Thursday, March 23, 2006

Triumph of the Individual

Donald Boudreaux of "Cafe Hayek" has an excellent essay at TCS today.

Today is the fourteenth anniversary of the death of F.A. Hayek -- the greatest social scientist of the 20th century.

Born in Austria in 1899 before the Pax Britannica collapsed into the vicious statism that marked much of the 20th century, Hayek spent most of his career watching the worship of power supplant the love of liberty. Nazism and Stalinism were the two most grotesque forms of this power-worship, but as Hayek warned in his most famous book, The Road to Serfdom (1944), even milder forms are surprisingly dangerous.

The greatest influences on the young Hayek, who studied in Vienna, came from the Austrian economists Carl Menger and Ludwig von Mises. Although much of this influence took the form of technical economic theory -- the theory of money, the nature of competition -- the source of Hayek's fundamental contributions to our understanding of society comes from the method of doing social theory that he learned from these scholars.

This method is one of rigorous adherence to the tenets of "methodological individualism" -- a fancy name for recognizing that the only units in society who think and act are individual persons. Society doesn't think or act; the market doesn't think or act; the United States government doesn't think or act. Only individuals think and act.

Perhaps this point seems banal or even mistaken. It is neither. Consider this explanation from Parker T. Moon, an historian who taught at Columbia University in the early 20th century:

Language often obscures truth. More than is ordinarily realized, our eyes are blinded to the facts . . . by tricks of the tongue. When one uses the simple monosyllable "France" one thinks of France as a unit, an entity. When to avoid awkward repetition we use a personal pronoun in referring to a country -- when for example we say "France sent her troops to conquer Tunis" -- we impute not only unity but personality to the country. The very words conceal the facts and make international relations a glamorous drama in which personalized nations are the actors, and all too easily we forget the flesh-and-blood men and women who are the true actors. How different it would be if we had no such word as "France," and had to say instead -- thirty-eight million men, women and children of very diversified interests and beliefs, inhabiting 218,000 square miles of territory! Then we should more accurately describe the Tunis expedition in some such way as this: "A few of these thirty-eight million persons sent thirty thousand others to conquer Tunis." This way of putting the fact immediately suggests a question, or rather a series of questions. Who are the "few"? Why did they send the thirty thousand to Tunis? And why did these obey?

Whatever the topic -- war, economic growth, government regulation -- the only way to achieve genuine understanding of what's going on is to trace all actions back to the individuals who take them. The fact that individuals often act in concert -- say, as voters -- still requires those of us seeking to understand the outcomes of elections to understand the incentives and the constraints that confront the individuals who make up these groups.

Failure to be a consistent methodological individualist leads to misunderstanding. Consider, for example, that politicians and pundits frequently go on about how "we as a nation" did this, or how "we as a nation" must not do that.

"We" who make up the American nation number 300 million people, each with our own preferences, beliefs, and expectations. It's only an illusion that "we" act -- or can act -- as one. It's no less an illusion that "we" act when government acts in our name.

Should "we as a nation" rebuild New Orleans? Asked this question unawares, the typical person says "Yes." But the student of Hayek responds that a city can be rebuilt only by individuals. Success at such efforts might require the concerted actions of many individuals. But understanding this fact, the Hayekian is instantly aware that successful rebuilding efforts must give each individual an incentive to rebuild -- must give each individual appropriate knowledge to perform his part of the rebuilding task effectively -- must give each individual the information and ability necessary to coordinate actions with those of countless other individuals.

The Hayekian also understands that the individuals who make up government are spending other people's money for yet other people's benefit. So these officials lack both the incentives and the knowledge to spend this money wisely.

In short, the Hayekian understands that successful rebuilding can be done only by individuals acting in the market. The Hayekian isn't misled by romantic talk of "we as a nation" rebuilding New Orleans (or doing any other task) because the Hayekian never forgets that only individuals choose and act -- and that the market is the only means of harnessing individual knowledge and effort for the greater good.

Don Boudreaux is Chairman, Department of Economics at George Mason University. He hails from New Orleans, Louisiana -- a collection of roughly 200,000 individuals occupying 363.5 square miles.


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