I AM surprised to discover that Kevin Rudd, Australia's prime minister-elect, delivered a fairly in-depth lecture on Friedrich Hayek [pdf] about this time last year at the Centre for Independent Studies, a classical-liberal think tank in Sydney. I find that fact truly amazing. I cannot for the life of me imagine the circumstances under which, say, Hillary Clinton would end up giving a learned lecture on, say, Milton Friedman at the Cato Institute. It's a bit like that. So I'm pretty impressed.

That said, I am not surprised to discover that the leader of the Australian Labor Party is no fan of Hayek. Nor am I surprised, though I am a bit disappointed, to see what appears to be either an ignorant or willfully erroneous intepretation of the great man's thought. For example, Rudd sayeth:

Hayek argues that human beings’ altruism is a hangover from their primitive tribal experience, reinforced by religion, and must be purged if we are to optimise our individual liberty through rational self-centred participation in the market.

This is nonsense. Hayek does not think altruism must be purged. Hayek says, correctly, that in wealthy, advanced societies we have made a great transition from a system of personal exchange--based on kinship ties, group solidarity, and local reputation from repeated interaction--to an "extended order" of impersonal exchange. Crossing the chasm from personal to impersonal exchange is the great accomplishment of civilisation enabling the health, wealth, and prosperity enjoyed in the modern world. (This is one of the great themes in Vernon Smith's Nobel Prize lecture, and in the recent work [pdf] of Nobelist Douglass North.)

However, this transition does not come about due to altruistic regard for others. It comes about by creating impersonal substitutes for the personal trust extended to family and well-known community members. This is a damnably hard problem we're still struggling to understand, which is one reason development economics remains a failure. As Mr North put it:

A lot of economic historians have spent much time considering the way in which the western world, in the last six, seven centuries, evolved a set of institutions that made cooperation in impersonal exchange worthwhile. That is, these institutions changed the payoff so that impersonal exchange paid off and the economies of scale associated with large scale production made possible the world of relative abundance we now observe.

And Hayek's point is that altruism is not what makes these institutions work, and so is not what is responsible for the abundance we enjoy. But Hayek is crystal clear that altruism, fellow feeling, solidarity, etc. are what makes families and small communities work, and he specifically instructs us not to apply the artificial habits of the market to hearth and home lest we make a hash of it. But, likewise, if we attempt to run an extended order according to our homey sentiments, we'll trash it. This seems to be the idea that offends the sentimental Mr Rudd.

One of Hayek's great stengths is that he understands that the habits and mores that undergird the market order are not natural. That's why human beings have always been poor, except for the last couple hundred years. Which is just to say that our incredible health, wealth, and longevity rest on a foundation of cultivated artifice that we take care to preserve. Mr Rudd completely mangles the interpretation of Hayek on this point. Here's Hayek:

Rational behaviour is not a premise of economic theory, though it is often presented as such. The basic contention of theory is rather that competition will make it necessary for people to act rationally in order to maintain themselves. Competition is as much a method for breeding certain types of mind as anything else…

And here is Mr Rudd's commentary on this passage:

In other words, Hayek sees the market not just as a natural expression of a pre-existing self-interested human nature – but as a mechanism for actually developing the “selfish gene” and liberating it from outdated moral constraints focussed on the wellbeing of others.

Huh? I don't believe there is anything here about genes. Interestingly enough, though, Hayek actually disbelieves the selfish gene hypothesis and argues that group selection is responsible for our altruistic instincts. Anyway, the larger point is simply that the institutions that have saved us from hunger, disease, and early death require the emergence of a certain kind of culture--certain types of mind. If one really cares about the wellbeing of others, then one will seek to preserve this cultural endowment. A social-democratic Care Bear stare will not do it.

Rudd's lecture is mostly tendentious silliness, which is no surprise. He's a politician. I certainly wouldn't expect Mrs Clinton to get Milton Friedman right, either. But like watching a dog dancing on its hind legs, it's pretty entertaining watching politicians discuss serious ideas at all.

Those highly motivated can find other critiques of Rudd on Hayek here and here.