Kevin Rudd’s Fatal Conceit

Why Rudd is wrong about Hayek

Friedrich Hayek argued that human beings are "almost exclusively self-regarding", says Kevin Rudd. In contrast, modern Labor "argues that human beings are both ‘self-regarding’ and ‘other-regarding’." But what Hayek actually argued was that human beings naturally tend towards other-regarding sentiments such as altruism and solidarity. Surprisingly, he believed that modern civilization depends on our ability to suppress these sentiments.

Rudd’s Hayek is a cardboard cutout — a stereotypical neo-liberal who believes that human beings are innately selfish and who wants to turn everything into a commodity to be bought and sold in the marketplace. For Rudd, Hayek is the intellectual heir of Thomas Hobbes.

According to Rudd:

Neo-liberals speak of the self-regarding values of security, liberty and property. To these, social democrats would add the other-regarding values of equity, solidarity and sustainability. For social democrats, these additional values are seen as mutually reinforcing because the allocation of resources in pursuit of equity (particularly through education), solidarity and sustainability assist in creating the human, social and environmental capital necessary to make a market economy function effectively.

The self-regarding values are the values of the marketplace — the institution neo-liberals place above all others. According to Rudd, neo-liberals refuse to tolerate the intrusion of other-regarding values into market relationships. This leads to the erosion of the kinds of institutions that conservatives value. Family, church and community all suffer when they come into conflict with the market’s demands. Labour market deregulation, for example, exacerbates the tension between a person’s obligations as a worker and their obligations as a spouse, parent or carer.

Rudd may be right about the way free markets create conflict with other institutions, but he’s wrong about Hayek’s stance on human nature. Hayek that the only way that we could make "a market economy function effectively" was to suppress our innate desire for altruism and solidarity.

Like Rudd, Hayek did not believe that human beings are "almost exclusively self-regarding". Instead, he thought that we instinctively lean towards other-regarding values like altruism and solidarity. Unlike Rudd, however, he thought this was a problem.

In his last book, The Fatal Conceit: The Errors of Socialism, Hayek argued that our values are the product of two separate evolutionary processes. The first biological and the second cultural.

Biology and emotion

According to Hayek, our species has adapted to its environment by developing instinctual responses. Like many other animals, early humans survived by living together in small groups. These groups relied on shared aims and perceptions to coordinate their activities:

These modes of coordination depended decisively on instincts of solidarity and altruism — instincts applying to the members of one’s own group but not to others. The members of these small groups could thus exist only as such: an isolated man would soon have been a dead man. The primitive individualism described by Thomas Hobbes is hence a myth. The savage is not solitary, and his instinct is collectivist. There was never a ‘war of all against all’ (p 12).

This ‘natural morality’ survives even though our circumstances have changed. According to Hayek, civilization depends on our ability to suppress our natural emotional responses.

Culture as a ‘second nature’

If human beings had insisted on treating everyone in the same way as they treated members of their small group, the free trade would never have taken root. Hayek argues that, "An order in which everyone treated his neighbour as himself would be one where comparatively few could be fruitful and multiply" (p 13). Over time, people learned how to cooperate with others who were not members of their own small group and who did not share their aims and loyalties. They did this by agreeing on abstract rules:

These rules are handed on by tradition, teaching and imitation, rather than by instinct, and largely consist of prohibitions (‘shalt not’s’) that designate adjustable domains for individual decisions. Mankind achieved civilisation by developing and learning to follow rules (first in territorial tribes and then over broader reaches) that often forbade him to do what his instincts demanded, and no longer depended on a common perception of events. These rules, in effect constituting a new and different morality, and to which I would indeed prefer to confine the term ‘morality’, suppress or restrain the ‘natural morality’… (p 12).

For Hayek, these rules developed in much the same way as language. Morality was a human creation in the same way as language was a human creation. Nobody invented right and wrong. Instead, moral rules developed through a process of trial and error.

For those of us in the industrialised West, morality includes rules about respect for private property, keeping promises, and paying our own way. These are the values which have made market society possible. Undermining them places everyone’s material well-being at risk.

The dangers of emotion and rationalism

Even though market society allows us to live much more comfortable lives, Hayek believed that most of us struggle to live according to market morality. It is part of our nature to want to belong to a community whose members are united by common goals and shared loyalty. As a result:

Constraints on the practices of the small group, it must be emphasised and repeated, are hated. For… the individual following them, even though he depend on them for life, does not and usually cannot understand how they function or how they benefit him (p 13-14).

Ordinary people often find market society alienating. They find its demands heartless and inhuman. Why, they ask, should drought force farmers off their land when the government could simply make other citizens share? Why should rich parents be allowed to buy their children places in university when more smarter, more hard working students miss out? The democratic state is constantly under pressure to run society as if it were a tribe — sharing out resources and enforcing conformity with shared norms.

According to Hayek, these instinctive, emotional reactions are often encouraged by leftist intellectuals. While ordinary citizens struggle emotionally, leftist thinkers struggle intellectually. Intellectuals often regard traditional moral rules as irrational. Just as engineers want to replace traditional building practices with science and technology, intellectuals want to reconstruct morality according to rational principles. But according to Hayek, the results are usually no more successful than attempts to construct new and more rational languages.

What about the family?

Altruism and solidarity still have a place in society. According to Hayek there still exist:

…many, often overlapping, sub-orders within which old instinctual responses, such as solidarity and altruism, continue to retain some importance by assisting voluntary collaborations, even though they are incapable, by themselves, of creating a basis for the more extended order. Part of our present difficulty is that we must constantly adjust our lives, our thoughts and our emotions, in order to live simultaneously within different kinds of orders according to different rules (p 18).

Hayek admits that if "were always to apply the rules of the extended order to our more intimate groupings, we would crush them" (p 18). Like Rudd he saw the importance of other-directed values. But unlike Rudd, he never seriously considered the effect that the expansion of the market sphere might have on institutions like the family, church and community — or on environmental problems like climate change. Evolution has no purpose or end point, so there’s nothing to stop an unregulated market taking us out on a limb that’s unable to support our weight.

Was Hayek right?

Hayek worried that if we allowed the morality of the family and small group to intrude into the marketplace, we would end up destroying the economy and plunging society into poverty. But across Western Europe social democratic governments have incorporated values of altruism and solidarity into institutions like the welfare state without the destroying the market. If there is a road to serfdom, it is a much longer and twistier road than Hayek imagined.

And apart from the threat of chaos and starvation, Hayek has no real reason for favouring classical liberalism over social democracy. In fact, he is unable to mount an argument in favour of modern civilization over the kind of pre-modern hunter gather life advocated by the most extreme environmentalists. For Hayek, there is no reason to prefer one way of life to another. And worse still, Hayek has no answer to people who place more value on solidarity and honour than they do on their own survival.

Postscript: Why Don was wrong about Rudd

I’ve been unfair to Kevin Rudd in this post. In his article for the Monthly — ‘Howard’s Brutopia’ — he does come to grips with Hayek’s arguments about solidarity and altruism. I wrote this post based on Rudd’s op-ed piece — before I’d had a chance to read his article. Rudd’s discussion relies heavily on David McKnight’s book Beyond Right and Left. McKnight’s book is worth reading if you want a concise but well informed account of Hayek’s views from a left perspective.

If you’re interested in Rudd’s claim that there’s a contradiction between the right’s commitment to both family and market individualism you might also want to read Anthony Giddens’ 1994 book Beyond Left and Right. Giddens argues that:

If one is going to advocate individualism and individual initiative in the economic sphere, it makes no sense not to extend these to other domains as well, including that of the family. There is a damaging contradiction at the core of neoliberal thought. On the one hand in encouraging the free play of market forces, neoliberal political philosophy unleashes detraditionalizing influences of a quite far -reaching kind. On the other hand, the very traditional symbols which these influences help to dissolve are held to be essential to social solidarity. It is not surprising that New Right doctrines mix liberal freedoms and authoritarianism — even fundamentalism- — in an uneasy and unstable fashion (p 40).

Links: Kevin Rudd, ‘Howard’s Brutopia’ (pdf)

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26 Responses to Kevin Rudd’s Fatal Conceit

  1. Hayek postmodernist nihilist shock! Blogger tells.

  2. Jason Soon says:

    And apart from the threat of chaos and starvation, Hayek has no real reason for favouring classical liberalism over social democracy. In fact, he is unable to mount an argument in favour of modern civilization over the kind of pre-modern hunter gather life advocated by the most extreme environmentalists. For Hayek, there is no reason to prefer one way of life to another. And worse still, Hayek has no answer to people who place more value on solidarity and honour than they do on their own survival

    What are you on about Don? Libraries of books have been written setting out the case for liberalism inspired by Hayek. All the justification is there spread across all of Hayek’s work but particilar TCL and Individualism and Economic Order. You’re basing this conclusion on one book – The Fatal Conceit – which Hayek dictated on his sick bed and which was mostly ghost written by WW Bartley.

  3. Tony Healy says:

    Guys, no one really cares what Hayek said.

    Rudd’s column on the other hand was a surprisingly insightful piece accurately highlighting the problem of the Howard reign – the fostering of crony capitalism that hinders rather than bolsters markets.

    Very good piece Kevin Rudd. You’re not just an earnest honours student after all.

  4. Jason Soon says:

    If Rudd wants to position himself as some sort of intellectual then he should actually understand the damned sources he quotes. Don has demonstrated that he doesn’t. You’re right, he’s not an earnest honours student at all but a poseur at least when it comes to the history of political thought.

    And it was a ridiculous piece because there is no such thing as ‘market fundamentalism’ in Australia. The closest we’d get to that is if John Humphreys became Prime Minister and that has about as much chance of happening as Mark Latham becoming PM.

  5. Jason Soon says:

    And btw Nick if Hayek not being able to successful in justfying morality makes him a nihilist, well no one else can either. Hayek is basically on the right track in seeking a consequentialist justification. There are really only two ways you can plsy the game – consequentialism or question-begging (i.e. appeal to a final authority which has to be taken on faith). Now the retort to that is that consequentalism is itself taken on faith but not if your argument is something alone the lines that a scenario where everyone is following a particular morality or a set of rules for interacting in society is likely to lead to the satiafaction of the maximum number of different ends or preferences.

    Hayek’s consequentialism therefore leads to morality as a kind of procedural rationality for human society which is consistent with the liberal view of the State as having no ends in itself but as providing a meta-framework for the accomodation of different individual ends.The question is what are the minimal prohibitions necessary.

    On this view, some ends are outlawed or deemed immoral (e.g. the taboo against murder that is found in all socieities) because they lead to too much disruption and squeeze out too many of the other ends (e.g. with murder legalised everyone has to invest too many resurces into protecting against murder).

  6. Jason Soon says:

    Don, regarding your last point:

    For Hayek, there is no reason to prefer one way of life to another. And worse still, Hayek has no answer to people who place more value on solidarity and honour than they do on their own survival.

    There is a lot of truth to this but it doesn’t undermine morality because ultimately suicide bombers (1) do form a very small minority of the population (2) have evolved their preferences under very special circumstances and are ultimately no different from the rest of us and are not a separate species. Under different conditions which are increasingly the norm in the rest of the world, they would fundamentally have the same concerns as the rest of us.

    Now obviously if we had a different physiology than what we actually had, our morality would be radically different. If a substantial percentage of us had a significantly different brain wiring from the rest then our morality towards them would be different. The proof is in the way we *do* obviously treat animals differently from other humans. And notwithstanding the increase in awareness of animal rights we will continue to do so – for all but the most extremist animal rights campaigners we talk about the morality of minimising suffering rather than treating animals fully as humans. The proof is also in the way we apply different standards of treatment to people who are diagnosed to be obvious sociopaths (we basically lock them up foreever to preemptively avoid the commission of further crimes).

    So it is obvious from a naturalist perspective that, if you want to put it that way, morality is relative rather than absolute but only insofar as it is an accident of our physiology and psychology that humans react a certain way and have certain preferences for order. But we already accept that.

  7. Bannerman says:

    Interesting opinion, but all considered, that’s all it is.

  8. Rafe Champion says:

    Tony, are you saying that ideas don’t matter?

    Would you like to nominate some people whose thoughts we should care about?

    Maybe you just mean that it is tedious to read endless exegesis of the minutest details of the writings of dead theorists. In which case we need to do a check on the problem, reformulate the point that is being disputed and if it matters, go on debating, but if it is just a scholarly detail, maybe leave it alone. Life is short and the list of things to talk about is very long.

  9. Jeremy says:

    Tony I’m puzzled. I didn’t see any insights: just a series of quite dubious claims, none of which were supported by any evidence. When Rudd comes up with some evidence of a net inrease in the negative effects of market transactions on families under this government, then I’ll pay attention. Until then, it just reads like hyperbole.

    Also: what exactly is ‘market fundamentalism’, and who advocates it?

    What I think Rudd is trying to do is to play on the differences between the two groupings in the Liberal Party, the Liberals and the Conservatives, and find room in their disagreements for Labor to gain some electoral purchase. Andrew Norton mentions these differences in his October 3 posting regarding Quadrant.

  10. Don Arthur says:

    Jason – In response to your first comment:

    1. "All the justification is there spread across all of Hayek’s work but particular TCL and Individualism and Economic Order."

    Perhaps. Here’s one example from The Constitution of Liberty:

    Some readers will perhaps be disturbed by the impression that I do not take the value of individual liberty as an indisputable ethical presupposition and that, in trying to demonstrate its value, I am possible making the argument in its support a matter of expediency. This would be a misunderstanding. But it is true that if we want to convince those who do not already share our moral suppositions, we must not simply take them for granted. We must show that liberty is not merely one particular value but that it is the source and condition of most moral values. What a free society offers to the individual is much more than what he would be able to do if only he were free. We can therefore not fully appreciate the value of freedom until we know how a society of free men as a while differs from one in which unfreedom prevails (p 6).

    There are at least two ways of reading this:

    (a) Hayek is a rights-based libertarian who begins with "individual liberty as an indisputable ethical presupposition";

    (b) Hayek is a consequentialist who relies a conservative justification of liberty. As a conservative he thinks we should hold certain beliefs even if we have no rational reason to. Since we don’t know what the consequences of abandoning our moral practices might be, we should be cautious about reform.

    It seems to me that (b) is more likely. On page 64 he goes on to discuss the status of beliefs and practices which cannot be rationally justified. He argues that:

    We would destroy the foundations of much successful action if we disdained to rely on ways of doing things evolved by the process of trial and error simply because the reason for their adoption has not been handed down to us. The appropriateness of our conduct is not necessarily dependent on our knowing why it is so. Such understanding is one way of making our conduct appropriate, but not the only one. A sterilized world of beliefs, purged of all elements whose value could not be positively demonstrated, would probably be not less lethal than would an equivalent state in the biological sphere.

    While this applies to all our values, it is most important in the case of moral rules of conduct. Next to language, they are perhaps the most important instance of an undesignated growth, a set of rules which govern our lives but of which we can say neither why they are what they are nor what they do to us: we do not know what the consequences of observing them are for us as individuals and as a group (p 64).

    2. "You’re basing this conclusion on one book – The Fatal Conceit – which Hayek dictated on his sick bed and which was mostly ghost written by WW Bartley"

    I think the quote above shows that I’m not basing my conclusion on one book.

    But I take your point about TFC. Bruce Caldwell, the general editor of the The Collected Works of FA Hayek, writes:

    Because it was his last book, some might be tempted to view it as containing the final distillation of Hayek’s mature thought. The temptation should be avoided; there are some facts surrounding the writing of the book that create interpretative difficulties (p 316).

    Caldwell goes on to explain the circumstances in which to book was written and questions how much of the book represents WW Bartley’s thought and how much represents Hayek’s (or perhaps even Jeffrey Friedman’s).
    Alan Ebenstein has more here.

  11. Jason Soon says:

    Point taken Don. Point (b) is certainly more his approach than (a). But I would still see it as an additional justification for his system rather than a necessary one because there is enough there in his work to not just hang on (b) though the sentence he highlighted is a bit of a cop-out. We can only take these selectionist arguments so far because the measure of success of selection is rather up in the air, isn’t it? If we base it on population then perhaps we should adopt Confucianism. If we base it on wealth per population, a different story altogether, and so on.

    And what Jeremy said. Rudd’s piece – well it’s just piffle, piffle.

  12. Don Arthur says:

    Jason – On your last comment.

    “So it is obvious from a naturalist perspective that, if you want to put it that way, morality is relative rather than absolute…”

    It seems to me that Hayek is arguing that citizens should not act as if they had any doubt that their traditional moral beliefs were absolutely true. He attacks ‘rationalists’ who want to discard any traditional belief or practice unless it has rational justification.

    But at the same time, he needs some mechanism for moral adaptation. He says:

    I do not wish to underestimate the merit of the persistent and relentless fight of the eighteenth centuries against beliefs which are demonstrably false. But we must remember that the extension of the concept of superstition to all beliefs which are not demonstrably true lacks the same justification and may often be harmful (p 64).

    So if Hayek’s right then how should members of pre-modern cultures behave today? Should they accept the traditional beliefs and practices of their society? Or should they embrace modernity?

  13. Jason Soon says:

    So if Hayek’s right then how should members of pre-modern cultures behave today? Should they accept the traditional beliefs and practices of their society? Or should they embrace modernity?

    How many pre-modern cultures are really left for this to be a question of import? last I heard there was one somewhere in one of the islands in the South China Sea (?) that were throwing spears at helicopters or something like that. As long as they keep to themselves I’d say it’s up to them.

  14. Jason Soon says:

    It seems to me that Hayek is arguing that citizens should not act as if they had any doubt that their traditional moral beliefs were absolutely true.

    Well, Hayek was reading too much Burke. He’s underestimating the strength of society. God died long ago, Don, and the world hasn’t gone to hell in the developed economies. We don’t need myths or sacred cows, we just need presumptions based on prudential considerations.

  15. Bring Back EP at LP says:

    I think Jase is saying Hayek should have seen the back of Burke!

  16. Fred Argy says:

    Getting back to Rudd’s paper, I have read Don’s interesting piece and I do not believe he is questioning the justification for Rudd’s underlying social concerns. Indeed he says Rudd is right in identifying a conflict between free market values (efficiency and inndividualism) and other widely held social norms (like sharing, equality of starting opportunity, family and sense of community). Rudd is pointing out that the way this conflict is increasingly being resolved by Howard’s new liberalism differs markedly from the way a social democrat would resolve them.

    What Don is questioning is Rudd’s attribution of certain ideas to Hayek. Fair point – and it was perhaps a little naughty of Rudd to over-simplify Hayek’s complex ideas – but hardly justifying Jason’s atack on Rudd as a ‘poseur”.

    Like Don Healey, I say well done to Kevin Rudd! He is starting an overdue philosophical debate about what kind of society we want.

  17. Jeremy says:

    With the greatest respect Fred, if Kevin Rudd wants to start a philosophical debate then he will have to define his terms – ‘market fundamentalism’ being just one of them.

    ‘Market fundamentalism’ sounds to me like another term for the old straw man of ‘economic rationalism’ – read the Hagger and Coleman book of that name if you want to learn of the knots that the users of that phrase tied themselves into trying to define it.

    Rudd is also making claims about the real world impacts of the government’s policies. OK then, if he is so sure, then it should be easy to produce evidence to support his claims. Can we see it please?

    These are what I would call the foundations of a serious intellectual argument. Until Rudd produces them, then he is only posing – yes, Jason is right – as an intellectual, while his argument remains at the level of simply chucking stones at the other guy.

  18. Bring Back EP at LP says:

    with the greatest respect this is like debating what is cricket.

    I say it is only played over 5 days whilst another says it can be a one-dayer.

    Rudd is a politician first and only he aint trying to be an intellectual and he is engaging an opponent with the aim of beating him.

    the intellectuals on this thread show a quite naive view of politics!

  19. Jeremy says:

    I’m sorry all – the name of the Coleman and Haggar book is ‘Exasperating Calculators’.

  20. Tony Healy says:

    Oh, the horror. Rudd is a poseur! I’m sure he will never recover.

    > Rudd is also making claims about the real world impacts of the government’s policies. OK then, if he is so sure, then it should be easy to produce evidence to support his claims. Can we see it please?

    He will bring it to the tute next Wednesday Jeremy.

  21. Jason Soon says:

    For God’s sake Tony, stop being so flippant. The man is writing for The Monthly, which is supposed to be an intellectual journal of repute, not the National Enquirer.

  22. Jeremy says:


    Fred Argy is a reputable, serious and seriously good economist and intellectual. He is one of the Titans of Australian economic thought.

    I, on the other hand, haven’t made myself known for anything. And am not likely to any time soon.

    So I’m not going to cross swords with him unless I am standing on solid ground. That’s what I was trying to show in my response.

  23. Mike Pepperday says:

    I just happen to have handy a definition of “market fundamentalism”:

    “S– was an extreme individualist… [He believed] we have been blest with an automatic, self-regulating mechanism which operated so that the pursuit by each individual of his own self-interest and private ends would result in the greatest possible satisfaction of the wants of all. All that was necessary was to remove obstacles to the operation of this mechanism, the success of which rested on no conditions other than those included in the conception of rational pursuit of self-interest.”

    The author is one Professor Brinton and he is being quoted by Talcott Parsons is his 1937 “The structure of social action.” He goes to say that he agrees with Brinton that S– is dead. Hah! Parsons is dead.

    Who is S–? No, not Smith.

  24. Ian Irvine says:

    Rudd’s determined critique of the core ‘ideology’ (yes, neo-liberalism is an ideology) of Howard’s regime is fascinating indeed. Once the general public gets a good look at the implicit Social Darwinism behind this government (certainly coming out of von Hayek – though rarely spoken of by Howard) the disintegration of ‘we’ feeling (not just agressive nationalism) and ‘community’ in Australian society (and domestic and foreign policy [disasters?]) over the past 8 or so years may begin to form a totalising narrative in the public’s mind. Neo-liberalism taken to its logical extreme and allied with Neo-Con moral authoritarianism quickly mutates into a form of fascism best understood as ‘corporate fascism’ – i.e. it is ultimately undemocratic and opposed to human rights agandas which begin, always, with the ability of individuals/families etc. to secure basic material needs, as per Maslow’s heirarchy. As institutionalised exclusion and scapegoating mount the backlash leads to a punitive/surveillance state (such we are now approaching in Australia) designed to handle the human debris created by the ideology’s success. There have been other forms of fascism of course – socialist/communist, militarist etc. – but at their end point they have much in common. At a time of increasing ecological crisis, majority world crisis, etc. [make your own list?] the government’s every ‘man’ (and yes, ‘gender’ is an issue in Neo-Liberalism) for himself ideologicial individualism (homo economicus?) begins to look like a species parasite perfectly calibrated to send us all the way of the dodo (the poor ‘majority worlders’ first, of course) – the strong (read: ‘entrepeneurs’) most adapted to new millennium ‘transactional/entrepreneurial capitalism’ see this as perfectly, okay – if you can’t transact/innovate/sell yourself/compete/consume on the global market you deserve the ‘punishment’ the market hands out, you are essentially ‘not human’ … even if you’re a child unable to compete or an older person with disabilities etc. Thomas Hobbes in Leviathen a mere babe in nappies compared to this stuff! Neo-liberalism, as per Von Hayek, is more than an economic model, it’s a model for ‘subjectivity’ (of what is the self composed?) and self in relation to the social. This too needs to be emphasised by Rudd and Australia’s opposition parties; one look at those dreadful reality TV shows on mainstream media channels, defines its core principles and how they are transmitted ot the public – pretend to love your friends/neighbours/fellow humans but all the time plot to do them in and take the treasure your self. If you’re (we’re) feeling ‘depressed’ and ‘alienated’ from your/our own core being, from your/our families and lovers, from your/our communities and the environment, from your/our bodies even it may have something to do with the successful institutionalisation of Neo-lib/Neo-con values in Australia over the past 20 years. Yes, mental health, even among the ‘oppressor’ class is one of the definitive fault indicative of the ideology’s failure. There are others if you care to look around ….

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