Are markets (and other social phenomena) really "spontaneous"?

Economics Economics Questions
1

I have misgivings about the term. “Spontaneous” can mean “impulsive” (as in “he spontaneously started dancing”), which is obviously unsuitable. In biology, it means “involuntary”, which also obviously doesn’t apply to human action. I suppose “without external cause” (as in “spontaneous combustion”) fits somewhat, because the direction of market activities occurs within the market and not outside of it.

But on the whole I think the term has the same problem as “emergent order”, “invisible hand” and “natural order”. They all make the social phenomena seem involuntary, either in a mystical or mechanistic way. And that is particularly unfitting for the Austrian tradition, which is distinguished for, more than any other tradition, consistently basing social science on purposive, deliberate, voluntary human action. I think “cooperative”, “polycentric”, or “distributed” order would be more accurate.

I also agree with Joseph Salerno, who prefers to use the term “process” instead of “mechanism”. As he wrote:

First, the vague, nebulous, and mystical metaphor of the “invisible hand” is inadequate to capture the richness of the modern Austrian conception of the pricing process. It is, therefore, an easy target for the enemies of the market economy and should be abandoned.(…)

…the term “price mechanism” is–well–too mechanistic. It does not convey the dynamism and human rivalry that is th essence of price making. I suggest the term “pricing process,” which goes back to Boehm-Bawerk and was used by Mises. The former by the way also used the German term “Preiskampf” (“price struggle”) which he adopted from A. E. Shaeffle, one of his teachers.

2

Spontaneous = without external cause. Not ordered from outside, yet reaching a state of order anyway via the purposive actions of each individual.

Emergent order is probably the most accurate/descriptive term, but spontaneous order is fairly established and not inaccurate. To me, emergent has precisely the connotation of “arising from many individual actions,” which seems to align perfectly with the Austrian perspective. I don’t see any room for mysticism in the concept.

Also, the particular aspects of an emergent order that are emergent are of course those that are not what most of the actors are aiming for, hence they are involuntary - though that does not mean undesirable. It is not that the butcher, the baker, and the candlestick maker voluntarily strive for the material betterment of society; it is that their actions in pursuit of their own goals, for themselves only, end up constituting an order/process that makes society better off, even though none of them were necessarily aiming for such a condition.

Whether we call the fact that capitalism results in general prosperity a “social phenomenon” seems the source of your misgivings, and that I think is just because social phenomenon is a fuzzy term.

It almost seems you meant to imply that social science is based on social phenomena. But in the second sentence the phenomena you apparently refer to are things like “general prosperity” or “lack of chaos” (the benefits of capitalism, or the ways it leads to such benefits), whereas in the third sentence the phenomena are the actions of individuals. The term social phenomena is vague enough to encompass both types of phenomena, and that is confusing things I think. It’s as if you have ended up saying that the emergent phenomena must be voluntary just because the individual phenomena are. Or that Austrian analysis cannot talk about involuntary beneficial circumstances (circumstances no individual actor necessarily aimed for) arising since it is consistently based on voluntary action.

To speak as if the market itself were an actor is only a metaphor, of course, but it can and is misinterpreted (especially “invisible hand”), so I do take the point seriously as a practical matter of terminology choice. I just don’t think terms like cooperative order capture the essential characteristic of the emergent phenomena being wholly unintended/involuntary from the perspective of each actor, yet beneficial to them nonetheless.

3

Great points AJ! Considering them, and actually looking at the dictionary definition of “emergent”, I now find that term in particular wholly unobjectionable. For some reason, the term just conjured images of plant growth, which gives that mechanistic vibe I dislike. But “spontaneous” and “natural” still seem misleadingly mechanistic/biological to me.

The kind of problems that arise with language like this that conveys automaticity is discussed by Mises in Human Action:

As the interventionist sees things, the alternative is “automatic forces” or “conscious planning.” It is obvious, he implies, that to rely upon automatic processes is sheer stupidity. No reasonable man can seriously recommend doing nothing and letting things go as they do without interference on the part of purposive action. A plan, by the very fact that it is a display of conscious action, is incomparably superior to the absence of any planning. Laissez faire is said to mean: Let the evils last, do not try to improve the lot of mankind by reasonable action.

This is utterly fallacious talk. The argument advanced for planning is entirely derived from an impermissible interpretation of a metaphor. It has no foundation other than the connotations implied in the term “automatic” which it is customary to apply in a metaphorical sense for the description of the market process. Automatic, says the Concise Oxford Dictionary, means “unconscious, unintelligent, merely mechanical.” Automatic, saysWebster’s Collegiate Dictionary, means “not subject to the control of the will, … performed without active thought and without conscious intention or direction.” What a triumph for the champion of planning to play this trump card!

The truth is that the alternative is not between a dead mechanism or a rigid automatism on one hand and conscious planning on the other hand. The alternative is not plan or no plan. The question is whose planning? Should each member of society plan for himself, or should a benevolent government alone plan for them all? The issue is not automatism versus conscious action; it is autonomous action of each individual versus the exclusive action of the government. It is freedom versus government omnipotence.

Laissez faire does not mean: Let soulless mechanical forces operate. It means: Let each individual choose how he wants to cooperate in the social division of labor; let the consumers determine what the entrepreneurs should produce.

4

It is highly disturbing that mere metaphors are make-or-break in serious public debate.

5

free emergent order

6

Say what you will about the Cato Institute, but it hosts some really great debates. Here is one that ends up wrestling with this same semantic issue, and turns into a very thorough elucidation of the tremendously important - but hard-to-grasp - concept of spontaneous order.

http://www.cato-unbound.org/archives/december-2009-hayek-and-the-common-law/

7

Sorry for bringing this thread back up after so long however I think I have something to contribute to it. In particular I would like to bring attention to several points made by F.A. Hayek in his "The Confusion of Language in Political Thought", the first thing to think about is how the market process allows us to grasp more information then can be gained by one person, as Hayek states "

Modern civilisation has given man undreamt of powers largely

because, without understanding it, he has developed methods

of utilising more knowledge and resources than any one mind

is aware of.

This is important because knowledge and capital is widely dispersed with no one mind or person capable or needed to grasp all of the information in order for the system to work. This goes well with the idea of order being ‘Sponteaneous’ because the wide arrays of the order itself did not originate from one mind but from the vast store of knowledge which we have been able to tap into through the market system.

By the by, our problem in Hayek’s view is that too much anthromorphizing has been going on because our language structure has not fully caught up with the evolution of the market or extended order.

We are still very far, however, from making full use of the

possibilities which those insights open to us, largely because our

thinking is governed by language which reflects an earlier mode

of thought.

In effect, I think the above does present a problem for us when advocating a market society. Mainly because of how we must fight the inherent mental prejudices against the market order, in particular the idea of treating the economy like a machine designed by a human for a particular purpose. Such language obscures the truth of what we are trying to get at and I am not so sure if reinserting a more active way of describing human action would help or hinder the way we describe the market process. However, I am more then open to being wrong on this point.

8

Wow, I never knew Hayek was so aware of language confusion issues. One of my first posts in this board two years ago was A Redefinition of Terms in the Anarcho-Capitalist Paradigm, and I’ve probably written hundreds of posts that touch on this kind of thing, sometimes in great detail.

9

With most people there is this conception that the market and society are two mutually exclusive things, that society precludes the market, when the market is simply the economic behavior of society. One cannot exist without the other; there is no society without a market and no market without a society. Society will always have markets and be subject to the forces of supply and demand, however hampered they may be by any political structure.

So anybody who argues that X economic activity is not in the interests of or is harmful to society, I call bullshit. It is that pretense of representation which has allowed so many to claim they speak for society in order to further their own desires, creating new power dynamics and privilege that did not exist previously and distorting social cohesion by manufacturing identities, and conflicts therein.

These power dynamics may exist in different forms across different populations (I consider ‘society’ to be global, not constrained to nation-states, although there are different cultures across different populations; I am open to revise this position though), but these antisocial forces all spring from that pretense of representation which leads to privilege and power grabs. This is what has been termed intersectionality, and it is a crucial concept to understand.

10

In fact, I have reservations about the word ‘market’ itself to describe a free economy as it isn’t conceptually clear imo.

‘Market’ to me refers to a place, a location, and thus is commonly seen as a system (as far as I understand the common definition of ‘system’ which I may be incorrect). Which leads to the viewpoint that it is like any system and its margins can be adjusted and changed. Yes, outwardly markets are distorted, changed, reduced in scope in many ways, but still continue to exist in spite of these attempts (black market).

Much of libertarian/anarch theory speaks of it as a process, not some Platonic object (apologize for unclear wording here), so the wording seems insufficient to me.

Are all processes necessarily systems? I wouldn’t think so, but I’d have to know more about how people describe ‘system’ with regards to political theory.

Are money and prices a system or a process? I’d say there are plenty of systems built around the pricing process (might be wrong), but that’s my point; not all markets use money in the same way and some don’t even use money at all.

If anything, I think the market = economy. Instead of nice little compartments that plug in and out (‘command economy, socialism, capitalism, corporatism etc’)

I am wanting for the right words and terminology to describe what I mean, but I hope I got it across.

11

“I have misgivings about the term. “Spontaneous” can mean “impulsive” (as in “he spontaneously started dancing”), which is obviously unsuitable. In biology, it means “involuntary”, which also obviously doesn’t apply to human action. I suppose “without external cause” (as in “spontaneous combustion”) fits somewhat, because the direction of market activities occurs within the market and not outside of it.”

“But on the whole I think the term has the same problem as “emergent order”, “invisible hand” and “natural order”. They all make the social phenomena seem involuntary, either in a mystical or mechanistic way. And that is particularly unfitting for the Austrian tradition, which is distinguished for, more than any other tradition, consistently basing social science on purposive, deliberate, voluntary human action. I think “cooperative”, “polycentric”, or “distributed” order would be more accurate.”

There is a conception of “spontaneous order” or “emergent order” that is consistent with both Mises’s apriorism and the analytical aspect of Hayek’s thinking. Recall that Hayek provided his own conception of analytical social science:

“From the fact that whenever we interpret human action as in any sense purposive or meaningful, whether we do so in ordinary life or for the purposes of the social sciences, we have to define both the objects of human activity and the different kinds of actions themselves, not in physical terms but in terms of the opinions or intentions of the acting persons, there follow some very important consequences; namely, nothing less than that we can, from the concepts of the objects (X), analytically conclude something (Y) about what the actions will be. If we define an object in terms of a person’s attitude toward it (X), it follows, of course, that the definition of the object implies a statement about the attitude of the person toward the thing (Y). When we say that a person possesses food (X-1) or money (X-2), or that he utters a word (X-3), we imply that he knows that the first can be eaten (Y-1), that the second can be used to buy something with (Y-2), and that the third can be understood (Y-3)—and perhaps many other things.” (“The Facts of the Social Sciences”)

Here, Hayek provides his own conception of analytical social science, basically his own conception of praxeology.

If the above method is valid, then for any social object or phenomenon X which “appears” in action or in consciousness, its analytic corollary Y must also “spontaneously” appear. For any social object or phenomenon X which “appears” in action or in consciousness, its analytic corollary Y must “emerge” ordered with it.

In this conception, we assume that the social fact X which occurs for the actor is a fact of volition. For example, “I observe X” where “observation” is an intentional action. The (necessary) occurrence of Y we may conceive as the unintentional (i.e., “spontaneous”) result of the actor’s bringing about X. The actor brings about X (thus, purposive action). Y emerges “ordered” with X “spontaneously.”

Let’s look at Lionel Robbins’ conception of economic law:

“Economic laws describe inevitable implications. If the data they postulate are given, then the consequences they predict necessarily follow…If the “given situation” (X) conforms to a certain pattern, certain other features (Y) must also be present, for their presence is “deducible” from the pattern originally postulated.” (An Essay on the Nature & Significance of Economic Science)

Thus, any time we assume that social fact or social phenomenon X appears in the action or consciousness of the actor (any time we assume its “presence”), then social fact or social phenomenon__Y__ must also appear in the action or consciousness of the same actor, regardless whether the actor purposely aims for Y to appear. Social fact Y appears “spontaneously,” as it were, “ordered” with X, upon the appearance to the actor of social fact X.

The bridge that connects Misesian apriorism to Hayek’s spontaneous order is the conception of social fact X as the content of an intentional action, rather than as an objective fact of nature. This is where the mistake and oversight lies. Instead of conceiving that a market “exists” or a price “exists” in the objective sense, we can re-cast these social phenomena as contents of action by conceiving them as subjective facts: “I see a market” or “I observe a market” or “I’m visiting a market” etc… This re-casts the objective conception as a subjective action conception.

We have then satisfied Hayek’s objection to praxeology, which is:

“I have long felt that the concept of equilibrium itself and the methods which we employ in pure analysis have a clear meaning only when confined to the analysis of the action of a single person and that we are really passing into a different sphere and silently introducing a new element of altogether different character when we apply it to the explanation of the interactions of a number of different individuals.”

“…the sense in which we use the concept of equilibrium to describe the interdependence of the different actions of one person does not immediately admit of application to the relations between actions of different people.” (“Economics and Knowledge”)

Because we have now conceived social facts (prices, markets, interest rates, families, languages, laws, other people, etc.) as subjective phenomena (as the content of actions). Then Hayek’s analytical method (his own version of praxeology) must apply to these phenomena as social phenomena. When any of these social phenomena (X-1, X-2, X-3, etc.) “appear” to an actor as the content of his action (I observe X-1, I do X-2, I see X-3, etc.), then social phenomena Y-1, Y-2, and Y-3 must spontaneously “order” (i.e., spontaneously appear without any volition or conscious intention on the part of the actor) with X-1, X-2, and X-3 for that same actor. We may thus reconcile Misesian apriorism with Hayekian spontaneous order.

If I see a market, then by analytical necessity, exchange must “spontaneously” appear ordered with that market.

If I see a price, then by analytical necessity, selling must “spontaneously” appear ordered with that price.

If I hear a language, then by analytical necessity, communication must “spontaneously” appear ordered with that language.

(all these meant as illustrative examples regardless of theoretical consistency or validity)