Economy

Certainly one is justified in questioning how a functional macro-social order could emerge if each person’s knowledge and preferences were directed—according to the principle of collective individuation—primarily toward the micro-social task of legitimately bringing about mutual happiness.  This question appears especially justified when, due to the influence of much modernistic thought, one equates a generally beneficial, social-systemic order with an order that must be constructed according to an overarching plan—a “social good”, “national good”, or “common will” (Arendt [1958] 1989, 38-49; Hayek [1952] 1979, 141-182).  In such a case, one might ask, just how could it be possible for a macro-social order to emerge without an overarching plan?

Carl Menger, the founder of the Austrian School, provided the rudiments to the answer when he placed the following question at the center of his institutional-economic analysis:

How can it be that [social orders] which serve the common welfare and are extremely significant for its development come into being without a common will directed toward establishing them?  (Menger [1883] 1985, 146)

Insofar as one seeks to bring about collective individuation in a manner that involves the body, property, or authority of another person, one either (a) engages in communicative action in order to obtain this other agent’s explicit or implicit consent or (b) assumes the consent of the other on the grounds of previous communicative action which has established this consent.  As a social manifestation of active preference, consensus formation with regard to relations of body, property, and authority involves a degree of variability within the lifeworldly/systemic environment, yet the possibility of reaching consensus emerges according to lifeworldly/systemic constraints (organismal, cultural, societal [political/economic/civil], and personal).  If the consent of the other has not been and cannot be fully achieved or adequately anticipated, then—on the basis of the principle of liber(aliz)ation—non-intervention in their body, property, and authority constitutes a legitimate constraint.  If one has not established the other’s consent with regard to body, property, and authority, then they are simply not available or ready-to-hand.  Where one does achieve the other’s consent, one incorporates the requirements for this consent—the consent conditions—into the formulation, articulation, and enactment of one’s projects.  Consent conditions entail obligations and commitments.  Through these obligations and commitments, one’s preferences (and relevance structures) and knowledge (and stock-of-knowledge) reflect the consent conditions of others.  (Negative externalities are basically unknown harmful effects on other persons that are ostensibly illegitimate once they enter the consciousness of the agent who causes them.  Within the current analysis, negative externalities could only exist where [1] agents are unaware of the harmful effects of their actions, and where [2] it is too costly for the victims or other agents who have compassion for the victims to inform the agents who are causing harm.  For the purposes of the current analysis, I will assume that it is never too costly to inform agents when they are causing illegitimate harm.  Therefore, where all agents act according to the principle of collective individuation, all negative externalities will eventually be eliminated.)

More importantly, within a functional social system, the others whom one has encountered have already enacted and formulated their projects and consent conditions in a manner that acknowledges, respects, and incorporates the consent conditions of those others whom they have previously encountered or have expected to encounter.  Again, those other persons whom they have previously encountered have already formulated their projects and consent conditions in a manner that takes into account the consent conditions of those other persons whom they have previously encountered or have expected to encounter, etc.  By defining and bringing about her happiness in a manner that respects every other as one who should actively seek happiness, each agent intentionally brings about integration between and among the knowledge and preferences of specific social agents; yet because those others whom others have encountered have already integrated their knowledge and preferences with others whom they have previously encountered or have expected to encounter, each person also unintentionally coordinates his-her knowledge and preferences with others whom these others have previously encountered, etc.  Accordingly, one who engages in consensus formation with regard to relations of body, property, and authority with another unintentionally dissipates knowledge and preferences that reflect the consent conditions of agents whom she has rarely or never directly encountered; and thereby one’s actions and interactions tacitly incorporate an elaborate, dynamic, and relatively anonymous network of specific consent conditions—via aggregated and mediated obligations, commitments, and interlocking expectations—of which he-she could not possibly be explicitly aware.  Furthermore, collective individuation entails coordination between the authority, body, and property of every participating agent. Because one’s interactions incorporate the consent conditions of every other whom one has directly encountered, and one’s actions and interactions thereby unintentionally incorporate the consent conditions of others whom one has rarely or never directly encountered, each agent exercises his-her actual authority, directs his-her actual body, and applies his-her actual property in a manner that intentionally and unintentionally incorporates the consent conditions of other agents.  Hence, within ideal social-systemic conditions, symbolic integration and material coordination are inextricably linked.

Such a complex and dynamic embodiment of consent conditions could not be fully grasped by any individual consciousness.  This is simply because one’s actions always already participate within it and would always already be incorporated within it.  One would have to achieve a breadth of knowledge and exercise a capacity for understanding more inclusive than that of one’s own in order to fully comprehend a social-systemic process which incorporated one’s own.  Within ideal social-systemic conditions, social integration and systemic coordination are inextricably linked.  It is through the unintentional distribution of knowledge and preferences that reflect the concrete situations of every social agent that societal orders emerge.  They can be legitimate orders that are the result of human interaction, yet which are not the result of a “common will” or “collective will” that has been consciously directed toward establishing them.

The freed market is an example of societal order resulting from an elaborate network of consent conditions.  Market production involves mutually strategic relations for the sake of maximizing revenue; it involves the production of exchange values which are then presumably sold to consumers as use values.  Because a price-offer is a market agent’s consent condition for the exchange of a given good or the performance of a given service, each agent within the ideal-typical market formulates and articulates her own price-offers in a manner that takes into account the price-offers of other, relevant market agents.  At the same time, her price-offers respect the prior consent conditions she has established in previous instances of consensus formation.  Likewise, each agent mutually defines and enacts his-her projects according to the projects of other market agents whom she has directly encountered or has expected to encounter, and she negotiates and enacts projects involving her actual body, property, and authority in a way that honors previously established consent conditions.

Insofar as an instance of exchange does not entail the intervention by one agent in the body, property, or authority of another agent against this other agent’s consent, such an instance of exchange must involve the following, rule-based process:

(i) Agent X originally owns good b or can bring about the product of service b in a manner that does not entail intervention in the body, property, or authority of another agent against this other agent’s consent.

(ii) Agent Y originally owns good a or can bring about the product of service a in a manner that does not entail intervention in the body, property, or authority, of another agent against this other agent’s consent.

(iii) Agent X prefers the ownership of good a or the product of service a over and above the ownership of good b or the product of service b.

(iv) Agent Y prefers the ownership of good b or the product of service b over and above the ownership of good a or the product of service a.

(v) Agent X gives the ownership of good b to Agent Y or performs service b for Agent Y under the consent condition that Agent Y gives the ownership of good a to Agent X or performs service a for Agent X.

(vi) Agent Y gives the ownership of good a to Agent X or performs service a for Agent X under the consent condition that Agent X gives the ownership of good b to Agent Y or performs service b for Agent Y.

The basis of this process is commonly known as the market principle (Mises [1949] 1966, 194-198), and through these instances of exchange each agent acquires the ownership of a good or the product of a service that, at the time of consensus, he-she values with more esteem by foregoing the ownership of a good or the product of a service that in itself, at the time of consensus, he-she values with less esteem.

Through intentional adjustment and re-adjustment of one’s own consent conditions according to the consent conditions of other market agents, and through course-of-action types such as (a) advertising, (b) bargaining, and (c) contracting, each market agent intentionally and unintentionally dissipates information regarding the desirability and availability of various goods and services. Advertising, understood as an ideal-typical course of action, communicates to others one’s general desire for exchange (Mises [1949] 1966, 320-322); bargaining establishes each agent’s concrete consent conditions for an exchange; and, where legitimate instances of exchange are possible, contracting fixes each agent’s detailed grounds for an exchange.  These communicative acts, at the same time, unintentionally dissipate consent conditions—whether obligations or commitments—previously established by the participating agents as well as consent conditions established by previously encountered agents, etc., which thereby function in subsequent instances of consensus formation as tacitly acknowledged, societal possibilities and constraints.

The societal structure of the market will spontaneously reflect this intentional and unintentional exchange of obligations and commitments.  Clearly, such a complex and dynamic system of price-offers (consent conditions), which gives rise to the price system, could not be fully grasped by any individual consciousness.  Again, this is because one’s actions and interactions would always already participate within it and be incorporated within it as well, and one would have to achieve a breadth of knowledge and exercise a capacity for understanding more inclusive than that of one’s own in order to fully comprehend a social-systemic process which incorporated one’s own.  However, it is through the unintentional distribution of knowledge and preferences that a market system can emerge: a social order which is the result of consensual interaction, but which is not the direct result of a deliberate human design.

The freed market is an example of societal order, and it therefore is analogous to civil society.  Within market society, agents generally establish or join firms and enter relationships to socially produce exchange values for the sake of acquiring revenue.  Within civil society, on the other hand, agents generally establish organizations or create gatherings to socially produce direct utility via the application of use values.  Typically, outputs from market production serve as inputs for social production within civil society.  Exchange values thereby become use values as they move from market production to household production or production within civil society.

Because the principle of liber(aliz)ation prohibits the intervention by one agent in the body, property, or authority of another agent against this other agent’s consent, organizations and firms that emerge from legitimate social processes—of which the freed market, tied to pecuniary motivations and exchange value, is only a particular instance—must reflect the selectivity, relevance, and attention of those specific agents who establish and support them.  These organizations and firms, with their manifold obligations and commitments, themselves emerge amidst instinctual-organismal, cultural, societal (political/civil/economic), and personal constraints.  Here, an organization or firm is understood as a group of individuals who fulfill a common end, aim, or goal; and this goal may well be spiritual or aesthetic, as in the instance of a temple or museum.  An organization or firm will therefore rarely, if ever, involve the participation of every agent within the given community, and the existence of an organization will rarely, if ever, entail intervention within the body, property, or authority of every agent within the given nation or society.  This is why it is most often intellectually and ethically dangerous to address a community or nation as though it were or should be a single organization or firm; and this is what Václav Havel refers to when he writes that ”the essence of life is infinitely and mysteriously multiform, and . . . cannot be contained or planned for, in its fullness and variability, by any central intelligence.” (Havel 1992, 62).  It is not a coincidence that at the onset of dysfunctional, mass-totalitarian societies, public officials typically take on the role of parents—as a communist “mother” or fascist “father”—while many citizen-“children” look to these officials for welfare or guidance (Klima [1990] 1994; Stevens 1983, 118-139).  In this way, they conspire to conceive of society as a single “household” rather than as an elaborate network of various households, organizations, and firms (Arendt [1958] 1989, 39-40).

However, a nation or society is a dynamic complex of relationships between and among various organizations and firms—in the words of Friedrich Hayek, a catallaxy—rather than a single “economy” in the strict sense of this latter term, which unfortunately suggests an overarching household or firm (Arendt [1958] 1989, 28-49; Hayek [1967] 1984c, 367-368).  Furthermore, within the ideal social-systemic condition, this network nevertheless forms a legitimate and harmonious macro-social order that allows every adult agent to actively bring about collective individuation. Through concretely embodied instances of consensus formation in language, legitimate interactions facilitate coordination within the wider social-systemic condition. Hence, within the ideal forms of civil society and market society, symbolic and material reproduction of the lifeworld/system are inextricably linked.  Each agent, through piecemeal and selective interactions, intentionally and unintentionally integrates preferences and knowledge that reflect the consent conditions of various other persons. At the same time, agents intentionally and unintentionally coordinate relations among bodies, properties, and authorities, so that social integration and systemic coordination are inextricably linked.  Societal spontaneous orders emerge according to the principle of collective individuation through each agents mutual attentiveness to concrete situations; they are not the direct result of an overarching plan, and they therefore cannot be properly understood as though they were a single household or firm (Menger [1883] 1985, 193-196; Hayek [1937] 1948).

[References forthcoming.]

Civil Society