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Friedrich Hayek and American Science Fiction

Mises Daily: Friday, April 08, 2011 by

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[Transcribed from the Libertarian Tradition podcast episode "Friedrich Hayek and American Science Fiction"]

F.A. Hayek

Friedrich August von Hayek was born in Vienna on the eighth day of May 1899. When he graduated from the University of Vienna in 1921, at the age of 22, he applied for a job with the Austrian Office of Claims Accounts, the government agency charged with paying the nation's war debts as those had recently been defined in the Treaty of Saint Germain, the treaty that, for those who lived in Austria, ended World War I.

Hayek had a letter of recommendation from a very high-ranking and influential professor of economics at the university, Friedrich von Wieser, and it seems to have been largely on the strength of Wieser's recommendation that Hayek was hired by his new boss, a 40-year-old named Ludwig von Mises. When Hayek came into Mises's employ, he favored the democratic-socialist politics of Wieser, his mentor at the university. But it didn't take too many weeks of daily exposure to Mises to set Hayek on the right track with regard to that.

Mises taught Hayek a great deal and gave him the two great subjects of his early years as a wunderkind economist — the socialist-calculation problem and what has come in years since to be called Austrian business-cycle theory. It has been said, and not without justice, that when Hayek won the Nobel Prize in Economics in 1974, he was being honored for his elaboration of Mises's theory of the business cycle. Yet, questions of originality aside, it always seemed to be Hayek who attracted public attention — attracted it first and attracted more of it. This began in the 1930s and continued right up to the time of Hayek's death, 19 years ago last month, on March 23, 1992.

In the ''30s, it was Hayek, not Mises, who defended Mises's business-cycle theory in public debate with John Maynard Keynes. In one year in the following decade (it was 1944), Mises published two short books — Bureaucracy and Omnipotent Government — while Hayek published only one. But Hayek's book, The Road to Serfdom, was an international bestseller that set the stage for a sensationally successful US lecture tour. And 30 years later, it was Hayek, not Mises, who won the Nobel Prize.

Also, in the last decade, it has been Hayek, not Mises, who has begun to worm his way into American popular culture — this despite the fact that his prose style can be, shall we say, formidable? I remember years ago — sometime back in the '80s, I think — reading a brief comment by the American science-fiction writer, Samuel R. Delany; in this passage, Delany said of some author or other that his prose was "almost opaque with precision." Delany wasn't writing about Hayek, but I recall looking up from the page and thinking, "Hayek!"

The most recent, and therefore currently the most noticeable, instance of this unlikely penetration of American popular culture by Hayek is the "Fear the Boom and Bust" rap video, which, with amazing accuracy, depicts the famous ongoing public debate during the 1930s between Hayek and Keynes over the business cycle and government policy. If, somehow, you have managed not to see this small masterpiece yet, run, don't walk, to the YouTube video.

Meanwhile, let me tell you about a less well-known appearance Friedrich Hayek made in American popular culture in the last decade — one involving ideas of his that he definitely did not learn from Ludwig von Mises. It was in 2003 in a novel called Pattern Recognition by William Gibson. Gibson is a South Carolina native now in his early 60s; he fled to Canada to escape the Vietnam-era draft and has lived in Vancouver ever since. With the publication of his revolutionary novel Neuromancer in 1984, he became the resident wunderkind of North American science fiction, a status I think he could be said to have gone on holding through the 1990s. Then, in 2003, he published Pattern Recognition, the first realistic novel of international business that might be said to be informed by an Austrian perspective.

Pattern Recognition by William Gibson

Hayekians will instantly notice Gibson's title, of course, and will suspect some connection between his novel and one of their master's most deservedly famous essays, "The Theory of Complex Phenomena."Download PDF They will be right to do so. The main character of Pattern Recognition is Cayce Pollard, a 32-year-old independent marketing consultant with a rare skill set to offer the advertising agencies and design firms that make up her clientele. She is, Gibson tells us, a sort of "dowser in the world of global marketing," a person whose job is "finding whatever the next thing might be." As she explains to a hopeful young designer of hats at one point in the novel, "What I do is pattern recognition. I try to recognize a pattern before anyone else does."

In this, of course, she is no different from anyone else in the marketplace. In this, she is only human. As Hayek notes in "The Theory of Complex Phenomena," no matter how

urgently we may want to find our way in what appears just chaotic, so long as we do not know what to look for, even the most attentive and persistent observation of the bare facts is not likely to make them more intelligible. … Until we have definite questions to ask we cannot employ our intellect.

And, of course,

questions will arise at first only after our senses have discerned some recurring pattern or order in the events. It is a recognition of some regularity (or recurring pattern, or order), of some similar feature in otherwise different circumstances, which makes us wonder and ask "why?" … It is to this trait of our minds that we owe whatever understanding and mastery of our environment we have achieved.

Nonetheless, Hayek reminds us, this trait of our minds is not without its drawbacks. "Marvellous … as the intuitive capacity of our senses for pattern recognition is," he writes, "it is still limited." For one thing, "only certain kinds of regular arrangements (not necessarily the simplest) obtrude themselves on our senses. Many of the patterns of nature we can discover only after they have been constructed by our mind." Another built-in limitation is the uncomfortable fact that there are problems so complex that no one mind can solve them, no matter how formidable its powers of pattern recognition.

As Hayek noted in 1945 in "The Use of Knowledge in Society," another of his justly celebrated essays,

the peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus … a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

No one mind can grasp the pattern of the entire economy all at once — if only because that pattern is constantly changing, constantly evolving. In another sense, then, as Hayek puts it, "the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place." For "the continuous flow of goods and services is maintained by constant deliberate adjustments, by new dispositions made every day in the light of circumstances not known the day before, by B stepping in at once when A fails to deliver." And people who can recognize patterns before anyone else does can do very well for themselves in the marketplace by knowing before anyone else exactly what adjustments need to be made.

One such person is the entrepreneur, whose recognition of a pattern no one else sees enables him to launch successful new enterprises. Another is the radio or television programmer, the theatrical or musical booking agent, the buyer for a retail store, the person whose recognition of a pattern few others yet see enables her to profitably anticipate changes in the public taste. Yet another is the professional marketer, someone like Cayce Pollard.

As the action of Pattern Recognition begins, sometime in the early 21st century, Cayce has been flown to London by an advertising firm called Blue Ant to pass judgment on a proposed new corporate logo for one of the agency's largest clients. It is to such logos that Cayce has a special sensitivity — or perhaps it might better be called a set of finely tuned receptors or a set of special talents. "Her talents," Gibson tells us, which her boss at Blue Ant "calls her tame pathologies, had carried her along, and gradually she'd let them define the nature of what it was that she did. She'd thought of that as going with the flow, but maybe, she thinks now, it had really been the path of least resistance."

But of course going with the flow is following the path of least resistance — it's going where the flow is unimpeded. And this is precisely what is required of every participant in the world of business who seeks monetary success: to find one's niche, to find the place where one's natural talents or acquired skills best take the sting out of the slings and arrows of outrageous competition, to identify one's comparative advantage in the marketplace.

Cayce has certainly done so, however much time she may devote to worrying pointlessly about it all. She dutifully attends the meeting at which she is to evaluate the proposed new logo — at which, as she puts it to herself, she is "to serve as a very specialized piece of human litmus paper." Taking a look, Gibson writes, "she knows immediately that it does not, by the opaque standards of her inner radar, work. She has no way of knowing how she knows."

One is reminded here of the character John Strapp in another science-fiction story set in the world of business, "Time Is the Traitor" by Alfred Bester. Bester, an acknowledged influence on Gibson's writing, introduces Strapp in a manner that would have made Hayek's heart fond. "There was a man named John Strapp," Bester wrote,

the most valuable, the most powerful, the most legendary man in a world containing seven hundred planets and seventeen hundred billion people. He was prized for one quality alone. He could make Decisions. Note the capital D. He was one of the few men who could make Major Decisions in a world of incredible complexity, and his Decisions were 87 percent correct. He sold his Decisions for high prices.

There would be an industry named, say, Bruxton Biotics, with plants on Deneb Alpha, Mizar III, Terra, and main offices on Alcor IV. Bruxton's gross income was Cr. 270 billions. The involutions of Bruxton's trade relations with consumers and competitors required the specialized services of two hundred company economists, each an expert on one tiny facet of the vast overall picture. No one was big enough to coordinate the entire picture. Still, the day would come when Bruxton would need a Major Decision on policy. A research expert named E. T. A. Goland in the Deneb laboratories had discovered a new catalyst for biotic synthesis. It was an embryological hormone that rendered nucleonic molecules as plastic as clay. The clay could be modeled and developed in any direction. Query: Should Bruxton abandon the old culture methods and retool for this new technique? The Decision involved an intricate ramification of interreacting factors: cost, saving, time, supply, demand, training, patents, patent legislation, court actions and so on. There was only one answer: Ask Strapp.

Bruxton does. Strapp Decides. And "in return, Bruxton had an 87 percent assurance that the Decision was correct." Yet, as Aldous Fisher, Strapp's liaison man, notes, "he doesn't know how he does it. If he did he'd be one hundred percent right instead of eighty-seven percent. It's an unconscious process."

Cayce "has no way of knowing how she knows." Strapp "doesn't know how he does it." Nor is either of their situations unique. Alfred Bester reports, in his "Introduction" to a 1976 reprinting of "Time Is the Traitor" (which was originally published in 1953), that he himself did his own work in the marketplace without understanding fully how he did it. "I don't coolly block a story in progressive steps like an attorney preparing a brief for the supreme court," he wrote.

I'm more like Zerah Colburn, the American idiot-savant, who could perform mathematical marvels mentally and recognize prime numbers at sight. He did it, but he didn't know how he did it. I write stories, but as a rule I don't know how I do it.

Hayek would say, I believe, that this is merely one of millions of possible examples of a phenomenon he describes as "the capacity to act according to rules which we may be able to discover but which we need not be able to state in order to obey them." (This is taken from yet another justly celebrated Hayekian essay, "Rules, Perception, and Intelligibility.")

In Hayek's view, "the most striking instance of the phenomenon is the ability of small children to use language in accordance with the rules of grammar and idiom of which they are wholly unaware." But "the phenomenon is a very comprehensive one and includes all that we call skills" — skills like judging corporate logos, making Decisions, writing fiction, or, as Hayek notes, "the skill of a craftsman or athlete" or a player at the billiards table. Skills are also, of course, what each of us has to sell in the marketplace.

So far as I know, no one else has pointed out this Hayekian angle in Gibson's novel, but it's there, and with any luck it may intrigue a few more people into picking up Hayek himself to see what all the fuss has been about. For anyone hoping to see continued growth of the libertarian tradition in the years to come, such an outcome is profoundly to be desired.