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Polanyi vs Hayek?

Philip Mirow ski

First d raft


Dr. Stockmann. Who the devil cares whether there is any

risk or not! What I am doing, I am doing in the name of
truth and for the sake of my conscience.
Hovstad. You are a man who deserves to be supported,
Aslaksen. Yes, there is no denying that the Doctor is a
True friend to the towna real friend to the community,
that he is.
Billing. Take my word for it, Aslaksen, Dr. Stockmann is a
friend of the people.
Aslaksen. I fancy the Householders Association will make
use of that expression before long.

Hendrik Ibsen, An Enemy of the People, Act III Scene 1

It seems that Ibsens 1882 play An Enemy of the People captured a certain crystalline
moment in the history of the conception of the intellectuals role in society. The ideal there
inscribed was one of the fearless spokesman of truth to power, a vessel of great internal fortitude
(and perhaps independent means) telling the community what they did not want to hear, in
pursuit of the greater good. This was the era of the birth of the public intellectual, around the
same time that Emile Zola scribbled JAccuse during the Dreyfus Affair. Of course, such an
heroic figure must inevitably encounter opponents. For Ibsen, as for Nietzsche, it was the
contemptible herd (A minority may be right; a majority is always wrong). For others, it would
instead be the craven intellectual who had sold out his allegiance to truth for forty pieces of
silver, the false intellectual providing rationalizations for the powerful interests behind the
curtains. In any event, subsequent generations of aspirants nurtured this image of a kind of a
calling, one which could serve as consolation through years of apprenticeship or slow book sales
or plangent obscurity.
This archetype also informed a certain genre of intellectual history, not to mention the
classical sociology of intellectuals. In these types of histories, it became rather common to drape
an intellectual biography around the clotheshorse of the public intellectual, revealing how the
person in question had remained true to their vocation, or in some cases, deviated from the script
in otherwise comprehensible ways. The narrative would predictably delight in their heroic
facility in charming the public, praise the policies which they had propounded, marvel how they

navigated the political shoals, and generally endorse the notion that their notoriety was a
consequence of their own personal morality and their dogged intentionality. The intellectual and
their ideas were treated as two aspects of the same coherent individual, the quiddity of the one
underwriting the solidity of the other. The standard trope of such histories would be to insist that
the person in question was an ever-constant Captain of his own Fate; if there were changes over
the course of the life, they would be treated as minor course corrections in a transparent
trajectory. 1 Rarely would the biographer entertain the notion that the protagonists role was
reconstructed by their environment and their epigones, or that their reception was largely
governed by forces beyond the ken (or the reach) of the public intellectual. That would violate
the archetype of heroic self-determination.
I venture to suggest that most of the work done on Karl Polanyi and Friedrich Hayek over
the last 70 years conforms to these 19th century tropes of heroic intellectual stalwarts. For two
thinkers who more or less repudiated methodological individualism, their intellectual interpreters
seemed to have misplaced the memo. One motive for this old-fashioned shadow play is that
Polanyi and Hayek are the poster boys scratch thatthe intellectual standard-bearers for two
opposed political movements, namely, a variant of a sociologically-inclined non-Marxian
socialism, in the first instance, and a well-entrenched Neoliberalism, in the second. Part of the
reason this panned out in this way was that both figures cut their teeth on the early Socialist
Calculation Controversy in Vienna in the 1920s, an experience that set them down their
respective paths in forging the later arguments which would make them famous. The massive
hagiographic literature on Hayek admits this was the case, although it barely notices any role of
Karl Polanyi in Vienna. The hagiographic literature on Polanyi at least admits that the perceived
enemy at the outset was early Austrian neoliberals like Mises and Hayek;2 Karl Polanyi in 1922
penned one of the earlier responses to Mises assertion that economic calculation would be
impossible under socialism. Indeed, some modern glosses of Neoliberalism from the Left, such
as Jamie Pecks Constructions of Neoliberal Reason (2010), sets up the biographical account in
his chapter 2 as a sort of parallel account of the adventures of Friedrich Hayek and Karl Polanyi,

Perhaps they might admit some flexibility, like Alaksen in Enemy: my political past is an open book. I have never
changed, except perhaps to become a little more moderate, you see. My heart is still with the people; but I dont
deny that my reason has a certain bias towards the authorities
(Polanyi-Levitt, 2013, pp.29-32; 47-50; Dale, 2010

even though there is no evidence that the trajectories of the two figures ever actually intersected.3
Whatever the camp, their hero is indeed feted as a Friend of the People, while their opponents,
naturally, are Enemies of the People.
An important convention in this little stage drama is that the audience must come to
discern who qualifies as a true public intellectual and who is merely a poseur, the craven
lickspittle of some shadowy offstage forces. It is convenient for the curtain-raiser that The Great
Transformation and The Road to Serfdom both appeared in 1944, thus setting up a conflict arc as
the determination as to whom will triumph, enjoying the spoils. This dramaturgy is rarely the
handiwork of the main protagonists on either side, although it must be admitted that Hayek
pointed the way with his denunciation of intellectuals with whom he disagreed as secondhand
dealers in ideas in his 1949 fit of pique: The main reason for this state of affairs is probably
that, for the exceptionally able man who accepts the present order of society, a multitude of other
avenues to influence and power are open, while to the disaffected and dissatisfied an intellectual
career is the path to both influence and power. 4 Modern neoliberal followers were quick to take
up the gauntlet: Polanyi's popularity thus represents the triumph of yearning and romanticism
over science in disciplines like sociology. "The Great Transformation" ultimately offers more
insight into the nature of the professoriat than it does to societies they study. 5
It was left to a rather more pugnacious member of the Neoliberal Thought Collective, a
Bronx-born Thomist, Murray Rothbard, to tar Karl Polanyi personally with unsavory motives:
I therefore must conclude that this is Polanyis sole basic complaint against the free society and
the free market: they do not permit him, or any of his friends, or anyone else, to use force to
coerce someone else into doing what Polanyi or anyone else wants; they do not permit force and
violence; they do not permit dictation; they do not permit theft; they do not permit exploitation. I
must conclude that the type of world that Polanyi would force us back into, is precisely the world
of coercion, dictation, and exploitation. And all this in the name of humanity? Truly, Polanyi,
like his fellow thinkers, is the humanitarian with the guillotine.
In fact, it is precisely such left-wing intellectuals as Polanyi who are always weeping about the
Coca-Colaization of the rest of the world and bemoaning the supposedly lost glories of folk
culture in the undeveloped countries. For as soon as they get the chance, peoples all over the
world, regardless of cultural tradition, abandon their supposedly beloved culture in order to adopt
Western ways, Western clothes, get a Western-type job or serve Western tourists, and earn
Western moneyand drink Coca-Cola6
This is suggested by his daughter (Polanyi-Levitt, 2013, p.24).
Hayek, The Intellectuals and Socialism (1949), in Hayek (1969, pp.188-189). Also note footnote 3, which paints
Jews as especially susceptible in this regard.
(Clark, 2008). See also McCloskey
(Rothbard, 2009, pp. 133

One version of the hermeneutics of suspicion begets another. The opposing side also
seeks to discredit Hayek from the Left as a mere shill for class power and privilege. A rather
unimaginative version of Polanyite attacker tends to quote from the Lewis Powell memo to the
Chamber of Commerce in 1971: There should not be the slightest hesitation to attack the
Naders, the Marcuses and others who openly seek the destruction of the system. Nor should there
be a reluctance to penalize politically those who oppose it.7 Other Polanyites endorse the
analyses of Marxists like David Harvey who openly indict Hayek and the neoliberals of
providing ideological cover for US strategic interests and corporate class warfare. 8 A more
scholarly cadre looks more carefully into the sources of organization and funding of the
neoliberals, and diagnoses a change in the types of intellectuals that have taken up the mantle of
Hayek: This is the context in which the huge investment by right-wing foundations in think
tanks and policy organizations has proven so important. In the place of the earlier strata of
organic intellectuals who had deep roots in actual business, these organizations have promoted
and recruited new cohorts of business intellectuals whose primary ideological commitments are
to market fundamentalism. 9 Curiously enough, some of Hayeks disaffected fellow-travellers in
MPS, such as Frank Knight, also felt this way: I have gone along with these groups largely for
the ride [I] am interested in the cause of freedom, but within judicious limits, and these
people seem to think of just giving everybody their own way, notably businessmen and property
owners. 10
So with respect to both protagonists there has been a symmetry in the cast of characters,
and a symmetry of ethos. Perhaps there is also one more symmetry, although it often gets far less
airplay. In the period after 1944, neither figure was wildly popular with the public. Granted, The
Road to Serfdom was a best-seller in America (though not Britain), and it is true that Hayek
enjoyed a triumphal book tour in 1945. Yet Hayek later bemoaned the fact that, In America, it
was discussed mostly by people who had not read it (1994, p.104); he admitted in retrospect
that his little popular book had tarnished his reputation amongst economists, and academics more

See .
(Dale, 2010, pp. 209-210; ) This extends even to some neoclassical economists: Perhaps [Hayek] would be
appalled at the thought of a Congress full of Tea Party Hayekians. But it was his book, after all. The fact that natural
allies such as Knight and moderates such as Viner thought that he had overreached suggests that the Bad Hayek
really was there in the text. (Solow, 2012)
(Block & Somers, 2014, p.215; see also Phillips-Fein, 2009).
Frank Knight to Theo Suranyi-Unger, 16 May 1965, Box 61, folder 12, Frank Knight Papers, Regenstein Library,
University of Chicago.

generally. The move to Chicago in 1950 was a kind of retreat, a licking of wounds after a very
public drubbing by Keynes; and the convening of the Mont Plerin Society in 1947 was another.
In both cases he had sought to create a special space where he could pursue his inclinations
among a small coterie of like-minded scholars, sheltered from larger intellectual currents; partly,
this was due to the fact that his political position in Road was rather amorphous and self-
contradictory; the politics of Neoliberalism still had to be worked out, and it was a task that
would take decades. The Great Transformation had made no comparable splash, and eventually
Karl Polanyi had to retreat to the discipline of anthropology because his account of the modern
world harbored some thorny contradictions that he suspected needed clarification. He did enjoy a
faculty position at Columbia from 1947-1957; but the space it seemed to open up for this
Austrian migr scholar seemed strangely confining, as did the culture of the world capital of
finance. Rather than work through the various problems of his nascent position, more and more
Polanyi seemed to try and make his points with arcane disquisitions on so-called primitive
economies, a problematic guaranteed to evade almost all serious scrutiny by those concerned
with postwar politics.
If I may briefly indulge in a personal sidelight, I was trained by some followers of
Polanyi as an undergraduate. They seemed to think that Polanyi had provided suitable support
for a revival of Institutional economics in America; and that the behavior of ancient or
marginalized peoples, either contemporary or historical, would reveal deep truths about the
nature of humanity and its encounters with the market. It will come as no surprise that their
hopes were badly misguided and sadly dashed; and indeed, even economic anthropology soon
repudiated their Polanyite version of an alternative social science of markets.11 So if we grant
both sides a desire to treat their protagonists symmetrically as successful public intellectuals, it
has to be admitted up front that Hayeks posse of supporters in the Mont Plerin Society[MPS]
easily won out over the remnants of Institutionalists in the subsequent decades. But that is not the
Aristotelian arc I want to explore in this talk.
I would instead like to explore the possibility that their respective ideas were in fact far
closer than this simply dramedy of pitiless conflict could suggest. They both posited dichotomies
that were vertiginously unstable; and in one particular case, one might venture to suggest it was
very nearly the same dichotomy. Only recently have one or two commentators begun to trip over

I discuss this, particularly as it played out in the career of Marshall Sahlins, in (Mirowski 1994).

that possibility.12 Polanyi and Hayek also both made bold predictions about the future that were
wildly off-base, which their respective followers still seem unable to take to heart. Instead, they
keep lobbing the same old canards at each other: market fundamentalism, or closet
totalitarians. If we can get past some of that, and possibly come to see these polar positions as
more alike than opposed, we might be able to imagine a discussion of markets which might
actually move beyond the repetitive and ancient antimonies.

2. A Budget of Polarities
The set of customary oppositions between Karl Polanyi and Friedrich Hayek are readily
sketched, and undoubtedly familiar to many in this audience. I will set out by naming them, but
then I will return to pick away at them, in a poor mans version of deconstruction, to call into
question the supposed hierarchy of oppositions that seem to undergird much political thinking.
The first thing that everyone knows about Polanyi is that he was a socialist, whereas
those on the Left tend to characterize Hayek as a market fundamentalist. Labels such as these
are always tricky; anyone who deals in them responsibly knows that they must qualify them
almost immediately. Kari Polanyi Levitt, someone understandably concerned to get the nuances
right, insists Karl was all his life a socialist, but of course, that meant something different to
someone who grew up in Hungary and Red Vienna. She thus continues, His socialism was
neither that of traditional European social democracy, nor that of centralized communist
planning. It was more akin to the third stream of European socialist traditionthe populist,
syndicalist, quasi-anarchist and corporativist one. Other important influences included Robert
Owen and English guild socialism; the democratic functional socialism of Otto Bauer; Max
Adlers insistence on the socialist mission of the working class to raise the cultural level of
society and last but not least, a rereading of Capital which brought to the fore Marxs
alienation critique of capitalism.13 Whatever one might say about that last component, it is
pretty clear that Polanyi was not a Marxist by any stretch of the imagination. Gareth Dale (2010,
p.14) goes so far to suggest he subscribed to neoclassical value theory; something for which I
believe there is very little evidence after he moved to the US. It may not be too far off to call him

See (Rodrigues, 2013; Samuels 2011 p. ; Migone, 2011)
(Polanyi Levitt, 2013, p.39).

a market socialist, a fairly common position on the Left in the 1940s and 1950s.14 Kari Polanyi
Levitt plumps instead for the label Christian Socialist, which has the virtue of stressing the moral
insistence of his vision. If anything, Polanyis vision coquetted with the transcendent: Socialism
is the tendency inherent in an industrial civilization to transcend the self-regulating market by
consciously subordinating it to a democratic system (1957, p.234).
Hayek, on the other hand, was relatively cagey about his own position; nevertheless, the
one common denominator of his intellectual trajectory which everyone knows was his opposition
to socialists. Numerous commentators before me have insisted that the Road to Serfdom is a
slippery book, and not only because it predicts the eventual downfall of civilization due to the
nefarious planning of socialists, but because it strives to tie them inexorably to the Nazis and
the Fascists. [S]ocialists everywhere were the first to recognize that the task they had set
themselves required the general acceptance of a common Weltanschauung, of a definite set of
values. It was in these effortsthat the socialists first created most of the instruments of
indoctrination of which Nazis and Fascists have made such effective use (1944, p.113). If he
had to name his comrades, he frequently had recourse to the term liberalsanother label
which lost all effective content over time, since it had less and less to do with actual classical
liberalism. He explicitly renounced the epithet conservative, and seemed to revel in praising
fusty outr figures like Adam Ferguson and Francesco Guicciardini; one suspects him of the
practice of pater le bourgeois when he said, Im becoming a Burkean Whig (1994, p.141).
But readers should take it to heart when he wrote in Road that, Probably nothing had done so
much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules
of thumb, above all the principle of laissez faire (1944, p.17). Polanyites like to accuse Hayek
of market fundamentalism; but that epithet is far too evocative of religious slurs to capture the
subtlety of Hayeks position; and worse, I think, it distracts from any serious understanding of
the Neoliberal movement to which Hayek gave impetus. Hayek ultimately does appeal to a kind
of faith, but it is grounded in a very bleak vision of human epistemology, not some
providential market eschatology.
Hayek, by comparison with Polanyi, wanted to transcend the weaknesses of the
supposedly self-defining and self-sufficient market by consciously subordinating it to the

His friend Jacob Marschak, who was instrumental in getting him to New York, was a prominent market socialist
of that era, and another Mitteleuropa figure who got his start in the Socialist Calculation Controversy.

political interventions of a group dedicated to the construction of what they considered a more
robust market society. Curiously, Polanyi sometimes asserted something similar about the
neoliberals, only with the codicil that they lusted after a Utopia that could never actually exist.
Where Polanyi was sadly mistaken was that he didnt realize organization and political
imagination could trump the need for any fixed final ideal; success was not to be measured
relative to some ultimate goal, but rather, through the provisional defeat of their opponents from
one local contest to the next. The appeal to some magical pie in the sky spontaneous order was
mainly effective in keeping the attention of the populace directed away from the pitiless war of
ideas and policies on the ground.

A] Embeddedness, Society
The second thing that everyone thinks they know about this duo was that Polanyi
believed that markets were embedded in society, whereas Hayek believed there was no such
thing as society. As Fred Block has maintained, Because Thatchers theres no such thing as
society is no longer merely an omen but an established ideological fact (though not, to be sure, a
social one), Polanyis plea for us to recognize the reality of society is just as compelling today.

But venture beyond the slogans, and things rapidly become murky. Insistence upon the
economy being embedded in something larger sounds nice and cozy, but amongst his
acolytes, that tenet is precisely where some of the worst intellectual problems begin to emerge.16
Polanyi is all over the place about whether or not the economy is or can be separated from
society; or in what sense markets were or ever could become disembedded, what constitutes
the bedframe and the bedding of society, whether or not this is just the old Tnnesian
formulation of Gemeinschaft and Gesellschaft in trendier bedclothing, and so forth. For example,
is the so-called double movement a faltering failed attempt to get out of bed? Is the distinction
between market and society really a wooly attempt to reduce the world into two classes: current
commodities, and the things that money cant buy now but soon will? That polarity seems to
work for Michael Sandel and his undergraduate audiences, but equally seems thin gruel for
social theorists. The notion that economy and society could become estranged from one another

See, for instance, (Krippner et al, 2004; Krippner & Alvarez, 2007; Block & Summers, 2014, pp.91-95; Dale, 2010,
chap.5; ).

was a Polanyian theme well before the Great Transformation. In an article written for the
Austrian weekly Der Volkswirt[The Economist], Polanyi sums up the situation at the beginning
of the 1930s: Between the economy and politics an abyss has opened. That is in meagre words
the diagnosis of the age. The economy and the political sphere have made themselves
independent and wage war against each other17
At minimum, one has to concur with Fred Block when he asks: Why didnt Karl Polanyi
return to clarify the concept of embeddedness after the Great Transformation? 18 Maybe this had
something to do with the reified, or at least severely undertheorized, concept of society itself?
Enter Hayek. The older Hayek apparently went on a rant about the very existence of
society, later reduced to an epigram by Mrs. Thatcher, although I must acknowledge that
neoliberals often warn against taking The Fatal Conceit too seriously in retrospect, because
allegedly the editor took excessive liberties with the text.19 In any event, Hayek wrote there:
The more the range of human cooperation extends the more social comes not to be the
key word in a statement of the facts but the core of an appeal to an ancient, and now obsolete,
ideal of general human behavior Thus the word society has become a convenient label
denoting almost any group of people, a group about whose structure or reason for coherence
nothing need be knowna makeshift phrase people resort to when they do not quite know
what they are talking about. (1988, pp.112-113)

The younger Hayek, circa 1946, was nowhere near so crotchety, however. In an exercise
to explain his own rather qualified notion of individualism to his audience, he suggested that in
order to contribute to our understanding of society, it would be a prerequisite to be starting
from men whose whole nature and existence is determined by society (1948, p.6). Although he
disdained any recourse to aggregates, he equally admitted people were malleable, continually
being formed and shaped by their experiences. After his foray into psychology, Hayek would
subsequently come to posit that knowledge itself might exist outside the consciousness of
individual agents, which could quality as the return of the social with a neoliberal vengeance.
Later members of the Neoliberal Thought Collective also seemed to be unable to dispense with
society as a useful concept, without much more in the way of clarification. One might not
particularly find it edifying, but the Chicago School subsequently took to asking with gusto

In (Polanyi, 2002, pp.138-9).
See (Block & Somers, 2014, p.95).
For instance, Alan Eberstein, The Fatal Deceit at:

whether culture might influence economic growth by the insertion of variables such as
religious affiliation, ethnic background, political beliefs and a raft of quasi-social variables in
baroque regression equations purportedly explaining economic growth, the prevalence of
entrepreneurs, preferences for redistribution by the state, and much else.20 Sociologists seem
nervously apologetic about endorsing an over-socialized man, but the neoliberals dont seem
all that bothered one way or another.
Thus I would tend to agree with the following Austrian assessment of their theoretical
Both Hayek and Polanyi share a similar vision in terms of their relationship between the
individual and the institutional structure. The both believe the agent and structure have an
interactive relation that is not deterministic
If Hayek was concerned with the danger posed by organizational reform that hindered the
market, Polanyi criticized the emergence of rules that eliminated organizational and
institutional buffers between the economic and the social spheres and that eradicated and
scattered the very bounds of human life, like family, safety and living within a familiar culture
and environment. (Migone, 2011, pp. 366, 357)

However, one has to temper this similarity to concede that subsequent members of the
hard right of the Neoliberal Thought Collective tended not to grant any validity to the
market/society distinction, in contrast to Hayek. Both the libertarian and intransigent Chicago
wings took the position that Polanyi was wrong because there was nothing that the market could
not organize:
The market, therefore, is preeminently social; and the rest of the social consists of other
voluntary, friendly, nonmarket relations, which also, however, are best conducted on the basis
of a spiritual exchange and mutual gain. (Isnt it better if A and B are both friendly to each
other, than if A is friendly to B but not vice versa?)
The market, then, far from being a disrupter of society, is society. What, then, would Polanyi
use to replace the market? The only relation aside from the voluntary is the coercive;
in short, Polanyi would replace the market by the social relation of force and violence, of
aggression and exploitation. (Rothbard, 2009, p.135)

B] Role of Nature
The third thing that everyone knows about Hayek and Polanyi is that Hayek believed that
markets were in some sense natural, whereas Polanyi insisted that they were in some other
sense unnatural. I have been struck upon re-reading GT just how clearly Polanyi makes the
case that economics became disengaged from philosophy and the other social sciences precisely

(Guiso et al, 2006).

by indulging in a heightened naturalism, artificially isolating the market into an ontological
sphere of its own and then patterning its explanation upon some contemporary natural science.
Here it is not that the market in itself is disembedded, but rather that dominant theories about the
market undergo artificial isolation predicated upon the model of the deterministic science. He
makes the case for population biology as the wellspring of inspiration, dating it from
Townsends 1786 Dissertation on the Poor Laws, and extending it on through Malthus and
thenceforth through to Darwin, positing that the laws of nature were identical to the laws of the
market. Polanyi wrote, The biological nature of man appeared as the given foundation of a
society that was not a political orderWhat induced orthodox economics to seek its foundations
in naturalism was the otherwise inexplicable misery of the great mass of producers [in the
Industrial Revolution] (1957, pp.115, 123).
While the interplay of theories of the human body and classical political economy is now
taken as a fairly commonplace trope,21 it seems to me that Polanyi had missed out on the natural
appropriation that had already hit the jackpot in terms of cultural credibility, namely, the origins
of neoclassical price theory in the energy physics of the mid-19th century. The marginalist
revolution, with its mathematics of constrained optimization and utility pattered upon potential
energy, did not need to scream Nature! quite so vehemently as the earlier Malthusian dogma;
all it had to do was seduce wave upon wave of minions who became convinced that they were
contributing to the first real science of human behavior. The Nature of energetics was a
relentless pursuit of deterministic equilibrium; yet, at the same time, in the 19th century it proudly
sported the ambition to be a Theory of Everything. Indeed, one offshoot of the Polanyian insight
was a research program exploring all the myriad ways a backhanded dependence upon Nature to
define the market could flourish, even amongst those too distracted to realize they were
mimicking physics.22
The problem, however, was that a conceptual naturalization of market theory in
economics was not at all the same thing as the purported absence of naturalization of markets in
practice. Polanyi notoriously insisted that land labor and money were fictitious commodities,
hinting that because they were unnatural, they were in some sense artificial or illegitimate.
After claiming that, Commodities are here empirically defined as objects produced for sale on

See (Mirowski, 1989; Gallagher, 1986;)
In that sense, much of my own work in the history of economics may have been suggested by my early exposure
to The Great Transformation.

the market (1957, p.72), he then proceeds to upend conventional wisdom by insisting labor and
land are not actual commodities because they were not produced for sale; and more curiously,
he insisted money was not produced at all, because it is just a token brought into existence by
the banking system or state finance. Apparently, the market can only legitimately deal in the
artifactual: things produced through human intentionally to be sold on the market. This weird
insistence upon intentionality at the heart of his definitions is Polanyis own strangulated appeal
to Nature: there, presumably, things only legitimately belong on the market because the relevant
artisans designated them so destined. If Nature is (wrongly) defined as that which exists outside
the realm of human intentionality and manipulation, then Polanyi begins to sound a bit like
Rousseau, or maybe Henry George. His later reversion to the study of ancient and primitive
economies reinforced this impression. Indeed, the so-called double movement in Polanyi was a
dynamic where too many social phenomena became rendered unnatural through some
encroaching market development, prompting a reaction which restored something approximating
a prior state of Nature. This potentially leads to all manner of paradoxical conundrums, such as
slavery rendering labor a real commodity, metallic currencies existing as the only real money,
children bred to provide for their parents in old age real or legitimate labor, . For someone
who was apparently insisting upon the central place of law and custom, Polanyis own
commodity definition had brutally abstracted from law and established practice, in favor of a
disguised appeal to the natural. Perhaps this is one reason he felt impelled to retreat into the
realms of ancient and primitive economies in later life.
Hayek also had an uneasy relationship to Nature, but curiously, it was not at all the same
reification as the one encountered in the history of neoclassical price theory. I have sought to
summarize this thesis elsewhere,23 so for the present purposes I will merely state the case in a
relatively telegraphed manner.
There were roughly three phases of Hayeks career, when one organizes it around his
attitudes towards Nature. The first, which even most contemporary Austrians ignore, saw Hayek
as a conventional Austrian economist of the 1920s and early 1930s: he was busy trying to
shoehorn the notion of capital as roundaboutness into some tendentious story of business
cycles. This program was a dead end by the mid-1930s, with most Viennese jumping ship for

(Mirowski, 2007). But see section 3 below.

something more plausible.24 If this was all Hayek had ever done, we would not be discussing him
today. In the second phase, politics came to the fore: in the 1930s and 1940s Hayek began his
famous reconceptualization of the market as information processor, but concurrently engaged in
what he called his Abuse of Reason project. Here, Hayek had recourse to a cobbled-together
philosophy of the ineffable to try and square his personal ambition to be a scientist, his hostility
to socialism, the upsetting tendency of many natural scientists to portray socialism as scientific,
and the failure of his previous Austrian macroeconomic theory. From thenceforth, Hayek
argued that the market was no longer a set of pipes channeling capital though roundabout
channels, but rather an information processor, organizing and conveying the appropriate
information to the relevant actors, by an instrumentality that could not be fully comprehended or
manipulated by any central planner. Just as he began to assert in this period that the human mind
could not come to an adequate understanding of its own operations, he also wanted to assert that
Reason could not on its own devices fully comprehend why markets are necessarily the
superior format of social organization. Thus Hayek in this period became a kind of scold,
denouncing most attempts to ground social thought in Nature as Scientism, which he equated
with a hubris born of believing one could plan and manipulate people the same way one planned
and manipulated Nature.
A lot of neoliberals also regard this second phase of Hayeks as a bit of an
embarrassment, since anyone who assumed an intransigent stance against Science was never
going to get anywhere in the American Century. Luckily for them, sometime after 1947 or so,
Hayek experienced a volte-face with regard to Nature, and decided he had to join the crowd in
America naturalizing the market. The evocation of Nature happened at a number of different
conceptual locations:
(a) Hayek would now acquiesce in the portrait of a single unified science, which he had
been resisting for at least a decade or more. There was no open renunciation of his prior
position; instead, he simply began to rely upon Karl Popper to inform people on what real
science looked like.
(b) Hayek began to endorse various aspects of the cybernetics project, which sought to
reduce thought to mechanism. This was the source of his embrace of the sciences of
complexity, which he derived from his reading of Warren Weaver (Mirowski, 2002, 175).
(c) With a lag, Hayek began to appeal to evolution to explain how an ineffable complex
order, which he simply equated with The Market, could have come about. The onus for
ineffability was thus shifted from an earlier reliance upon Germanic philosophy to a more up-

See (Klausinger, 2006).

to-date biologistic metaphor. The conviction that a non-Darwinian evolution could still
support a Naturalistic defense of the market was a precept more or less lifted from some of the
cyberneticists, who were rather thick on the ground in postwar Chicago. The idea that
evolution displays an unambiguous arrow of time in the direction of greater complexity was
another of their favored doctrines, rapidly taken up by Hayek and the neoliberals.

Hence, Hayek struggled mightily with the heritage of Naturalism over the course of his
career, but eventually capitulated to it, therefore ending up in a place nearer to Polanyi than
either would care to admit. For both, Nature came to represent something that existed outside the
ambit of human intention and manipulation. The major difference was the valence each attached
to it.
This flirtation with natural concepts proved salutary for the subsequent Neoliberal
Thought Collective, if only because it suggested that there was a way to accomplish the
impossible, to square the circle of preaching the virtues of a spontaneous order, all the while
promulgating a political doctrine that the strong state must be commandeered to bring about the
sorts of markets which constituted that order.

C] Markets as constructed vs. spontaneous

The fourth thing that people think they know about Hayek and Polanyi is that Hayek
believed markets worked fine left on their own, whereas Polanyi asserted that markets required
constant intervention to be made to seem to work. Again, the polarity is illusory, but one needs
some background to experience the Gestalt switch.
The place to start, as usual, was Vienna. It is de rigueur to note that a fierce critique of
classical liberalism was happening around the time of Red Vienna, with all manner of thinkers
seeking to unearth the internal contradictions of the laissez faire sensibility. One such critique
that was developed in that hothouse was a notion that laissez faire was an ignis fatuus, in the
sense that it posited a political state that could never actually exist. Karl Polanyis most
important intellectual contribution was to import those arguments into the English language
context, in the guise that suggested all attempts to impose a market free of all governmental
intervention was self-refuting:
Just as, contrary to expectation, the invention of labor-saving machinery had not diminished
but actually increased the uses of human labor, the introduction of free markets, far from
doing away with the need for control, regulation and intervention, enormously increased their

range. Administrators had to be constantly on the watch to ensure the free working of the
system. Thus even those who wished most ardently to free the state from all unnecessary
duties, and whose whole philosophy demanded the restriction of state activities could not but
entrust the self-same state with the new powers, organs and instruments required for the
establishment of laissez faire.25

Let us call this the unintended consequences argument: all attempts to demote the state
to night-watchman status end up augmenting the power and size of the state with respect to the
market. On the same page, Polanyi indicts liberals Spencer and Sumner, Mises and Lippman
for perceiving the incongruity, but blaming it all upon impatience, greed, and shortsightedness
of the politicians, rather than anything specific about the free market itself, which is upheld as
some sort of Platonic natural ideal. In other words, his opponents all realized that something
paradoxical had happened to their political comrades when they sought to institute their program
of free markets, but they took it as adventitious, all written off to accidents and weakness of will.
Less frequently do modern Polanyites acknowledge that Karl pressed the critique one step
further, pushing home the irony:
This paradox was topped by another. While laissez faire economy was the product of
deliberate state action, subsequent restrictions on laissez faire started in a spontaneous way.
Laissez-faire was planned; planning was not.26

Let us call this the **reverse English** argument: it upends the usual implications of the
opponents presuppositions. Reverting to his equation of the unintentional with the Natural,
Polanyi therefore combines two arguments: one, unintended consequences, that liberal political
attempts to actuate their vision of the market protected from the state just ends up making the
state stronger; and two, **reverse English**, that this also sets in motion a Natural rejection
mechanism of political mobilization in the larger populace to restrict the market expansion.
Notice how Polanyi is gratified that he can seemingly invert the commitments of his opponents,
equating the spontaneous with the Natural, but then knock them askew by claiming natural
provenance for his own political position of market skepticism and revanchist regulation.
However, parenthetically, I would like to point out that there is very little specific empirical
evidence cited to support these propositions, especially the second one.

(Polanyi, 1957, pp.140-141).
(Polanyi, 1957, p.141).

What is intriguing and unexpected is the extent to which Hayek accepts much of this
Viennese two-step. Of course, one must acknowledge that large swathes of Hayeks later
writings are taken up with a convoluted and rather boring series of attempts to insist there really
really is something called spontaneous order in history, and that it looks a lot like the market;
but those castles in the air have very little to do with the practical political precepts that have
been subsequently developed within the neoliberal thought collective. It is not some
spontaneous order that is conjured at Heritage Action or the Frasier Institute or the Institute of
Public Affairs. If Hayek really was so supremely confident in the inherent spontaneity of the
market, there would be no rational earthly motivation behind the elaborate political mobilization
theorized and then implemented by the neoliberals, especially from the 1970s onwards.27
Indeed, it is in taking this contradiction to heart that the neoliberals have distinguished
themselves from the earlier classical liberals. The confession already rears its head in Road to
Serfdom: In no system that could be rationally defended would the state do nothing. An
effective competitive system needs an intelligently designed and continuously adjusted legal
framework (1944, p.39). Hayeks opponents interpreted these lines as concessions to their belief
in the inevitability of the mixed economy, but they were sadly mistaken.28 In effect, first
Hayek, and then to a more elaborate extent the later neoliberals, affirmed the first half of
Polanyis Viennese two-stepalthough without crediting him personally in any manner. The
neoliberals recognized early on that the creation of new markets is a political process, requiring
the intervention of an organized power (Rodrigues, 2012, p.1008). History taught them that the
political will to impose good markets resulted in a strong state and elaborate regulation; then,
so be it. The neoliberals would accept the unintended consequences argument, but rather than
taking it as a refutation of their ambitions, they would absorb it as a blueprint for achieving their
ultimate ends, by intentional embrace.
The state would necessarily need to expand in economic and political power over time;
the only codicil to the trend would be that the neoliberals themselves would need to seize state
power, and rewrite the regulations so that they could create the kind of market society they
believed was progressive. The unintended consequences of expansion of state power would be

This is documented in (Mirowski, 2013). Hayek [is] much closer than Mises to Polanyis (1944) characterization
of the paradoxical relation between the state and markets in capitalism: the development of markets demands an
expanding state with the power to impose the rules that markets require (Rodrigues, 2013, p.1007).
One example of this can be found in (Rodrigues, 2012); another in (Caldwell, 2004).

overcome through redoubled intentionality, political organization, and conscious intervention.
Ideal markets had to be imposed; they wouldnt just happen. Hayek at certain junctures in his
career ranted against the evils of the constructivist mentality, but it is difficult to regard this
neoliberal embrace of the strong state as anything other than constructivist. This frame tale is
now widely accepted as the correct interpretation of 80 years of the history of the Neoliberal
Thought Collective.29
How about the second half of the Viennese two-step, the **reverse English** argument?
Hayek realized that the great democratic masses might not accept the imposition of the New
Neoliberal Order from above; especially in a democracy, neoliberal gains might be quickly
reversed at the ballot box. Hayek often complained that the socialists thought they knew what
was best for the masses, often absent their consent, but in this regard, effectively, the neoliberals
were no different.30 The one place where Hayek diverged from Polanyi was he could not ever
allow that the blowback from markets could ever be a natural response of the masses. At
various points, Hayek would blame the recalcitrance of the populace to market reforms on the
scurrilous class of intellectuals, or on the self-interest of the politicians, or even upon the
fundamental ignorance of the populace about the consequences of their preferences. But the
eventual solution favored by the bulk of the neoliberal thought collective was to render
democracy so hamstrung and ossified that it would never prove capable of neutralizing
neoliberal market structures erected by the strong state. Their strong state had to come cladded
with strong defenses against the will of the governed. I doubt whether a functioning market has
ever newly arisen under an unlimited democracy, and it seems likely that unlimited democracy
will destroy it where it has grown up. 31 This was the watchword of the later Hayek, of Bruno
Leoni, of James Buchanan and the Virginia public choice school, of the Washington consensus,
and the architects of the WTO and the European Union and the independence of central banks.
One can observe that, just as with Ibsen and Dr. Stockmann, sticking to your neoliberal
principles may make it seem to others like you have become an Enemy of the People.

3. Its the Things they share that have led us astray

(McPhail & Farrant, 2013; Peck, 2010; Mirowski, 2013; Rodrigues, 2013; 2012; Shearmur, 1996).
The similar stance of Hayek and the socialists is repeatedly stressed in (Shearmur, 1996, p.62, 103, 104).
(Hayek, 1979, p.77).

I have come here today bearing a perhaps unexpected and unwelcome message: it is the
presuppositions that Karl Polanyi and Friedrich Hayek shared that bracket them as intriguingly
paired in the intellectual history of Neoliberalism, perhaps as much or more so than the
oppositions and polarities for which they are more conventionally known. Given their Viennese
backgrounds and early involvements with the Austrian School of Economics, some consilience
of fundamentals might have been expected as a matter of course. The similarities might not have
persisted more than a curiosum, however, except for the fact that a comparable set of
unexamined presuppositions often inform modern political disputes, and consequently, often
tend to further strengthen the cultural dominance of Neoliberalism.
The deep presuppositions that we have identified have to do with the ways both figures
ground each discourse concerning markets in cultural themes that bear much of the emotional
charge of their respective political stances. The three most germane to our duo are their appeals
to Nature, their endorsement of a constructivist stance, and commitments to a certain ontology of
markets. One reason that Hayek and Polanyi remain fascinating, in a way no modern orthodox
economist has ever managed to approximate, is that they were engaged in disputation over the
most basic ontology of what a market is, and by implication, what constitute the most important
functions a market performs.
As already mentioned, for both Polanyi and Hayek, Nature, suitably interpreted, should
tell us what an ideal social organization should look like, and simultaneously, undergird the
appropriate political stance towards markets. This is a very ancient cultural preoccupation,
nowhere near novel in 1944; but Polanyi and Hayek were dissatisfied with the answers on offer
in their youth, and struggled to provide some alternatives. Polanyi denounced the naturalism of
the economists, only to replace it with a naturalism of his own: there were fictitious
commodities, and then there were true commodities, things produced consciously for the
market and intended for sale. The class of fictitious commodities tended to get conflated with
strong moral convictions about classes of phenomena which should never be subject to sale,
sometimes gathered together under the portmanteau of community or society, a natural
formation under stress, and this lent a crusading tone to Polanyis system. Such locutions
permitted the portrayal of the so-called double movement as itself Natural: the extension of
market organization in respect of genuine commodities was accompanied by its restriction with
respect to fictitious ones (1957, p.76). This concoction still makes contemporary sociologists

cringe, but inspires popular philosophers like Michael Sandel to impoverish analysis of markets
as though it were a mere dispute over values, thus demarcating the limits of markets by
identifying what money cant buy with what Nature never intended.32 This species of Nature
talk never goes out of fashion; but perhaps one of the reasons it is evergreen is that it never leads
Per contra, after Hayek got over his mid-career phase of denouncing scientism, he
realized that images of the market needed to be updated at least to the middle of the 20th century,
to match emergent new images of Nature. Older mechanical notions just wouldnt do. Just as
with Polanyi, Nature had to be something that stood outside the boundaries of human
intentionality; but in his case, it was a market as a giant information processor, one that evolved
beyond the understanding of the human participants, and knew things of which they themselves
were unaware.
In the second instance, and bucking the trend of contemporary economic commentary,
both Hayek and Polanyi conceded that markets were constructed, and not born in immaculate
conception, or else somehow always already present back to when the world began. That prior
assembly was required was a stance which could have been found well established in the
Germanic literature; and Polanyi himself was heavily indebted to writers such as Thurnwald and
Malinowski, as well as the Historical School. Both Polanyi and Hayek conceded the role of the
state in this process of fabrication; but what they made of it was where the friction between their
renditions began. Polanyi sought to chase the fabrication back to some strained notion of origins
and primitive economies, whereas Hayek realized that any hope of controlling the process of
construction meant footsoldiers occupying the state, and proceeded to convene Mont Plerin to
debate how this should be accomplished. It is significant that it was the neoliberals who took
constructivism as a personal injunction to mobilize politically, and not the Polanyites, however
much they may have considered themselves activists.
The third ontological principle shared by Polanyi and Hayek was that they would both
retain the firmly established practice of characterizing The Market as a relatively homogeneous
monolithic entity. Incongruously for both, they resorted to the language of evolution, but a
strange sort of transmogrification which left the basic outlines and functions of the Market
unchanged. For both, it was something that retained its identity and operation through vast

See, for instance, .

stretches of time and space. Polanyi may have been skeptical that The Economy referred to any
stable phenomenonhe preferred to think of multiple modes of provisioning physical
sustenancebut his skepticism was never extended to what he called the market system. For
Hayek, The Market was effectively monolithic because it was the embodiment of an order which
no human could possibly comprehend: the only alternative to submission to the impersonal and
seemingly irrational forces of the market is submission to an equally uncontrollable and therefore
arbitrary power of other men (1944, p.205). Yet this stark dichotomy was based on the notion
that market forces were not arbitrary: that is, they performed the same operations in the same
way no matter what the circumstances. Thus The Market for Hayek was monolithic not only
because it was impenetrable to human understanding; but also because it reputedly performed its
information conveyance towards all and sundry with no discrimination or favor. This purported
impartiality was the centerpiece of Hayeks claim that The Market would transcend politics, in
an environment of the rule of law.
At least up until now, I have never encountered an enthusiast for either Polanyi or Hayek
who has realized that these three fundamental tenets of both Neoliberalism and a non-Marxian
market skepticism are not only shared, but also intrinsically self-contradictory, ushering both
positions towards a political incoherence. Appeals to ground the economy in Nature have never
sat very comfortably with the constructivist stance; and the constructivist stance essentially
contradicts the possibility of an invariant uniform market system existing though time. Let us
once again consider each of the three shared presumptions in turn, in the interest of suggesting
that one or more of them should be repudiated, at least by a Left that might be willing to
entertain the chilling thought that both Polanyi and Hayek might be regarded in hindsight as
Enemies of the People.

[a] Appeals to Nature

As someone who has struggled with intellectual history all my life, I will be the first to
admit that cultural appeals to Nature may never be effectively banished from any winning theory
of politics and the economy. That prescription has all the paradoxical character that comes with
exhortations to not think of an elephant, when considering the social dynamics of zoos.
Nevertheless, it seems inescapable that both Polanyi and Hayek are attempting the impossible
when they assert the primacy of some version of Nature, on the one hand, and yet seriously

espouse the constructivist stance, at least when it comes to markets, on the other. The crux of the
problem is that the cultural connotations of Nature that they tend to access are precisely those
that posit some entity separate and distinct from human intentionality, existing in some sense
prior to the working out of human aspirations and machinations. Whenever they each posit
markets as artifacts on the one hand, but endow them with attributes associated with nature on
the other, they end up having to suspend most serious examination into how their cherished
markets actually work, much less a dynamic inquiry into how they evolve.
I want to acknowledge here that modern environmentalists have been struggling with the
possibility that there exists no such pristine Nature in the world, since human fingerprints are
everywhere, once one begins to look. Some have even argued that Nature is an impossibly
corrupt concept, whatever its empirical status, since it is both polymorphously perverse, whilst
defined in a negative fashion relative to society. 33 Nevertheless, I am not prepared to argue the
empirical status of Nature here, but rather to insist upon the self-defeating ways that Polanyi and
Hayeks Neoliberal thought collective have committed their followers to six impossible things
before breakfast.
Polanyi and his followers attempt to seek out the telltale signs of Nature in the very
ontology of commodities. He evidently believed that that there were fictitious commodities and
Natural commodities, as argued in the previous section. Polanyis theoretical futility comes with
his attempt to be a Naturalist about commodities, but a constructivist concerning markets. His
appeal to the Viennese two-step is supposed to reconcile these positions, but it seems to me that
merely stymies theoretical inquiry. One might infer that the marriage of naturalism and
constructivism would stipulate that different market procedures might tend to be applied to
differing classes of commodities, according to some criteria of legitimacy; but indeed, neither he
nor his followers ever explored that option in any serious way. One can only speculate that this
was a result of his commitment to the third unexamined precept of market monism, discussed
below. In any event, his staunch commitment to constructivism ended up being something that
never was accorded serious causal power in his system; and in being vestigial, rendered his key
insight relatively ineffectual.
While Hayek himself never arrived at a completely settled doctrine concerning Nature
and the market, I think it fair to say his modern epigones have arrived at a worldview that has

See (Cronon, 1995; Castree, 2014).

proven to be attractive to a broad phalanx of followers. One obvious consequence is that for
neoliberals, the ontology of commodity identities has been dispensed with: phenomenal diversity
of things has been dissolved into a great cloud of knowledge dispensed by the Market. In the
Neoliberal Thought Collective, The Market is treated as one special aspect of Nature no one is
prepared to renounce that particular cultural obsession but Nature itself is now portrayed as
ineffably complex, after notions developed in cybernetics and systems theory and expressed in
contemporary ecology: evolving, adaptive, non-linear, chaotic. Neoliberal Nature is the ne plus
ultra of unknowability.34 Nature itself never needs saving from mankind: as Hayek wrote: most
people are inclined to accept uncritically the fallacy of much of the conservationist movement.35
This ontology constitutes the core of the neoliberal critique of socialism: no human intelligence
could ever understand itself, much less the roiling appearance of chaos which constitutes its
natural environment, to a degree sufficient to plan the economy, because the reasons it musters
are always less complex than the phenomena it would wish to master. However, contrary to their
libertarian fellow travelers, Neoliberals also subscribe to the doctrine of a strong State, one
poised and willing to build and maintain the world of markets which in their view conform to
their vision of ever greater freedom. The Neoliberals concede that it may appear that the existing
Market system sometimes fails; but the correct answer to these hiccups is to instate more
Markets, since nothing else can ever begin to cope with the complexity of evolution. The
prescription for Market failures is always the construction of more markets; however, that
prescription can only successfully be imposed by a strong State. Moreover, since democratic
electorates are always clamoring for bread and circuses which threaten to thwart the telos of
improvement in their view, a strong State must vigilantly strive to keep them in line; ideally, a
State controlled by Neoliberal politicians. This sometimes appears painfully confusing to
outsiders, who cannot comprehend how neoliberals can so blithely demonize the state, and yet
simultaneously concede its necessity in their political program.

At this point I would beg to differ from some important recent work of John ONeill (2012). There, he argues,
When it comes to the natural world, Hayek abandons his acknowledgement of epistemic limits that he applies to
the social (2012, p.1082). There are two responses to this claim, each of which would require a separate paper unto
themselves. First, there is the question of the extent to which Hayek changes his tune concerning this issue over his
own career, and how it relates to his changing visions of science. But second, as described in (Mirowski, 2013), is
the fact that the subsequent neoliberal thought collective resolves this tension in Hayeks work, by inventing the
full-spectrum response described there.
(Hayek, 2011, p.495)

Jeremy Walker and Melinda Cooper have done us the indispensable service of outlining
how the neoliberal political project has taken substantial inspiration from modern scientific
disciplines such as ecology, in portraying social systems as complex adaptive systems. They
particularly highlight the notion of resilience promoted in the systems ecology literature,
starting with the papers of Crawford Holling (1973). As they put it:
Hayek defines the radical freedom of the market by its indifference to all external limits and
transcendental lawsThe laws of the market rest on no pre-existent foundation: their very
resilience serves as proof of concept, in the same way that the law of natural selection
constantly proves or disproves the viability of chance mutations in nature. (Walker & Cooper,
2011, p.150)

What they do not stress enough in my view, however, is that Hayek and his followers
have been able to endow The Market with such transcendental legitimacy precisely because they
subscribe to a seldom-examined ontological tenet: rules (which Hayek equates with society) do
evolve, as does Nature; but The Market is treated as both uniform and invariant. The Market can
dependably sanction success or failure of human endeavor because it is the Rock upon which the
complex chaotic maelstrom dashes; The Market is the zero point from which all motion and
change is measured. The Market itself is never chaotic, because its epistemic virtue exists outside
of time. The Market must be generic and unwavering, because if it were completely embedded in
historical time (like Society, like Nature), then it could in principle be just as clueless about the
true Telos of human striving as any deluded human being; in other words, it could get things
wrong. But this generic transcendence cannot be long maintained within the neoliberal political
Just as with the Polanyites, for the modern NTC the contradiction arises because the
Natural (and unknowable) Market can only serve as epistemic guarantee if it cannot be altered or
otherwise modified by human beings; but this utterly undermines their injunction to go forth and
construct markets where they are not sufficiently in conformity with neoliberal political
aspirations.36 The sharply maintained distinction between chaotic Nature and an invariant trans-
historical Market would undermine the very innovation that has made the NTC a successful
political movement: its injunction to act in the absence of comprehensive knowledge. As
Shearmur has observed, Hayek thus arrives at the strange situation of being a consequentialist

The same is true for the recent neoliberal prescription for global warming of encouraging entrepreneurs to
engage in geoengineering.

who thinks we cannot say much about consequences. 37 At base, the founding politics of
Neoliberalism are thus patently incoherent.
Indeed, presuppositions concerning Nature render politics entirely irrational for both the
followers of Polanyi and of Hayek.

[b] The constructivist stance and its politics

The next conundrum involves the internal contradiction between constructivism and the
way both Polanyi and Hayek conceive of politics and market monism.
One of the deepest insights one might legitimately glean from the virtual Polanyi-Hayek
dialogue staged herein is that markets need to be strategically wrought and subjected to persistent
intervention in order to function with passable success. The lesson which lies beyond this rather
broad generalization comes when one asks: who makes the markets, and of what materials does
the process of construction consist? The curious aspect of both the Polanyian and Hayekian
traditions is their acceptance of the principle that it is first and foremost the State that makes the
market go; yet simultaneously, both associate the State with the epitome of the non-Natural.
State interventions, they both concur, consist of setting up previously non-existent markets,
taking potentially disruptive market rivalries and taming them with special peaceful agoras, and
mitigation of harmful fallout of commodification.
As we have already observed, Polanyi conflates the Natural with the non-intentional, so
almost absent-mindedly, he relegates state action to the sphere of the artificial, which badly
hobbles his nominally socialist politics. State action is described as the creation of fictional
commodities, and the pushback comes from a society which does not react based on reason and
discrimination, but instead with an almost autonomic reflex revulsion. The source and structure
of the reaction is almost never spelled out in detail in Polanyi, perhaps because of his tendency to
paint the double motion as if it first provoked a generalized crisis, and only then was the
situation repaired willy-nilly and piecemeal by the unspecified survivors. This is apparently what
he means by suggesting Laissez-faire was planned; planning was not (1944, p.141). But what
is the character of the latter version of planning which ensues? There evidently exists a species
of constructivism which does not involve the imposition of laissez-faire, but Polanyi is rarely
explicit as to what it looks like, and how we might recognize it. Because of his Owenite and

(Shearmur, 1996, p.3)

syndicalist sympathies, one might speculate he had in mind various forms of redistribution; but
the social structures of any such counter-system would presumably be at least as involved and
complicated as the market systems they were intended to displace. Furthermore, in later
anthropological work, Polanyi treats redistribution as a mechanism separate and distinct from the
market system. It would seem a dereliction of politics to leave such an important book of
blueprints to the vagaries of Nature; but Polanyi seems not to take the problem seriously, at least
in part because he is impervious to the contradiction of his appeals to Nature being combined
with his constructivist proclivities.
At least in this respect, modern economic sociologists who pledge allegiance to
embeddedness have grown a bit more sophisticated than Polanyi, in that they realize that
markets have not been constructed solely by the state according to some fixed plan, and nor has
all the tinkering been prompted by revulsion against neoliberal politics; and furthermore, the
intentionality of both the State and the other market participants is rarely comprehensively
realized in the outcomes. Pushback to market schemes takes many forms, and in most cases
happens in mixed formats: If there be a Nature lurking in the mix, it resembles the contested
Nature of Science Studies, more than the independent Nature of the natural sciences. Because
they seek to argue that markets and their institutions are eminently political structures, they
describe the twists and turns of market innovation as trials of strength and tales of the
unexpected. Frequently, they write detailed histories of single markets in particular national
contexts, with only thin applications of theory to guide their narratives.
The topics that garner the bulk of attention are a number of diverse interventions made by
US regulators and courts from the 1960s onwards to improve or otherwise reconfigure specific
markets. Here we point to the work of a number of economic sociologists, such as Greta
Krippner, Sarah Quinn, Juan Pablo Pardo-Guerra, Carolyn Sissoko, Martha Poon, Yuval Millo,
and a host of others.38 Their shared perspective is that many dramatic alterations in market
formats and functions began as well-meaning reforms reacting to short-term political
controversies, often without any intention of producing the later upheavals in actual market
functions which ensued. To give a brief flavor of this work, we can point to the exemplary text of
Sarah Quinn on the birth of securitization of mortgage debt. She documents the efforts of Fannie
Mae to encourage a wider and deeper national mortgage market up until 1968, at which juncture

See (Krippner, 2011; Quinn, 2010; Pardo-Guerra & MacKenzie, 2014; Pardo-Guerra, 2010; Sissoko, 2010)

Lyndon Johnson sought to hide his ballooning budget deficits linked to the Vietnam War by
privatizing Fannie Mae and placing its activities off-book, and laying the foundation for
standardized Mortgage Backed Securities, authorizing Fannie to issue securitized bonds, based
upon pools of sanctioned mortgages, sweetened with a number of partially hidden government
guarantees. In 1970 Freddie Mac was founded on this same model. With further amendments
which cannot be covered here, the government effectively removed much housing subsidy off its
books in the short term, and simultaneously encouraged further financial innovation on the part
of private issuers of debt, patterned upon previous governmental innovation. Loans supposedly
became separated from the local conditions under which they were granted, and were repackaged
in ever more abstract baroque financial instruments with kaleidoscopic attributes, blessed by
agencies (like the ratings firms) who possessed no discernible powers of insight. New
instruments begat new markets, which eventually came to grief in the global financial crisis of
2007-? Similar stories have been told concerning the post-1970 fragmentation and
demutalization of share markets, the rise of credit scoring, special investment vehicles (SIVs),
and much else besides.
The curious aspect of constructivism shared by the Hayekian Neoliberals with the
Polanyites is that, whenever they are self-consciously facing up to the fact markets must be
constructed, they spend almost all their efforts speculating on the shapes, legal structures and
activities of their ideal State within a hermetically sealed vacuum, and almost nothing devoted to
actual markets. One reads The Constitution of Liberty and Law, Legislation and Liberty in vain
for blueprints as to what specifics of market structure might be deemed well appointed in
designated situations. In the former, for instance, the chapter on Housing is mostly about the
errors of town planning; the next chapter on agriculture and natural resources (23) is mostly
about price controls rather than how such primary products are actually produced and sold under
special circumstances of harvest cycles, with issues of spoilage and depletion, and the
widespread maintenance of an agricultural sector. What seems to be missing is any
acknowledgement that, whenever it comes to tinkering with markets, private capital is not so
much pitted in merciless conflict with the state, but instead generally subsisting in a persistent
symbiotic relationship. Indeed, this is the lesson slowly learnt by the subsequent Neoliberal
Thought Collective, in that the aim of the consecutive shells of think tanks, foundations, quasi-
governmental organizations, central banks, international NGOs and Astroturf organizations, in

conjunction with projects like the Federalist Society dedicated to taking over the judiciary, is
ceaseless vigilance and permanent revolution in the structure of markets. From something so
small as defining a standard of electrical resistance or the definition of molecular biological
equivalence,39 to something as large as putting a corporation on the same footing with a human
person for various legal purposes, or stipulating that a double auction market is more
transparent than administrative allocation of communication spectra for legal purposes, the
shifting interface of rules and commodities comprises the vast array of market interventions that
mostly travel just under the radar. The whole notion that the State is somehow currently pitted in
implacable opposition to capital on all fronts is quite literally absurd, and can only be maintained
by distracting attention from the endless constructivist projects of re-engineering markets.
This constructivist mandate is precisely the reason why the dependence on the central
trope of socialism for both the respective Polanyite and Hayakian political projects, either as
badge of honor or root of all evil, is incoherent. If socialism is thought to be the integration of
the state into the economic process for the ultimate purpose of alteration of the operation of
markets, then both sides of the constructivist crusade have been staunch socialist interventionists
for as long as they have existed. The recent crisis has only brought this aspect of Socialism for
the Rich to public consciousness, although it has perdured throughout the postwar period. This
shared presupposition on the Left and the Right of constructivism has killed off socialism as a
distinct political identity; there is nothing here to rally around.

C] The Ontology of Markets

The final contradiction shared by both camps is the way their constructivist proclivities
are tripped up by their commitment to The Market as a monolithic self-consistent phenomenon.
Here I want to start with the paradox noted by the self-professed Polanyite Greta
the basic intuition that markets are socially embedded has led economic sociologists
to take the market itself for granted markets are little more than placeholders in theories of
economic governance, a foil against which to elaborate institutional forms conceptualized as
alternatives to markets.40

See, for instance, (Busch, 2011).
(Krippner et al, 2004, p.110; Krippner, 2001, p.787). Her earlier verdict was even more damning: economic
sociology has done scarcely better than economics in elaborating the concept of the market as a theoretical object in
its own right (Krippner, 2001, p776).

As counterpoint, I now will quote a few rather prominent neoliberals observing much the
same thing when it comes to orthodox neoclassical microeconomics:
It is a peculiar fact that the literature on economicscontains so little discussion of the
central institution that underlies neoclassical economicsthe market. (Douglass North, 1977,
Although economists claim to study the market, in modern economic theory the market
itself has even a more shadowy role than the firm (Ronald Coase, 1988, p.7).

I wonder if anyone in my audience finds these admissions more than a little

extraordinary. What both sides of the polarity scrutinized in this paper seem to admit, at least in a
few out of the way instances, is that the entire massive scrum of scholars of Polanyite and
Hayekian persuasions have inadvertently managed to neglect their central theoretical icon, viz.,
The Market. It would be as if one finally breached their respective theoretical citadels, only to
find them both empty at their cores. That is an observation weirdly absent from most histories of
economic thought. Throughout the annals of economics and sociology, most of the time, the
concept of the market was treated as nothing more than a general synonym for the phenomenon
of exchange itself, and hence rendered effectively redundant (Rosenbaum, 2000). Even in the
few instances when some key thinkers in the tradition felt they should discuss the actual
sequence of bids and asks in their models of trade say, for instance, Walras with his
ttonnement and his bons, or Edgeworth with his recontracting process what jumps out at the
historian is the extent to which the sequence of activities posited therein bore little or no
relationship to the operation of any actual contemporary market.41 Mid-20th century attempts to
develop accounts of price dynamics were, if anything, even further removed from the
increasingly sophisticated diversity of market formats and structures and the actual sequence of
what markets accomplish. Later Polanyite research into so-called primitive economies had little
bearing on the operation of modern markets, almost by design.
If we take these observations at face value, then the question cannot be avoided: why
have successive generations of social theorists, so concerned either to praise or denounce the
market, have such aversion bordering upon oblivion to how market structures work in diverse

A symptom of the general oblivion to market structures is the urban myth about Leon Walras being inspired by
the Paris Bourse. A good historian such as Walker (2001) makes short work of that fairy tale. The only claim that a
real-world market anywhere near approximated the actual sequence of events in Walras ttonnement of which I am
aware is a description of the operation of the post-war London bullion price-fixing ring. See Jarecki (1976).

and disparate manners? The answers might be divided up into some general sources of myopia,
and those presuppositions characteristic of the Neoliberals and the Polanyites.
It has been the mandate of almost all social theory of the last two centuries to portray the
Market as Natural, as previously observed; and what that has meant is that it needs be deemed
law-governed, in much the same way that the natural world is thought to conform to natural
laws. Of course, the version of Nature has changed substantially over time, along with the natural
sciences, but the common denominator is that this law should nonetheless operate uniformly, in
the same manner, throughout all time and in all cultural circumstances. Market theory should
apply indifferently to medieval fairs, Dutch tulip auctions in the 17th century, itinerant peddlars,
fixed urban shops, and Internet trading. Hence, the monolithic uniformity of market operation
has been one of the deepest foundational axioms of Western social science. The few thought
communities that have ventured to challenge the axiom, such as elements of the German
Historicists, have been rudely erased from the history of economic thought. The imposition of
mathematical models may also have been important in suppression of diversity, although we
shall not consider that further here.
Consequently, to maintain the monolithic uniformity, it has been necessary to bypass
consideration of heterogeneous market structures and heterogeneous market outcomes. This may
strike some economists as hyperbolic, until they are brought to the realization that the orthodoxy
has replaced variegated market characterizations with either (a) commodity characterizations, or
else (b) varying degrees of something called competition. In the history of neoclassical
microeconomics, any differences in market structures where the agents congregated would be
treated as (b) second-order complications (viz., perfect competition vs. monopoly) or else (a)
collapsible to commodity definitions (the labor market; the fish market), and therefore The
Market as a unified process was thus preserved as a relatively homogeneous and
undifferentiated entity. This becomes clear when one observes the same model is extended to
cover all the variegated cases. All diversity was effectively foisted off onto either agent identities
or commodity characteristics.
Now we turn finally to our protagonists. Austrians often correctly point out that Hayek
did not accept conventional neoclassical microtheory, but there is substantial evidence that even
late in life, he nonetheless endorsed the principle of a monolithic market which equilibrated

something he called supply and demand in a uniform manner across time and space. 42 Indeed,
precisely because we mere human beings could never comprehend just how the Market worked
its magic, it would be inevitable that our acknowledgement of markets as super information
processors would reify them all as one big unified mechanism, whatever might be the truth
beyond the ken of humanity. And that is exactly what Hayek proceeded to do in his later career.
Whenever modern Austrians feel they must discuss price theory, they end up doing much the
same thing.43
As for Polanyi, he enjoys a reputation for preaching the diversity of exchange formats,
but when it comes to his indictment of the market system, this reputation is largely undeserved.
I defer here to some Polanyites, who have themselves worried over this weakness in his
treatment of markets:
[Polanyi] fails to argue, rather than assert, why the pattern of locational and appropriational
movements is the feature essential to explaining the character of the economy, and his
explanation of how economies are embedded in societies consequently lacks precision. His
mechanisms of integration describe patterns of goods exchange in empirical societies but
function ultimately as formal categories, with wholly dissimilar institutions assembled
together under the same heading Other critics again, of a sympathetic varietyhave
suggested his static conception of capitalism fails to identify the way in which the
development of capitalism modifies the forms taken by markets and commodities. 44

Another summarizes this lacuna by pointing out Polanyi accepts too much of the
systemic logic attributed to the capitalist economy by neoclassical economic theory. 45 When
Polanyi denounces the baleful influences of the market system, one should understand this as a
rejection of the image projected of markets by neoclassical theory, while unreflectively still
subscribing to that theory.
See, for instance, (Hayek, 1975): These discrepancies of demand and supply in different industries, discrepancies
between the distribution of demand and the allocation of the factors of production, are in the last analysis due to
some distortion in the price system that has directed resources to false uses. It can be corrected only by making sure,
first, that prices achieve what, somewhat misleadingly, we call an equilibrium structure, and second, that labor is
reallocated according to these new prices. The primary cause of the appearance of extensive unemployment,
however, is a deviation of the actual structure of prices and wages from its equilibrium structure. Remember, please:
that is the crucial concept. The point I want to make is that this equilibrium structure of prices is something which
we cannot know beforehand because the only way to discover it is to give the market free play; by definition,
therefore, the divergence of actual prices from the equilibrium structure is something that can never be statistically
See the post at the blog Social Democracy for the 21st century THURSDAY, JULY 10, 2014
Vulgar Austrians do not Understand Austrian Price Theory (Updated)
(Dale, 2010, p.246-247).
(Lacher 1999, p.326).

It is my last contention that, whatever the motives behind Polanyis and Hayeks
respective embrace of the ontology of a uniform market, it serves to render both their political
positions incoherent. The major contradiction resides with their commitment to constructivism,
as described above. If states and market participants are continuously intervening to recast
markets to operate in alternative modalities, then how can this be reconciled with the proposition
that the outcomes always end up producing the same old results in the same old registers?
Furthermore, why do the Neoliberals bother to build up their elaborate reserve capacity to take
over the state and reconfigure markets, if the net result is to make the Market operate in the same
grooves that it careened down beforehand? One might cavil that all that intervention merely
serves to shore up market failures that diverge from the monolithic equilibrium, restoring the
system to full self-consistency, but while that argument might carry the day in orthodox
economic theory, it is a poor simulacrum of the basic message of both Hayek and Polanyi.
Neoliberals in particular mobilize to re-engineer markets to favor roundabout schemes to
privatize and otherwise appropriate surpluses previously captured by public interest groups, or
else to reconfigure outcomes to conform to the objectives of large corporate sponsors.46 These
goals can only be realized if markets are intrinsically diverse entities, comprised of a wide range
of components that, when fitted together, produce very different price and quantity outcomes.
But concentration on price and quantity is insufficient to capture the myriad of ways that market
formats differ. Although this is not the place to go into technical detail, it is enough here to
suggest that Hayek and the neoliberals do not go far enough when portraying markets as
information processors. Perhaps one way to drive the lesson home is to imagine that markets are
akin to computers of differing computational capacities, biased to perform certain functions well,
and others less perspicuously.
Intuitively, we might characterize a particular market as a specialized piece of software,
which both calculates and acts upon inputs, comprised of an integrated set of algorithms that
perform the following functions:
o Data dissemination and communications, plus rules of exclusion
o Order routing through time and space
o Order queuing and execution

This generalization is fleshed out in a series of forthcoming lectures by Mirowski and Nik-Khah from INET on the
history of the economics of information.

o Price discovery and assignment
o Custody and delivery arrangement
o Clearing and settlement, including property rights assignment
o Record-keeping

Once one gathers together all the various functions in one place for scrutiny (and this list
is by no means exhaustive), it may begin to dawn upon the followers of Hayek or Polanyi the
extent to which the abstract portrait of exchange (derived from physics) as the simple motion of a
point through commodity space served to obscure rather than illuminate the broad gamut of
market functions. Further, it hindered consideration of their dynamics of change. As one legal
authority has written,
Approaches which ignore the inner structure of exchanges, such as those viewing an
exchange solely as a trading system (as in the microstructure finance economics), a reduced
form production function (as in neoclassical economics), an impersonal investment guided by
managers (as in organization theory), are not rich enough in detail or subtlety to be able to
understand the nature and conduct of exchanges. (Lee, 1998, p.8)

But more germane to the present context, it could serve to transform the conception of
politics for future generations. As we have seen, neither Hayek nor Polanyi made a plausible
case for a world of political action where one repeatedly and implacably pitted the State versus
the Market. However much that served as the outer shorthand for their followers, the facts on
the ground belied any such simplistic opposition. Their portmanteau combinations of Nature,
Constructivism and the Monolithic Market co-existed in such a mutual state of incoherence that
they tended to undermine any well-defined roster of socialists pitted against liberals.
The alternative suggested here would be to acknowledge the existence of numerous
configurations of markets-plus-states, co-existing in an ecology of such institutions at any
historical juncture. Political struggle could then be cast as programs to alter the distributions of
those market forms at some specific historical juncture, and less frequently, to innovate entirely
new market formats that combine unprecedented sets of component functions in new and
unexpected ways. From Speenhamland to automated high speed trading, from the banning of
slavery to the personification of the corporate form, disruptions of the social fabric might be
understood as ***


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