This year marks the 30th anniversary of the publication of F.A. Hayek’s last book, The Fatal Conceit: The Errors of Socialism. Hayek, of course, was one of the major classical-liberal theorists of the 20th century. Many would call him a libertarian, others would deny him the honor—or curse—of that label. He was a polymath who contributed to many fields of inquiry, including economics, political theory, psychology, and philosophy. In 1974 he shared the Nobel Prize in Economic Sciences with Gunnar Myrdal, a socialist economist who may be remembered for nothing other than that.

In the entry on Hayek in the New Palgrave Dictionary of Economics, Bruce Caldwell notes, “If Hayek was in the right place at the right time, it was usually with the wrong ideas, at least from the perspective of most of his contemporaries.” Hayek was a deep, original, and controversial thinker, as The Fatal Conceit illustrates.

Economics of knowledge / The main error of socialism, he argues, lies in its rationalist goal of social engineering. Socialists do not see the limitations of reason. They do not understand that between natural and artificial phenomena, “between instinct and reason,” there is a third category that contains social institutions such as language, morals, and law. Such evolved institutions, which include private property and markets, allow us “to adapt to problems and circumstances far exceeding our rational capacities,” even if we cannot rationally explain their complex benefits. Attempting to remodel society on a rational basis could spell the end of civilization and “destroy much of present humankind and impoverish much of the rest.”

The ideas in The Fatal Conceit build on Hayek’s economics of knowledge, developed in the 1930s and 1940s. Consider, say, tin, as he proposed in his 1945 article, “The Use of Knowledge in Society” (American Economic Review 35[4]: 519–530). If the metal becomes scarcer, its price will increase, transmitting to consumers the signal to economize on tin-made goods and to producers the signal to produce more tin. It does not matter whether the cause is that the supply of tin has decreased or its demand has increased, and nobody needs to understand that. Through trade, the price signal will be transmitted to consumers and producers far away.

Market-determined prices incorporate the producers’ local knowledge, the traders’ information, and the users’ preferences. All information is thus taken into account by all. In this way, more knowledge is used in society than any individual separately possesses and any planner could ever marshal. Through markets, more is produced of what consumers want than any other economic system could achieve.

More generally, evolved social institutions use information efficiently. They represent the results of the interaction of millions of individuals over time, and they incorporate all the underlying knowledge, even unconscious knowledge (as most of our knowledge is, from Hayek’s viewpoint). In this way, “cultural evolution, and the civilization it created, brought differentiation, individualization, increasing wealth, and great expansion of mankind.” Hayek reminds us that the evolutionary approach was pioneered in social studies by Adam Smith and Adam Ferguson in the 18th century, before Darwin used it in biology.

Extended order vs. the tribe / This efficient use of information allows an “extended order” of cooperation among individuals, “beyond the limits of human awareness.” “Every individual becomes a link in many chains of transmission through which he receives signal enabling him to adapt his plans to circumstances he does not know,” Hayek writes. Society is a “complex system”—he used that expression before it became so omnipresent in science—produced by the independent actions of its individual elements. In comparison, a government bureaucracy is a very simple and ignorant system. “So far as we know,” he hypothesizes, “the extended order is probably the most complex structure in the universe.”

Trade—especially international trade—provides the paradigmatic case of an extended order. Trade fuels specialization and the division of labor. Trade caused “a substantial disruption of the early tribes,” which contributed to new knowledge, the advance of civilization, and economic prosperity.

The extended order is based on abstract rules, like those of private property and the rule of law, which do not impose common goals but allow each individual to pursue his own personal ends. At the polar opposite, the tribe is made of individuals who know each other and are obliged to conform to concrete morals based on primitive instincts and the requirements of collective goals. As Hayek says, the process of the extended order of civilization has been to replace “common concrete ends” with “general, end-independent abstract rules of conduct.” The moral rules of an extended order contradict the stifling traditions of the tribe, but they also restrain primitive urges, which is why so many people resist them.

Hayek presents 18th-century French philosopher Jean-Jacques Rousseau as the modern representative of tribal morals. By forcing individuals to obey concrete orders from the state, socialism undermines the extended order in favor of a Rousseauvian conception of the good savage in a tight and ecological society. Contrary to what Rousseau thought, notes Hayek, “the primitive is not solitary, and his instinct is collectivist.” Let me add that the vision of society or “the country” as a team evokes the tribal order that Hayek finds behind the socialist agenda.

Hayek sees the process of social evolution as analogous to, but different from, biological evolution. He criticizes sociobiology for focusing on genetic transmission instead of imitation and learning in the formation of the rules we follow. He writes:

The gradual replacement of innate responses by learnt rules increasingly distinguished man from other animals, although the propensity to instinctive mass action remains one of several beastly characteristics that man has retained. … The decisive change from animal to man was due to such culturally determined restraints on innate responses.

In Chapter 7 of The Fatal Conceit, titled “Our Poisoned Language,” Hayek brings to our attention the fact that our usual language is often biased toward primitive ways of looking at the world, toward small-group morals. Consider, for instance, the routine personification of society and the glorification of everything “social.” In reality, he reminds us, collective utility “exists as little as collective mind.”

Ode to diversity / Contrary to the homogeneous tribe, the extended order is based on diversity—real diversity. A few pages of The Fatal Conceit sing an ode to diversity. For example:

Civilization is so complex—and trade so productive—because the subjective worlds of the individuals living in the civilized world differ so much. Apparently paradoxically, diversity of individual purposes leads to a greater power to satisfy needs generally than does homogeneity, unanimity and control—and also paradoxically, this is so because diversity enables men to master and dispose of more information.

Hayek emphatically rejected the “conservative” label. The postscript of his Constitution of Liberty (1960) was titled “Why I Am Not a Conservative.” In The Fatal Conceit, he suggests that sexual mores should naturally change when the purpose of previous social taboos no longer exists:

I believe that that new factual knowledge has in some measure deprived traditional rules of sexual morality of some of their foundation, and that it seems likely that in this area substantial changes are bound to occur. … I am entirely in favor of experimentation—indeed for very much more freedom than conservative governments tend to allow.

He adds that “the development of variety is an important part of cultural evolution, and a great part of an individual’s value to others is due to his differences from them.” Hayek has always been as ahead of his time as he has been controversial.

He is also far from being a progressive. An important implication of accepting the spontaneous social order is that “social justice” is meaningless. There can be no social justice or injustice in an order that develops spontaneously. Evolution cannot be just or unjust. Only an individual can be just or unjust.

Too conservative? / In some ways, The Fatal Conceit appears to be Hayek’s most conservative book. Speaking about philosopher W.W. Bartley III, who helped an ailing Hayek finish the book (and provided a complete edition of Hayek’s work), Caldwell mentions that “questions have been raised about how much of the book should be attributed to Bartley and how much to Hayek.” Yet, The Fatal Conceitseems in line with Hayek’s three-volume Law, Legislation and Liberty (1973–1979). But the earlier Constitution of Liberty arguably represents a younger Hayek who was more classical-liberal.

Already visible in Law, Legislation and Liberty, a sort of absolutist traditionalism colors The Fatal Conceit. Hayek goes so far as to say that “man became intelligent because there was tradition … for him to learn” (his emphasis).

Everything is fine as long as tradition generates a liberal extended order. But it does not always. What if tradition veers toward the tribal model? As Hayek seems to admit, this happened in Sparta, and ultimately in Egypt, Athens, the Roman Empire, and China. If, as he also admits, “the expansion of capitalism—and European civilization—owes its origins and raison d’être to political anarchy,” should statist traditions be obeyed? Should we just wait and see, and embrace whatever comes out of the system? At a certain point, traditions become stifling. Traditions should be revered, but only up to a point.

A related concern is raised by Chapter 8, titled “The Extended Order and Population Growth.” Societies that adopted the morality of the extended order have prevailed over primitive societies, Hayek argues, in large part because their traditional rules have allowed for the creation of more wealth and thus a more numerous population. Against environmentalists and Malthusian types, he claims that population growth fuels diversity, the division of labor, and productivity.

There can be no social justice or injustice in an order that develops spontaneously. Evolution cannot be just or unjust. Only an individual can be just or unjust.

But are the results of group selection by cultural evolution necessarily good? Hayek says he does not make that claim, but a simpler one that a return to tribal morals would “doom a large part of mankind to poverty and death.” So far so good, and we might forget libertarian concerns for primitive tribes displaced by the advance of civilization—provided the displacement respects certain humanitarian constraints. But the author of The Fatal Conceit goes a bit further: “There is in fact no reason to expect that the selection by evolution of habitual practices should produce happiness.” Is this morality sufficient? Aren’t we back to a simplified utilitarianism where individuals can be sacrificed to the existing order?

Appendix D of the book also suggests tensions between the individual and the spontaneous order of evolved institutions. Hayek claims that “not even all existing lives have a moral claim to preservation.” He understands the Eskimo practice of abandoning senile members to die before the tribe’s seasonal migration because it may have allowed them to save their offspring. He admits the “individual’s right voluntarily to withdraw from civilization,” but questions any “entitlements” to those who do that. “Rights derive from systems of relations of which the claimant has become a part through helping to maintain them,” he explains. The entitlement point is close to the libertarian argument that individuals should not be forced to subsidize others, but one can easily imagine tyrannical drifts and exclusions—whereby, for example, rednecks and other “deplorables” would be excluded from society.

Conclusion / In The Fatal Conceit, Hayek defends the extended order of the market as well as the traditional institutions that produced and maintained it (in some parts of the world, at some time in history). But he does not really consider what to do when a conflict appears between evolved traditions and individual liberty. Has he gone too far in his reverence for tradition? Have we lost meaningful individual consent in the process?

Whatever the answer, the broad points made in The Fatal Conceit remain valid and provide a welcome antidote to the deification of lawmakers. The fact that people only venerate ideal lawmakers, not those they actually observe, should help deflate the state’s aura. Unfortunately, most people believe that the big problem is that the Red team is in power instead of the Blue, or vice versa. Hayek shows that traditional rules embedded in the extended order of a free-market society provide a better way of coordinating individual actions than commands from lawmakers and other political authorities.

Traditions, of course, must remain open to criticism, but this does not mean they should be actively challenged by a social-engineering state.