Freeman

BOOK REVIEW

Discovering a Good Society Through Evolution and Design

The Best Social, Legal, and Political Institutions Must Be Discovered

DECEMBER 01, 1995 by KYLE S. SWAN

Martti Vihanto’s Discovering a Good Society Through Evolution and Design, is an interesting and new approach to Austrian welfare economics and social philosophy. Vihanto’s treatment consists of first, an extended essay explaining the main tenets of Austrian economics and their historical development. He reviews the Austrians on methodology, how theorists in the Austrian school have historically approached economics, and introduces the concepts of human ignorance and entrepreneurial discovery.

The six remaining previously published essays elaborate on the various elements introduced in the first by bringing into the picture contributions from different disciplines. For example, Vihanto borrows from public choice theory for his critique of contemporary welfare economists who develop fancy social welfare functions to justify the unlimited government action they recommend. These economists’ models assume benevolence in government officials when James Buchanan, among others, has demonstrated that people in government are self-interested like everybody else and tend to misuse public power for personal gain. Abandoning the assumption of benevolence paints a more realistic picture of political phenomena and strengthens Vihanto’s criticism of the use of unrestrained government action to enhance welfare.

Discovering a Good Society’s strongest area is the discussion of the spontaneous order. The pursuit of one’s own interests results in an unplanned harmony of interests. As spelled out by the Physiocrats of eighteenth-century France and echoed by Classical economists such as Adam Smith, the spontaneous order always referred to a state of affairs where individuals utilized given information to coordinate their ends, clearly a static concept. The subtle refinements made by Austrian economists Ludwig von Mises and F. A. Hayek implied a spontaneous ordering and evolution of the market highlighting the inevitable possibility that competitive forces would push individuals to discover as yet unforeseen possibilities with unknown results. Such are the workings of a truly spontaneous order.

Vihanto broadens this analysis to apply to social theory in general. He explains that deliberate search for unforeseeable discoveries is impossible. The best social, political, and legal institutions for the maintenance of society must be discovered. Says Vihanto, in a liberal order “we should create favorable conditions for such discoveries rather than be content with the institutions we currently happen to know.”

These institutions affect all members of society and thus must in the minds of all members be agreeable not to just a few privileged members of society, a majority of elected officials, or a bureau of planners. Unanimity is a necessity. Austrian economists have shown that you can only know individual subjective preferences through a person’s actions. As Mises said, preferences cannot even be said to exist outside individual acts of choice. By rational reconstruction of their actions we interpret their goals, desires, preferences, etc. Vihanto argues that there are only two ways for individuals to reveal their preferences for or against institutions. First, by popular referendum. However, the unanimity criterion makes this option unlikely. Second, by moving to or remaining in a society where the institution exists. Vihanto calls this group competition and argues that good institutions will be discovered as an unintended consequence of this process. Moreover, as individuals move from societies with “bad” institutions to those with “good” ones, these latter societies will have survived the natural selection process and potentially prosper. The process may also lead societies with “bad” institutions to adopt the institutions that have proved successful for more prosperous societies.

Vihanto’s discussion is really teaching us the importance and benefits of decentralization, by echoing the classical liberal stance on toleration and experiments in living. His seems an excellent argument for states’ rights advocates or even secessionist movements. The impetus for change lies in these decentralized units. The United States potentially has 50 different models to discover the best ways of doing things. Further investigation into the implications of Vihanto’s study may yet bear fruit. []

Mr. Swan is a member of FEE’s staff and a graduate student at New York University.

ASSOCIATED ISSUE

December 1995

comments powered by Disqus

EMAIL UPDATES

* indicates required
Sign me up for...

CURRENT ISSUE

July/August 2014

The United States' corporate tax burden is the highest in the world, but innovators will always find a way to duck away from Uncle Sam's reach. Doug Bandow explains how those with the means are renouncing their citizenship in increasing numbers, while J. Dayne Girard describes the innovative use of freeports to shield wealth from the myriad taxes and duties imposed on it as it moves around the world. Of course the politicians brand all of these people unpatriotic, hoping you won't think too hard about the difference between the usual crony-capitalist suspects and the global creative elite that have done so much to improve our lives. In a special tech section, Joseph Diedrich, Thomas Bogle, and Matthew McCaffrey look at various ways these innovators add value to our lives--even in ways they probably never expected.
Download Free PDF

PAST ISSUES

SUBSCRIBE

RENEW YOUR SUBSCRIPTION