude that the market threatened the society and so it. Polanyi. 258). when it supported the fascists and dictatorial governments. there was a strong contrast between the opulence of the rich elites and the poverty of the lower classes during the post-war. The liberalism tends to consider the society as a multiplicity. 23 . 1993). however. both served in the Gemeinsame Armee during the First World War. the self-regulated market would be a rationalist construct23 (p. we called the attention to the likeness of some of their biographical aspects. were ardent defenders of the democratic rule and studied Any resemblance with Hayek’s rationalist constructivism can be mere coincidence. as it refused to acknowledge the reality of the society24. preferred to resign autonomous and personal freedom for the protection of the State. Thus. as a whole. Both men identified themselves with the socialist answer during the beginning of the 1920s. including those defended by the liberals. in a collective way. in other words. the USA. According to Polanyi. Both Hayek and Polanyi were contemporaneous at the end of the Austro-Hungarian Empire (Hayek was Austrian and Polanyi was Hungarian). Conclusion And so. both consequences of the double movement process. 25 See Özel (2007) for more details. as we mentioned above. only the individual has real existence. but they took different paths from then on. Both had to flee from their homelands and adopted England and. argues that in a society in which the market participates of the social sphere. 24 When Thatcher said “there is no such thing as society”. (CLARK. and the social orders are result from the individual interactions. 5.socialism.
Hayek as a stubborn defender of the free market system. Some of these points as well as others were raised by Migone.institutional change. 6). and the economy could provide a better level of welfare if there was no interference in the economy. in which banks would compete for the creation of money. 26 . the view that every change. p 109). p. advanced the minimal intervention of the State in all the areas of society. avoiding to fall into what Midgley called the “escalator myth”. all within the demanding constrains of liberal democracy and market economies. a strong State was a minimal State. in The Denationalization of Money). is also a moral advance and that it leads mankind to “a single inexorable process of improvement” (MIDGLEY. to assure capital accumulations and the reproduction of the working class. criticized Hayek for “[addressing] an age obsessed by the fear of mass unemployment while turning an indifferent eye on this problem” (POLANYI. Burczak (2006.57) says that there are “hidden costs to Hayek’s position” that show how the rule of law is non-neutral and that inequality may emerge in a market society and can reach untenable levels if let unchecked because the market outcome may be systematically biased against the poor. p. who also compared these two author and explained why this comparison is relevant: The Hayekian and the Polanyian approaches represent different strands of a long-standing intellectual tradition of social interaction that concerned itself with the effects of modernization and economic rationalization on society […] In other words. Indeed. but it will not be addressed in this paper due to space constraints. For Hayek. not even to create money (Hayek proposed a complex system. 2006. Hayek also rejected the idea of social justice. (Migone. the anarcho-capitalism. 27 Michael Polanyi’s theory of tacit knowledge plays a role in conceptualizing the spontaneous order. although he was far from being a representative of the most radical incarnation of liberalism. who was Karl Polanyi’s liberal brother27. 1949. a conclusion that is a logical and undeniable consequence of his philosophy26. p. This also attests the disparities between the two. Lister (2011) affirmed that Hayek’s criticism of social justice is based on one definition of social justice and that is possible to build a Hayekian theory of social justice based on its similarities with the position of John Rawls. Michael Polanyi. the Polanyian and Hayekian traditions represent the two poles of the tension inherent in the modern capitalist market: the need to reconcile individual freedom with social stability. biological or technological. 267). 1985.
For instance. Hejeebu & McCloskey (1999) cite many scholars of ancient cultures who encountered little evidence of mainly administered prices. p. According to Muukonen. Polanyi certainly considered Marx as one of his mains intellectual influences. but not through human will. who believed that “cultural factors dominate economy and in ancient societies the economy was ‘embedded’ in to the rest of the society and serve other purposes than getting profits” (MUUKONEN. Polanyi was a primitivist. For example. based on later studies. 29 Polanyi’s main works after The Great Transformation deepened his analysis of the ancient society in the sense of developing the issue. His main argument was that society defends itself from the intrusion of the market in the spheres of social life by the process of double movement. since those discoveries would testify the existence of much more developed and self-regulated market than he supposed that existed. he became a very disappointed man. 28 . into primitive economies and into classical and preclassical antiquity. it would dig its own grave. Peter Drucker. p. observed that. However. Tandy (1997) emphasizes that Polanyi´s insights are still correct. 38)30. as it would be obviously expected.Karl Polanyi. 300) mentions that the only institution that can be affirmed there is a consensus to say it emerged through spontaneous order is the Language. this does not allow us to determinate until which point the institutions are created by spontaneous order or. on the other hand. and he insisted in the defense of this perspective despite some criticism to it. and gives a different interpretation. even if an uncontroversial definition of spontaneous order The relation of Polanyi with Marx´s legacy is far from linear. in spite of being proposed in the XVIII century. is the simplest and most explainable of the definitions: spontaneous order is the process in which certain institutions emerge through the human action. in other words. according to these new discoveries. but criticized different and important issues of his work and his attitudes (Polanyi-Levitt. 2006. which Polanyi used. although his most emphatic positions need some revisions. His vision of the market’s role in ancient societies was criticized by many authors. Let us go back again to Adam Ferguson’s definition which. was a non-Marxist socialist28. 30 This claim is controversial. 31 Boehm (1994. and according to him primitivism is largely rejected today (idem). North (1977) reconsiders the example of the Kulas. 2009). like cooperatives31? This work indeed concludes that there are institutions that emerged through a process of spontaneous order. it does not tell us which parts of societies should be let to self-regulate themselves and which parts must have active intervention of the government or any other coercion mechanism. the more elusive did the good non-market society become” (CARLSON. one of the greatest business scholars and friend of Polanyi. “the more he dug into prehistory. he defended that if the society let the market work alone. 1994). The main criticism is that archeological discoveries29 were incompatible with his arguments about the role of the market in ancient societies.
even if it is a just little bit. However. it can be proved using the Hayekian cultural evolution theory that the State evolved organically. as Sandefur (2009a) shows in his example. the market would be more efficient in taking advantage of the tacit. even in spite of a certain level of market failures. be it the customer buying a loaf of bread in the bakery or the government issuing a law.” The main consequence of this view is that it allows the individuals to act independently and to pursue their own goals. emancipating the individuals and giving them a free range of action. despite their many disagreements about how society ought to allocate its resources. as it could not hold all the tacit. and each interaction modifies these societies. perhaps the biggest criticism to Karl Polanyi’s argument rests in his confidence in the primitivism. 2012). in a way more efficient than any central planner” (LOPES&ALMEIDA.does not exist. The necessity of a State is indispensable32 As it was said above. Societies work with the interactions of the billions of individuals that inhabit our planet. Lister (2011) correctly reminds us that one thing that Hayek showed “is that markets and private property rights are important not just because they are efficient at producing wealth. little by little. because the resistance to the penetration of the Actually. but because they involve people with very different values and purposes managing to cooperate in generally beneficial ways. something thart leads us to the double movement described by Polanyi. dispersed and incomplete knowledge of its society. It can be argued that the double movement is a specific kind of spontaneous order. Mechanisms of planning and coercion are not exclusive to the government. comparing a government that determines that every employee has to have a healthcare plan with the manager of a firm who determines his employee should do the same. 32 . And here is where resides the criticism that Hayek directed to the socialists in the economic calculation debate: the central planning board could not encompass the economic complexity in order to calculate the optimal and unequal allocation of welfare. “In this sense. when working relatively well. The idea of spontaneous order calls our attention to the complexity that any society involves. and to preserve this individual autonomy. but this is beyond the scope of this paper. is really a place in which pacific and fair exchanges can be realized without the need of intervention. society needs to organize itself as to restrict the market to its own sphere. A conclusion is that the market. dispersed and incomplete knowledge to mobilize resources and create institutions to take advantage of a determined face of the knowledge. becoming something different from what it was some time before.
For this reason. society must be careful with the double movement process. We expect that this discussion can evolve to develop a better comprehension of the institutions we have today. Bibliography Note that Sandefur’s dilemma occurs once more. Sugden (1988) enumerates three reasons to justify the study of the concept of spontaneous order: a) through the price mechanism and the conventions existing everywhere. c) the concept helps to understand where and how beliefs emerge. it will occur authoritarianly. because if the double movement did not occur democratically. and viceversa. anarcho-capitalism. to explain the rise of fascism and the increased weight of socialism as alternatives to the perceived failures of capitalism in the 1930s. This criticism allows us to propose that all the research programs based on any form of anarchism (anarchosindicalism. 34 What is what actually happens in the real world. degenerative. Thus. when the spontaneous order is recognized and institutionalized (cemented). This is a problem that involves much of the fundamentals of the society and of the capitalism and utilizing Orwellian arguments of “right-is-good-left-is-bad”. in lakatosian terms. This is what Polanyi tried to show in The Great Transformation. since the State is the main agent capable to attend social demands. The acknowledgement that the double movement is spontaneous could help to solve some problems in both authors: the double movement would have a much more solid base than primitivism and there were a justification to give space to social questions in Hayek’s theory. because the demand for social justice would emerge spontaneously. it ceases to be spontaneous. whether for more freedom to the self-regulation of the markets or for a bigger restriction to their action. individuals are driven to a focal point and can demand protection. 33 . according to its own directives. does not allow the dialogue to progress. through revolution or through changes in the law33. anarchism must be rejected as a reasonable and viable political alternative34. among others) should be considered. anarcho-primitivism.market in social life starts in a decentralized way. A secondary conclusion is that. it cannot be simply dismissed. the market is a place in which this concept has fundamental importance. And through the propagation mechanisms studied in Bowles (2003). b) this concept allows us to understand better models of bounded rationality.
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