Stephen Hicks, Ph.D.

Hayek and Rand on reason — APEE panelists

In addition to the session on Ethics and the Financial Crisis, I am chairing a session on the theme of “Reason in Hayek and Rand” for the Association for Private Enterprise Education conference to be held April 11-13, 2010 in Las Vegas, Nevada.

The rationale for the session: Two giants of twentieth-century thought — but few comparative studies have been done. The following panelists will discuss how Friedrich Hayek’s account of reason compares to Ayn Rand’s.

Reason in Hayek and Rand
Chair: Stephen Hicks, Rockford College

Jennifer Baker, College of Charleston
Title: “Buying and Value”
Abstract: F. A. Hayek and Ayn Rand have very distinct descriptions of consumer behavior. Rand describes consumers purchasing what they do as an acknowledgement of the value of the product. Hayek reprimands economists who make a similar description, as it is a clear “mistake.” What causes one account to differ from another on this matter? What is at stake when it comes to the rationality ascribed to consumer choice? In this paper I lay out the Randian and Hayekian alternatives and assess them against each other.

David Kelley, Atlas Society
Title: “Rand vs. Hayek on Abstraction”
Abstract: Both Ayn Rand and Friedrich Hayek understood that the political institutions of freedom rest on cultural foundations. Both thinkers held that individuals are influenced by the beliefs, values, and practice of their culture. Both believed that civilization has progressed from the tribalism of primitive societies toward the greater individualism of modern liberal society. At a deeper level, however, Rand and Hayek differ profoundly about the nature of culture and cultural change. Rand holds that cultural practices rest on ideas that are the product of reason and open to rational assessment. Hayek offers an evolutionary account in which ideas as well as practices are acquired by imitation and spread by a kind of natural selection.
This difference is in large part the result of more fundamental differences in their respective epistemological views. In this paper, I will discuss one central issue that I believe underlies many of the others. That issue concerns the nature of abstractions—our concepts for general kinds of their and their common attributes, and the abstract principles and rules that we form with our concepts. Rand held that we form abstractions from the observation of particular, concrete things. Hayek held the opposite view that abstractions are primary; some are innate, some acquired from our cultural environment, but neither can be independently supported by observation of concretes. Though Hayek’s view is in some ways more in tune with current theories of cognition, I will argue that it is both false and inconsistent with a fully individualist moral and political theory.

Tibor Machan, Chapman University
Title: “Hayek and Rand on Constructive Rationalism”
Abstract: F. A. Hayek was suspicious of constructive rationalism and this has sometimes been taken to amount to a diminution of human reason in Hayek’s eyes. Ayn Rand, in contrast, has embraced human reason as the primary means for people to grasp reality and to guide themselves as they conduct their lives.
Do Hayek and Rand disagree? Yes, Ayn Rand has been very harshly critical of Hayek, judging by her marginalia of The Road to Serfdom (see Robert Mayhew, ed., Ayn Rand’s Marginalia). But her focus in these comments was Hayek’s allegedly infelicitous writing and thus sloppy thinking, not so much his positions on various issues and even less his ideas concerning human reason. In other contexts Rand has been identified as a critic of rationalism, which could be taken as paralleling Hayek’s objection to constructive rationalism. I plan to explore these matters.

Alexei Marcoux, Loyola University Chicago
Title: “Hayek’s Epistemic Case for Entrepreneurial Capitalism”
Abstract: One case for entrepreneurial capitalism is straightforwardly philosophical. A handful of fundamental principles are announced and argued for. Then it is shown that an entrepreneurial capitalist social order follows from the principles announced and defended. Roughly, this is the approach of libertarian defenders of the market like Murray Rothbard, Robert Nozick, and Ayn Rand. Another case for entrepreneurial capitalism proceeds differently. It is based on an account of the epistemic limitations of human beings and what works to their advantage given those limitations. This is the approach of F. A. Hayek. In a long and prolific career that saw him make significant contributions to economics, psychology, and social and political philosophy, the common thread in Hayek’s thought is the limits of human cognition. Those limits undermine the prospects of socialist calculation and of the technocratic, managerial capitalism taught in university-based business schools and championed by thinkers like Alfred Chandler and J. K. Galbraith. The case based on epistemic limitations is contingent rather than necessary. For that reason (among others), it draws fire from other defenders of entrepreneurial capitalism for being insufficiently definite. Parallels in the thought of Michael Oakeshott will also be discussed.

The increasing(ly clear) relevance of Ayn Rand

“Read the news today? It’s like ‘Atlas Shrugged’ is happening in real life,” as this Facebook group points out.

Many intelligent observers have noted the connection, which has led to sharply increased sales of Atlas and prominent coverage of Atlas’s themes in Business Week, Forbes, the New York Times, the Economist, The Wall Street Journal, and other major publications. And from across the pond comes this British magazine’s tribute and commentary on Ayn Rand’s significance. (Thanks to Bob H. for the link.)

Amity Shlaes’s recent piece in Bloomberg is well worth reading: Atlas Is Shrugging With a Growing Load. Shlaes is the author of a recent history of the Great Depression and so is well positioned to offer commentary on our times. A pair of key quotations from Shlaes’s piece:

On punitive taxation: “In 1986, a year when Atlas Shrugged sold between 60,000 and 80,000 copies, the top 1 percent of earners paid 26 percent of the income tax. By 2000, that 1 percent was paying 37 percent, and Atlas Shrugged sales were at 120,000. By 2006, the top 1 percent carried 40 percent of the burden.”

On government fiat money and deficit financing, quoting Rand: “Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’”

Today’s events are a consequence of political, economic, and, more importantly, philosophical principles adopted by the most influential thinkers and doers of the last several generations. The antidote, accordingly, requires that this and the next generation’s most influential thinkers and doers change their philosophical course.

For follow-up material on Rand’s philosophical analysis of the roots of the crisis and the antidote, I recommend the following.

For general readers, here is my introductory overview of Ayn Rand’s biography and ethics at the Internet Encyclopedia of Philosophy.

For all readers, here are two recent anthologies of essays on Atlas Shrugged, one edited by Professor Edward Younkins and the other edited by Professor Robert Mayhew.

For a technical, book-length discussion of Rand’s ethical theory, here is Tara Smith’s Ayn Rand’s Normative Ethics. For further discussion of Professor Smith’s book, here is my review [pdf], published in Philosophy in Review, and Carrie Ann Biondi’s extended review [pdf], published in the most recent issue of Reason Papers.

For a philosophically-informed analysis of the crisis by a top-level financial professional, I recommend John Allison’s analysis. Allison is Chairman of BB&T and one of the great businessmen of our generation. Evidence: BB&T is one of the major banks that is still very healthy. Like Todd Zywicki, I recently heard Allison speak on the origins of the financial crisis and how BB&T avoided being sucked into the mess, and I recommend his analysis highly.

As we are suffering through yet another hard experiential lesson about collectivism and enforced altruism, let’s resolve to learn the lesson clearly and in principle so that the next generation will see more encouraging signs like these.