The Competitiveness of Nations in a Global Knowledge-Based Economy

F. A. von Hayek

Economics and Knowledge 1

Scientism and the Study of Society: PART III



XI – “Purposive” Social Formations

XII – “Conscious” Direction and the Growth of Reason

XIII – Engineers & Planners

XIV - Conclusion

                        [HHC: titles added to numbered items]           

Economica, New Series, 11 (41)

Feb. 1944, 27-39.



XI – “Purposive” Social Formations

IN the concluding portions of this article we have to consider certain practical attitudes which spring from the theoretical views already discussed.  Their most characteristic common feature is a direct result of the inability, caused by the lack of a cormpositive theory of social phenomena, to grasp how the independent action of many men can produce coherent wholes, persistent structures of relationships which serve important human purposes without having been designed for that end.  This produces a “pragmatic” 2 interpretation of social institutions which treats all social structures which serve human purposes as the result of deliberate design and denies the possibility of an orderly or purposeful arrangement in anything which is not thus constructed.

This view receives strong support from the fear of employing any anthropomorphic conceptions, so characteristic of the scientistic attitude.  This fear has produced an almost complete ban on the use of the concept of “purpose” in the discussion of spontaneous social growths, and it often drives positivists into an error similar to that they wish to avoid: having learnt that it is erroneous to regard everything that behaves in an apparently purposive manner as created by a designing mind, they are led to believe that no result of the action of many men can show order or serve a useful purpose unless it is the result of deliberate design.  They are thus driven back to a view which, is essentially the same as that which, till the eighteenth century, made man think of language or the family as having been “invented” or the state having been created by an explicit social contract, and in opposition to which the compositive theories of social structures were developed.

As the terms of ordinary language are somewhat misleading, it is necessary to move with great care in any discussion of the “purposive” character of spontaneous social formations.  The risk of being lured into an illegitimate anthropomorphic use of the term purpose is as great as that of denying that the term purpose in this connection designates something of importance.  In its strict original meaning “purpose” indeed presupposes an acting person deliberately aiming at a result.  The same, however, as we have seen before, 3 is true of other concepts like “law” or “organization”, which we have nevertheless been constrained, by the lack of other suitable terms, to adopt for scientific use in a non-anthropomorphic sense.  In the same way we may find the term “purpose” indispensable in a carefully defined sense.

The character of the problem may usefully first be described in the words of an eminent contemporary philosopher who, though elsewhere, in the strict positivist manner, he declares that “the concept of purpose must be entirely excluded from the scientific treatment of the phenomena of life”, yet admits the existence of “a general principle which proves frequently valid in psychology and biology and also elsewhere: namely that the result “of unconscious or instinctive processes is frequently exactly the same as would have arisen from rational calculation” 4  This states one aspect of the problem very clearly: namely, that a result, if it were deliberately aimed at, could be achieved only in a limited number of ways, and that it is actually achieved by one of those methods, although nobody has consciously aimed at it.  But it still

1. The first two parts of this article appeared in Economica for August, 1942, and February, 1943.

2. On this concept of the “pragmatic” interpretation of social institutions as for the whole of this section compare Carl Menger, Untersuchungen über die Methode der Sozialwissenschaften, 1883 (L.S.E. reprint 1933), book II, chapter 2, which is still the most comprehensive and most careful survey known to me of the problems here discussed.

3. See Part I of this article, Economica, August, 1942, p. 721.

4. Cf lvi. Schlick, Fragen der Ethik, Vienna, 1930, p. 72.


leaves open the question why the particular result which is brought about in this manner should be regarded as distinguished above others as desirable and therefore deserve to be described as the “purpose”.

If we survey the different fields in which we are constantly tempted to describe phenomena as “purposive” though they are not directed by a conscious mind, it becomes rapidly clear that the “end” or “purpose” they are said to serve is always the preservation of a “whole”, of a persistent structure of relationships, whose existence we have come to take for granted before we understood the nature of the mechanism which holds the parts together.  The most familiar instances of such wholes are the biological organisms.  Here the conception of the “function” of an organ as an essential condition for the persistence of the whole has proved to be of the greatest heuristic value.  It is easily seen how paralysing an effect on research it would have had if the scientific prejudice had effectively banned the use of all teleological concepts in biology and, e.g., prevented the discoverer of a new organ from immediately asking what “purpose” or “function” it serves. 1

Though in the social sphere we meet phenomena which in this respect raise analogous problems, it is, of course, dangerous to describe them for that reason as organisms.  The limited analogy provides as such no answer to the common problem, and the loan of an alien term tends to obscure the equally important differences.  We need not labour here the now familiar facts that the social wholes, unlike the biological organisms, are not given to us as natural units, fixed complexes which ordinary experience shows us to belong together, but are recognisable only by a process of mental reconstruction; or that the parts of the social wholes, unlike those of a true organism, can exist away from their particular place in the whole and are to a large extent mobile and exchangeable.  Yet, though we must avoid overworking the analogy, certain general considerations apply equally in both cases.  As in the biological organisms so in spontaneous social formations we often observe the parts to move as if their purpose were the preservation of the wholes.  We find again and again that if it were somebody’s deliberate aim to preserve the structure of those wholes, and if he had the knowledge and the power to do so, he would have to do it by causing precisely those movements which in fact are taking place without any such conscious direction.

In the social sphere these spontaneous movements which preserve a certain structural connection between the parts are, moreover, connected in a special way with our individual purposes: the social wholes which are thus maintained are the condition for the achievement of many of the things we individually aim at, the environment which makes it possible even to conceive of most of our individual desires and which gives us the power to achieve them.

There is nothing more mysterious in the fact that, e.g., money or the price system enable man to achieve things which he desires, although they were not designed for that purpose, and hardly could have been consciously designed before that growth of civilisation which they made possible, than that, unless man had tumbled upon these devices, he would not have achieved the powers he has gained.  The facts to which we refer when we speak of “purposive” forces being here at work are the same as those which create the persistent social structures which we have come to take for granted and which form the condition of our existence.  The spontaneously grown institutions are “useful” because they were the conditions on which the further development of man was based - which gave him the powers which he used.  If in the form in which Adam Smith put it the phrase that man in society “constantly promotes ends which are no part of his intention” has become the constant source of irritation of the scientistically-minded, it describes nevertheless the central problem of the social sciences.  As it was put a hundred years after Smith by Carl Menger, who did more than any other writer to carry beyond Smith the elucidation of the meaning of this phrase, the question “how it is possible that institutions which serve the common welfare and are most important for its advancement can arise without a common will aiming at their creation” is still “the significant, perhaps the most significant, problem of the social sciences.” 2

1. On the use of teleological concepts in biology compare the careful discussion in J. H. Woodger, Biological Principles, 1929, particularly the section on “Teleology and Causation “, pp. 429-455 ; also the earlier discussion in the same work (p. 291) on the so-called “scientific habit of thought’s causing the “scandal” of biologists not taking organisation seriously and “in their haste to become physicists, neglecting their business.”

2. Untersuchungen, etc., p. 163 {HHC: extensive German footnote not reproduced} [If for the ambiguous and somewhat question-begging term “social welfare” we substitute in this statement “institutions which are necessary conditions for the achievement of man’s conscious purposes” it is hardly saying too much that the way in which such “purposive wholes “are formed and preserved is the specific problem of social theory, just as the existence and persistence of organisms is the problem of biology.]

HHC: [bracketed] displayed on page 29 of original.


That the nature and even the existence of this problem is still so little recognised’ is closely connected with a common confusion about what we mean when we say that human institutions are made by man.  Though in a sense man-made, i.e., entirely the result of human actions, they may yet not be designed, not be the intended product of these actions.  The term institution itself is rather misleading in this respect, as it suggests something deliberately instituted.  It would probably be better if this term were confined to particular contrivances, like particular laws and organisations, which have been created for a specific purpose, and if a more neutral term like “formations” (in a sense similar to that in which the geologists use it, and, corresponding to the German Gebilde) could be used for those phenomena, which, like money or language, have not been so created.

From the belief that nothing which has not been consciously designed can be useful or even essential to the achievement of human purposes, it is an easy transition to the belief that since all “institutions” have been made by man, we must have complete power to refashion them in any way we desire. 2  But, though this conclusion at first sounds like a self-evident commonplace, it is, in fact, a complete non sequitur, based on the equivocal use of the term “institution”.  It would be valid only if all the “purposive” formations were the result of design.  But phenomena like language or the market, money or morals, are not real artifacts, products of deliberate creation. 3  Not only have they not been designed by any mind, but they are also preserved by, and depend for their functioning on, the actions of people who are not guided by the desire to keep them in existence.  And as they are not due to design but rest on individual actions which we do not now control, we can at least not take it for granted that we can improve upon, or even equal, their performance by any organisation which relies on the deliberate control of the movements of its parts.  In so far as we learn to understand the spontaneous forces, we may hope to use them and modify their operations by proper adjustment of the institutions which form part of the larger process.  But there is all the difference between thus utilising and influencing spontaneous processes and an attempt to replace them by a mechanism relying on conscious control.

We flatter ourselves undeservedly if we represent human civilisation as entirely the product of conscious reason or as the product of human design, or when we assume that it is necessarily in our power deliberately to re-create or to maintain what we have built without knowing what we were doing.  Though our civiisation is the result of a cumulation of individual knowledge, it is not by the explicit or conscious combination of all this knowledge in any individual brain, but by its embodiment in symbols which we use without understanding them, in habits and institutions, tools and concepts, 4 that man in society is constantly able to profit from a body of knowledge neither he nor any other man completely possesses.  Many of the greatest things man has achieved are not the result of consciously directed thought, and still less the product of a deliberately co-ordinated effort of many individuals, but of a process in

1. How much intellectual progress has been obstructed here by political passions is readily seen when we compare the discussion of the problem in the economic and political science with, say, the study of language where, what in the former is still disputed, is a commonplace nobody dreams of questioning.

2. Menger speaks in this connection rightly of “a pragmatism which, against the wishes of its representatives, leads inevitably to socialism.”  (Untersuchungen, etc., p. 208.)  To-day this view is most frequently found in the writings of the American “Institutionalists” of which the following (taken from Professor W. H. Hamilton’s article on “Institution” in the Encyclopedia of the Social Sciences, Vol. VIII, pp. 87-89) is a good example: “The tangled thing called capitalism was never created by design or cut to a blueprint; but now that it is here, contemporary schoolmen have intellectualised it into a purposive and self-regulating instrument of general welfare”.  From this it is only a few steps to the demand “that order and direction should be imposed upon an unruly society.”

3. A typical example of the treatment of social institutions as if they were true artifacts, in a characteristic scientistic setting, is provided by J. Mayer, Social Science Principles in the Light of Scientific Method, Durham, N. C., 5945, p. so, where society is explicitly “designated as an ‘artificial creation’, much as an automobile or steel mill is, that is to say, made by the artifice of man”.

4. The best illustration, perhaps, of how we constantly make use of the experience or knowledge acquired by others, is the way in which, by learning to speak, we learn to classify things in a certain manner without acquiring the actual experiences which have led successive generations to evolve this system of classification.  There is a great deal of knowledge which we never consciously know implicit in the knowledge of which we are aware, knowledge which yet constantly serves us in our actions, though we can hardly be said to “possess” it.


which the individual plays a part which he can never fully understand.  They are greater than any individual precisely because they result from the combination of knowledge more extensive than a single mind can master.

It has been unfortunate that those who have recognised this so often draw the conclusion that the problems it raises are purely historical problems, and thereby deprive themselves of the means of effectively refuting the views they try to combat.  In fact, as we have seen, 1 much of the older “historical school” was essentially a reaction against the type of erroneous rationalism we are discussing.  If it failed it was because it treated the problem of explaining these phenomena as entirely one of the accidents of time and place and refused systematically to elaborate the logical process by which alone we can provide an explanation.  We need not return here at any length to this point already discussed. 2  Though the explanation of the way in which the parts of the social whole depend upon each other will often take the form of a genetic account, this will be at most “schematic history” which the true historian will rightly refuse to recognise as real history.  It will deal, not with the particular circumstances of an individual process, but only with those steps which are essential to produce a particular result, with a process which, at least in principle, may be repeated elsewhere or at different times.  As all explanations, it must run in generic terms, it will deal with what is sometimes called the “logic of events”, neglect much that is important in the unique historical instance, and be concerned with a dependence of the parts of the phenomenon upon each other which is not even necessarily the same as the chronological order in which they appeared.  In short, it is not history, but compositive social theory.

One curious aspect of this problem that is rarely appreciated is that it is only by the individualist or compositive method that we can give a definite meaning to the much abused phrases about the social processes and formations being in any sense “more” than “merely the sum” of their parts, and that we are enabled to understand how structures of interpersonal relationships emerge, which make it possible for the joint efforts of individuals to achieve desirable results no individual could have planned or foreseen.  The collectivist, on the other hand, who refuses to account for the wholes by systematically following up the interactions of individual efforts, and who claims to be able directly to comprehend social wholes as such, is never able to define the precise character of these wholes or their mode of operation, and is regularly driven to conceive of these wholes on the model of an individual mind.

Even more significant of the inherent weakness of the collectivist theories is the extraordinary paradox that from the assertion that society is in some sense “more” than merely the aggregate of all individuals their adherents regularly pass by a sort of intellectual somersault to the thesis that in order that the coherence of this larger entity be safeguarded it must be subjected to conscious control, i.e., to the control of what in the last resort must be an individual mind.  It thus comes about that it is in practice regularly the theoretical collectivist who extols individual reason and demands that all forces of society be made subject to the direction of a single master-mind, while it is the individualist who recognises the limitations of the powers of individual reason and consequently advocates freedom as a mean to the fullest development of the powers of the inter-individual process.


XII - “Conscious” Direction and the Growth of Reason

The universal demand for “conscious” control or direction of social processes is one of the most characteristic features of our generation.  It expresses perhaps more clearly than any of its other clichés the peculiar spirit of the age.  That anything is not consciously directed as a whole is regarded as itself a blemish, a proof of its irrationality and of the need completely to replace it by a deliberately designed mechanism.  Yet few of the people who use the term “conscious” so freely seem to be aware what it precisely means; most people seem to forget that .“conscious” and “deliberate” are terms which have meaning only when applied to individuals, and that the demand for conscious control is therefore equivalent to the demand for control by a single mind.

This belief that processes which are consciously directed are necessarily superior to any spontaneous process is an unfounded superstition.  It would be truer to say as Professor Whitehead has argued in another connection, that on the contrary “civilisation advances by extending the number of important operations we can

1. See Part II of this article, Economica, February, 2943, pp. 50 et seq.

2. Ibid., pp. 54-58.  Cf. also Part I, p. 289, and Meager, Untersachungen, etc., pp. 164 et seq.


perform without thinking about them.” 1  If it is true that the spontaneous interplay of social forces sometimes solves problems no individual mind could consciously solve, or perhaps even perceives, and if they thereby create an ordered structure which increases the power of the individuals without having been designed by any one of them, they are superior to conscious action.  Indeed, any social processes which deserve to be called “social” in distinction to the action of individuals are almost ex definitione not conscious.  In so far as such processes are capable of producing a useful order which could not have been produced by conscious direction, any attempt to make them subject to such direction would necessarily mean that we restrict what social activity can achieve to the inferior capacity of the individual mind. 2

The full significance of this demand for universal conscious control will be seen most clearly if we consider it first in its most ambitious manifestation, even though this is as yet merely a vague aspiration and important mainly as a symptom: this is the application of the demand for conscious control to the growth of the human mind itself.  This audacious idea is the most extreme result to which man has yet been led by the success of reason in the conquest of external nature.  It has become a characteristic feature of contemporary thought and appears in what on a first view seem to be altogether different and even opposite systems of ideas.  Whether it is the late L. T. Hobhouse who holds up to us “the ideal of a collective humanity self-determining in its progress as the supreme object of human activity and the final standard by which the laws of conduct should be judged”, 3 or Dr. Joseph Needham who argues that “the more control consciousness has over human affairs, the more truly human and hence super-human man will become”, 4 whether it is the strict followers of Hegel who adumbrate the master’s view of Reason becoming conscious of itself and taking control of its fate, or Dr. Karl Mannheim who thinks that “man’s thought has become more spontaneous and absolute than it ever was, since it now perceives the possibility of determining itself”, 5 the basic attitude is the same.  Though, according as these doctrines spring from Hegelian or positivist views, those who hold them form distinct groups who mutually regard themselves as completely different from and greatly superior to the other, the common idea that the human mind is, as it were, to pull itself up by its own boot-straps, springs from the same general approach: the belief that by studying human Reason from the outside and as a whole we can grasp the laws of its motion in a more complete and comprehensive manner than by its patient exploration from the inside, by actually following up the processes in which individual minds interact.

This pretension to be able to increase the powers of the human mind by consciously controlling its growth is thus based on the same theoretical view which claims to be able fully to explain this growth, a claim which implies the possession of a kind of super-mind on the part of those who make it; and it is no accident that those who hold these theoretical views should also wish to see the growth of mind thus directed.

It is important to understand the precise sense in which the claim to be able to “explain” existing knowledge and beliefs must be interpreted in order to justify the aspirations based on it.  For this purpose it would not be sufficient if we possessed an adequate theory which explained the principles on which the processes operate to which the growth of mind is due.  Such knowledge of the mere principles (either a theory of knowledge or a theory of the social processes involved) might assist in creating conditions favourable to that growth, but could never provide a justification for the claim to direct it.  This claim presupposes that we are able to arrive at a substantive explanation of why we hold the particular views we hold, of how our actual knowledge is determined by specific conditions.  It is this which, the “sociology of

1. A. N. Whitehead, An Introduction to Mathematics (Home University Library), 1922, p. 61.

2. It cannot be objected to this that what is meant by conscious control is not control by a single mind but by a concerted and “co-ordinated” effort of all, or all the best minds instead of by their fortuitous interplay.  This phrase about the deliberate co-ordination merely shifts the task of the individual mind to another stage but leaves the ultimate responsibility still with the co-ordinating mind.  Committees and other devices for facilitating communications are excellent means to assist the individual in learning as much as possible; but they do not extend the capacity of the individual mind.  The knowledge that can be consciously co-ordinated in this manner is still limited to what the individual mind can effectively absorb and digest.  As every person with experience of committee work knows, its fertility is limited to what the best mind among the members can master; if the results of the discussion are not ultimately turned into a coherent whole by an individual mind, they are likely to be inferior to what would have been produced unaided by a single mind.

3. L. T. Hobhouse, Democracy and Reaction, 1904, p. 108.

4. J.Needham, Integrative Levels. A Revaluation of the Idea of Progress (Herbert Spencer Lecture), Oxford, 1937, p. 47.

5. K. Mainnheim, Man and Society in an Age of Reconstruction, 1940, p. 213.


knowledge” and the various other derivatives of the “materialist interpretation of history” undertake when, e.g., they “explain” the Kantian philosophy as the product of the material interests of the German bourgeoisie in the late 18th century, or whatever other similar theses they present.  We cannot enter here into a discussion of the reasons why even with respect to views now regarded as errors, and which on the basis of our better present knowledge we may in a sense be able to explain, that method does not really provide an explanation.  The crucial point is that to attempt this with respect to our present knowledge involves a contradiction: if we knew how our present knowledge is conditioned or determined, it would no longer be our present knowledge.  To assert that we can explain our own knowledge is to assert that we know more than we do know, a statement which is non-sense in the strict meaning of that term. 1  There may, perhaps, be sense in the statement that to a greatly superior mind our present knowledge would appear as “relative” or conditioned in a certain manner by assignable circumstances.  But the only conclusion we should be entitled to draw from this would be one opposite to that of the “boot-strap theory of mental evolution”; it would be that on the basis of our present knowledge we are not in a position successfully to direct its growth.  To draw any other conclusion than this, to derive from the thesis that human beliefs are determined by circumstances the claim that anyone should be given power to determine these beliefs, involves the claim that those who are to assume that power possess some sort of super-mind.  Those who hold these views have indeed regularly some special theory which exempts their own views from the same sort of explanation and credits them, as a specially favoured class, or simply as the “free-floating intelligentsia”, with the possession of absolute knowledge.

While in a sense this movement represents thus a sort of super-rationalism, a demand for the direction of everything by a super-mind, it prepares at the same time the ground for a thorough irrationalism.  If truth is no longer discovered by observation, reasoning and argument, but by uncovering hidden causes which, unknown to the thinker, have determined his conclusions, if whether a statement is true or false is no longer decided by logical argument and empirical tests, but by examining the social position of the person who made it, when in consequence it becomes the membership of a class or race which secures or prevents the achievement of truth, and when in the end it is claimed that the sure instinct of a particular class or a people is always right, reason has been finally driven out. 2 This is no more than the natural result of a doctrine which starts out with the claim that it can intuitively recognise wholes in a manner superior to the rational reconstruction attempted by compositive social theory.

If it is true, moreover, as in their different ways both individualists and collectivists contend, that social processes can achieve things which it is beyond the power of the individual mind to achieve and plan, and that it is from those social processes that the individual mind derives what power it possesses, the attempt to impose conscious control on these processes must have even more fatal consequences.  The presumptuous aspiration that “reason” should direct its own growth could in practice only have the effect that it would set limits to its own growth, that it would confine itself to the results which the directing individual mind can already foresee.  Though this aspiration is a direct outcome of a certain brand of rationalism, it is, of course, the result of a misunderstood or misapplied rationalism which fails to recognise the extent to which individual reason is a product of inter-individual relationships.  Indeed, the demand that everything, including the growth of mind, should be consciously controlled, is itself a sign of the inadequacy of the understanding of even the general character of the forces which constitute the life of the human mind and of human society.  It is the extreme stage of these self-destructive forces of our modern “scientific” civilisation, of that abuse of reason whose development and consequences will be the central theme of the following historical studies.

It is because the growth of the human mind presents in its most general form the common problem of all the social sciences that it is here that minds most sharply divide, and two fundamentally different and irreconcilable attitudes manifest themselves.  On the one hand the essential humility of individualism, which endeavours to understand as well as possible the principles by which the efforts of individual men have in fact been combined to produce our civilisation, and from this understanding hopes to derive the power to create conditions favourable to further growth; and, on the other hand, the hybris of collectivism which aims at conscious direction

1. See Part II of this article, Economica, February, 1943, pp. 36 and 6o seq.

2. Interesting illustrations of the length to which these absurdities have been carried will be found in E. Gruenwald, Das Problem der Soziologie des Wissens, Vienna, 1934, a posthumously published sketch of a very young scholar which still constitutes the most comprehensive survey of the literature of the subject.


of all forces of society.  The individualist approach, in awareness of the constitutional limitations of the individual mind, 1 attempts to show how man in society is able, by the use of various resultants of the social process, to increase his powers with the help of the knowledge implicit in. them and of which he is never aware; it makes us understand that the only “reason” which can in any sense be regarded as superior to individual reason does not exist apart from the inter-individual process in which, by means of impersonal media, the knowledge of successive generations and of millions of people living simultaneously is combined and mutually adjusted, and that this process is the only form in which the totality of human knowledge ever exists.  The collectivist method, on the other hand, not satisfied with the partial knowledge of this process from the inside, which is all the individual can gain, bases its demand for conscious control on the assumption that it can comprehend this process as a whole and make use of all knowledge in a systematically integrated form.  It leads thus directly to political collectivism; and though logically methodological and political collectivism are distinct, it is not difficult to see bow the former leads to the latter and how, indeed, without methodological collectivism political collectivism would be deprived of its intellectual basis: without the pretension that conscious individual reason can grasp all the aims and all the knowledge of “society” or “humanity”, the belief that these aims are best achieved by conscious central direction loses its foundation.  Consistently pursued it must lead to a system in which all members of society become merely instruments of the single directing mind and in which all the spontaneous social forces to which the growth of the mind is due are destroyed. 2

It may indeed prove to be far the most difficult and not the least important task for human reason rationally to comprehend its own limitations.  It is essential for the growth of reason that as individuals we should bow to forces and obey principles which we cannot hope fully to understand yet on which the advance and even the preservation of civiisation depends. 3  Historically this has been achieved by the influence of the various religious creeds and by traditions and superstitions which made men submit to those forces by an appeal to his emotions rather than his reason.  The most dangerous stage in the growth of civilisation may well be that in which man has come to regard all these beliefs as superstitions and refuses to accept or to submit to anything which he does not rationally understand.  The rationalist whose reason is not sufficient to teach him those limitations of the powers of conscious reason, and who despises all the institutions and customs which have not been consciously designed, would thus become the destroyer of the civilisation built upon them.  This may well prove a hurdle which man will repeatedly reach, only to be thrown back into barbarism.

It would lead too far here more than briefly to refer to another field in which this same characteristic tendency of our age shows itself: that of morals.  Here it is against the observance of any general and formal rules whose rationale is not explicitly demonstrated that the same kind of objections are raised.  But the demand that every action should be judged after full consideration of all its consequences and not by any general rules is due to a failure to see that the submission to general rules, couched in terms of immediately ascertainable circumstances, is the only way in which for man with his limited knowledge freedom can be combined with the essential minimum degree of order.  Common acceptance of formal rules is indeed the only alternative to direction for a common purpose man has yet discovered.  The general acceptance of such a body of rules is no less important because they have not been rationally constructed.  It is at least doubtful whether it would be possible in this way to construct a new moral code that would have any chance of acceptance.  But so long as we have not succeeded in doing so, any general refusal to accept existing moral rules merely because their expediency has not been rationally demonstrated (as distinguished from the case when the critic believes he has discovered a better moral rule in a particular instance and is willing to brave public disapproval in testing it) is to destroy one of the roots of our civilisation. 4

1. Cf. Part I of this article, Economica, August, 1942, pp. 280 and 290.

2. It is, perhaps, not so obvious as to make it unnecessary to mention it, that the fashionable disparagement of any activity which, in science or the arts, is carried on “for its own sake “, and the demand for a “conscious social purpose” in everything, is an expression of the same general tendency and based on the same illusion of complete knowledge as those discussed in the text.

3. Some further aspects of the big problems here just touched upon are discussed in my Road to Serfdom. 1944, particularly chapters VI and XIV.

4. It is characteristic of the spirit of the time, and of positivism in particular, when A. Comte speaks (Système de Politique Positive, Vol. I, p. 356) of “La supferiorité necessaire de la morale démontrée sur in morale révélée”, characteristic especially in its implied assumption that a rationally constructed moral system is the only alternative to one revealed by a higher being.



XIII - Engineers & Planners

The ideal of conscious control of social phenomena has made its greatest influence felt in the economic field.  The present popularity of “economic planning” is directly traceable to the prevalence of the scientistic ideas we have been discussing.  As in this field the scientistic ideals manifest themselves in the particular forms which they take in the hands of the applied scientist and especially the engineer, it will be convenient to combine the discussion of this influence with some examination of the characteristic ideals of the engineers.  We shall see that the influence on current views about problems of social organisation of his technological approach, or the engineering point of view, is much greater than is generally realised.  Most of the schemes for a complete remodelling of society, from the earlier utopias to modem socialism, bear indeed the distinct mark of this influence.  In recent years this desire to apply engineering technique to the solution of social problems has become very explicit; 1 “political engineering” and “social engineering” have become fashionable catchwords which are quite as characteristic of the outlook of the present generation as its predilection for “conscious” control; in Russia even the artists appear to pride themselves on the name of “engineers of the soul”, bestowed upon them by Stalin.  These phrases suggest a confusion about the fundamental differences between the task of the engineer and that of social organisations on a larger scale which make it desirable to consider their character somewhat more fully.

We must confine ourselves here to a few salient features of the specific problems which the professional experience of the engineer constantly bring up and which determine his outlook.  The first is that his characteristic tasks are usually in themselves complete: he will be concerned with a single end, control all the efforts directed towards this end, and dispose for this purpose of a definitely given supply of resources.  It is as a result of this that the most characteristic feature of his procedure becomes possible, namely that, at least in principle, all the parts of the complex of operations are preformed in the engineer’s mind before they start, that all the “data” on which the work is based have explicitly entered his preliminary calculations and been condensed into the “blue-print” that governs the execution of the whole scheme. 2 3  The engineer, in other words, has complete control of the particular little world with which he is concerned, surveys it in all its relevant aspects and has to deal only with “known quantities”.  So far as the solution of his engineering problem is concerned, he is not taking part in a social process in which others may take independent decisions, but lives in a separate world of his own.  The application of the technique which he has mastered, of the generic rules he has been taught, indeed presupposes such com-

1. Once again one of the best illustrations of this tendency is provided by K. Mannheim, Man and Society in an Age of Reconstruction, 1940, particularly pp. 240-244, where he explains that “functionalism made its first appearance in the field of the natural sciences, and could be described as the technical point of view.  It has only recently been transferred to the social sphere … Once this technical approach was transferred from natural sciences to human affairs, it was bound to bring about a profound change in man himself.  The functional approach no longer regards ideas and moral standards as absolute values, but as products of the social process which can, if necessary, be changed by scientific guidance combined with political practice …  The extension of the doctrine of technical supremacy which I have advocated in this book is in my opinion inevitable … Progress in the technique of organisation is nothing but the application of technical conceptions to the forms of co-operation.  A human being, regarded as part of the social machine, is to a certain extent stabilised in his reactions by training and education, and all his recently acquired activities are co-ordinated according to a definite principle of efficiency within an organised framework.”

2. The best description of this feature of the engineering approach by an engineer which I have been able to find occurs in a speech of the great German optical engineer Ernst Abbe : “{HHC: extensive German footnote not reproduced}” (quoted by Franz Schnabel, Deutsche Geschichte im neunzehnten Jahrhundert, vol. III, 1934, p. 222 - a work which is a mine of information on this as on all other matters of the intellectual history of Germany in the nineteenth century).

3. It would take too long here to explain in any detail why, whatever delegation or division of labour is possible in preparing an engineering ‘blueprint’, is very limited and differs in essential respects from the division of knowledge on which the impersonal social processes rest.  It must suffice to point out that not only must the precise nature of the result be fixed which anyone who has to draw up part of an engineering plan must achieve, but also that, in order to make such delegation possible, it must be known that the result can be achieved at no more than a certain maximum cost.


plete knowledge of the objective facts; those rules refer to objective properties of the things and can be applied only after all the particular circumstances of time and place have been assembled and brought under the control of a single brain.  His technique, in other words, refers to typical situations defined in terms of objective facts, not to the problem of how to find out what resources are available or what is the relative importance of different needs.  He has been trained in objective possibilities, irrespective of the particular conditions of time and place, in the knowledge of those properties of things which remain the same everywhere and at all times and which they possess irrespective of a particular human situation.

It is important, however, to observe that the engineer’s view of his job as complete in itself is, in some measure, a delusion.  He is in a position to treat it as such in a competitive society because he can regard the assistance from society at large on which he counts as one of his data, as given to him without having to bother about it.  That he can buy at given prices the materials and the services of the men he needs, that if he pays his men they will be able to procure their food and other necessities, he will usually take for granted.  It is through basing his plans on the data offered to him by the market that they are fitted into the larger complex of social activities; and it is because he need not concern himself how the market provides him with what he needs that he can treat his job as self-contained.  So long as market prices do not change unexpectedly he uses them as a guide in his calculations without much reflection about their significance.  But, though he is compelled to take them into account, they are not properties of things of the same kind as those which he understands.  They are not objective attributes of things but reflections of a particular human situation at a given time and place.  And as his knowledge does not explain why those changes in prices occur which often interfere with his plans, any such interference appears to him due to irrational (i.e., not consciously directed) forces and he resents the necessity of paying attention to magnitudes which appear meaningless to him.  Hence the characteristic and ever-recurrent demand for the substitution of in natura 1 calculation for the “artificial” calculation in terms of price or value, i.e., of a calculation which takes explicit account of the objective properties of things.

The engineer’s ideal which he feels the “irrational” economic forces prevent him from achieving, based on his study of the objective properties of the things, is usually some purely technical optimum of universal validity.  He rarely sees that his preference for these particular method its merely a result of the type of problem he has most frequently to solve, and justified only in particular social positions.  Since the most common problem the builder of machines meets is to extract from given resources the maximum of power, with the machinery to be used the variable under his control, this maximum utilisation of power is set up as an absolute ideal, a value in itself. 2  But there is, of course, no special merit in economising one of the many

1 The most persistent advocate of such in natura calculation is, significantly, Dr. Otto Neurath, the protagonist of modern “physicalism” and “objectivism”.

2. Cf. the characteristic passage in B. Bavinck, The Anatomy of Modern Science (translated from the 4th German edition by H. S. Hatfield), 2932, p. 564: “When our technology is still at work on the problem of transforming heat into work in a manner better than that possible with our present-day steam and other heat engines .., this is not directly done to cheapen production of energy, but first of all because it is an end in itself to increase the thermal efficiency of a heat engine as much as possible.  If the problem set is to transform heat into work, then this must be done in such a way that the greatest possible fraction of the heat is so transformed … The ideal of the designer of such machines is therefore the efficiency of the Carnot cycle, the ideal process which delivers the greatest theoretical efficiency”.

It is easy to see why this approach, together with the desire to achieve a calculation in natura, leads engineers so frequently to the construction of systems of “energetics” that it has been said, with much justice, that “dam Characteristikum der Weltanschauung des Ingenieurs ist die energetische Weltanschauung” (L. Brinkmann, Der Ingenieur, Frankfurt, 2908, p. i6).  We have already referred (Part II of this article, Economica, February, 2943, p. 40) to this characteristic manifestation of scientistic “objectivism” and there is no space here to return to it in greater detail.  But it deserves to be recorded how widespread and typical this view is and how great the influence it has exercised.  E. Solvay, G. Ratzenhofer, W. Ostwaldt, P. Geddes, F. Soddy, H. G. Wells, the “Technocrats” and L. Hogben are only a few of the influential authors in whose works “energetics” play a more or less prominent rôle.  There are several studies of this movement in French and German (Nyssens, L’ênergetique, Brussels, 1908; G. Barnich, Principes de politique positive basée sur l’ênergetique sociale de Solvay, Brussels, 1918; G. Helm, Die Energetik in ibrer geschichtlichen Entwicklung, Berlin, 1898 ; Schnehen, Energetiscbe Weltanschauung, 1907). A. Dochmann, F. W. Osiwald’s Energetik, Bern 1908, and the best, Max Weber, “Energetische Kulturtheorien” (s 909) reprinted in Gesammelte Aufsatze zur Wissenschaftslehre, (1922), but none of them adequate and none, to my knowledge, in English.

The section from the work of Bavinck from which a passage has been quoted above condenses the gist of the enormous literature, mostly German, on the “philosophy of technology” which has had a wide circulation and of which the best known is F. Zschimmer, Philosophie der Technik, 3rd ed., Stuttgart, 1933.

[This literature is very instructive as a psychological study, though otherwise about the dreariest mixture of pretentious platitudes and revolting nonsense which it has ever been the ill fortune of the present author to peruse.  Its common feature is the enmity towards all economic considerations, the attempted vindication of purely technological ideals, and the glorification of the organisation of the whole of society on the principle on which a single factory is run.  (On the last point see particularly F. Dessauer, Philosophic der Technik, Bonn, 1927, p. 229.)  It would be unfair, however, not to mention here the brilliant study in which an eminent American engineer has very clearly shown the limitations of the application of engineering technique to problems of social organisation: D. C. Coyle, “The Twilight of National Planning,” Harper’s Magazine, October, 1935.]

HHC: [bracketed] displayed on page 36 of original.


factors which limit the possible achievement, at the expense of others.  The engineer’s “technical optimum” proves frequently to be simply that method which it would be desirable to adopt if the rate of interest were zero - or the supply of capital unlimited, which would indeed be a position in which we would aim at the highest possible rate of transformation of current input into current output.  But to treat this as an immediate goal is to forget that such a state can be reached only by diverting for a long time resources which are wanted to serve current needs to the production of equipment.  In other words, the engineer’s ideal is based on the disregard of the most fundamental economic fact which determines our position here and now, the scarcity of capital.

The rate of interest is, of course, only one, though the least understood and therefore most disliked, of those prices which act as impersonal guides to which the engineer must submit if his plans are to fit into the pattern of activity of society as a whole, and against the restraint of which he chafes because they represent forces whose rationale he does not understand.  It is one of those symbols in which the whole complex of human knowledge and wants is automatically (though by no means faultlessly) recorded and to which the individual must pay attention if he wants to keep in step with the rest of the system.  If, instead of using this information in the abridged form in which it is conveyed to him through the price system, he were to try in every instance to go back to the objective facts and take them consciously into consideration, this would be to dispense with the method which makes it possible for him to confine himself to the immediate circumstances and to substitute for it a method which requires that all this knowledge be collected in one centre and explicitly and consciously embodied in a unitary plan.  The application of engineering technique to the whole of society requires indeed that the director possess the same complete knowledge of the whole society that the engineer possesses of his limited world.  Central economic planning is nothing but such an application of engineering principles to the whole of society based on the assumption that such a complete concentration of all relevant knowledge is possible.1

Before we proceed to consider the significance of this conception of a rational organisation of society it will be useful to supplement the sketch of the typical outlook of the engineer by an even briefer sketch of the functions of the merchant or trader.  This will not only further elucidate the nature of the problem of the utilisation of knowledge dispersed among many people, but also help to explain the dislike which not only the engineer but our whole generation shows for all commercial activities, and the general preference that is now accorded to “production” compared to the activities which, somewhat misleadingly, are referred to as “distribution”.

Compared with the work of the engineer that of the merchant is in a sense much more “social”, i.e., interwoven with the free activities of other people.  He contributes a step towards the achievement now of one end, now of another and hardly ever is concerned with the complete process that serves a final need.  What concerns him is not the achievement of a particular final result of the complete process in which he takes part, but the best use of the particular means of which he knows.  His special knowledge is almost entirely knowledge of particular circumstances of time or place, or, perhaps, a technique of ascertaining those circumstances in a given field.  But though this knowledge is not of a kind which can be formulated in generic propositions or acquired once and for all, and though in an age of Science it is for that reason regarded as knowledge of an inferior kind, it is for all practical purposes no less important than scientific knowledge.  And while it is perhaps conceivable that all theoretical knowledge might be combined in the heads of a few experts and thus made available to a single central authority, it is this knowledge of the particular, of the

1. That this is fully recognised by its advocates is shown by the popularity among all socialists from Saint-Simon to Marx and Lenin, of the phrase that the whole of society should be run in precisely the same manner as a single factory is now being run.  Cf. V. I. Lenin, The State and Revolution (1917), “Little Lenin Library,” 1933, p. 78.  “The whole of society will have become a single office and a single factory with equality of work and equality of pay”; and for Saint-Simon and Marx, Economica, February, 1941, p.28.


fleeting circumstances of the moment and of local conditions, which will never exist otherwise than dispersed among many people.  The knowledge of when a particular material or machine can be most effectively used or where they can be most quickly or cheaply obtained is quite as important for the solution of a particular task as the knowledge of what is the best material or machine for the purpose.  The former kind of knowledge has little to do with the permanent properties of classes of things which the engineer studies, but is knowledge of a particular human situation.  And it is as the person whose task is to take account of these facts that the merchant will constantly come into conflict with the ideals of the engineer, with whose plans he interferes and whose dislike he thereby contracts.


XIV - Conclusion

The problem of securing an efficient use of our resources is thus very largely one of how that knowledge of the particular circumstances of the moment can be most effectively utilised; and the task which faces the designer of a rational order of society is to find a method whereby this widely dispersed knowledge may best be drawn upon.  It is begging the question to describe this task, as is usually done, as one of effectively using the “available” resources to satisfy “existing” needs.  Neither the “available” resources nor the “existing” needs are objective facts in the sense of those with which the engineer deals in his limited field: they can never be directly known in all relevant detail to a single planning body.  Resources and needs exist for practical purposes only through somebody knowing about them and there will always be infinitely more known to all the people together than can be known to the most competent authority. 1  A successful solution can therefore not be based on the authority dealing directly with the objective facts, but must be based on a method of utilising the knowledge dispersed among all members of society, knowledge of which in any particular instance the central authority will usually know neither who possesses it nor whether it exists at all.  It can therefore not be utilised by consciously integrating it into a coherent whole, but only through some mechanism which will delegate the particular decisions to those who possess it, and for that purpose supply them with such information about the general situation as will enable them to make the best use of the particular circumstances of which only they know.

This is precisely the function which the various “markets” perform.  Though every party in them will know only a small sector of all the possible sources of supply, or of the uses of, a commodity, yet, directly or indirectly, the parties are so inter-connected that the prices register the relevant net result of all changes affecting demand or supply. 2  It is as such an instrument for communicating to all those interested in a particular commodity the relevant information in an abridged and condensed form that markets and prices must be seen if we are to understand their function.  They help to utilise the knowledge of many people without the need of first collecting it in a single body, and thereby make possible that combination of decentralisation of decisions and mutual adjustment of these decisions which we find in a competitive system.

In aiming at a result which must be based, not on a single body of integrated knowledge or of connected reasoning which the designer possesses, but on the separate knowledge of many people, the task of social organisation differs fundamentally from that of organising given material resources.  The fact that no single mind can know more than a fraction of what is known to all individual minds sets limits to the extent to which conscious direction can improve upon the results of unconscious social processes.  Man has not deliberately designed this process and has begun to understand it only long after it had grown up.  But that something that not only does not rely on deliberate control for its working, but has not even been deliberately designed, should bring about desirable results, which we might not be able to bring about otherwise, is a conclusion the natural scientist seems to find difficult to accept.

It is because the moral sciences tend to show us such limits to our conscious control, while the progress of the natural sciences constantly extends the range of conscious control, that the natural scientist finds himself so frequently in revolt

1. It is important to remember in this connection that the statistical aggregates which it is often suggested the central authority could rely upon in its decisions, are always arrived at by a deliberate disregard of the peculiar circumstances of time and place.

2. Cf. in this connection the suggestive discussion of the problem in K. F. Mayer, Goldwanderugen, Jena, 1935, pp. 66-68, and also the present author’s article “Economics and Knowledge” in Economica, February, 1937.


against the teaching of the moral sciences. Economics, in particular, after being condemned for employing methods different from those of the natural scientist, stands doubly condemned because it claims to show limits to the technique by which the natural scientists continuously extend our conquest and mastery of nature.

It is this conflict with a strong human instinct, greatly strengthened in the person of the scientist and engineer, that makes the teaching of the moral sciences so very unwelcome.  As Bertrand Russell has well described the position, “the pleasure of planned construction is one of the most powerful motives in men who combine intelligence with energy; whatever can be constructed according to a plan, such man will endeavour to construct … the desire to create is not in itself idealistic since it is a form of the love of power, and while the power to create exists there will be men desirous of using this power even if unaided nature would produce a better result than any that can be brought about by deliberate intention”. 1  This statement itself occurs, however, at the beginning of a chapter, significantly headed “Artificially Created Societies”, in which Russell himself seems to support these tendencies by arguing that “no society can be regarded as fully scientific unless it has been created deliberately with a certain structure to fulfil certain purposes.” 2  As this statement will be understood by most readers, it expresses concisely that scientistic philosophy which through its popularisers has done more to create the present trend towards socialism than all the conflicts between economic interests which, though they raise a problem, do not necessarily indicate a particular solution.  Of the majority of the intellectual leaders of the socialist movement, at least, it is probably true to say that they are socialists because socialism appears to them, as A. Bebel, the leader of the German Social Democratic movement defined it more than fifty years ago, as “science applied in clear awareness and with full insight to all fields of human activity.” 3  The proof that the programme of socialism actually derives from this kind of scientistic philosophy must be reserved for detailed historical studies.  At present our concern is mainly to show to what extent mere intellectual error in this field may profoundly affect all prospects of humanity.

What all the people who are so unwilling to renounce any of the powers of conscious control seem to be unable to comprehend is that this renunciation of conscious power, power which must always be power by men over other men, is for society as a whole only an apparent resignation, a self-denial individuals are called upon to exercise in order to increase the powers of the race, to release the knowledge and energies of the countless individuals that could never be utilised in a society consciously directed from the top.  The great misfortune of our generation is that the direction which has been given to its interests by the amazing progress of the natural sciences is not one which assists us in comprehending the larger process of which as individuals we form merely a part, and in appreciating how we constantly contribute to a common effort without either directing it or submitting to orders of others.  To see this requires a kind of intellectual effort different in character from that necessary for the control of material things, an effort in which the traditional education in the “humanities” gave at least some practice, but for which the now predominant types of education seem less and less to prepare.  The more our technical civilisation advances and the more, therefore, the study of things as distinct from the study of men and their ideas qualifies for the more important and influential positions, the more significant becomes the gulf that separates two different types of mind: the one represented by the man whose supreme ambition is to turn the world round him into an enormous machine, every part of which, on his pressing a button, moves according to his design; and the other represented by the man whose main interest is the growth of the human mind in all its aspects, who in the study of history or literature, the arts or the law, has learnt to see the individuals as part of a process in which his contribution is not directed but spontaneous, and where he assists in the creation of something greater than he or any other single mind can ever plan for.  It is this awareness of being part of a social process, and of the manner in which individual efforts interact,

1. The Scientifiic Outlook, 1931, p. 211.

2. Ibid., p. 211.  The passage quoted could be interpreted in an unobjectionable sense if “certain purposes” is taken to mean not particular predetermined results but as capacity to provide what the individuals at any time wish - i;e., if what is planned is a machinery which can serve many ends and need not in turn be “consciously” directed towards a particular end.

3. A. Bebel, Die Frau and der Sozialismus, 13th  ed, 1892, p. 376.  {HHC: German footnote not reproduced} Cf. also F. Ferri, Socialism and Positive Science (translated from the Italian edition of 1894).  The first clearly to see this connection seems to have been lvi. Ferraz, Socialisme, Naturalisme et Positivisme, Paris, 1877.


which the education solely in the Sciences or in technology seems to fail so lamentably to convey.  It is not surprising that many of the more active minds among those so trained sooner or later react violently against the deficiencies of their education and develop a passion for imposing on society the order which they are unable to discover by the means with which they are familiar.

In conclusion it is, perhaps, desirable to remind the reader once more that all we have said here is directed solely against a misuse of Science, not against the scientist in the special field where he is competent, but against the application of his mental habits in fields where he is not competent.  There is no conflict between our conclusions and those of legitimate science.  The main lesson at which we have arrived is indeed the same as that which one of the acutest students of scientific method has drawn from a survey of all fields of knowledge: it is that “the great lesson of humility which science teaches us, that we can never be omnipotent or omniscient, is the same as that of all great religions: man is not and never will be the god before whom he must bow down.” 1

1. M. R. Cohen, Reason and Nature, 1931, p. 449.  It is significant that one of the leading members of the movement with which we are concerned, the German philosopher Ludwig Feuerbach, explicitly chose the opposite principle, homo homini Deus, as his guiding maxim.