Here is the second fragment on early neoliberalism. The previous post being on Hayek, this one is on Michael Polanyi. Both built their approach to the world upon their abhorrence of the Soviet Union – a position that was unfashionable among intellectuals at the time. But where Hayek used his powerful refutation of central planning to take him where the argument could not reasonably stretch – to support laissez-faire – Polanyi was guilty of no such overreach.
Michael Polanyi and polycentrism
Like virtually all the important early neoliberals, Michael Polanyi was an émigré from central Europe. Polanyi’s training was in chemistry and from the early 1930s he became increasingly concerned at the idea that scientific development could be directed by the state – as the Soviet Union aspired to do and as Western left-wing intellectuals urged upon the West. He began writing against this tendency at about the time Hayek was articulating his own thinking about the centrality of information to the functioning of the economic system. But Polanyi’s concept of polycentricity provides a way into the question of distributed knowledge that is more general and parsimonious than Hayek’s elaboration of the way in which markets harness distributed knowledge for economic good.
Citing the image below in Figure 1 of a physical object made of straight rods and fastenings at the nodes, Polanyi asks us to imagine stressing it – as one would a model of a bridge – by nailing the top node to some fixture and hanging a weight from it as illustrated in Figure 2.
Figures 1 and 2
To work out the configuration of Figure 2 ‘monocentrically’, a singular intelligence would need to calculate all the stresses between each rod, not just directly but also indirectly through all the other rods. This cognitive task would be immensely complicated. And here we are thinking of a simple object subject to well-understood forces. In fact, the object is a functioning polycentric order. That is, one only need stress it by hanging a weight from it as illustrated in Fig 2 and it becomes an analogue computer solving polycentrically what was so complex to solve monocentrically. Each of the elements of the object adjusts to the stress. None has the ‘full picture’ but the various parts of the object ‘calculate’ an efficient response to the stress.
A wide range of formalized polycentric problems of which the solutions lie beyond the power of exact calculation can be solved by a suitable method of approximation, which is of great interest to us as it represents a perfect paradigm of coordination by independent mutual adjustments. The method consists in dealing with one centre at a time while supposing the others to be fixed in relation to the rest, for that time.1
The example Polanyi chooses to illustrate polycentricity would work perfectly in the embodied cognition literature as an example of what in that literature is called ‘causal spread’. That is, the causal mechanisms that lead the organism to perform in some way arise not simply from a brain at the centre cognising reality and effecting some intention by sending out millions of instructions to the various parts of the body to respond. Rather, the organism’s cognition of the world and its response, are distributed through that organism and/or its environment.
Polanyi’s point is that science is a polycentric order in this sense; that it comprises numerous nodes of intelligence (scientists and teams of scientists) all operating autonomously but each mutually adjusting itself to others’ views and outputs. And as he makes clear, thinking of markets as polycentric orders offers a compelling way to reprise the arguments of the socialist calculation debate about the superiority of polycentric market economies to monocentric centrally planned ones.
Polanyi, Michael, 1951, The Logic of Liberty, Routlege, pp. 170-1. He’d earlier described the economy in similar terms:
Each interaction tends to a new mutual adjustment in the sense of a somewhat increased satisfaction to the consumer, as expressed by his own preference; and the series of continuously repeated mutual inter-actions tends to produce a distribution of resources in which each element of a resource is used by producers to the greatest satisfaction of the consumers, as expressed by their demand curves. The result may be called a dynamic order of production, because it is an arrangement of great complexity and usefulness, achieved by a series of direct lateral adjustments between individual producers making independent decisions.
He goes on:
The social legacies of language, writing, literature and of the various arts, pictorial and musical; of practical crafts, including medicine, agriculture, manufacture and the technique of communications; of sets of conventional units and measures, and of customs of intercourse; of religious, social and political thought all these are systems of dynamic order which were developed by the method of direct individual adjustment, described for Science and Law.
Polanyi, M., 1941. The growth of thought in society. Economica, 8(32), pp.428-456, p. 436,8. ↩