Wednesday, April 11, 2012

The Fatal Conceit

The conception of a self-organising structure began to dawn upon mankind, and has since become the basis of our understanding of all those complex orders which had, until then, appeared as miracles that could be brought about only by some super-human version of what man knew as his own mind.  --F. A. Hayek, The Fatal Conceit (emphasis mine)

Professor Hayek proposes a dichotomy between a self-organizing system and a directed system with the directed system functioning as though God himself were giving the orders from heaven to mankind.  Hayek stresses that this distinction is the primary concern of his book, The Fatal Conceit:  The Errors of Socialism, when he explicitly states that he is addressing the distinction between the 

advocates of the spontaneous extended human order created by a competitive market, and on the other hand those who demand a deliberate arrangement of human interaction by central authority based on collective command over available resources.  (7)
First, I want to go over some of the "key quotes" that popped into my mind after reading these two quotations from F. A. Hayek.  These quotations remind me of not only Ludwig von Mises's discussions of both the materialistic philosophy and the philosophies of history but also Gustave de Molinari's discussions of the divine right of kings theory of government.  Then, I want to apply the concepts from the discussion to a real world example, namely, the story of the creation of the Federal Reserve System.

 Some Germane Quotations That Popped into my Head

When F. A. Hayek mentions the "super-human" mind and "miracles," he is suggesting a much bigger problem that embraces "supernatural" interventions into the affairs of mankind.  The theme here seems to be that some "exogenous" [i.e., originating from OUTSIDE] force is at work directing and guiding the affairs of mankind.  

I want to begin with Mises's Theory and History and his discussion on the "theme of the philosophy of history."  This is a term that probably most of you have never heard of before!  I have heard of it used before mainly in discussions of economic history.  Mises describes "philosophies of history" as being equivalent to Biblical prophecies.  They are at the level of "divine revelations," which pertain to the course of mankind's future--what will happen has already been written down in the book and so the future is inevitable.  Mises writes that "In pre-Marxian ages it was not customary to call philosophies of history scientific.  Nobody ever applied the term 'science' to the prophecies of Daniel, the Revelation of St. John, or the writings of Joachim of Flora" (104).

Philosophies of history often set up the "leader" as the "representative" of God himself.  God tells the "leader" what to do; the "leader" then relays these orders to the masses of the people, who are expected to obey the "leader" because the "leader" is God's representative on earth.  The "leader" must guide and direct the affairs of the masses because they are simply too stupid to run their own lives.  Mises writes about this version of the philosophy of history that 

the first group contends that Providence [i.e.,  God, especially when conceived as omnisciently directing the universe and the affairs of humankind with wise benevolence] elected some mortal men as special instruments for the execution of its plan.  In the charismatic leader superhuman powers are vested.  He [The leader] is the plenipotentiary [a diplomatic agent possessing full power and authority] of Providence [God] whose office it is to guide the ignorant populace the right way. (109)

In a similar vein, Mises discusses how this "superhuman" director of human affairs once again plays an integral role when one tries to apply a "materialistic philosophy" in the real world of running a government.  By "materialistic philosophy," Mises is referring to a doctrine that claims that "all human thoughts, ideas, judgments of value, and volitions [i.e., a choice or decision made by the will] are the product of physical, chemical and physiological processes going on in the human body" (Theory and History, 63).  Usually, a materialistic philosophy "declares that the only factors producing change are those that are accessible to investigation by the methods of the natural sciences (The Ultimate Foundation of Economic Science, 25).   Mises spends most of his time addressing a "quasi-materialistic doctrine" called the "Marxian dialectical materialism" (The Ultimate Foundation of Economic Science, 26).  The difference between a "pure" materialistic philosophy and the Marxian quasi-materialistic philosophy is over what we ascribe thinking, ideas, judgments of values, and volitions to.  In the pure materialistic philosophy, they are ascribed to physical, chemical and physiological processes.  In the Marxian version, "action and volition are ascribed to the material productive forces" (The Ultimate Foundation of Economic Science, 27).  What this means is that men do not think, do not form judgments of value, and do not act.  It means that "the production relations, the necessary effect of the prevailing stage of the material productive forces, are determining their ideas, volitions, and actions" (ibid).

For Mises, all of these materialistic and quasi-materialistic metaphysics involve creating a "God" (or a phantom as he calls it) who functions as a super-human entity.  This super-human entity ends up making all the choices, doing all the thinking, and performing all the acting.  Man no longer exists; he is being manipulated by something.  Man seems to be more like a puppet in these doctrines; someone or something is pulling all of the strings of the "puppet-man."  These metaphysical doctrines

must imply converting an inanimate factor into a quasi man and ascribing to it the power to think, to pass judgments of value, to choose ends, and to resort to means for the attainment of the ends chosen.  It must shift the specifically human faculty of acting to a nonhuman entity that it implicitly endows with human intelligence and discernment.  There is no way to eliminate from an analysis of the universe any reference to the mind.  Those who try it merely substitute a phantom of their own invention for reality.  (The Ultimate Foundation of Economic Science, 28)
And we are back to the "divine" or "super-human" entity once again trying to directing the course of human affairs.  Mises goes so far as to argue that the logical conclusion of this arrangement is tyranny.  It is the creation of a situation in which some men know the will of God while others do not.  If those who do not know the will of God do not conform they must be liquidated.  Mises writes that, under this doctrinal approach

the only way it can avoid a radical skepticism that does not have any means of sifting truth from falsehood in ideas is by distinguishing between "good" men, i.e., those who are equipped with the faculty of judging in conformity with the mysterious superhuman power that directs all affairs of the universe, and "bad" men, who lack this faculty.  It must consider as hopeless any attempts to change the opinions of the "bad" men by discursive reasoning and persuasion.  The only means to bring to an end the conflict of antagonistic ideas is to exterminate the "bad" men, i.e., the carriers of ideas that are different from those of the "good" men.  Thus, materialism ultimately engenders the same methods of dealing with dissent that tyrants used always and everywhere.  (The Ultimate Foundation of Economic Science, 29, emphasis mine)
What all of this sounds like to me is this:  X has idea A and Y has idea B, and idea A conflicts with idea B.  But how can this be?  How can our super-human force, our material productive forces, give off conflicting ideas?  If these material productive forces do all the thinking and acting then how can we have these conflicting ideas?  Shouldn't X have idea A and Y have idea A too?  Shouldn't our super-human force be consistent when it comes to implanting ideas into the minds of men?  Is X the "God-sent prophet" revealing to use the truth?  Is Y the "hell-born tempter" sent to deceive mankind?  Who is the legitimate leader and who is the devil incarnate  (Theory and History,109)?  All of this seems to boil down to one person claiming to have correctly discerned the message and therefore everybody else must either be a liar or must not have heard from our super-human force.  The person who does hear from the super-human force must then be telling the truth, and this person must be the legitimate leader.

From Mises's Theory and History and from his Ultimate Foundation of Economic Science, we have seen the operation of some sort of super-human entity or some sort of divinely-appointed leader who gets to direct the course of human affairs and gets to direct each and every individual.  Each human "being" seems to be reduced to the status of "puppet," i.e., a non-acting, non-thinking, non-choosing entity.  As you can tell, Mises's discussion is very abstract.  To bring this discussion a bit closer to the "concrete" level, I will take a look at Gustave de Molinari's treatment of this issue, which is found in his book The Production of Security.  I will then complete this blog with a very "concrete" look at the history of the Federal Reserve System.

Molinari, writing in 1849 France, discusses what he calls the Regime of Terror.  There are two variations on this theme:  the Divine Right of Kings and the Divine Right of Majorities.  

Mises's discussion above about philosophies of history and the materialistic philosophies seems to relate to the divine right of kings discussion found in Molinari's work.  Both involve invoking appeal to a mystical being that is going to direct and guide society and mankind.  Molinari speaks of how divine Providence (using the same language that Mises used) has appointed his representatives on earth to run society for him.

[Legislators] being the continuators of Providence on earth, they would have to be regarded as almost equal to God.... If you succeed in persuading the multitude that God himself has chosen certain men or certain races to give laws to society and to govern it, no one will dream of revolting against these appointees of Providence, and everything the government does will be accepted.  (The Production of Security, Chapter 9)

It seems to me that based on Mises and Molinari, we have somebody or some small group claiming to have heard the voice of God, the voice of Providence, the voice of the material productive forces, or whatever and nobody else is allowed to question this voice.  The voice has spoken.  The rest of you masses have only one function:  obey the leader.  The advantage here is simple:  how can anybody question the leader?  I object!  You are wrong Mr. Leader!  How do I go and investigate God?  Will God answer me from heaven with an answer?  Will the material productive forces shout out from heaven, "Neil, you are wrong?"  I don't think so.  There is no absolutely no way to verify what the leader says!  The leader could simply be making all of this stuff up!!!  And, in fact, this train of thought actually did happen.  According to Molinari (emphasis mine)

one fine day they took it into their heads to question and to reason, and in questioning, in reasoning, they discovered that their governors governed them no better than they, simple mortals out of communication with Providence, could have done themselves.  It was free inquiry that demonetized the fiction of divine right.  (The Production of Security, Chapter 9)
When the mystical divine right approach to directing society fell apart (i.e., obey use or be killed as a heretic), according to Molinari, the communist version of popular sovereignty was then tried.  This is the Divine Right of Majorities approach.  According to Molinari, the decisions of the majority must become the law; "the minority is obliged to submit to it."  "If there is no unanimity, if there is still dissension after the debate, the majority is in the right."  Just as the materialistic philosophy ends with the liquidation of all dissenters, so too the sovereignty of the "people" ends with death to all non-conformists.  Molinari writes in chapter 10 of how the Regime of Terror  unleashed by the "sovereign people" leads to the guillotine (emphasis mine):

If anyone does not recognize the authority of those chosen by the people, say the theoreticians of the school of Rousseau, if he resists any decision whatsoever of the majority, let him be punished as an enemy of the sovereign people, let the guillotine perform justice.
In summary, we see various approaches to justify why a leader should be allowed to "direct" society.  The philosophy of history approach basically says:  the book of prophecy says that things will be this way.  What you see right now is inevitable; therefore, there is no reason for you to rebel.  The materialistic philosophies say to the people:  you can't think; you can't act; you can't choose.  Something else is doing all of that for us.  I the leader am the only one who hears the voice of this super-human force or I am the only one who can interpret it correctly.  Therefore, all the rest of you should obey my commands.  I am necessarily right; the masses are necessarily wrong.  Finally, the divine right of majorities is saying, the majority is right, because the majority is capable of discovering the "right laws."  All dissenters must obey.  In sum:  the leader is right because whatever he is doing was preordained.  The leader is right because he is following the material productive forces; these forces told him what to do.  The leader is right because he has the majority votes behind him.

Justifying the "Directing" of Society:  The Case of the Federal Reserve

One book that looks at the history of the Federal Reserve is called Secrets of the Temple:  How the Federal Reserve Runs the Country.  I find the title to be revealing.  The Federal Reserve is viewed as a "temple," which implies that maybe something similar to the "divine right of kings" is at work.  Except instead of calling themselves kings, the leaders of the Federal Reserve "temple" are all technocratic bureaucrats.  

The people, the masses of ordinary citizens "were incompetent to govern" (Secrets of the Temple 285) and so "a new ethic was born--faith in the technocratic approach to government" (ibid).  "Decisions on great public issues that were once left to politics should be consigned to disinterested experts, bureaucratic technicians who had specialized training" (284).  Notice how the "divine right of the majority" is no longer at work with our Federal Reserve System; the framers of this system do not want any public input at all--at least not directly into the operation of the Fed itself.  It seems as if what has happened here is that the technocratic bureaucrats are just emulating the old divine right of kings approach in order to justify why they get to make all the decisions.  Or, to be even more arrogant, to make the "right decisions" for society.  "The managers must occasionally ignore public opinion in order to make correct decisions" (Secrets of the Temple 284).  Instead of hearing the "voice of God" or the "voice of the material productive forces" or "read the prophecies of fortune," these temple-dwelling technocrats have heard the "voice of banking and business data" (ibid, 285).  The book of prophecy that was at the heart of the "philosophy of history" is now the collection of statistical data, i.e., the business and economic statistics filling up computer databases.  The masses are now supposed to worship the "divine right of the statistical model," i.e., the interpretation of the database interpreted by our "high priests" a.k.a. the technocratic bureaucrats at the Federal Reserve.  The "high priests" are no longer interpreting the book of prophecy; they are now interpreting the statistical models that come out of the databases.  Just as one is not supposed to question the representatives of God, so too one is not supposed to question the representatives of the divine statistical model.

These technocratic bureaucrats at the Federal Reserve--the modern day high priests--played an important role in helping out "God," i.e., the power elite masters.  Rothbard summarized all of this so brilliantly when he writes (emphasis mine)

To achieve a regime of big government and government control, power elites [our modern day Gods; "the Prophecy," "Providence," "the material productive forces"] cannot achieve their goal of privilege through statism without the vital legitimizing support of the supposedly disinterested experts and the professoriat [the representatives of God on earth; God's ambassadors; the high priests; the Federal Reserve technocratic bureaucrats].  (The Origins of the Federal Reserve, Section 10)

Concluding Remarks

I called this blog "The Fatal Conceit" and started with Hayek's book by the same name because I wanted to say that the idea that anyone can direct society has got to be the most "fanciful notion" ever conceived.  What I wanted to say is that every time some leader comes along and says:  here I am to direct society--do what I say, he has to always come up with some sort of "fanciful notion" in order to justify what he is doing.  Do what I say because it is written in the prophecy--yeah, the prophecy that the "leader" wrote up the night before, which conveniently makes him the leader!  I, your leader am the only one who knows how to properly  judge in accordance with the will of the material productive forces.  I have no way of knowing what is going on inside the minds of the masses, but that is irrelevant!  I am a "good" person; you are all "bad" people.  I am right; you are wrong.  If you don't obey me, you will die!  My technocratic bureaucrats have figured out the "right" answer, so you must submit to my technical expertise.  In all of these situations we see the same thing over and over again:  the masses are too stupid to make any decisions; I the leader will do all the thinking for you.  I think; you obey or die.  In order to get the masses to go along with this tyranny, the leader then has to invent some ridiculous story in order to justify what is happening.  These ridiculous stories are what I consider to be "the fatal conceit."

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