Critical Review — F.A. Hayek (1967): “The Principles of a Liberal Social Order”, in idem., The Essence of Hayek, ed. by C. Nisshiyama and K.R. Leube, Stanford 1984, 363–381

The reimagining of classical liberalism through the paradigm of the individual and laissez-faire as the cornerstones has set the notion of modern mainstream economics. Since the 1930s, the then considered heterodox Austrian School of Thought was contending with the dominant capitalist phase of the Keynesian and attempting to theoretically dilute the capacity of the socially oriented concept of a state. Friedrich August von Hayek was a prominent representative of the Austrian school of thought along with Carl Menger, Eugen Böhm von Bawerk, Friedrich von Wieser. Hayek along with the economist Milton Freedman to some extent could be considered as the “founding fathers” of the modern neoliberal economics that became mainstream after the 1970s (e.g., Hayek served as an adviser to Thatcher’s government in the UK). Henceforth, the ideological background of Hayek can be easily depicted in his works as he pursues the theoretical argumentation serving the enhancement of the free market doctrine.

Evidently, it goes without the saying that in his 1967 work “The Principles of a Liberal Social Order”, he chooses a strategy where he diligently tries to present the superiority and righteousness of the free-market liberal radicalism through a somewhat comparative argumentation. He incepts this comparative examination by contrasting two divergent paths of the liberal perception of the world. On the one hand, Hayek identifies classical British Liberalism (e.g., Adam Smith and Edmund Burke) and modern American Liberalism (e.g., John Marshall and Daniel Webster), and on the other hand, he distinguishes Continental Liberalism (e.g., mainly Classical French School of thought with the ones like Voltaire). Furthermore, he constructs observably biased reasoning with the appraisal of the type of Liberalism, mainly classical British liberalism as the combination of Whig and Radical utilitarian ideas, whilst in a sense, Hayek denounces the continental liberalism as he argues for it to give the unlimited powers to the majority as an ideal rather limiting the powers of the government. Moreover, he firmly offers the criticism of continental liberalism to the reader by making a distinction between liberalism and democracy for it has a proclivity of paving the way from democracy to authoritarianism, and from liberalism to totalitarianism. Presiding this reasoning he builds an argument stating for the distinction between liberalism and democracy to exist. He presents liberalism as the mechanism of limiting the governmental power whereas the concept of democracy is the tool for comprehending for whom it is to possess the power (pp. 363–365).

This type of obviously biased comparison is a methodology where Friedrich Hayek abstracts from the positivist and factual argumentation. Ergo, this tactical move makes him contradict himself for it his emphasis on the evidence-based rationality that he correlates with the classical liberalism with admiration and negating the reasoning of the Continental Liberalism that with a very vague explanation he considers to be anti-liberal as its means are keen for producing the unlimited power to the government. Consequently, his next strategic move is to undertake a more deductive comparative explanation focusing on finding the true form of liberalism not in the continental variation. He develops an argumentation presenting the true face of liberalism to be based on the evolutionary interpretation of knowledge and culture resting on the tradition, striving for the progression towards the creation of equal opportunities to all members of the free society. Accordingly, he stresses the point that liberalism is a naturally evolved phenomenon and thus that unlike the continental interpretation it negates the deliberate design of the social order. Therefore, here Hayek attempts to somehow confer the characteristics of evolutionary liberalism to a product of spontaneity and not the product of theoretical construction. Additionally, he also resorts to intertwining certain aspects of conservatism with the type of liberalism envisioned by him. For instance, from his perspective liberalism as an evolutionary phenomenon has no quarrel with religious beliefs, while the second type of anti-liberal continental liberalism always puts itself in the antagonist relation with religion.

That being the case, he carries on his ideological dispute with continental liberalism by suggesting the impossibility of creating a free society within the ideological frameworks. Hayek ventures to exhibit the be the absurdity of the idea of the concept of “public good” and propose an oriented system attempting to attack socialism. He propels his viewpoint by stating the system serving the common ends is not capable to deliver the interests of the individual. In accordance with his beliefs, he states that only through the spontaneous order it is possible for the best individuals to exercise the best of skills and knowledge in the pursuit of their desire, hence creating a reciprocal society based on the exchange among the individuals. Thereupon, he focuses on the universality of liberalism and states that are not to be curbed by any other organisation as the organisations tend to be purpose-oriented. He presents that these purposes are presented as common, but do contribute to the creation of the unfree society limiting the domain of the individual. Thus, the idea of equality in purpose-oriented organisations is non-existent, and only through spontaneous liberal order with rules regulating only the conduct of the just exchange of interests can truly create a society of true equality of equal opportunities and liberty.

It is envisaged by Hayek to encroach on the communitarian purpose-oriented proper social and economic order by using the terms of professor Michael Oakeshott that portray it as unfree and teleocratic, but present law-governed spontaneous as a free and nomocratic social order (p.366). As a result, he coins a new term “catallaxy”. With this move, he promotes the dissimilarity between the proper economics and the liberal free-market economy envisioned by him. In order to strengthen his argumentation, the adjustment of the catallaxy is made for the economic model he perceives to incorporate the idea of reciprocity through barter or exchange and the notion to be admitted to the community. Hence, through this desperate move, he attempts to show the necessity of restricting “coercive” governmental power only to the oversight and the execution of the rule of conduct.

For making his standpoint valid he progresses into examining the role of the rule of law within the state what should be its purpose. He breaks down his argument by underlining the private property to be the material representation of the individual’s domains and thus the idea of social justice for him is unjust as he addresses social justice to be a move against spontaneity. He argues, that the notion of social justice is to give privileges to the underserved by taking away the material resources from the one group that aggregated the wealth through their skill, knowledge, chance, and just competition. Henceforth, in liberalism, the main power of the government is to provide negative liberties and positive, meaning the provision of the legal system guaranteeing just competition and just exchange through the free market. Hayak goes further and argues that wages and remuneration can only be ascertained according to the values of the services have to particular people.

To summarise, it is worth underlining that Hayek’s abstract analysis and the strategic moves built upon the reasoning lacking the examples do bequeath to a reader an attempt of rendering the righteousness of the classical liberalism reimagined into catallaxy to the most beneficial for the individual desires and the peaceful social order. Retroactively, it is worth considering that he also tries to develop some historical argumentation, lacking any scientific method, where he presents the first exchange to occur in the tribal order to be the inception of pre-rationalist spontaneous evolutionary liberalism — catallaxy. Consequently, the paper poorly attempts to capture the natural emergence of the liberal order and its difference from the Keynesian liberalism, thus emanating the neoliberal social order limiting the state to be its remedy and a simple conductor of the free market relations.