Book Review: The Fatal Conceit: The Errors of Socialism by F. A. Hayek
OCTOBER 01, 1989 by ROBERT TAYLOR
The University of Chicago Press, 5801 South Ellis Avenue; Chicago, IL 60637 • 1989 • 180 pages • $24.95 cloth
At the ripe old age of 90, Nobel Laureate Friedrich von Hayek has loosed one final curve ball at the academic world. While intended as a capstone work to summarize his lifelong contributions to the social sciences, this book takes a somewhat novel tack by examining the origin and nature of ethics.
Like Marx, Hayek sees an inherent contradiction in Western capitalistic societies. Unlike Marx, however, Hayek sees this contradiction in terms of an ethical dualism, not a materialistic dialectic, and he also feels that this contradiction is both necessary and beneficial—though nonetheless problematic.
Hayek approaches ethics from an entirely different angle from most philosophers. While philosophical ethics usually entail rationalistic system-building from certain assumptions about human nature or from bits of empirical data, Hayek’s ethics are non-rationalistic and based upon the historical process. Hayek rejects the explicit, rationalistic construction of most ethical systems because such constructions rest upon the “fatal conceit” of human reason. Reason, Hayek argues, is incapable of commanding the information necessary to design an ethical system.
Hayek believes that ethics lie somewhere between instinct and reason. Ethics—like language, the marketplace, and the common law—are a spontaneous order that, in the words of Adam Ferguson, is the product of “human action, but not human design.”
Our ethical system was not designed by anyone; it is traditional, handed clown from generation to generation, and learned by imitation. Its progress and development were achieved by a process of social evolution: those cultures which adopted “good” ethical systems survived and flourished, while those with “bad” ones either floundered or adopted more successful ethical systems. This subtle process of trial-and-error has produced Western ethics, a highly successful system.
In what way do Western ethics contain a “contradiction”? To understand this proposition, one must examine Hayek’s theory of the actual historical development of ethics. Hayek holds that the original human ethical system was that of the small group—the hunter/gatherer tribe. These “small group” ethics were both solidaristic and altruistic. The primitive tribes at the dawn of human history were each united by a shared purpose—rudimentary survival in an uncontrollable, hostile environment—that superseded the different purposes of the tribes’ individual members.
As time passed, agricultural techniques were developed and cities were founded. These events provided a basis for two further developments that made “small group” ethics untenable: economic trade and population growth. Trade placed members of closed communities in constant contact with “foreigners” who usually did not share the group’s purposes or beliefs. Population growth, spurred by relative economic security, made the small group rather large, with the result that members of the same group were often strangers to one another and often pursued different ends.
These social changes were matched by changes in the ethical sphere. “Small group” ethics were not applicable to diverse, cosmopolitan communities; groups that failed to adapt became isolated and economically stagnant. Through the social evolutionary process, “small group” ethics were gradually replaced by what Hayek calls “extended order” ethics. “Extended order” ethics abandoned commands that sought collective ends in favor of abstract, generally applicable rules that facilitated varied individual ends. These ethics served as an impersonal mechanism for the coordination of individual actions and plans, whereas “small group” ethics were dependent upon the highly personal rule of the tribal leader, who directed the group to a common goal.
While “extended order” ethics replaced “small group” ethics as the dominant system, “small group” ethics continued to exist side by side with their more successful counterparts. Families, friendships, and businesses continued to operate according to the solidaristic principles of “small group” ethics for obvious reasons. Love, camaraderie, and shared purpose—so necessary to human fulfillment—are possible only within the small group. Thus, contemporary Western ethics are a heterogeneous mixture: “extended order” ethics tell individuals and groups how to act within the larger social order, while “small group” ethics instruct individuals how to behave within the confines of the various voluntary organizations to which they belong.
But, as Hayek notes, individuals have only a “limited ability to live simultaneously within two orders of rules.” The dividing line between the two ethical structures often becomes fuzzy in application, leaving individuals confused concerning their obligations. For instance, one would dearly have an obligation to assist a friend or family member in financial need. But what about a needy stranger who accosts one on the street? Or a fellow businessman, teetering at the edge of bankruptcy, with whom one is competing in the marketplace of the extended order?
Hayek warns that, as strong as the tension may be, the balance between the two systems of ethics must be maintained. Both systems serve vitally important functions within their own spheres: “small group” ethics provide for warmth and compassion essential to man as a social animal, while “extended order” ethics provide a coordination function necessary to maintain economic security and further growth in both population and wealth.
While no one (with the possible exception of Ayn Rand’s followers) is calling for an extension of “extended order” ethics into the realm of the small group, there is an influential intellectual group, the socialists, calling for just the opposite: the reconquest of the West by “small group” ethics. Needless to say, Hayek looks upon this prospect unfavorably. Hayek, while admitting that such an event might initially satisfy our instincts, points out its long-range consequences: poverty, starvation, and widespread death. “Extended order” ethics, Hayek notes, are chiefly responsible for making possible our present level of population and economic well-being; their abandonment would lead to chaos and primitive tribalism, a tribalism which, lacking large-scale coordinating capabilities, would be unable to sustain Earth’s population.
The ethical dualism Hayek sees in Western society is ultimately incapable of resolution. The socialist alternative, argues Hayek, is reactionary and inapplicable to the complex yet subtle extended order of the modern world. Hayek’s final message in The Fatal Conceit is wise counsel that should be pondered by all: the maintenance of a classical liberal society, an extended order composed of individuals and voluntary organizations freely interacting, is, without exaggeration, a matter of life and death. 
Robert Taylor is a junior studying political science and economics at the University of Tennessee at Knoxville. This review is adapted from a column in the campus newspaper, The Daily Beacon.