Two Views on Social Stability (Birner & Ege)

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American Journal of Economics and Sociology, Inc.

Two Views on Social Stability: An Unsettled QuestionAuthor(s): Jack Birner and Ragip EgeSource: American Journal of Economics and Sociology, Vol. 58, No. 4 (Oct., 1999), pp. 749-780Published by: American Journal of Economics and Sociology, Inc.Stable URL: http://www.jstor.org/stable/3488006

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TwoViews on Social Stability:

An UnsettledQuestion

ByJACK IRNERnd RAGIP GE

ABSTRACT.Emil Durkheimpublished TheDivision ofLabour n Societyas

partof his strategy o createa place for sociology as a science independent

from economics. The book describes how social cohesion and coopera-

tion evolve spontaneously in the course of the process of the division of

labour.FriedrichHayek developed a theory of marketsand competition

which was later extended into a theory of society, in which spontaneousevolution is a central element. The main force behind this process is

competitionand the evolution of coordination. Both authorsaddress the

problemof social stability.Hayek rejectsDurkheim'sanalysisas construc-

tivistic,but his criticism s unjustified.Furtheranalysisrevealsmany simi-

laritiesbetween the two authors' heories of societal evolution. A striking

pointof convergenceis thatHayek'stheoryof markets s a networktheory,

and that sociological network theory is directly inspired by Durkheim's

work. The main differences are Hayek's emphasis on the division of

knowledge and on coordinationas the fundamentalstabilizingforces as

opposed to Durkheim'sstress on the division of labour and cooperation.

The network approach,togetherwith an elaboration of Hayek'spsychol-

ogy, offerperspectivesforintegrating oordinationand cooperationinto a

unified theory of social stability.

* Jack Birner is Professor of Economics at Maastricht University and the Labora-

tory of Cognitive Science at the University of Trento. His publications include

Hayek, Co-ordination and Evolution: His Legacy in Philosophy, Politics, Econom-

ics, and the History of Ideas, co-editor with Rudy van Zijp, Routledge, 1994; and

"Cambridge Histories True and False," in C. Marcuzzo, L. Pasinetti and A. Roncaglia

(eds.), The Economics ofJoan Robinson, Routledge, 1996. Ragip Ege is Professor of

Economics at BETA, Universit6 Louis Pasteur, Strasbourg, France. Ege has pub-

lished articles about Friedrich A. Hayek and Karl Marx in Revue Economique and

Revue dEconomie Politique. Recently he has co-authored with R. dos Santos

Fereira, "LeTemps et la conception du capitalisme chez Marx,"in the 1998 volume

of Revue dEconomique Politique.

American Journal of Economics and Sociology, Vol. 58, No. 4 (October, 1999).

C 1999 American Journal of Economics and Sociology, Inc.



750 AmericanJournal of Economics and Sociology

Introduction

THE QUIP ABOUT ECONOMISTS howing thatsomethingworks and sociologists

showingwhy itdoesn't is usually passed off as justa joke.Butlike so many

jokes, it contains a kernel of truth.A methodologist mightpoint out that it

capturesthe idea that sociologists think of themselves as offeringa more

generaltheoryof society than economists do. Tolerantsociologistsleave a

place for economic explanationswhere theyareapplicableand true.At the

same time they claimtheir theories to be more generalthaneconomics inthat they specify the special conditions under which economic explana-

tions are true, while also providing an explanation of what happens

outside the domain of validityof economics. In the Popperianand Polish

traditions n the philosophy of science this is known as the correspon-

dence principle.1

Establishinga correspondence relationwould be an accuratedescrip-

tion of the aimof EmilDurkheimwhen he publishedhis firstbook in 1893,

Ladivision du travailsocial [Tbheivision of labour in society].Its content

and method are direct consequences of Durkheim'sproblem situation.

This is defined by his objective of placing sociology on the map as a

scientific discipline in its own right. In order to create this intellectual

space, Durkheim meets sociology's nearestrival,classicalpoliticalecon-

omy, in the doctrine thatconstitutes its cornerstone,the division of labor.

He does so by saying that the mostimportantconsequence of the division

of labor is not efficiency,but solidarity.Given the intellectualsituation inthe "moral ciences" at the end of last century,this compels Durkheimto

define his positionvis-A-visAdam Smith.According o TheTbeoryofMoral

Sentiments,what makes a civil society possible is sympathy,the human

capabilityof imaginingthe others' position. Sympathy is based on the

similarityof human beings. However, the division of labor,which is the

subjectof The Wealthof Nations, presupposes that humans are different

from each other. This is an internalcontradiction n Smith's hought, and

for Durkheim ts solutionconstitutesthe birthright f sociology. However,

the fact that he explicitlyseeks to create a place for a new social science

that is independent from economics does not mean that he denies that

economics has its merits.On the contrary:



SocialStability 751

C'estaux 6conomistesque reviente m6rited'avoir espremiers ignale e caractere

spontanede la vie sociale,d'avoirmontreque la contrainte e peutque la fairedevier

de sa directionnaturelleet que, normalement, lle r6sulte, non darangements

exterieurs t imposes, mais d'une libre elaboration nterne DTS,p. 380). [Credits

duetheeconomists or firsthavingseenthespontaneous haracter f social ife,and

having hownthatconstraint ould only make tdeviate rom ts natural irection nd

that,normally,t resultsnot in arrangements hich are external nd imposed,but in

a free internal laboration.Durkheim 964,p. 386)].2

Despite this generous recognition, Durkheim skillfullymaneuvers into

the position of secondaryfactors the mechanisms that "the economists"

(except for Smithand Spencerhe is never explicitwho they are) think are

sufficientto explainsocial stabilityand harmony.The whole of Book IIof

DTSis devoted to a systematic analysis to "the causes and conditions"of

the divisionof labor.By causes Durkheimmeans the sufficientconditions,

and by (secondary) conditions the necessary conditions. This reveals a

rathermodern approach to causality.But for Durkheimthe main function

of the distinctionis methodological and strategic: t serves to define his

own position with respect to economics. All that he finds of value ineconomics is relegated to the domain of necessary conditions, while his

own explanatory factors constitute the sufficient conditions. Thus, he

obtainswhat he regardsas an incorporationof the economic theoryof the

division of labor and of the emergence of modern society into his own

theory.

On the casual observer modern society leaves an impression of a

confusing complex of millionsof actions of disconnectedindividuals,each

of whom is motivatedby his own goals, rather han a relativelyharmoni-ously evolving and stablewhole of coordinated behaviors.The scientific

object of Durkheim'sinvestigationin DTS is the explanation of social

stability.He is fascinatedby the capacityof the industrialized ociety of his

time to growwithout a centralorganizing nstitution o keep it fromfalling

apart.Durkheim'sanalysisis inspired by the searchfor the conditions for

the surprising stabilityof society in the face of its apparentlyanarchic

structure.

Not only is modern society highly stable, it also harboursmechanisms

that enable its membersto benefitfrom itspossibilitiesforself-deployment

whose scope and level are unmatched in human history. One of

Durkheim'sgreat merits is that he has given expression to this sense of



752 American Journal of Economics and Sociology

wonder about the fact that a social structure hat has not been rationally

and deliberatelyorganized does not fall apart.

We find the same sense of wonder and the same fascinationat industrial

society's capacity for self-organization and stabilityin the work of the

economist and social theoreticianFriedrichHayek.From the late 1920sto

the early'40sHayek'smain occupationwas to find an explanationfor the

lack of coordination and the economic instability hat characterizesbusi-

ness cycles. Graduallyhis interest moved to the greater question of the

stabilityof society as a whole, and to the problemof how to preservethe

freedomof the individual.His most importantpublications n this field areTheConstitutionof Liberty 1960) and Law, Legislationand Liberty LLL),

published in three volumes in 1973, 1976, and 1979. The similarities

between Hayek and Durkheimdo not stop here. They both share a more

"practical"oncern: the intellectual,moraland social crisis thatthey detect

in theircontemporarysociety. Durkheimspeaks of the state of legal and

moralanomy in which the economy finds itself (see, for instance, DTS,p.

II): conflicts and economic crises, due to the lack of rules within certain

professional groups.The theme thatinspires Hayek'swork from TheRoadto Serfdom(1944) to his very last book, The Fatal Conceit (1988), is his

sense of alarmat the intellectualhubris thatmakes modern humans think

they can organizethe complex processes that characterize he evolution of

social institutionsaccording to their desires. Hayek fears that this attitude

may destroy everythingthat has been achieved in the domain of freedom

of the individual.As to the question of how to solve the social problems

they analyze, both authorsshare the conviction that a-possibly violent-

solutionimposedfromthe outside would not work.3There aremanymore

similaritiesbetween Durkheim and Hayek, as we hope to make clear.

The same sense of wonder about the stabilityof society, which is the

root of political economy and sociology, inspiredAdam Smithto develop

the idea of the invisible hand. Both Durkheimand Hayek declare them-

selves to be the intellectualheirs of the Scottishphilosopher, although they

emphasize differentaspects of his thought. This is closely related to the

different ntellectual raditions n which the two authorsplace themselves.

The tradition o which Durkheim belongs emphasizes the role of law in

society, while Hayek's lineage pays particular ttention to the competitive

market.The differencecan be formulatedas that between cooperationand

coordination. Our point of departure n this article is that the similarities



Social Stability 753

and differences etweensociologistDurkheim'snd economistHayek's

theoriesof socialstabilityustify

urchoosing hemas representativesf

alternativexplanationsf socialstability.Ourgoalis to give ananswer o

the questions f whateach has to contribute,owthese contributionsre

related, ndhow we mayuse them omakeprogressn the explanationf

socialstability.

II

The Division of Laborand SocialCohesion

DURKHEIMRIES OMAKEhe characteristicsf modernndustrialocietyclear

by contrastingt withearlier,moreprimitiveormsof socialorganization.

This s moreof a methodologicalevice hana realhistoricalnalysis.His

"segmentaryociety"s a fictionor conceptual rtifacthatallowshim to

definethe institutions nd mechanisms f modern ociety,rather han a

truthful escriptive ccount. n Durkheim'sonjecturalistory,he most

primitivetate of societyis the horde.It is characterizedy a type of

cohesion hat s due to similarity:Si Ion essaye de constituerpar la pensee le type ideal d'une soci&t6dont la

cohesionresulteraitxclusivement es ressemblances,n devra a concevoir omme

une masseabsolument omogenedont les partiesne se distingueraientasles unes

des autres,et par consequentne seraientpas arrangees ntreelles, qui,en un mot,

seraitdepourvueet de toute formedefinieet de touteorganisation. eserait e vrai

protoplasme ocial, le germe d'ou seraient sortis tous les types sociaux. Nous

proposonsd'appelerhorde 'aggregat insicaracteriseDTS,p. 149). [Ifwe tryto

constructntellectuallyheidealtypeof a societywhose cohesionwasexclusivelyhe

resultof resemblances,we shouldhaveto conceive t as anabsolutelyhomogeneousmass whose partswere not distinguishedrom one another.Consequently hey

would haveno arrangement;n short t would be devoid of all definite ormandall

organization.t would be the veritable ocialprotoplasm,he germwhencewould

ariseall socialtypes.Weproposeto call theaggregatehuscharacterized,orde. p.

174)].

Primitiveocietyis a repetition f identicalaggregates f hordes.Its

structures, in terms that we borrowfromHerbertSimon,maximally

redundant.4he next step in the development f societyis the clan: a

horde hathas ceasedto be independent ndhas becometheelementof

a more extended "plusetendu") roup: egmentaryociety.Clanchiefs

aretheonlyformof socialauthorityn thisstructure,markinghebegin-

ningof a diversification.till,n these "inferiorocieties,"heonlyformof




solidaritys thatwhichderives romsimilarity.histypeof society s no

longerpurelyhypothetical. rawing n Fustelde Coulanges,Durkheimgives the examplesof Australianborigines,ndian ribes,etc. In such

societies, eligions all-pervasive.ecausena small ocietyeverybodys

facedwiththe sameconditions f existence,hecollective nvironments

essentiallyoncrete. ndividualxperiences rethe sameandhaveas their

objects thesame)specific hings.Thecollective haracters well-defined.

Durkheim'segmentaryociety s ruledby "droit6pressif." epressive

lawpunishes hose actsthatoffend he collective onvictionsndthatare

aninfringementn the rulesandvalues hataresharedbythecommunityas a whole. So, repressiveaw is the rule in those societiesin which

criminal ctsneednotbe explicitly odified. ts rulesarefirmly ooted n

the collectivememory hat each individual arrieswith him. In sucha

societythere is no room for individual ariations.Eachsegment s the

bearerof the samestrong eelings,the sametraditionalalues,andthe

same socialrules the infraction f whichjustifieshe severest orm of

punishment.

Since the segmentsareautarchic,here is no need (or incentive) orexchangebetweenthem. The solidarityn this societyis solidarity y

likeness "par imilitudes"), hichDurkheimalls mechanical olidarity.

Thissociety s characterizedy "communism":

Lecommunisme,n effet, est le produitnecessairede cette cohesionspecialequi

absorbel'individudans le groupe, la partie dans le tout. La propriet6n'est en

definitiveque l'extensionde la personnesur les choses.Ladonc oP la personnalit6

collectiveest la seule qui existe, la proprieteelle-meme ne peut manquerd'etre

collective.Ellene pourradevenir ndividuelle uequand 'individu,e degageantdelamasse,seradevenu, uiaussi,un etrepersonnelet distinct,nonpas seulementen

tantqu'organisme,mais en tantque facteurde la vie sociale (DWS,pp. 154-55).

[Communism,n effect, is the necessaryproductof this special cohesion which

absorbs he individualnthegroup, hepart n thewhole. Propertys definitive nly

of the extensionof the personoverthings.Where he collectivepersonality s the

only one existent,propertyalso mustbe collective.It will become individual nly

when the individual,disengaginghimself from the mass, shall become a being

personalanddistinct,not onlyas an organismbutalso as a factor n social life. (p.

179)].

There s no possibilityorindividualersonalityo develop n a society

where collective onscience ulessupreme.

As we observedabove, in Durkheim's iscussionof the necessary



SocialStability 755

conditionsfor the division of labor to progresswe find the more typically

economic factors,such as the need for individuals to develop their indi-

vidual traits, innovation, and, most fundamentally,rationality.This last

factorappears n the form of an explanationof the developmentof rational

thought. Individualsbecome more independentfrom the groupsto which

they belong when the members of a society increase in number.When

societies become more voluminous, i.e., when their physical and hence

their social density increases, this collective conscience changes. It is

forcedto elevate itself above local differences and to cope with space and

distance;hence it has to become more abstract. It is thus that abstractconcepts arise (DTS,p. 272). For Durkheim,the more general collective

conscience becomes, the more room it leaves for individualvariations

(DTS,p. 275). Since collective conscience is almost entirelya productof

the past (so, of tradition), ts role diminishes as segmentary society is left

behind. Withinthe extended group there is more individual iberty (DTS,

p. 284). When society becomes dispersed over a larger area it has to

become more abstract:

[elileest elle-memeoblig&e e s'e1ever u-dessusde toute es diversitesocales,dedominerdavantageespace et, par consequent,de devenirplus abstraite.Car l n'y

a gubreque des choses g6neralesque puissentktrecommunesa tous ces milieux

divers.Ce nest plustelanimal,maistelleespece;tellesource,mais es sources; elle

forkt,mais la forkt in abstracto DTS,p. 272). [thecommonconscience"is itself

obligedto rise abovealllocal diversities,o dominatemorespace,andconsequently

to becomemore abstract.Fornot manygeneral hingscan be commonto all these

diversenvironments.t is no longersuchanimal,but such a species;not thissource,

butsuchsources;not thisforest,butforest in abstracto"p. 287)].

This also explains the increasingrationalizationof society:

Celaseul est rationnel e quiest universel.Cequi deroute entendement,c'est e

particuliert le concret.Nous ne pensonsbienque le general.Parconsequent,plus

la conscience commune est proche des choses particulibres, lus elle en porte

exactementempreinte,plusaussielle est inintelligibleDTS,p. 275). [Thisaloneis

rationalwhich is universal.What bafflesunderstandings the particular nd the

concrete.Onlythegeneral s thoughtwell of. Consequently,he nearer hecommon

conscience s to particularhings, he more it bearstheir mprint,he moreunintel-

ligible t also is. (p. 289-290)].

Once rationalthought has emerged, there is no way of keeping it in

check. This is a mixed benefit, as instinctalways has a more compelling

force than reason: "Parcequ'elle devient plus rationnelle,la conscience



756 AmericanJournal of Economicsand Sociology

collectivedevientdoncmoins mperative,t, pourcetteraison ncore,elle

gene moins le libredeveloppement es varietes ndividuelles"DTs,p.

276). ["Becauset becomes more rational, he collectiveconsciencebe-

comes ess imperative,ndforthisveryreason,t wields essrestraintver

the freedevelopment f individual arieties."p. 290-291)].However,he

main orceof collective onsciousness erivesnot so much rom he fact

that t issharedby contemporariess from he fact hat tis aproduct f the

pastwhich took a longtime to develop.

L'autorit6e la consciencecollective st donc faiteen grandepartiede l'autorite e

la tradition.Nous allonsvoir que celle-ci se diminuen6cessairement measurequele type segmentaire'efface DTS, p. 277) [Theauthority f collectiveconscience s,

then,in largepartcomposedof the authority f tradition.We shallsee that he latter

necessarilydiminishes s the segmental ype is effaced(p. 291)].

As societybecomesmoreopen and mobile, raditionoses its sway.For

instance, he more advanceda society,the less the aged are held in

reverence. t is from he young thatchange s to be expected,provided

theyhavedissociatedhemselves rom he erroneous ractices f thepast.

Modern ociety s characterizednonparune repetition e segmentssimilaires t homogenes,maisparun systemed'organesdifferents ont

chacuna un rolespecial,et quisontformeseux-memesde partiesdiffer-

enciees"157)["not yarepetitionfsimilar, omogeneous egments, ut

byasystemofdifferentrgans achof whichhasa special ole,andwhich

are themselves ormedof differentiatedarts"p. 181)]. ndustrialociety

rests on an advanceddivisionof labor,a degreeof specializationnd

differentiationhich s inconceivablensegmentaryociety.Theelements

of whichmodern ocietyconsistsno longerexistsideby side as thelinksof a chain,butshow a morecomplicated,ierarchicatternhat s defined

by the logical requirementsf theirfunction.They are "coordonnest

subordonneses uns aux autresautourd'unmemeorganecentral"157)

["co-ordinatedndsubordinatedne to another round he samecentral

organ"p. 181)].However, ndividuals renot passively ubjugatedo the

moralprescriptionsf collectiveconscience,as they were in primitive

society,where heywere nterchangeablendwheremechanicalolidarity

cemented hesocialbonds.Thetype of cohesionwhich rules n modern

societyis organicsolidarity.Durkheim greeswith Spencer hat social

harmony erives rom he division f labor,butcriticizes im(in ch.LVII)

forthinkinghat ndustrialolidaritys characterizedy spontaneity-so




that there is no need for a repressive apparatus-and for thinking that the

only link among individuals s that of absolutely free exchange and hence

competition. But neither is it true that self-interest s the only basis of social

stability DTS,pp. 180-81). The growingnumberand complexity of legal

rules that develop as society progresses is sufficient to make this clear.

Nevertheless, Durkheim observes that the idea of a social contract n the

sense of Rousseau is also hard to defend. Morespecifically,repressive aw

cedes more and more to restitutivelaw, which aims not at punishing

infractionsof a generally valid moral code, but serves as a means for

redress so as to put things back into the order that they should have been(DTS,p. 79). The situations o which restitutive aws apply are usually very

specific, so that most members of society remain in complete ignorance

about these legal rules. As the division of labor advances, so does the

technicalityof the legal rules.The increasingcomplexityof social relation-

ships in modernsociety has necessitated an ever more complex system of

laws to manage them. This does not mean that judges can decide arbi-

trarily; hey remain bound by the rules that are generally accepted in

society.Like Comte, Durkheim believes that what is really spontaneous is

society itself.Neither the division of labor nor competitioncan be consid-

ered as spontaneous phenomena in the true sense of theword.Admittedly,

when the organic division of labor emerges, it solidifies the social bonds.

Butthat does not mean that it createsthem. "Cette nteractionen suppose

une autre qu'elle remplace" (DTS, p. 262) ["this integration supposes

anotherwhich it replaces" p. 278)].And furtheron we read:

Les organismesplus complexesse formentpar la repetitiond'organismes lus

simples, emblables ntreeux, quine se differencient u'une oisassocies.Enun mot

lassociationet la cooperation ontdeux faitsdistincts, t si le second, quand l est

developpe,reagit ur e premier t le transforme,i les societeshumainesdeviennent

de plusen plus des groupesde cooperateurs,a dualitedes deux phenomenesne

s'evanouit as pourautantDTS,pp. 262-63). [more omplexorganisms reformed

by the repetition f moresimple,similarorganismswhich aredifferentiatednly if

once associated. n short,associationandco-operation re two distinctacts,and if

the second,when developed,reactson the firstandtransformst, if humansociety

becomegroupsof co-operators,he dualityof the two phenomenadoes not vanishfor all that(p. 278-279)].

Specializationand differentiation akeplace on the basisof association.

ForDurkheim,the social whole always precedes the individualparts.See




forexampleDTS,p. 264,wherehe writes:"La ie collectiven'estpasnee

de lavie individuelle,maisc'est,aucontraire,a secondequiestneede la

premiere""Collectiveifeis notbornfrom ndividualife,butit is, on the

contrary,he secondwhich is bornfrom he first"p. 279)].

Comtebelieves hat he division f labor,fpushed oofar,willresultn

the disintegrationf society.Individualswho specialize n ever more

narrowly efinedandabstractaskswillretire nto theirown private nd

solitary niverses.Here, he divisionof laborbecomesa centrifugalorce

that makessocietyfall apart nto isolatedatoms. A differentunifying

principles needed to counterbalancehis disintegratingorce.Thegov-ernment r the statemust ntervene:

I1 est clair, en effet, que le seul moyen reel d'empkcherune telle dispersion

consiste a 6rigercette indispensable eactionen une nouvellefonctionspeciale,

susceptibled'intervenironvenablement anslaccomplissement abituelde toutes

les diverses onctionsde 1'6conomieociale,poury rappeler ans cesse lapens6ede

lensemble et le sentiment e lasolidariteommune Durkheim uotingComte,DTS,

p. 349). [It s clear, neffect, hat heonly realmeansof preventinguch a dispersion

consists n thisindispensableeactionn a new andspecialfunction, usceptibleof

fittingly nterveningn the habitual ccomplishmentf all diverse unctionsof social

economy,so as to recall o them unceasinglyhe feeling of unityand the sentiment

of commonsolidarity p. 358-359)].

Accordingo Comte, he solidarityhat s producedby the divisionof

labor is morefragile hanthe cohesion of a society that rests on the

principleof likenessor homogeneity.Forthis reasonhe advocates he

conscious nterventionf thestate ncreating olidarity, nd, n "Noteur

la definition du socialisme" Durkheim 1893), socialism. WhereasDurkheim haresthe idea thattheremust be rules,he does not share

Comte'spessimism.DurkheimhinksComte's essimism s based on his

failure orecognizehe realnature nd he powerof organicolidarity.he

malfunctionsndanomalies f modern ocietyarenot so muchdue to the

disappearancef the pervasivenessf the commongoalsof segmentary

societyas to the slownesswithwhich individuals doptthe rules and

regulationshatarenecessaryor a peacefuland harmoniousoexistence

of functions hathave becomeseparatedby the divisionof labor.The

highlyefficientmechanismshat createdcohesion in traditionalociety

have been destroyed y theprogress f specialisationn modern ociety

and a new equilibriumas notyet beenfound:




Des changementsprofondsse sont produits,et en tres peu de temps, dans la

structure e nos societes; elles se sont affranchies u type segmentaire vec une

rapidite t dans des proportions ont on ne trouvepas un exempledans ihistoire.Parsuite, a moralequi correspond ce type social a regress6,maissans que lautre

se developpatassez vitepourremplire terrain ue la premiere aissaitvide de nos

consciences DTS,p. 405) [Profoundhangeshave been producedn the structure f

our societies na veryshort ime; heyhavebeenfreedfrom hesegmental ype with

a rapidityand in proportions uch as have never before been seen in history.

Accordingly,he moralitywhich corresponds o this social type has regressed,but

withoutanotherdevelopingquickly noughtofillthe ground hat he first eft vacant

in our consciences p. 408)].

Hence the crises and anomalies to which Durkheim devotes the third

and last book of DTS. Durkheim repeatedly and explicitlymentions that

the system of rules which serve to avoid malfunctionsand anomies in

modern societymust be the productof aspontaneous process, lest it create

instability:"lavie sociale, partoutou)elle est normale, est spontanee;et si

elle est anormale,elle ne peut pas durer" 180) ["social ife, wherever is

normal, is spontaneous, and if it is abnormal, t cannot endure"(p. 202-

203)]. This is a very importantpoint in his thought. He also argues thatrules that do not suit the individuals n theirspecific situationsand which

are imposed from above create the anomaly of the "divisiondu travail

contrainte."Aswe have seen, Durkheimopposes the idea thatcompetition

alone can lead to a stable institutional ramework.

Competitionhas a centrifugaleffect on society if it occurs in a situation

in which there is no social cohesion; only in conditionsof solidaritydoes

it contribute o social stability.Thisconclusion serves to furtheremphasize

the differencewith the economic theory accordingto which cooperation

emerges as a consequence of competition:

Puisquea concurrence e peut pasavoirdetermine e rapprochement,l fautbien

qu'ilaitpr6existe;l fautqueles individus ntre esquels a luttes'engagesoientdeja

solidaireset le sentent,c'est-a-direappartiennent la meme societe (DTS, pp.

259-60). [Sincecompetition annothave determined hisconciliation,t musthave

existedbefore.The individuals mongwhom the struggles wagedmustalreadybe

solidaryand feel so. That s to say, theymustbelongto the samesociety (p. 276)].

Butdespite the fact thathe thinkshe has incorporatedeconomics in his

own theory,he gives no descriptionof the institutionwhich, accordingto

Smith,determinesthe extent of the division of labor: the market.6That is

understandablesince even economists rarely offer an analysis of the



760 American Journal of Economicsand Sociology

functioningof markets.Among the few exceptions is FriedrichHayek, to

a discussion of whose work we now turn.

III

Equilibrium, Markets, and Coordination

HAYEKREJECTSHE STANDARDNocL~ssicAL AAYsis of marketsbecauseit is static

andtautological. tatic,becauseitprovidesa classification f various ypesof

markets hataredefinedin termsof staticconditions,such as the numberof

sellers or purchasers nd the shape of the demand and supplycurves.Tau-tological,because it makes a numberof assumptionshatdepriveits models

of empirical ontent.As faras this atter spect sconcemed, Hayeksinglesout

the assumptions f perfectcompetitionandperfect nformation. he neoclas-

sicalassumptionof perfectcompetitiondescribesa situation n whichgoods

andsellersorproducersarecompletelyhomogeneousand the priceis given.

Thischaracterizeshe absenceof any competition.Theassumptionof perfect

informations one of the conditions of marketequilibrium.Here Hayek's

criticism s thatequilibriums definedas the state in which all buyersandsellers have perfect nformation.

The concept of equilibrium s centralto Hayek's alternative xplanation

of the way in which markets work.7 The basic unit of analysis is the

planningindividual.The idea of a plan logicallypresupposes time. Hayek

defines equilibriumas the correspondencebetween the expectations on

which each individualbases his or her plans and the informational nput

which serves as feedback.The individualapplies the "pure ogic of choice"

to his or herown preferencesand his or herperceptionof the environment

when planninghis or her behavior. An economic system is composed of

a multitude of such perceiving,planning,and utility-maximizingndivid-

uals who interact and communicate with each other. The system is in

equilibriumf the plans of all individualsarecompatiblewith one another.

Marketsare the social institutionsin which individuals exchange goods

and services using theirprices as guidelines. The interactionon markets

creates a communication structurethat transmitsprice information effi-

ciently and rapidly since individuals' fields of perception are partially

overlapping.Competitionis a crucialelement in the spreadingof infor-

mation; it consists of a process in which individuals actively seek to

discover new and so faruntriedopportunities.Hayek emphasizesthe role



SocialStability 761

of learning nd knowledgebysaying hat hedivisionof knowledgeand

itscoordinationremorefundamentalhan hedivisionof labor.Markets

are social institutionshat have arisenand survived n an evolutionary

processbecausetheyrespondedo the need for coordinatingispersed

knowledge.Theycreate he highdegreeof availabilityf knowledge o

everyone hatcharacterizesevelopedeconomies.8Their unctioninge-

lies on an efficient ommunicationtructure.

The nclusion f the structuref communicationntheanalyticalrame-

workis veryunusual n economics,9 nd has a numberof far-reaching

consequences.One is that it highlights he importance f an agent'sposition or the acquisition f the knowledgewhich is necessaryorthe

economic systemto show a tendency o an equilibrium:therelevant

knowledgewhichhemustpossess n order hatequilibrium ayprevails

the knowledgewhich he is boundto acquiren view of the position n

whichhe originallys, and the planswhichhe thenmakes"Hayek1937,

p. 53). This introduces he element of what we may call position-

constrainedearning.Thepassage ustquotedcontinues:

It is certainly otall the knowledgewhich, f he acquiredtbyaccident,would beusefulto himandleadto a changein his plan.We may therefore erywell have a

positionof equilibriumnly becausesomepeoplehave no chanceof learning bout

factswhich,if theyknewthem,would inducethemto alter heirplans.Or, n other

words, t is only relative o theknowledgewhicha person sboundto acquire n the

courseof the attempto carryout hisoriginalplanthatan equilibriums likely o be

reached Hayek,1937,p. 53).

Anotheractorhatwe findhere spath-dependency.ayek lsodiscusses

theamount fknowledgewhichwouldbe needed n a decentralizedystemin order hat tmayreach he sameequilibriumhatan omniscientictator

would imposeas "asort of optimumposition"Hayek1937,p. 53)10:

One condition for he decentralizedystemequilibriumo coincidewith thatof

thecentralized ictator-economy)ouldprobably e thateachof thealternativeses

of anysortof resourcess knownto theownerof some suchresources ctually sed

for anotherpurposeand that n thiswayall the different ses of theseresourcesare

connected,eitherdirectlyor indirectly ibid.).

Thenote to this sentenceelaborates:That t is notnecessary, s one might hink, hateverypossibleuse of anykindof

resources houldbe knownto at leastone among heownersof eachgroupof such

resourceswhich are used for one particular urposeis due to the fact that the

alternativesnown to the ownersof the resourcesn particularses are reflectedn



762 AmericanournalofEconomics nd Sociology

the prices of these resources.In this way it may be a sufficientdistribution f

knowledgeof the alternative ses, m, n, of . . . y, z, of a commodity,f A,who uses

the quantity f theseresources n his possession orm,knows of n,andB,who uses

his for n, knows of m,whileC,who uses his foro, knows of n, etc.,untilwe get to

L, who uses his forz, but knows onlyof y.11

Aswe haveobserved,Hayekscriticismf traditionalquilibriumheory

is that t is circular:Correctoresights ... not,as it has sometimes een

understood, precondition hichmustexist n order hatequilibrium ay

be arrivedt.It sratherhedefining haracteristicf a stateofequilibrium"

(1937,p.42).12Thiscriticismmaybe reformulateds follows:Theassump-tion of correct oresight mpliesthat individuals ave fullaccessto all

available nowledge bout hefuture.notherwords, hereareno gapsor

otherimperfectionsn the intertemporalommunicationtructure. or

theircurrentxchange elationshipshe assumptionf perfectnformation

impliesa similarperfection f the present ommunicationtructure. ei-

ther s the case in reality. o, the perfectnformationssumptionelegates

the standard eoclassical nalysisat the most to the statusof a limiting

case,oranidealizingmodelwithout mpiricalontent.Onthe otherhand,

markets ndcompetitionreconsideredo be crucial lementsncreating

anefficient tructure f communication. eoclassical nalysishas littleor

nothingosayabout his.Hayekdoes:"Thewhole actsas one market, ot

becauseany of its members urveythe whole field,but because their

limited ndividualieldsofvisionsufficientlyverlap o that hroughmany

intermediarieshe relevant nformations communicatedo all" 1945,p.

86). However,Hayekdoes not see thatthisdefinesa researchproblemratherhana solutionwhichhe presentsn the formof thepricesystem).

To mentionone problem,hespeedwith which theinformations trans-

ferred bviouslymatters.fthe local nformationpreads lowly, heremay

be no tendency owards quilibrium.

The acquisition f implicitknowledgeand experienceby meansof

personal ontacts s another lement hat s introduced ith the commu-

nication tructure.Hayekspeaksof "abodyof very important utunor-

ganizedknowledge"1945, p. 80) which is not scientific."Weneed to

remember nlyhow muchwe haveto learn n any occupation fterwe

havecompleted ur heoreticalraining,ow big a partof ourworkingife

we spend earning articularobs,and how valuable nasset n allwalks



SocialStability 763

of life is knowledge of people, of local conditions, and of special circum-

stances"(Hayek, 1945, p. 80).

A great merit of Hayek's analysis of markets is that he has called

attention to the crucial role of an economy's interactionand communica-

tion structure. n fact, Hayek's explanationis one of the earliestinstances

of a network analysis of markets, whose explanatory factors include

connectivity,13 he strengthand frequency of interactions,the develop-

ment of personal relationships,and the transmissionof information.It is

one of the curious facts of intellectual history that until recentlyHayek's

type of analysisof marketswas only takenfurtherby one economist, G. B.Richardson,14nd that this work, too, failed to produce a researchtradi-

tion. Networkanalysesof marketsby economists firstbegan to reappear,

uninfluenced by either Hayek or Richardson,with the work of Alan

Kirmanand Rob Gilles.15Network analysis is a much more flourishing

researchtraditionin sociology. The most importantapplicationsof net-

work models to markets and competition can be found in the work of

Mark Granovetter,HarrisonWhite, and Ronald Burt.16Although very

similar n spiritto Hayek's approach,these sociologists do not refer to iteither. This is apparentlyan instance of disconnected intellectual net-

works. What can be the reason for this lack of influence on economics of

network analysis by sociologists and economists?

The hypothesis that seems to arise from our previous analysis is the

following. Sociologicalnetworkanalysisis directly nspired by Durkheim.

He introduced an approach that is different from that of economics.

Networkanalysishas inheritedthis difference. This would explainwhy it

has failed to create an analytical tradition in economics. In order to

examine the validity of this idea we propose a comparison between

Durkheim'ssocial theory in DTS and Hayek's theory of society. But, we

will firstdevote a couple of paragraphso showing how Hayek'seconomic

theory developed into a theory of society.

IV

Social Institutions as Coordinating Devices

THECENTRAL ROBLEMof Hayek'sanalyticaleconomics is the explanationof

the lack of coordinationwhich causes disequilibrium rowth.Theproblem

arises because individualsonly perceive their direct economic environ-




ment. Pricesare partof this environment. he monetary ystemhas a

dynamics f itsown whichpermitshe amount nd the divisionof means

of exchangensociety odivergerom hebarter atiobetweengoodsthat

reflect he conditions f realscarcities.Whenever hisdivergence ccurs,

thedecisions oconsume, aveand nvest,whicharenecessarily asedon

the only pricesthat can be perceived,viz. money prices,are mistaken.

When he realconditionshave revealed hemistakes,t is too late to put

thingsright mmediately,nd the resultare businesscycles(i.e., disequi-

librium rowth).Like hemarket,hemonetary ystemhas evolvedspon-

taneouslyas a solution o the need to enter ntoexchangerelationshipswith ever moredistant conomicunits. nthatsense it is a solution o the

problemof socialcomplexity.However, his particularolutionhas its

cost:economic luctuations.

Herewe have in a nutshell he threeelements hatHayekgeneralized

graduallynto a theoryof society:

1. the basicproblemof an economy society) s the problemof coor-

dination;

2. individuals aveonlylimitedknowledge;neconsequences that he

economy society)as a wholeappears o themas a phenomenon f

suchadegreeofcomplexityhat ndividualsy themselveswillnever

be able to oversee, o understand llthe detailof, norto coordinate

allthe individualransactions ith others hatmakeup aneconomy

(a society);

3. markets (social institutions) are solutions to the problem of social

complexityhathave spontaneously eveloped n an evolutionaryprocess.

It is withrespect o the economic ystem hatHayek irstexpresseshis

sense of wonder at the fact that the millionsof interactions etween

individualso notresult n totalchaos; nstead,whatwe usuallyobserve

is a relativelytableset of repeatednteractionshatoccuraccordingo

some set of rules hatare sharedby most.'7Thefacts hathumanknowl-

edge is so severely imitedand that the spontaneouslyvolvedsocial

institutions ave apparentlymastered he complex problemof social

coordinationeadsHayek o defendnon-interventionismnd liberalism.

He contrasts his with the traditionwhich he calls"constructivism"ndwhich he identifieswith the tradition f Cartesianationalismnd the




FrenchSchool of Engineers. He accuses it of seeing only one solution to

social complexity, conscious interventionand regulation.Prominentrep-

resentatives of this traditionare Saint Simonand Comte.

In Hayek's social philosophy, history plays a role that is very similar o

that in Durkheim's.He introduces the "tribalociety,"not as a description

of a real historicalpast, but as an analyticaldevice to lend contrastto his

analysisof what makes modem society work. He also develops an evo-

lutionarytheory of society which culminates in his theory of cultural

evolution. It may be considered to be the scientificunderpinningof the

contrast between the mechanismsthat rule the tribal and the open soci-eties. Hayek develops his evolutionarytheory in, for example, "Noteson

the Evolutionof Systemsof Rules of Conduct"1967), Law,Legislationand

Liberty,and his last book, The Fatal Conceit(FC, 1988). There are three

kinds of evolution in human affairs:genetic evolution, which produces

instincts and instinctivebehavior;the evolution of rationalthought; and

cultural evolution. Cultureoccupies an intermediateposition between

instinctand rational hought,not only in the course of the developmentof

the species, but also logically and psychologically.This is Hayek'srudi-mentaryexplanation of the emergence of rationalthought.18 nstinctive

behavior is sufficient for the coordination of the actions of individuals

within small primitive groups, the members of which have common

perceptionsand objectives.On the otherhand,within the developed and

"abstract"ociety (or, which is the same, the "extendedorder"),which is

too complex to be fully understoodby the human mind, coordination is

ensured by abstract rules that have developed gradually.These rules

govern privateproperty, honesty, contracts,exchange, commerce, com-

petition,profit,and the protectionof privacy.So, they have verymuch the

same functionas solidaritydoes in Durkheim.Those rules are transferred

by tradition, learning, and imitation(FC, p. 12). There is a continuous

tension between the rules governing individual behavior and those gov-

erning the functioning of social institutions. The formation of abstract

systemsand institutionsof coordinationhave forced individuals o change

their natural or instinctive reactions (ibid., p. 13). The fact that their

behavioris still largelyruled by the instincts of the tribalsociety and has

not kept pace with the development of the abstractsociety explainswhy

they tryto oppose these systems. "Dislikinghese constraints o much,we

hardlycan be said to have selected them;rather hese constraints elected




us: theyenableus to survive"p. 14).The institutionshatemergearethe

resultof certain ndividualstumbling ponsolutions o particularrob-lems in a processof competition. ndeed,competition s a processof

discoverys partof everyevolutionary rocess p. 19).

Forunderstanding ayek's evelopmentroma technical conomist o

a philosopher f society,"Individualism:rueandFalse"IT, 1945) s an

important rticle.It is also one of the few places where he refersto

Durkheim,woreasons orpayingattentiono it. In ITEHayekworksout

the consequences f the theoryof societyof the ScottishEnlightenment

and its individualist ethodology.Thisargumentsdirected gainstheproperly ollectivistheoriesof societywhich

pretend o be able directly o comprehend ocialwholeslikesociety,etc., as entities

sui generiswhich existindependently f the individualswhichcomposethem(I7T,

p. 6).

This has to be distinguishedromthe so-called ndividualismf the

Cartesianchool,whichis usuallyreferredo as rationalism. his s why

Hayek calls the true individualism f the ScottishEnlightenmentnti-

rationalism.The antirationalisticpproach,which regardsman not as a highlyrationaland

intelligentbut as a very irrational nd falliblebeing,whose individual rrorsare

corrected nlyin thecourseof a socialprocess,and which aimsto makethe bestof

a very imperfectmaterial, s probably he most characteristiceatureof English

individualismITE,pp. 8-9).19

Thisinsight s due to Mandeville. he maindifferences etween the

pseudo-individualismf the rationalisticr engineeringradition n the

one handandthetrue ndividualismf the Scotsare that"truendividu-alism s theonly theorywhich canclaim o make he formation f spon-

taneoussocialproductsntelligible,"ndwhich"believes.. that, f left

free,men will oftenachievemore than individual umanreasoncould

designor foresee"pp. 10-11).Thishasconsequencesorpoliticalphi-

losophy:

The greatconcernof the greatindividualistwriterswas indeed to find a set of

institutionsywhichmancouldbe induced,byhisownchoiceandfrom he motives

which determinedhis ordinary onduct,to contribute s much as possibleto the

need of allothers .. (1f, pp. 12-13).

Hayekemphasizes he anti-rationalisticharacter f this philosophy,which is




a view which in generalratesrather ow the place which reasonplays in human

affairs,which contends hatmanhas achievedwhat he has in spite of the factthathe

is only partlyguided by reason, and that his individual eason s very limitedandimperfect .. One might even say that the former s the productof an acute con-

sciousness of the limitations f the individualmindwhich induces an attitudeof

humilityoward he impersonal ndanonymous ocialprocessbywhichindividuals

help to create hingsgreater han they know ... (ITE,p. 8).

The greatdiscoveryof the classical economists is that

many of the institutions n which humanachievements est have arisenand are

functioningwithout a designingand directingmind. . . and that the spontaneous

collaborationf freemenoften creates hingswhicharegreaterhan heir ndividualminds can everfully comprehendITF,p. 7).

V

The Relationship between Sociology and Economics Revisited

WE HAVEOBSERVEDHAT mith is an intellectual ancestor that Hayek and

Durkheim both share. Hayek would not have been happy with this

common heritage. In ITE(as well as in other publications, the mostimportantof which here is The Counterrevolution f Science) he criticizes

"rationalist onstructivism,"he tradition hat he identifies with Descartes

and Comte.He presentsthis traditionas diametricallyopposed o the ideas

of the ScottishEnlightenment.The factthatDurkheimexplicitlyrecognizes

his intellectualdebt to Comtemay explain why Hayekcondemns him as a

constructivist: It s in the insistence on social 'solidarity'hatthe construc-

tivistapproachto sociology of Auguste Comte,EmilDurkheimand Leon

Duguit shows itself most clearly" LLLII,. 11, n. 9). Hayek demonstrates

a fundamentalmistrustof the idea of cooperationand an almostdogmatic

emphasis on the efficiency of coordination as the binding principle in

society. Compare,for instance, the following passage in The Fatal Con-

ceit.20

One revealingremarkof how poorlythe orderingprincipleof the market s

understood s the common notion that 'cooperations betterthan competition'.

Cooperation,ikesolidarity, resupposesa largemeasureof agreement n ends as

well as on methodsemployed n theirpursuit.t makessensein a smallgroupwhosemembers hareparticular abits,knowledgeand beliefsaboutpossibilities.tmakes

hardlyanysensewhen the problem s to adapt o unknowncircumstances;et it is

thisadaptationo theunknownon which the coordination f effortsn the extended

orderrests FC, p. 19).




Hayek refuses to understandby "cooperation" nythingbut a conscious,

deliberate, and intentionalact of solidarity.As such, cooperation can only

take place in the small face-to-face tribal group with its shared goals.

However, what Durkheim has in mind when he speaks of cooperation is

not the behavior of individualswho, one day, decide to get together and

agree on common objectives. On the contrary.What he means are the

various forms of interactionand complementaritybetween the "functions"

which emerge with the increasing division of labor in society. The indi-

vidualsare no more than the holdersor performersof these functions,and

throughtheirrelationshipswith other individualsthe variousspecializedsocial organs will be in touch with other organs in society. It would be

entirely justified to apply Ferguson's expression "the result of human

actions but not of humandesign,"one of Hayek's favouritequotations,to

the durkheimianprocess of the emergence of cooperation. We have

alreadyseen that Durkheim's idea of cooperation is much subtler than

Hayek thinks. For instance, Durkheim is very criticalof Spencer'sthesis

thatevery society consists of cooperation.To this he opposes Comte's dea

thatcooperationdoes not give rise to society; on the contrary, t presup-

poses its existence.21

We have taken Hayekas a representativeof an economic approachto

social institutions and social stabilityin which coordination is a central

element. However, the distance between his analysis and Durkheim's,

whom we have chosen as a representativeof the sociological approach in

which cooperation is crucial,seems to exist more in Hayek's subjective

opinion than in his analysis. The conclusion appears to be either thatHayekhas not read Durkheimverywell (or not at all), or that he read him

but forgot the argument.The phrase to the extent that Durkheim is a

constructivist,which we quoted above, is a note to a passage statingthat

the GreatSociety has nothing to do with solidarity n the "true" ense of

conscious unitedness in the pursuitof common goals. Durkheimsays the

exact opposite. Hayek's njusticewith regard o Durkheim s compounded

in LLLJII,here he accuses Durkheimof being the originatorof confusing

altruisticwith moral. Yet Durkheim'sstrategy or creatinga social science

independent fromeconomics startswith his takingissue with exactly this

idea.Ironically,whatHayek presentsas criticism s more likea restatement

of Durkheim's deas, couched in Hayek's language.22



SocialStability 769

VI

Cooperation versus Coordination?

HOWEVER, THIS IS A MATITEROF INTELLECTUAL ISTORY. Here we are more

interestedin the question of whether there exist fundamentaldifferences

between sociology and economics as represented by Durkheim and

Hayek.We have seen how accordingto Durkheimthe division of laborin

society, accompanied by restitutive aw as the observableexpression of a

growing social cohesion or solidarity,goes hand in hand with the devel-

opment of individualpersonality.This is only possible in a society which

provides the materialand spiritualconditionsfor individuals o distinguish

themselves fromthe collective. The form of society thatgives individuals

the space fordevelopingtheirown personalcharacterss a society that has

learned, in a manner of speaking, not to severely punish those who dare

take their distance from the collective values.23 Here, the visions of

Durkheimand Hayek are very close indeed. Hayek'sGreatSociety is only

possible if thereis a framework hat allows individuals o divergefrom the

prescriptionsofacceptedmoralityand learnto pursuetheirown individual

objectives,withouthaving to justifythem. The marketorder,or catallaxy,

constitutes such a framework:

The GreatSocietyarosethroughhediscoveryhatmencan livetogethern peace

andmutuallybenefiting ach otherwithoutagreeingon particularims whichthey

severallypursue.The discovery hatby substituting bstract ulesof conduct for

obligatory oncreteends made it possibleto extend the orderof peace beyondthe

smallgroupspursuing he sameends,because t enabledeach ndividualogain rom

the skill andknowledgeof otherswhom he need not even know and whose aims

could be whollydifferent romhis own (LLLII,. 109).24

The continuityof the market orderwhich makes this peaceful coexist-

ence and the stabilityof the GreatSociety possible presupposes the belief

by its members in the existence and beneficial effects of spontaneous

coordination mechanisms that have not been consciously planned or

programmed.At the very least, it presupposes their willingness not to

tamperwith them. Here lies the vulnerabilityof the market order. Like

Durkheim,Hayek arguesthatsince this social organization orm is such a

recent discovery,the individualvalues are still more adaptedto the envi-

ronmentof the primitivegroup.The riskthatthreatens he marketorder is

"the revival of the organizationalthinking of the tribe"(LLLII, . 134),

where consciously imposed concrete rules were the norm. In order to




preserve he catallaxy, ts membersmust learnto renounce he sort of

solidarityhat is the result of the adoptionof commongoals. Hayek

condemns ocialismas a reassertion f "that ribal thicswhose gradual

weakeninghas madeanapproach o the GreatSocietypossible"ibid.).

Accordingo Durkheim,ndividualersonality evelopsasthedivision

of labor and restitutiveaw occupyan ever more important lace in

society. Accordingo Hayek,its developmentgoes togetherwith the

extensionof the marketand competitionn an evolutionary rocess.25

Durkheiminds heunity hatcharacterizedegmentaryocietyback, na

morestableandmoredeeplyrooted orm,nthecooperationetween hemanydifferentunctionswhich s theessence of the divisionof laborand

the socialcohesion hatresults rom herecognitionf the mutualdepen-

dence n modernociety.ForHayek,he coordinationfindividualctions

that s achievedby markets ndcompetition,ogetherwith the "minimal

justice"of the applicationof abstract ules of behaviorare sufficient

conditionsor hecohesion hatallows ndividualso pursue heirpersonal

goals, provided heyrespect hisspontaneous rder.

So,forDurkheimolidarityomesabout hrough ooperation, hereasaccordingo Hayekat least a minimal ormof cohesion s the resultof

coordination.

VII

Collective versus Individual?

THIS DOESNOTAPPEARo be the only difference.Hayek'smethodologys

generallydentifiedwithindividualismndDurkheim's ith collectivism.Forexample,hisdefinition f a social actpresupposesheexistenceof a

collective conscience,26whereas for Hayeka social fact is based on

individualxpectations nd perceptions.However, orHayekrules and

indeedrationalityrefundamentallyocialphenomena-this is the mes-

sageof, forinstance,Tlh27-and or Durkheimhe collective onscience

must be internalizedy the individuals f whom societyconsists; hey

must eel that heybelongto the samesociety DTS,p. 260).Also,when

Durkheimpeaksof the mechanical ausesandforces hatmakemen ive

moreclosely ogether, e mentions onsanguinity,haringhe same and,

the cultof ancestors, ndhaving n common he samehabits p. 262).

Perhapswith theexceptionof the first wo, all of thesefactors remental




and attitudinalrather han physical or objective.These are the factorson

the basis of which groups form,and only after groups have formed does

cooperation evolve. So on the matterof the (social) part-wholerelation-

ship the two authorsare much closer to one anotherthan they appearto

be. The point of contact lies in what Hayek calls the primacy of the

abstract,which is mirroredby Durkheim's xplanationof the emergenceof

abstract hought and rationality.

VIII

The Division of Knowledge

AN ASPECT N WHICH HAYEKseems to differ romDurkheims in histheoryof

the distributionof knowledge and its coordination:

Farmore mportanthan hismoralattitude ofcaring oroneselfand one'sfamily],

which mightbe regardedas changeable, s an undisputedntellectual act which

nobodycan hope to alterand which by itself s a sufficient asisforthe conclusions

which the individualist hilosophersdrew.This is the constitutionalimitation f

man'sknowledgeandinterests,hefact thathe cannot know more thana tinypart

of the whole society and thereforeall that can enter into his motives are theimmediate ffectswhich his actionswill have in the spherehe knows(ITh,p. 14).

Is thiswhere Hayek'strueoriginalitywith respectto Durkheim ies?The

next passage creates the impressionthatHayek himself thinksso:

Allthepossibledifferencesn men'smoralattitudes mount o little,so farastheir

significance or social organizations concerned,comparedwith the fact thatall

man'smindcaneffectively omprehend rethe factsof thenarrow ircleof whichhe

is the center; hat,whetherhe is completely elfishor the mostperfectaltruist,he

humanneeds forwhich he can effectively arearean almostnegligible ractionofthe needs of all membersof society(ibid.).

The division of knowledge as such is not discussed by Durkheim.

However, it is obvious thatwith increasingspecialization heretakesplace

a fragmentationand localizationof knowledge. For Durkheimthe growth

of knowledge, both in the sense of local, possibly tacitknowledge, and in

the sense of explicit and scientific knowledge, is a consequence of the

division of labor. He only needs to explainthe initial"jump"n the level of

knowledge which sets the process of diversificationof the social structure

in motion, i.e., the higherintelligencethat turns a particularndividual nto

a leaderwithin the horde. This,however, seems to belong to the domain

of necessaryconditionsthatallow the effects of a greatersocial densityor




volume o start reating hedivisionof labor.ForHayek, oo,thedivision

of laborand he ocalization fknowledgedevelop ogethernwhatwould

now be calledaprocessofco-evolution. hisdoes not seemtodistinguish

himfromDurkheim.Hayek's riginalityies inthewayinwhichhe links

the existenceof dispersed nowledge ndtheproblem f itscoordination

with the conceptof equilibrium, hich is the subjectof "Economicsnd

Knowledge."hisshowsa wayforward hatpromiseso addsomething

substantialo Durkheim'snalysiswithout ustifyingHayek'sharsh udg-

ment(whichwe mayreadas an implicit eplyto Durkheim'slaim hat

sociology s moregeneral haneconomics)"that, owevergratefulwe allmustbe forsomeof the descriptivework of the sociologists,orwhich,

however,perhaps nthropologistsndhistorians ouldhavebeenequally

qualified, here seems to me still to exist no more justificationor a

theoretical isciplineof sociology han therewould be for a theoretical

discipline f naturologypartrom he theoreticalisciplines ealingwith

particularlassesof natural rsocialphenomena"LLLIII,. 173).

Ix

Psychology

BEFORE NDICATINGOWhis "cognitive"artof Hayek's esearchprogram

may be developed further,we have to dwell upon a partof his work that

has remainedrelatively unknown. We mean his theoreticalpsychology,

which, in fact,was his earliestcontribution o science. In 1920, when he

wasstillastudent,Hayekwroteananalysis f themechanismywhich he

human brain transformssensory perceptions into knowledge about the

world. Using the latest results in brain research and the psychology of

perception,he constructeda theorythatwas aheadof its time. So muchso,

that when he published an extended version of the manuscript n 1952,

under the title The Sensory Order. An Inquiry into the Foundations of

TheoreticalPsychology, it was as much ignored as Donald Hebb's The

Organizationof Behaviorthreeyearsearlier,which contains a theory that

is very similarto Hayek's.28We have mentioned earlierthat perceptions

play a crucial role in Hayek'seconomics. It is thereforesurprising hat he

did not use, or even referto, his earlierpsychologicalanalysis of human

perception.Indeed, like his friendthe philosopherKarlPopper, he explic-

itly rejectspsychologicalanalysis in social science explanations.




Nothing compels us to take over this anti-psychologism.Indeed, in his

analytical economics Hayek himself seems less dogmatic than in his

methodology. In Price Expectations,MonetaryDisturbancesand Malin-

vestments,he declares himself"incompleteagreementwith [Myrdal] hen

he stresses the great importance of this element [expectations]in the

further development of the theory of industrialfluctuations" 1933, pp.

155-56). This seems to imply that he did not exclude psychological

explanationsfrom the domain of economics. By a complicatedseries of

transformationsn his thought,29a number of elements of his psycholog-

ical theoryended up as ideas central deas in his methodology and theory

of society. Among the formerare subjectivism, .e., the principle that the

factsof the social sciences are the opinions of the agents;the compositive

method, according to which all social phenomena have to be recon-

structedfrom these social facts;and the idea thatan importantdifference

between the social and the natural sciences is that in the former the

scientist is equipped with a mind that obeys the same principlesas the

minds of his objectsof

study.The most importantdeas in his social theory

thatwere inspiredby his psychology include thatof social institutionsas

self-organizingsystems; the market system as a structureof distributed

knowledge;and social institutionsas containingthe implicitknowledge of

earliergenerations(and hence being path-dependent).Fromthe idea that

the facts of social sciences are the productsof humanminds, togetherwith

the idea that no entitycanexplainanything hat is morecomplex than itself

(anotherof the philosophicalconsequences of Hayek'spsychology), fol-

lows the core of Hayek's theoryabout the limits to human understanding

of social phenomena, and hence to the possibilityof intervention.

We mentionthese facts aboutHayek'spsychologyfor two reasons. First,

because Hayek, in a process of intellectual development that is very

different romDurkheim's,arrivesat a number of conclusionsthatarevery

similarto Durkheim's.Second, because Hayek'swork harboursan as yet

unexploredpotentialforimprovingourunderstandingof social processes.

To this we turnnext.




X

Minds, Networks, and the Reintegration of Sociology and Economics

WE HAVE SHOWN ABOVE how Hayek generalized into a theory of social

institutions a number of ideas that are central to his economic theory.

Curiouslyenough, he failed to do so with what we may rightfullycall the

centralelement of his economics, the concept of equilibrium.Hayek (like

Durkheim)is a moral scientist in the sense of Mill in that he considers

social institutionsas owing their existence to the perceptions, expecta-

tions, and ideas of individuals(Durkheimspeaks of the collective con-science). Hayekdefines economic equilibriumas the compatibilityof the

perceptions and expectations on which individuals base their economic

plans. To explain social stability, hisequilibrium oncept can be extended

straightforwardlyo include all perceptions and expectations, not just

those thatconcern economic matters.Hayeknever makes this extension,

although it seems a naturalway to link his theory of society with, for

example, the sociological traditionof symbolic interactionism,which has

as centralconcept the definitionof the situation. The advantagesof thisextension of the equilibriumconcept become clear when we include the

role of the structureof communication.In orderfor a set of social institu-

tions to be stable, it is necessary that the individuals who populate the

social frameworkcontinue to have perceptions and expectations (from

now on we will use the word ideas) that are sufficientlycompatibleor

congruous.In order for that to be the case, they need to calibrate these

ideas. This can only take place when they can communicate with one

another,which presupposes a structureof communication.Their location

in that structure and the number, the type, and the intensity of their

contacts or ties with other individualsinfluence this calibrationprocess.

Includingthese factors n the analysisallows us to increase its explanatory

power and empiricalcontent.

Above, we have referred o the work of the networksociologist Harri-

son White.White studies the emergence and stabilityof differenttypes of

marketrelationships White 1988, 1993). Morespecifically, he studies the

market of products that are purchased by industry. These markets are

established and remain in existence (White speaks of these markets re-

producingthemselves) only if the structureof relationshipsamong sup-

pliers and purchasers is such that their perception of the situation is



SocialStability 775

sufficientlycongruent. Otherwise, a marketwill disappear. Thus, these

markets exist by virtue of the mutual compatibilityof the perceptions of

the market parties. White limits his analysis to the congruence of the

perception of the cost and utility functions of the marketparties. As in

Hayek'scase, this seems an unnecessaryrestriction. ndeed, including the

perception of more than these traditionallyeconomic factors offers the

perspectiveof enrichingthe analysiswithelements that allow us to include

both cooperationand coordination.30

A further extension of Hayek's equilibriumconcept builds upon his

cognitive psychology andhis theoryof culturalevolution.Itis the idea thatmental models and theirevolutionhave to be included in the explanation

of social phenomena. While social institutions are the result of mental

models, these mental models have evolved in interactionwith a particular

institutional nvironment.Thisenables us to subjectto further xamination

Durkheim's laim thatcooperationis more fundamental hancoordination.

A natural point of departurewould be the analysis of the effects of

competition.We remind the readerof Durkheim'scommentthat whether

or not competition has the beneficial effects that for instance Hayekascribesto it (viz. thatby discoveringknowledge it enhancescoordination)

depends on the presence orabsence of social cohesion. Thisis a claim that

can be tested empirically.But a moregeneraltype of analysismust address

the question of which explanatoryfactors are fundamental.Economic

theories ultimately invoke rationality.It is not entirely clear what the

fundamental actorsin sociological theories are. In the recent traditionof

"explanatory ociology," for instance, utilitymaximization is taken over

fromeconomics to explain social phenomena. In his networkanalysisof

competition, Burtemphasizes the social structureas an explanatoryfac-

tor.31He speaks of "[clausationesid[ing] n the intersectionof relations"

(1992, p. 192),which he contrastswith the "debilitatinglternativeof using

[individual]attributesas an ersatzexplanation" ibid., p. 193). However,

entrepreneurialbehavior in Burt'sanalysisis drivenby the perceptionto

"turna profit,"which seems to presuppose a maximizing principle.Even

Durkheim,despite his effortsto maximize his distancefromeconomics, in

the end invokes a maximizationprinciple.He does so when he discusses

the division of labour as a result of the strugglefor life: "Ladivision du

travailest donc un resultatde la luttepour la vie . . . (DTS,p. 253)."["The

divisionof laboris, then, a resultof the strugglefor existence ...."]. Every




specializationas as a result he increaseor ameliorationf production

(DTS,p. 255).It is difficulto understandwhy efficiencywould leadto

specializationf itsadvantages ere not noticedby at leastsome individ-

uals.So,Durkheimtthispoint ntroducesfficiency ythe backdoorso

to speak. This, in turn,leads us back to utility:"pourque la vie se

maintienne,l faut toujoursque la reparation oit proportionneeala

depense.. ." (p. 255)["but or life to be maintained,eparationmustbe

proportionateo the expenditure"272)].In fact, this is the Friedman-

Alchianevolutionary rgument or utilitymaximizationAlchian1950).

Thisstrongly uggests hatcost-benefit onsiderationsre more hannec-essaryconditions.So it seems thatthe questionabout the relationship

betweeneconomicsand sociology hatwas raisedby Durkheim as not

yetfounda definitive nswer.Arecent uggestion hat heremaybe more

thanone fundamental rivemotivating umanbehaviordeserves urther

investigation.t is due to'Hermann-Pillath,ho distinguishesn egoistic

and an altruistic lement.32 his theoryseems to presupposea type of

modular tructuref the humanmind hatcan also be found, or nstance,

in the workof JackendoffJackendoff 989).Thissuggests hat he studyof mentalstructures,ither in termsof modules or models,maybe a

necessary ngredientoransweringDurkheim's uestionaboutthe rela-

tionshipbetweeneconomicsand sociology.Hayek has pointedto the

directionn whichwe may ook:a studyof mindsconnectedbynetworks.

Nothingn Durkheim'shoughts inconsistentwiththat.33

Notes

1. ComparePopper 1972,ch. 5; Krajewski977;Birner1994.

2. Exceptwhen statedotherwise, n the caseof Durkheim age referencespreceded

by DTSare to Durkheim 893 1994).Referenceso Hayek's hreevolumes1973-79will

be givenasLLLI,I,orIII.AlltranslationsromDTS retaken romDurkheim 964. nthe

sequel we will only give the page references.

3. Compareor exampleDurkheim,DTS,p. III:"si e vaincupeut se resignerpourun

temps a une subordination u'il est contraintde subir,il ne la consentpas, et, par

consequent,elle ne saurait onstituerun equilibre table. Des treves imposeesparla

violencene sontjamais ue provisoires t ne pacifientpasles esprits""if he conquered,fora time,mustsuffersubordination ndercompulsion, hey do not consent to it, and

consequentlyhiscannotconstitute stableequilibrium.ruces, rrived tafterviolence,

areneveranything utprovisional, nd satisfyno one";pp.2-3];and HayekLLLII,. 136:

"theattempt o secure to each what he is thought o deserve,by imposingupon all a




systemof commonconcreteends towardswhich theireffortsare directedby authority,

as socialismaimsto do, would be a retrogradetep...."

4. Simon1968.5. Durkheimadds thatthis explains why we findprimitive ocieties so difficult o

understand.

6. Or perhapsbecauseof the fact that Durkheim houghthis theoryto be more

general. n thatcase,one may supposethathe foundtheanalysisof marketsn political

economy satisfactory.

7. It wouldbe anexaggerationo speakof Hayek's heoryof markets, ince he never

produceda fully-fledged ndcoherent xplanation.However,his workof the 1930sand

'40s containsthe most important lements for such a theory (compareBirner1999).

Hayek'smost important ublications ealingwith marketsand competition re Hayek

1937, 1945, 1946, 1947,and 1968.

8. Anaturalxtensionof Hayek'sdeas on this issue would be to saythat hisgeneral

availability f knowledge, ogetherwith a constructivisthilosophy,has led neoclassical

economists to construct heir highly idealized theory of markets. ndeed, the only

economy to which standardneoclassicalperfect competitionmodels approximately

apply is the now almostcompletelydefunctcentrallyplannedsocialistor communist

system.

9. Hayek s the firsteconomist o do so (1937).

10. Hayekdoes not explainwhat he meansby optimum,but the text makes t clear

that t is a situationn which no relevantknowledge s leftunusedso thatno individual

has a motiveto change his plan-an indirectway to expressa Paretooptimum.

11. CompareDesai(1994)for a discussionof the revolutionaryharacter f Hayek's

posingthe problemof the divisionof knowledge.

12. Compare lsoHayek:"The tatementhat, f peopleknoweverything,heyare in

equilibriums truesimplybecause that s how we defineequilibrium"1937:46).

13. Desai s theonlyone to notice hisaspectof Hayek's nalysis f markets.CpDesai

1994:41.14. CpRichardson960and1972.Richardson'sourcesof inspirationreHayekand

Marshall.

15. CpKirman 983, 1985, 1991;Gilles1990andlaterpublishedwork.

16. Cp for instanceGranovetter982,1985;White1988;Burt1992. Amongecono-

mists, he bestknown of these is Granovetter,nd hiswork,too, failed o giveriseto an

economic network radition.

17. Cp Hayek 1937and 1945.

18. UnlikeDurkheim,Hayeknever ormulates theoryof thedevelopment f rational

thought.OnthiscompareBirner1995,1999.19. This sverysimilar o Popper's pproacho socialscience.Watkins as coined the

fortunateerm"negative tilitarianism"orthis.

20. Given the fact thatHayekdid not himselfcompletethe book, it has to be cited

with caution.However,what Hayek says here is consistentwith his neglect of the



778 Americanournalof Economics nd Sociology

incentiveson cooperation n earlierwork,a neglect or which he has been criticized y,

forinstance,Witt1994,Shearmur994,and Bianchi1994.

21. "[Llaooperation, ien loin d'avoirpuproduireasociete,en suppose necessaire-ment e prealable tablissementpontan6"DTS,p. 262).["co-operation,ar romhaving

producedsociety, necessarily upposes,as preamble, ts spontaneousexistence."-p.

278].

22. Fora more extendeddiscussionof this issuein intellectual istory p Birner nd

Ege 1999.

23. Cp Bianchi1994.

24. Thiscanbe readas anaccurate ummary f Durkheim'sheoryof the divisionof

labor.

25. Cp Ege1995.

26. Cp Les r&glesde la methode sociologique. "Estfait social toute maniere de faire,

fix6e ou non, susceptibled'exercer ur lindividuune contrainte xterieure; u bien

encore,quiestgeneraledans 'etendued'unesocietedonneetouten ayantune existence

propre, ind6pendentede ses manifestations ropres"p. 14, italicsdeleted). [Inour

translation:Socialactsarealltypesofbehaviour,whetherornot laiddown inrules, hat

arecapableof actingasanexternal onstraint n theindividual;ralternatively,hatare

general everywhere n a particularociety while havingan existence of theirown,

independentromtheirspecificmanifestations"].

27. Cp I7T,p. 15,whereHayekpresents he marketorder)as a socialtrial-and-error

process, where Reason with a capitalR exists only by virtueof many individuals

contributingheirspecificknowledgeto societyin an unplannedmanner.

28. Both became stimuli to the developmentof neuralnetwork models and the

re-introductionf the studyof mentalprocesses nto psychology hat now dominates

research.The publication f Hebb'sbook almostmadeHayekgive up the projectof

publishinghis own. Fora discussionof Hayek'spsychologyandits(paradoxical) lace

in the whole of his work(to which the text below refersbriefly),cp Birner1999a.

29. Forwhichthe readermay want to consultBirner1999a.30. Richardson1960) s anearlyattempto includeboththese factors.Cpalso Birner

1999.

31. Burt1992.Thisanalysis an be considered s an extensionand a formalizationf

a typeof competitionhatwas analyzedby MisesandHayek.CpBirner1996.

32. The ideais of coursemucholder.One finds t,forinstance, n Menger.Compare

Birner1990.

33. Hayek's ocial heorywas strongly nfluencedby his neural-network odel of the

mind;cp. Birner1996and 1999a. nDurkheim, oo, we findreferences o physiological

psychology (of Wundt),though they have a different unction and seem to play amarginalole in thedevelopmentof histhought DWS,p. 322-3). Making omparisons

withbiology s a tradition hatgoes at least back to ComteandSpencer.However, ike

Hayek,Durkheimdoes not succumb to the temptationof an organicistic heory of

society.




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Documents

Two Views on Social Stability (Birner & Ege)