Last night’s BBC programme on F. A. Hayek was interesting and, like the Keynes programme, gave the subject a fair crack of the whip. It is not by way of criticism that I write this blog post, but a comment by Stephanie Flanders raised an issue in my mind that deserves further elaboration.
The series of programmes had a focus on money. I guess the BBC would have struggled to get an audience for a series which had as its theme the analysis of extended economic orders and structures. As such, there was a lot on money last night and quite a bit of material on the difficulty of central planning. There was a little less emphasis on the way in which the market produces stable extended orders and the way in which markets can regulate themselves. In a very different context, these ideas have been developed by Professor Elinor Ostrom, the 2009 Nobel Laureate. She is one person who Krugman could not accuse of producing ideas that were not borne out by history – her whole academic method was to research exactly what was happening in real time.
Our understanding of how markets develop these sophisticated forms of economic and social co-operation is one of Hayek’s greatest legacies. These orders can never be designed; they can only evolve. These orders often also add a deeply social aspect to the market economy (think about all the self-regulating sports that evolved in this country – including soccer). Ignoring this lesson is perhaps another sense in which there has, perhaps, been too much Chicago and not enough Vienna in our financial markets.