Friedrich A. Hayeks Individualism and Economic Order Summary - Essay Example

?INDIVIDUALISM AND ECONOMIC ORDER Summary of Economist’s Basic Ideas One of the best one-shot s that can be given to Friedrich A. Hayek’s “Individualism and Economic Order” to best depict the summary of the book is a debate of free market versus socialist planned economies (Burgess, 2008). Taking no central stand on which of the two sides namely free market and socialist planned economies that he belongs to or defends most, the writer succeeded in using a number of empirical themes picked from aspects of moral philosophy, social sciences and economic theories to clearly lay out a comparative analysis between the two forms of economic perspectives. The themes used by the writer indeed, became the central ideas around which the entire book, which is actually made up of a collection of writings was written. Four of these basic ideas are summarized below. Facts and Fallacies of Individualism The economist holds a basic idea that individualism, and for that matter social order is neither a fact nor a fallacy but that it is both a true and false. First, the economist writes to associate individualism more to be a social order whereby regardless of the fact that people are expected to behave and react in a certain individualistic manners to meet their economic needs of life, they are at the same time obliged to act according to the larger interest of society. From this perspective, the economist goes on further to give vivid reasons why individualism and for that matter social order could be considered to be false. The explanation given is that “in social matters one does not adhere to fixed principles but decides each question "on its merits"; that one is generally guided by expediency” (Hayek, 1996, p. 1). Invariably, the writer is implying that no individual would be robotic to economic principles even when those principles deny him food on his table. This is what makes individualism true because people function economically according to the dictates of their conditions. On the other hand, there is a justification given as to why individualism and economic order could be true. With this, the economist explains that “principles, have a way of asserting themselves even if they are not explicitly recognized but are only implied in particular decisions (Hayek, 1996, p. 1).” In other words, even if a person defies the provisions of economic principles, the core values of these principles remain a fact and thus true. The use of Knowledge in Society In the second theme and basic knowledge explicitly outlined by the economist, he visits the availability of knowledge and the use of it thereof in modern society. Whiles doing this, the economist related economies to social science by making the assertion that the provisions that make social existence possible form the basis of rational economic order (Gabby, 2005). To this the economist emphasizes the point that what society really needs to manager its rational economic order is logic. By logic, the economist talks of using common sense presented at the individual stage of getting things worked out for a person. A clear sense therefore, an endorsement is made by the writer of individualism as a fact by raising the point of logic. The economist further throws light on the fact that the logic needed to make things work out for individual entities within society comes about as a result of making use of available information, and thus knowledge. By the mention of some of the specific knowledge needed to making prudent economic choices, the writer is quick to further justify individualism in relation to the available knowledge needed to make the economies of society run by stating that “the peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge never exists in concentrated or integrated form but solely as the dispersed bits knowledge” (Hayek, 1996, p. 77). Socialist Calculation Indeed, it has already been said that central focus and the most perfect summary to be given to Hayek’s work is free market versus socialist planned economies. So while writing on this basic idea of socialist calculation, the economist delves deep into the issue of socialism or socialist planning of economies by looking at three distinct aspects of the socialist calculation. First he looks the nature and history of the problem, and then touches on the state of the debate, before coming to the competitive solution. With all these, the critical point that the writer was seeking to emphasize was that even though he had previously given so much justification to individualism, which brings forth the roots and dealings of a free market, society is fast changing towards a direction, whereby the need to coordinate all the individual perspectives of people have become a necessity (Bowman, 2007). The economist actually starts a crusade that aims at highlighting how weak and haphazard the indulgence to individualism is and so a justification by world economies and governments to seek to socialist approaches. In the opinion of Hayek (1996, p. 119), “today there is hardly a political group anywhere in the world which does not want central direction of most human activities in the service of one aim or another.” This is because it ensures that a single collective intervention and approach can be used to address the day to day economic needs of a larger group of persons rather than sticking to the pattern of getting singular economic ambitions fulfilled. The Economic Conditions of Interstate Federalism Closing up on his entire presentation, the economist visits the basic idea of interstate federalism and the economic conditions that make this meriting and non-meriting. First, the economist hails the individual efforts being made by world leaders and economic groups and regions to break trade barriers and create a single denominational market. In fact, this is an idea that the economist praises highly and states that the benefit that comes with it cannot be overemphasized. All of this not withstanding, the economist adds that there is a cost to pay in opening up the global market and that is the fact that “establishment of economic union will set very definite limitations to the realization of widely cherished ambitions” (Hayek, 1996, p. 255). The ambition being referred to here is directly related to interstate federalism. To this end, the lost of interstate federalism is in the estimation of the writer, the economic condition that needs to be paid by governments who want to benefit from the merits of an open global market. For (Hayek, 1996, p. 256) laments that “if international treaties are to be concluded only by the Union, it follows that the Union must have sole power over all foreign relations, including the control of exports and imports.” Evaluation of the ideas’ intellectual strengths Intellectually, it would be said that the economist gave a very fair and balanced argument in support of both the free market system and the creation of socialist economies. The balance created is a general intellectual strength of the ideas presented by the writer. But more specifically, mention can be made of intellectual validity of the idea that economic orders and rationales revolve round the existence of knowledge, which ironically “never exists in concentrated or integrated form but solely as the dispersed bits knowledge” (Hayek, 1996, p. 77). There is no denying the fact that most of the economic principles and philosophies that control and govern the regulation and circulation of resources and the materialization of these resources into the satisfaction of human needs hold their credence to the individual contributions of people to economic theory formation (Bowman, 2007). To this end, it is a major strength and with total intellectual justification to assign the existence of economic principles to the individual contributions made out of the knowledge of people. What is more, the economist was rightly on the point in giving vivid examples of how the individual knowledge and ideas that have been born by these people have succeeded in helping them achieve economic freedom in most cases. It is actually from this perspective that the economist gives much reverence to the power of the free market and hails it as a success, which can hardly be refuted in a typical economic scenario. Whiles making a lot of intellectual justification with the existence of knowledge, the economist was also loud and clear on how the individual knowledge can best be used for the benefit of the larger society and in this area also, a lot of intellectual points can be said to have been scored. If for nothing at all, modern economic studies have justified the power of coordinated economic rule as against the individualist exhibition of rule (Narus, 2006). So even though it may sound quite conflicting to justify free market or individualism and at the same time justify the socialist creation of economies, the economist could have his arguments well put together in drawing a relation between the two. For instance after having justified the fact that the knowledge in society and its use thereof should be credited to individuals and from an individualized perspective, he also rebuts his point with why it would almost be wasteful to keep these knowledge, which are brooded at the individual level, nurtured and applied at the individual level. It is for this reason that the economist, in direct consonance with modern economic practice outlines that the only way to have a common solution to the problems of as many people as possible at a go is to appreciate the need to have a consensus principle that meets the individual interests of all people (Narus, 2006). Quite logically therefore, the economist uses the justification in the way world governments has embraced socialist rule to highlight on reasons why it would almost be a failure to keep knowledge at the individual level instead of societal level. Evaluation of the ideas’ intellectual weakness Having agreed with the economist on the origins of knowledge in society and the best was to use this knowledge, it would be academically fair to also have a look at some of the key intellectual weaknesses that certain basic ideas presented by the economist have. One of these intellectual weaknesses has to do with the issue of the economic conditions for interstate federalism. Indeed, having justified some of the advantages that comes with the erasing of trade barriers, the economist should have remain firmer with his position rather than compromise with world leaders who cherish the sovereignty and federalism of their states to the detriment of a unified global economy. With the advent of globalization, one fact that can hardly be argued is the advantageous comparison between individualistic runnings of state economies as against the coordinated system of global running (Ankomah, 2005). It is for this reason that leaders all around the globe have started seeking trade and economic partnership that aims at fostering and consolidating the economic weaknesses and lapses that they have. From this perspective therefore, even though it was right for the economist to identify the economic conditions that come with interstate federalism, it is an intellectual weakness that he could not embrace the general stand that seem to be the order of the day today and that is the adherence to a more compact and a universally robust economic trade partnership and agreement. Indeed, but for the advantage of it, formation of economic communities across the globe would not have been this much. Relevance of Basic Ideas for our Understanding of Today’s Economy Just as it was illustrated by the economist, today’s economy is friendlier towards socialist approaches to getting the problems of people solved (Bovet and Sheffi, 2008). To this end, the basic ideas of the economists, especially those that explain the origins of knowledge and the best way to use socialist approaches to build a global economic order is highly relevant to today’s economy. If for nothing at all; a model on the socialist calculation has been established by appropriately identifying the problems and giving out interventions on these problems. In today’s economy, much of the debate is with who reaches down to the most number of people on the street and not about who gives out best statistics and principles of economics (Burgess, 2008). From this perspective, the point where the economists gives so much credence to individualism as a way of finding the most appropriate and workable solutions to one’s economic problems is rightly in consonance with today’s economy. It must indeed be emphasized and highlighted that the application of the latter is not only viable for individual people but for the collective practice of corporate bodies and governments as well. From this endeavor, a challenge is being thrown to managers of modern day economy to be pragmatic, and where necessary radical with the institutionalization and use of economic principles so as to achieve the ultimate goal of getting the problems of the people, who look up to them, solved. CITED WORKS Ankomah, D. Dispensing Economic Partnership and Trade Reviews. New York: Dynamite Press Series. 2005. Print. Bovet, D. .S., and Sheffi, Y. The brave new world of supply chain management. Supply Chain Management Review. 2008. 34(4): 14–22. Bowman, R. .J. Link by link: global supply chains. 2007. Distribution 96(8): 88–90. Burgess, R. Avoiding supply chain management failure: lessons from business process re-engineering. International Journal of Logistics Management. 2008. 9(1): 15–23. Gabby, G. Trade Maximisation and Growth. Oxford: University Press Limited. 2009. Print. Narus, J. A., and Anderson Jefferson C. Rethinking distribution: adaptive channels. Harvard Business Review. 2006.74(4): 112–120. Read More