1. James M. Buchanan, “Order Defined in the Process of its Emergence”*

*A note stimulated by reading Norman Barry, “The Tradition of Spontaneous Order,” Literature of Liberty, V (Summer 1982), 7-58.

Norman Barry states, at one point in his essay, that the patterns of spontaneous order “appear to be a product of some omniscient designing mind” (p. 8). Almost everyone who has tried to explain the central principle of elementary economics has, at one time or another, made some similar statement. In making such statements, however, even the proponents-advocates of spontaneous order may have, inadvertently, “given the game away,” and, at the same time, made their didactic task more difficult.

I want to argue that the “order” of the market emerges only from the process of voluntary exchange among the participating individuals. The “order” is, itself, defined as the outcome of the process that generates it. The “it,” the allocation-distribution result, does not, and cannot, exist independently of the trading process. Absent this process, there is and can be no “order.”

What, then, does Barry mean (and others who make similar statements), when the order generated by market interaction is made comparable to that order which might emerge from an omniscient, designing single mind? If pushed on this question, economists would say that if the designer could somehow know the utility functions of all participants, along with the constraints, such a mind could, by fiat, duplicate precisely the results that would emerge from the process of market adjustment. By implication, individuals are presumed to carry around with them fully determined utility functions, and, in the market, they act always to maximize utilities subject to the constraints they confront. As I have noted elsewhere, however, in this presumed setting, there is no genuine choice behavior on the part of anyone. In this model of market process, the relative efficiency of institutional arrangements allowing for spontaneous adjustment stems solely from the informational aspects.

This emphasis is misleading. Individuals do not act so as to maximize utilities described in independently existing functions. They confront genuine choices, and the sequence of decisions taken may be conceptualized, ex post (after the choices), in terms of “as if” functions that are maximized. But these “as if” functions are, themselves, generated in the choosing process, not separately from such process. If viewed in this perspective, there is no means by which even the most idealized omniscient designer could duplicate the results of voluntary interchange. The potential participants do not know until they enter the process what their own choices will be. From this it follows that it is logically impossible for an omniscient designer to know, unless, of course, we are to preclude individual freedom of will.

The point I seek to make in this note is at the same time simple and subtle. It reduces to the distinction between end-state and process criteria, between consequentialist and nonconsequentialist, teleological and deontological principles. Although they may not agree with my argument, philosophers should recognize and understand the distinction more readily than economists. In economics, even among many of those who remain strong advocates of market and market-like organization, the “efficiency” that such market arrangements produce is independently conceptualized. Market arrangements then become “means,” which may or may not be relatively best. Until and unless this teleological element is fully exorcised from basic economic theory, economists are likely to remain confused and their discourse confusing.



James M. Buchanan

Center for the Study of Public Choice

George Mason University (after 1983)

* This note was stimulated by Norman Barry’s thought-provoking article, “The Tradition of Spontaneous Order,” Literature of Liberty, 5 (Summer, 1982): 7-58. I am indebted to the Scaife and Earhart Foundations for support of my research and to Mr. Bruce Majors (Graduate Department of Philosophy, Catholic University of America) for able research assistance. Elaboration of some of the themes in this note will appear in G. P. O’Driscoll, Jr. and M. J. Rizzo, The Economics of Time and Ignorance (Oxford: Basil Blackwell, forthcoming in 1983).

1. Henri Bergson, Creative Evolution, Arthur Mitchell (trans.), New York: Henry Holt and Company, 1911, p. 39.

2. Edna Ullmann-Margalit, “Invisible Hand Explanations,” Synthese 39 (1978), pp. 282-286.

3. Henri Bergson, Creative Evolution, p. 37.

4. Frederic Schick, “Self-Knowledge, Uncertainty and Choice,” British Journal for the Philosophy of Science 30: 235-252.

5. Henri Bergson, Creative Evolution, p. 39.

6. Here the evolutionary theory is used to explain the maintenance rather than the origin of an order. Thus, an evolutionary principle like “survival of the fittest” presumably can explain the maintenance of certain eating customs.

7. Henri Bergson, Creative Evolution, p. 28.

8. James M. Buchanan, “Order Defined in the Process of its Emergence” Literature of Liberty [this issue].

9. F. A. Hayek, “Degrees of Explanation,” Studies in Philosophy, Politics and Economics, Chicago: University of Chicago Press, 1967.

10. John von Neumann and Oskar Morgenstern, Theory of Games and Economic Behavior, Princeton: Princeton University Press, 1947, p. 44.



Notes by Roland Vaubel

11. For a reconciliation of Hayek’s theory of evolution and James M. Buchanan’s contractarian approach see the impressive analysis of Victor Vanberg, Liberaler Evolutionismus oder Vertragstheoretischer Konstitutionlismus. TÜbingen: Walter Eucken Institut (VortrÄge und AufsÄtze, Nr. 80) J.C.B. Mohr, 1981, ISBN 3-16-344411-3.



Notes by Jeremy Shearmur

12. Barry, p. 28, citing Smith’s Lectures on Jurisprudence; note that this theme of the decline of all constitutions is found also in the work of Hutcheson.

13. Cp., on all this, J.G.A. Pocock, The Machiavellian Moment, and, for some discussion of its relation to Smith, D. Winch, Adam Smith’s Politics.

14. See, on this, Jacob Viner’s classic ‘Adam Smith and Laissez-Faire,’ and, for some brief discussion of the interpretation hinted at in this section, my pamphlet, Adam Smith’s Second Thoughts, Adam Smith Club, London, 1982.

15. Cp. my ‘Abstract Institutions in an Open Society,’ in Wittgenstein, The Vienna Circle and Critical Rationalism, ed. H. Berghel & Others, HÖlder-Pichler-Tempsky, Vienna, 1979, pp. 349-54.

16. See Hayek, ‘Individualism True and False,’ in Individualism and Economic Order, p. 32.

19. See, for further references and discussion, and a fuller defence of the views advanced in this section, my ‘The Austrian Connection: Carl Menger and the Thought of F.A. von Hayek,’ in B. Smith and W. Grassl (eds.), Austrian Philosophy and Austrian Politics, Philosophia Verlag, Munich, forthcoming.

20. In which respect he is very close to Hayek’s dismissal of ‘false’ individualism.

21. Compare here, however, the contrasting claim made in E.F. Miller’s most interesting ‘The Cognitive Basis of Hayek’s Political Thought’ in R.L. Cunningham (ed.), Liberty and the Rule of Law.

22. Note the way in which the ideas in the text of the Untersuchungen and in Appendix VII are, at least prima facie, in contrast with one another.