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Freedom Is Free

Mises Daily: Tuesday, May 03, 2011 by


[The Lily: Evolution, Play, and the Power of a Free Society • By Daniel Cloud • Amazon Digital Services, 2011 • 496 pages]

The Lily

Many people imagine that authoritarian regimes have an advantage over free societies because they can force people to conform to a rational plan. Freedom, it would seem, isn't free — it comes at the cost of irrationality. Free enterprise results in Hilferding's "anarchic production," democracy in Marx's "parliamentary cretinism." Surely better outcomes could be achieved by an all-wise, incorruptible philosopher king, if only a suitable person could be found for the job.

In The Lily: Evolution, Play, and the Power of a Free Society, Daniel Cloud, a researcher at Princeton University, argues that the apparent irrationality of the free society is actually its principal source of strength. The problem with planning is that it is limited by the cognitive capacity of the planner. The free society instead takes advantage of evolutionary forces, which through trial and error produce results that generally could not have been anticipated a priori.

Cloud's argument rests on the distinction between performative and declarative knowledge — the former being knowledge of how to do something, the latter knowledge that something is the case. "The knowledge that orders a society of successful rational utility maximizers is presumably all declarative knowledge," he notes, while "much of the knowledge in an evolved society is bound to be purely performative."

Unfortunately for any would-be philosopher kings, performative knowledge plays a key role in the solution of real-world problems. Not only does much of the economically relevant information in society consist of facts about what Hayek, in "The Use of Knowledge in Society," called "particular circumstances of time and place"; many of the techniques for making use of these facts are not even amenable to precise explication. Even if Hayek's "man on the spot" were able to convey all of the declarative knowledge at his disposal to a central authority he might still be unable to give a satisfactory account of what needed to be done.

The economic advantage of the free society is not simply that it can make effective use of all the declarative knowledge available to its members through the price system, as Hayek argued. Its freedom also allows new performative competencies to emerge through natural selection.

The outcomes it achieves are therefore not limited to those that could be figured out in advance by individual decision makers — be they beneficent central planners or profit-maximizing entrepreneurs. Instead, Cloud argues, as a result of individuals' "trial-and-error testing of incremental, negotiated, possibly frivolous modifications of systems of practices that were already working," the "wild power" of evolution exploits "all the possible functions of a form and its immediate modifications, without restriction. … Any attempt at detailed central planning would only get in the way of the evolutionary process, substituting the narrow judgment of a mere human person for the omniscient oracle of natural selection."

In biology, it is obviously the organism that is acted on by natural selection. For a theory of social evolution to make sense, it is necessary to identify analogous units of selection within society. For these to evolve in the same manner as their biological counterparts, Cloud argues that they must satisfy three criteria.

First, they must be indivisible so that parts share a "common selective fate" with the whole. Note that this rules out entities from which it is possible for individuals to disassociate themselves — for example, the German Volk or the proletariat. Cloud's story, while having everything to do with Darwin, has nothing to do with social Darwinism.

Second, the process that generates new units must be "fair" in the sense that the interests of the individual people involved are all taken into account. This makes it possible for a diverse range of forms to emerge in a manner analogous to the "fairness" exhibited in sexual reproduction, where the genes of both parents are equally represented in the offspring.

And third, this process must be frequently repeated so that there is sufficient opportunity for a large number of variations to be tried.

Democratic governments and capitalist firms meet all three criteria. Both are usually indivisible. Both are based on processes that are supposed to take everyone's interests into account (negotiation and voting). And both are formed frequently.

By contrast, one-party states and state-owned enterprises are at a clear disadvantage. While they meet the indivisibility criterion, they fail the "fairness" and "frequent-formation" tests. As a result, the evolutionary process is stifled. Only a limited range of variation is possible, and innovations emerge much more slowly, if at all.

In a free society, Cloud argues, capital plays a role not unlike that of the genome in facilitating natural selection. Firm formation can be thought of as analogous to sexual reproduction, with proprietors combining money and skills to form new social organisms in much the same way as parent animals combine their genes to form new individuals.

Marx argued that capital simply produces more capital, leading to periodic "crises of accumulation." Cloud's argument shows that there's actually a lot more to it than this: more "fit" capital reproduces more successfully than less "fit" capital. As a result, the population of firms evolves over time. The real crisis is that of the planned economy, where state interference stops this whole process in its tracks.

Without technological change, perhaps none of this would matter. "If we froze our technology at 1911 levels for a thousand years," Cloud believes, "we would eventually be able to centrally plan our economy without any loss of efficiency." But modern economic growth is ultimately about inventing new technologies and developing their practical applications. This requires the performative knowledge of inventors and entrepreneurs rather than the declarative knowledge of the planner. And only the "Oracle of Selection" can sort out the geniuses from the crackpots.

The free society must be based on negotiation rather than compulsion. This means that its intellectual life mirrors the evolutionary processes that determine its political and economic arrangements.

Just as these arrangements are not the product of any preconceived plan, so there is no official ideology restricting what individuals may believe. Common sense consists not of a body of dogmas but rather of ideas that survive debate. Ridicule, rather than censorship, is the ultimate arbiter of what is unworthy of belief.

Thus the free society is a playful society. It is constantly innovating, constantly coming up with new ideas, constantly trying new things. It thrives on irony and humor rather than on certainty. And it typically cannot even account for its own success. It simply accepts anything that works.

The moral of the story is that free societies, as the Tao Te Jing has it, "accomplish everything by doing nothing." They are, Cloud concludes, "like the flower, who has no rational plan to provide for herself, but still ends up dressed more richly than Solomon."

Freedom, in this sense at least, may be free after all.