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catallaxy in technical exile

The value of freedom

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Over at Thoughts on freedom, Sukrit invites his readers to comment on their interpretation of the word ‘freedom’ and what they see its value as. In this sprit I offer the following thoughts.

I think a lot of the fundamental arguments for the value of freedom can get lost in more specfic debate which boils down to things like GDP. Of course GDP is an important indicator, specifically of the volume of mutually beneficial trades that occur in a society, but only a very, very rough one. And of course as someone who is ultimately a consequentialist utilitarian I believe freedom is only valuable to the extent that it leads to people being on the whole, better off than they would be under alternative systems. While one can make a strong case for tying this to how markets promote GDP growth, what I think is a frequently overlooked long run utility-enhancing value of freedom lies in the fact that it helps facilitate what Mill called ‘experiments in living’.

I would argue that one classical liberal thinker whose thought might not at first glance have much similarity to Mill’s but who did pick up and develop on this aspect, was, you guessed it, Hayek. The key here is that it is not just in terms of facilitating experiments in living that a social order that allows as much individual freedom as possible is valuable, but facilitating experiments in just about anything – including different means of production and distribution, the anticipation of new desires (the sort of thing that the Buddhist Left, people like Clive Hamilton, want to stamp out), the production of new ideas and ways of looking at things.

All these elements link together in a long intellectual thread that go all the way back to Popper’s fundamental insight that progress occurs through a process of conjecture and refutation. Popper was talking mostly about scientific progress but ultimately this is how social and economic progress works too. In the ‘economic’ sphere- where conjecture is interpreted here as the freedom to use several property (a more accurate term than private property) to test one’s hypotheses about consumer’s future needs and wants or hypotheses about how best to organise production and distribution. For instance, when Henry Ford pioneered assembly line production and paying his workers above market efficiency wages, he was to all intents and purposes, engaging in an economic experiment, which as it happens, worked out well for him.

The problem that freedom solves here is that we do not know what the best way of organising production and distribution or anticipating new demands for all time and place – what is ‘best’ always changes according to time and circumstance – and the only way to discover this is for people, in this case, entrepreneurs, to experiment. The firm is in essence an embodied hypotheis, And what is refutation in this case? It is of course, to allow failures to occur – that is, to allow hypotheses to be refuted by the market saying ‘yea’ or ‘nay’ to particular products or ways of doing things (to continue our Ford analogy, think of the Edsel). Entrepreneurs are in this respect, essentially society’s fall guys.

Now, of course, there is no need to interpret this in a Social Darwinist way. We can allow market forces to let it rip and less efficient firms (which embody the hypotheses of its owners) go by the wayside and still have some form of social safety net for the humans involved (this is the equivalent of Popper’s formulation that ‘we should let our ideas die in our stead’). If this social safety net is generally available to all citizens on general terms, then this does not corrupt the ‘conjecture and refutation’ process, the experiment is not rigged because the right ‘signal’ is still being sent (i.e. produce the Edsel and make no money). This is why Hayek had no problem with a social safety net as such. Indeed, the existence of such a social safety net can facilitate the process of allowing markets to select out bad hypotheses by making it more politically acceptable to allow inefficient firms and industries to fail and thereby promote the allocation of human resources to better uses. In other words, the existence of such a net can increase labour mobility to a certain extent.

Which is not to say that rigging doesn’t and can’t occur. Crony capitalism and industry protection, where the gains of entrepreneurs are privatised and their losses are socialised, are examples where the experiment has been rigged, where the conjecture and refutation process is frustrated, and where, therefore in the long run, the progress that comes from selecting out the ‘less good’ hypotheses for anticipating consumer needs and wants and producing and distributing just does not occur. In this case, in addition to the general safety net that is available to all, there may be special bailout packages which keeps the inefficient firm which produces things less and less people want, to keep producing (and in so doing, squandering labour which could be better employed elsewhere and making it harder for them to adapt when the big crunch does finally come).

It is easy to see how analogous arguments for the value of freedom in promoting this conjecture and refutation process can be extended to the so-called ‘non-economic’ areas of life. See for examples of this, Andrew’s prolific posts on education. On the issue of the welfare state, that is why I am far less concerned with whether public provision continues to exist as long as there is scope for sufficient contestability in the use of tax dollars to purchase the goods and services provided by the welfare state (though education and housing vouchers for instance), Another application of this is of course in the principle of subsidiarity in political organisation, the aim of which is to facilitate greater experimentation in the provision of collective goods and maximise opportunities for exit and voice.

Let me end with a few supporting quotes from Hayek where he elaborates on some of the ideas I’ve summarised above. At p. 31-33 of the Constitution of Liberty he writes:

    It is because we do not know how individuals will use their freedom that it is so important. If it were otherwise the results of freedom could be achieved by the majority’s deciding what should be done by individuals. … It is therefore not necessarily freedom that I can exercise myself that is most important for me … What is important is not what freedom I personally would like to exercise but what freedom some person may need in order to do things that are beneficial to society. This freedom we can assure to the unknown person only by giving to all …

    The undesigned that constantly emerge in the process of adaptation will consist … of new arrangements or patterns in which the efforts of different individuals are coordinated and of new constellations in the use of resources …

Elaborating on the close link between freedom of speech and thought to freedom of action, at p. 35 he writes:

    Though the conscious manipulation of abstract thought once it has been set in train has in some measure a life of its own, it would not long continue and develop without the constant challenges that arise from the ability of people to act in a new manner, to try new ways of doing things, and to alter the whole structure of civilisation in adaptation to change. The intellectual process is in effect only a process of elaboration, selection and elimination of ideas already formed. And the flow of new ideas, to a great extent, springs from the sphere in which action, often non-rational action, and material events impinge upon each other.
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Written by Admin

June 25, 2006 at 12:37 pm

Posted in Uncategorized

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