I'm not really sure WTF this guy is talking about, but it seems really learned. Can someone break it down for me?
Nietzscheâs Marginal Children: On Friedrich Hayek
How did the conservative ideas of Friedrich Hayek and the Austrian school become our economic reality? By turning the market into the realm of great politics and morals.
In the last half-century of American politics, conservatism has hardened around the defense of economic privilege and rule. Whether itâs the libertarianism of the GOP or the neoliberalism of the Democrats, that defense has enabled an upward redistribution of rights and a downward redistribution of duties. The 1 percent possesses more than wealth and political influence; it wields direct and personal power over men and women. Capital governs labor, telling workers what to say, how to vote and when to pee. It has all the substance of noblesse and none of the style of oblige. That many of its most vocal defenders believe Barack Obama to be their mortal enemyâa socialist, no lessâis a testament less to the reality about which they speak than to the resonance of the vocabulary they deploy.
The Nobel Prizeâwinning economist Friedrich Hayek is the leading theoretician of this movement, formulating the most genuinely political theory of capitalism on the right weâve ever seen. The theory does not imagine a shift from government to the individual, as is often claimed by conservatives; nor does it imagine a simple shift from the state to the market or from society to the atomized self, as is sometimes claimed by the left. Rather, it recasts our understanding of politics and where it might be found. This may explain why the University of Chicago chose to reissue Hayekâs The Constitution of Liberty two years ago after the fiftieth anniversary of its publication. Like The Road to Serfdom (1944), which a swooning Glenn Beck catapulted to the bestseller list in 2010, The Constitution of Liberty is a text, as its publisher says, of âour present moment.â
But to understand that text and its influence, itâs necessary to turn away from contemporary America to fin de siĂšcle Vienna. The seedbed of Hayekâs arguments is the half-century between the âmarginal revolution,â which changed the field of economics in the late nineteenth century, and the collapse of the Habsburg monarchy in 1918. It is by now a commonplace of European cultural history that a dying Austro-Hungarian Empire gave birth to modernism, psychoanalysis and fascism. Yet from the vortex of Vienna came not only Wittgenstein, Freud and Hitler but also Hayek, who was born and educated in the city, and the Austrian school of economics.Â
Friedrich Nietzsche figures critically in this story, less as an influence than a diagnostician. This will strike some as an improbable claim: Wasnât Nietzsche contemptuous of capitalists, capitalism and economics? Yes, he was, and for all his reading in political economy, he never wrote a treatise on politics or economics. And despite the long shadow he cast over the Viennese avant-garde, he is hardly ever cited by the economists of the Austrian school.
Yet no one understood better than Nietzsche the social and cultural forces that would shape the Austrians: the demise of an ancient ruling class; the raising of the labor question by trade unions and socialist parties; the inability of an ascendant bourgeoisie to crush or contain democracy in the streets; the need for a new ruling class in an age of mass politics. The relationship between Nietzsche and the free-market rightâwhich has been seeking to put labor back in its box since the nineteenth century, and now, with the help of the neoliberal left, has succeededâis thus one of elective affinity rather than direct influence, at the level of idiom rather than policy.
âOne day,â Nietzsche wrote in Ecce Homo, âmy name will be associated with the memory of something tremendous, a crisis without equal on earth, the most profound collision of conscience.â It is one of the ironies of intellectual history that the terms of the collision can best be seen in the rise of a discourse that Nietzsche, in all likelihood, would have despised.
* * *
In 1869, Nietzsche was appointed professor of classical philology at Basel University. Like most junior faculty, he was bedeviled by meager wages and bore major responsibilities, such as teaching fourteen hours a week, Monday through Friday, beginning at 7 am. He also sat on multiple committees and covered for senior colleagues who couldnât make their classes. He lectured to the public on behalf of the university. He dragged himself to dinner parties. Yet within three years he managed to complete The Birth of Tragedy, a minor masterwork of modern literature, which he dedicated to his close friend and âsublime predecessorâ Richard Wagner.Â
One chapter, however, he withheld from publication. In 1872, Nietzsche was invited to spend the Christmas holidays with Wagner and his wife Cosima, but sensing a potential rift with the composer, he begged off and sent a gift instead. He bundled âThe Greek Stateâ with four other essays, slapped a title onto a cover page (Five Prefaces to Five Unwritten Books), and mailed the leather-bound text to Cosima as a birthday present. Richard was offended; Cosima, unimpressed. âProf. Nietzscheâs manuscript does not restore our spirits,â she sniffed in her diary.Â
Though presented as a sop to a fraying friendship, âThe Greek Stateâ reflects the larger European crisis of war and revolution that had begun in 1789 and would come to an end only in 1945. More immediately, it bears the stamp of the Franco-Prussian War, which had broken out in 1870, and the Paris Commune, which was declared the following year.Â
Initially ambivalent about the war, Nietzsche quickly became a partisan of the German cause. âItâs about our culture!â he wrote to his mother. âAnd for that no sacrifice is too great! This damned French tiger.â He signed up to serve as a medical orderly; Cosima tried to persuade him to stay put in Basel, recommending that he send cigarettes to the front instead. But Nietzsche was adamant. In August 1870, he left for Bavaria with his sister Elisabeth, riding the rails and singing songs. He got his training, headed to the battlefield, and in no time contracted dysentery and diphtheria. He lasted a month.Â
The war lasted for six. A half-million soldiers were killed or wounded, as were countless civilians. The preliminary peace treaty, signed in February 1871, favored the Germans and punished the French, particularly the citizens of Paris, who were forced to shoulder the burden of heavy indemnities to the Prussians. Enraged by its impositionsâand a quarter-century of simmering discontent and broken promisesâworkers and radicals in Paris rose up and took over the city in March. Nietzsche was scandalized, his horror at the revolt inversely proportional to his exaltation over the war. Fearing that the Communards had destroyed the Louvre (they hadnât), he wrote:
The reports of the past few days have been so awful that my state of mind is altogether intolerable. What does it mean to be a scholar in the face of such earthquakes of culture!âŠ It is the worst day of my life.Â
In the quicksilver transmutation of a conventional war between states into a civil war between classes, Nietzsche saw a terrible alchemy of the future: âOver and above the struggle between nations the object of our terror was that international hydra-head, suddenly and so terrifyingly appearing as a sign of quite different struggles to come.âÂ
By May, the Commune had been ruthlessly put down at the cost of tens of thousands of livesâmuch to the delight of the Parisian aesthete-aristocrat Edmond Goncourt:Â
All is well. There has been neither compromise nor conciliation. The solution has been brutal, imposed by sheer force of arms. The solution has saved everyone from the dangers of cowardly compromise. The solution has restored its self-confidence to the Army, which has learnt in the blood of the Communards that it was still capable of fightingâŠa bleeding like that, by killing the rebellious part of a population, postpones the next revolution by a whole conscription.Â
Of the man who wrote these words and the literary milieu of which he was a part, Nietzsche would later say: âI know these gentlemen inside out, so well that I have really had enough of them already. One has to be more radical: fundamentally they all lack the main thingââla force.âââ
* * *
The clash of these competing worlds of war and work echoes throughout âThe Greek State.â Nietzsche begins by announcing that the modern era is dedicated to the âdignity of work.â Committed to âequal rights for all,â democracy elevates the worker and the slave. Their demands for justice threaten to âswamp all other ideas,â to tear âdown the walls of culture.â Modernity has made a monster in the working class: a created creator (shades of Marx and Mary Shelley), it has the temerity to see itself and its labor as a work of art. Even worse, it seeks to be recognized and publicly acknowledged as such.Â
The Greeks, by contrast, saw work as a âdisgrace,â because the existence it servesâthe finite life that each of us livesââhas no inherent value.â Existence can be redeemed only by art, but art too is premised on work. It is made, and its maker depends on the labor of others; they take care of him and his household, freeing him from the burdens of everyday life. Inevitably, his art bears the taint of their necessity. No matter how beautiful, art cannot escape the pall of its creation. It arouses shame, for in shame âthere lurks the unconscious recognition that these conditionsâ of work âare required for the actual goalâ of art to be achieved. For that reason, the Greeks properly kept labor and the laborer hidden from view.Â
Throughout his writing life, Nietzsche was plagued by the vision of workers massing on the public stageâwhether in trade unions, socialist parties or communist leagues. Almost immediately upon his arrival in Basel, the First International descended on the city to hold its fourth congress. Nietzsche was petrified. âThere is nothing more terrible,â he wrote in The Birth of Tragedy, âthan a class of barbaric slaves who have learned to regard their existence as an injustice, and now prepare to avenge, not only themselves, but all generations.â Several years after the International had left Basel, Nietzsche convinced himself that it was slouching toward Bayreuth in order to ruin Wagnerâs festival there. And just weeks before he went mad in 1888 and disappeared forever into his own head, he wrote, âThe cause of every stupidity todayâŠlies in the existence of a labour question at all. About certain things one does not ask questions.â
One can hear in the opening passages of âThe Greek Stateâ the pounding march not only of European workers on the move but also of black slaves in revolt. Hegel was brooding on Haiti while he worked out the master-slave dialectic in The Phenomenology of Spirit. Though generations of scholars have told us otherwise, perhaps Nietzsche had a similar engagement in mind when he wrote, âEven if it were true that the Greeks were ruined because they kept slaves, the opposite is even more certain, that we will be destroyed because we fail to keep slaves.â What theorist, after all, has ever pressed so urgentlyânot just in this essay but in later works as wellâthe claim that âslavery belongs to the essence of a cultureâ? What theorist ever had to? Before the eighteenth century, bonded labor was an accepted fact. Now it was the subject of a roiling debate, provoking revolutions and emancipations throughout the world. Serfdom had been eliminated in Russia only a decade beforeâand in some German states, only a generation before Nietzscheâs birth in 1844âwhile Brazil would soon become the last state in the Americas to abolish slavery. An edifice of the ages had been brought down by a mere centuryâs vibrations; is it so implausible that Nietzsche, attuned to the vectors and velocity of decay as he was, would pause to record the earthquake and insist on taking the full measure of its effects?Â
If slavery was one condition of great art, Nietzsche continued in âThe Greek State,â war and high politics were another. âPolitical men par excellence,â the Greeks channeled their agonistic urges into bloody conflicts between cities and less bloody conflicts within them: healthy states were built on the repression and release of these impulses. The arena for conflict created by that regimen gave âsociety time to germinate and turn green everywhereâ and allowed âblossoms of geniusâ periodically to âsprout forth.â Those blossoms were not only artistic but also political. Warfare sorted society into lower and higher ranks, and from that hierarchy rose âthe military genius,â whose artistry was the state itself. The real dignity of man, Nietzsche insisted, lay not in his lowly self but in the artistic and political genius his life was meant to serve and on whose behalf it was to be expended.Â
Instead of the Greek state, however, Europe had the bourgeois state; instead of aspiring to a work of art, states let markets do their work. Politics, Nietzsche complained, had become âan instrument of the stock exchangeâ rather than the terrain of heroism and glory. With the âspecifically political impulsesâ of Europe so weakenedâeven his beloved Franco-Prussian War had not revived the spirit in the way that he had hopedâNietzsche could only âdetect dangerous signs of atrophy in the political sphere, equally worrying for art and society.â The age of aristocratic culture and high politics was at an end. All that remained was the detritus of the lower orders: the disgrace of the laborer, the paper chase of the bourgeoisie, the barreling threat of socialism. âThe Paris commune,â Nietzsche would later write in his notebooks, âwas perhaps no more than minor indigestion compared to what is coming.â
Nietzsche had little, concretely, to offer as a counter-volley to democracy, whether bourgeois or socialist. Despite his appreciation of the political impulse and his studious attention to political events in Germanyâfrom the Schleswig-Holstein crisis of the early 1860s to the imperial push of the late 1880sâhe remained leery of programs, movements and platforms. The best he could muster was a vague principle: that society is âthe continuing, painful birth of those exalted men of culture in whose service everything else has to consume itself,â and the state a âmeans of setting [that] process of society in motion and guaranteeing its unobstructed continuation.â It was left to later generations to figure out what that could mean in practiceâand where it might lead. Down one path might lay fascism; down another, the free market.
* * *
Around the timeâalmost to the yearâthat Nietzsche was launching his revolution of metaphysics and morals, a trio of economists, working separately across three countries, were starting their own. It began with the publication in 1871 of Carl Mengerâs Principles of Economics and William Stanley Jevonsâs The Theory of Political Economy. Along with LĂ©on Walrasâs Elements of Pure Economics, which appeared three years later, these were the European facesâAustrian, English and French-Swissâof what would come to be called the marginal revolution.
The marginalists focused less on supply and production than on the pulsing demand of consumption. The protagonist was not the landowner or the laborer, working his way through the farm, the factory or the firm; it was the universal man in the market whose signature act was to consume things. Thatâs how market man increased his utility: by consuming something until he reached the point where consuming one more increment of it gave him so little additional utility that he was better off consuming something else. Of such microscopic calculations at the periphery of our estate was the economy made.
Though the early marginalists helped transform economics from a humanistic branch of the moral sciences into a technical discipline of the social sciences, they were still able to command an audience and an influence all too rare in contemporary economics. Jevons spent his career as an independent scholar and professor in Manchester and London worrying about his lack of readers, but William Gladstone invited him over to discuss his work, and John Stuart Mill praised it on the floor of Parliament. Keynes tells us that âfor a period of half a century, practically all elementary students both of Logic and of Political Economy in Great Britain and also in India and the Dominions were brought up on Jevons.âÂ
According to Hayek, the âimmediate receptionâ of Mengerâs Principles âcan hardly be called encouraging.â Reviewers seemed not to understand it. Two students at the University of Vienna, however, did. One was Friedrich von Wieser, the other Eugen von BĂ¶hm-Bawerk, and both became legendary educators and theoreticians. Their students included Hayek; Ludwig von Mises, who attracted a small but devoted following in the United States and elsewhere; and Joseph Schumpeter, dark poet of capitalismâs forces of âcreative destruction.â Through BĂ¶hm-Bawerk and Wieser, Mengerâs text became the groundwork of the Austrian school, whose reach, due in part to the efforts of Mises and Hayek, now extends across the globe.
The contributions of Jevons and Menger were multiple, yet each of them took aim at a central postulate of economics shared by everyone from Adam Smith to the socialist left: the notion that labor is aâif not theâsource of value. Though adumbrated in the idiom of prices and exchange, the labor theory of value evinced an almost primitive faith in the metaphysical objectivity of the economic sphereâa faith made all the more surprising by the fact that the objectivity of the rest of the social world (politics, religion and morals) had been subject to increasing scrutiny since the Renaissance. Commodities may have come wrapped in the pretty paper of the market, but inside, many believed, were the brute facts of nature: raw materials from the earth and the physical labor that turned those materials into goods. Because those materials were made useful, hence valuable, only by labor, labor was the source of value. That, and the fact that labor could be measured in some way (usually time), lent the world of work a kind of ontological statusâand political authorityâthat had been increasingly denied to the world of courts and kings, lands and lords, parishes and priests. As the rest of the world melted into air, labor was crystallizing as the one true solid.
By the time the marginalists came on the scene, the most politically threatening version of the labor theory of value was associated with the left. Though Marx would significantly revise and recast it in his mature writings, the simple notion that labor produces value remained associated with his nameâand even more so with that of his competitor Ferdinand Lasalle, about whom Nietzsche read a fair amountâas well as with the larger socialist and trade union movements of which he was a part. That association helped set the stage for the marginalistsâ critique.
Admittedly, the relationship between marginalism and anti-socialism is complex. On the one hand, there is little evidence to suggest that the first-generation marginalists had heard of, much less read, Marx, at least not at this early stage of their careers. Much more than the threat of socialism underpinned the emergence of marginalist economics, which was as opposed to traditional defenses of the market as it was to the marketâs critics. By the twentieth century, moreover, many marginalists were on the left and used their ideas to help construct the institutions of social democracy; even Walras and Alfred Marshall, another early marginalist, were sympathetic to the claims of the left. And on some readings, the mature Marx shares more with the constructivist thrusts of marginalism than he does with the objectivism of the labor theory of value.
On the other hand, Jevons was a tireless polemicist against trade unions, which he identified as âthe best exampleâŠof the evils and disastersâ attending the democratic age. Jevons saw marginalism as a critical antidote to the labor movement and insisted that its teachings be widely transmitted to the working classes. âTo avoid such a disaster,â he argued, âwe must diffuse knowledgeâ to the workersâempowered as they were by the vote and the strikeââand the kind of knowledge required is mainly that comprehended in the science of political economy.âÂ
Menger interrupted his abstract reflections on value to make the point that while it may âappear deplorable to a lover of mankind that possession of capital or a piece of land often provides the owner a higher incomeâŠthan the income received by a laborer,â the âcause of this is not immoral.â It was âsimply that the satisfaction of more important human needs depends upon the services of the given amount of capital or piece of land than upon the services of the laborer.â Any attempt to get around that truth, he warned, âwould undoubtedly require a complete transformation of our social order.âÂ
Finally, there is no doubt that the marginalists of the Austrian school, who would later prove so influential on the American right, saw their project as primarily anti-Marxist and anti-socialist. âThe most momentous consequence of the theory,â declared Wieser in 1891, âis, I take it, that it is false, with the socialists, to impute to labor alone the entire productive return.âÂ
* * *
With its division of intellectual labor, the modern academy often separates economics from ethics and philosophy. Earlier economists and philosophers did not make that separation. Even Nietzsche recognized that economics rested on genuine moral and philosophical premises, many of which he found dubious, and that it had tremendous moral and political effects, all of which he detested. In The Wanderer and His Shadow, Nietzsche criticized âour economistsâ for having ânot yet wearied of scenting a similar unity in the word âvalueâ and of searching after the original root-concept of the word.â In his preliminary outline for the summa he hoped to publish on âthe will to power,â he scored the ânihilistic consequences of the ways of thinking in politics and economics.âÂ
For that reason, Nietzsche saw in laborâs appearance more than an economic theory of goods: he saw a terrible diminution of the good. Morals must be âunderstood as the doctrine of the relations of supremacy,â he wrote in Beyond Good and Evil; every morality âmust be forced to bowâŠbefore the order of rank.â But like so many before them, including the Christian slave and the English utilitarian, the economist and the socialist promoted an inferior human typeâand an inferior set of valuesâas the driving agent of the world. Nietzsche saw in this elevation not only a transformation of values but also a loss of value and, potentially, the elimination of value altogether. Conservatives from Edmund Burke to Robert Bork have conflated the transformation of values with the end of value. Nietzsche, on occasion, did too: âWhat does nihilism mean?â he asked himself in 1887. âThat the highest values devaluate themselves.â The nihilism consuming Europe was best understood as a democratic âhatred against the order of rank.âÂ
Part of Nietzscheâs worry was philosophical: How was it possible in a godless world, naturalistically conceived, to deem anything of value? But his concern was also cultural and political. Because of democracy, which was âChristianity made natural,â the aristocracy had lost âits naturalnessââthat is, the traditional vindication of its power. How then might a hierarchy of excellence, aesthetic and political, re-establish itself, defend itself against the massâparticularly a mass of workersâand dominate that mass? As Nietzsche wrote in the late 1880s:
A reverse movement is neededâthe production of a synthetic, summarizing, justifying man for whose existence this transformation of mankind into a machine is a precondition, as a base on which he can invent his higher form of being.
âââHe needs the opposition of the masses, of the âleveled,â a feeling of distance from them. [He] stands on them, he lives off them. This higher form of aristocracy is that of the future.âMorally speaking, this overall machinery, this solidarity of all gears, represents a maximum of exploitation of man; but it presupposes those on whose account this exploitation has meaning.
Nietzscheâs response to that challenge was not to revert or resort to a more objective notion of value: that was neither possible nor desirable. Instead, he embraced one part of the modern understanding of valueâits fabricated natureâand turned it against its democratic and Smithian premises. Value was indeed a human creation, Nietzsche acknowledged, and as such could just as easily be conceived as a gift, an honorific bestowed by one man upon another. âThrough esteeming alone is there value,â Nietzsche has Zarathustra declare; âto esteem is to create.â Value was not made with coarse and clumsy hands; it was enacted with an appraising gaze, a nod of the head signifying a matchless abundance of taste. It was, in short, aristocratic. Â
While slaves had once created value in the form of Christianity, they had achieved that feat not through their labor but through their censure and praise. They had also done it unwittingly, acting upon a deep and unconscious compulsion: a sense of inferiority, a rage against their powerlessness, and a desire for revenge against their betters. That combination of overt impotence and covert drive made them ill-suited to creating values of excellence. Nietzsche explained in Beyond Good and Evil that the self-conscious exercise and enjoyment of power made the noble type a better candidate for the creation of values in the modern world, for these were values that would have to break with the slave morality that had dominated for millennia. Only insofar as âit knows itself to be that which first accords honor to thingsâ can the noble type truly be âvalue-creating.âÂ
Labor belonged to nature, which is not capable of generating value. Only the man who arrayed himself against natureâthe artist, the general, the statesmanâcould claim that role. He alone had the necessary refinements, wrought by âthat pathos of distance which grows out of ingrained difference between strata,â to appreciate and bestow value: upon men, practices and beliefs. Value was not a product of the prole; it was an imposition of peerless taste. In the words of The Gay Science:Â
Whatever has value in our world now does not have value in itself, according to its natureânature is always value-less, but has been given value at some time, as a presentâand it was we who gave and bestowed it.Â
That was in 1882. Just a decade earlier, Menger had written: âValue is therefore nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needs, that is, to our lives and well-being.â Jevonsâs position was identical, and like Nietzsche, both Menger and Jevons thought value was instead a high or low estimation put by a man upon the things of life. But lest that desiring self be reduced to a simple creature of tabulated needs, Menger and Jevons took care to distinguish their positions from traditional theories of utility.Â
Jevons, for example, was prepared to follow Jeremy Bentham in his definition of utility as âthat property in an object, whereby it tends to produce benefit, advantage, pleasure, good, or happiness.â He thought this âperfectly expresses the meaning of the word Economy.â But he also insisted on a critical rider: âprovided that the will or inclination of the person concerned is taken as the sole criterion, for the time, of what is good and desirable.â Our expressed desires and aversions are not measures of our objective or underlying good; there is no such thing. Nor can we be assured that those desires or aversions will bring us pleasure or pain. What we want or donât want is merely a representation, a snapshot of the motions of our willâthat black box of preference and partiality that so fascinated Nietzsche precisely because it seemed so groundless and yet so generative. Every mind is inscrutable to itself: we lack, said Jevons, âthe means of measuring directly the feelings of the human heart.â The inner life is inaccessible to our inspections; all we can know are its effects, the will it powers and the actions it propels. âThe will is our pendulum,â declared Jevons, a representation of forces that cannot be seen but whose effects are nevertheless felt, âand its oscillations are minutely registered in all the price lists of the markets.âÂ
Menger thought the value of any good was connected to our needs, but he was extraordinarily attuned to the complexityâand contingencyâof that relationship. Needs, wrote Menger, âat least as concerns their origin, depend upon our wills or on our habits.â Needs are more than the givens of our biology or psyche; they are the desideratum of our volitions and practices, which are idiosyncratic and arbitrary. Only when our needs finally âcome into existenceââthat is, only when we become aware of themâcan we truly say that âthere is no further arbitrary elementâ in the process of value formation.Â
Even then, needs must pass through a series of checkpoints before they can enter the land of value. Awareness of a need, says Menger, entails a comprehensive knowledge of how the need might be fulfilled by a particular good, how that good might contribute to our lives, and how (and whether) command of that good is necessary for the satisfaction of that need. That last bit of knowledge requires us to look at the external world: to ask how much of that good is available to us, to consider how many sacrifices we must bearâhow many satisfactions we are willing to forgoâin order to secure it. Only when we have answered these questions are we ready to speak of value, which Menger reminds us is âthe importance we attribute to the satisfaction of our needs.â Value is thus âa judgmentâ that âeconomizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being.â It âdoes not exist outside the consciousness of men.â Even though previous economists had insisted on the âobjectification of the value of goods,â Menger, like Jevons and Nietzsche, concludes that value âis entirely subjective in nature.âÂ
* * *
In their war against socialism, the philosophers of capital faced two challenges. The first was that by the early twentieth century, socialism had cornered the market on morality. As Mises complained in his 1932 preface to the second edition of Socialism, âAny advocate of socialistic measures is looked upon as the friend of the Good, the Noble, and the Moral, as a disinterested pioneer of necessary reforms, in short, as a man who unselfishly serves his own people and all humanity.â Indeed, with the help of kindred notions such as âsocial justice,â socialism seemed to be the very definition of morality. Nietzsche had long been wise to this insinuation; one source of his discontent with religion was his sense that it had bequeathed to modernity an understanding of what morality entailed (selflessness, universality, equality) such that only socialism and democracy could be said to fulfill it. But where Nietzscheâs response to the equation of socialism and morality was to question the value of morality, at least as it had been customarily understood, economists like Mises and Hayek pursued a different path, one Nietzsche would never have dared to take: they made the market the very expression of morality.
Moralists traditionally viewed the pursuit of money and goods as negative or neutral; the Austrians claimed it embodies our deepest values and commitments. âThe provision of material goods,â declared Mises, âserves not only those ends which are usually termed economic, but also many other ends.â All of us have ends or ultimate purposes in life: the cultivation of friendship, the contemplation of beauty, a loverâs companionship. We enter the market for the sake of those ends. Economic action thus âconsists firstly in valuation of ends, and then in the valuation of the means leading to these ends. All economic activity depends, therefore, upon the existence of ends. Ends dominate economy and alone give it meaning.â We simply cannot speak, writes Hayek in The Road to Serfdom, of âpurely economic ends separate from the other ends of life.â
This claim, however, could just as easily be enlisted as an argument for socialism. In providing men and women with the means of lifeâhousing, food, healthcareâthe socialist state frees them to pursue the ends of life: beauty, knowledge, wisdom. The Austrians went further, insisting that the very decision about what constitutes means and ends was itself a judgment of value. Any economic situation confronts us with the necessity of choice, of having to deploy our limited resourcesâwhether time, money or effortâon behalf of some end. In making that choice, we reveal which of our ends matters most to us: which is higher, which is lower. âEvery man who, in the course of economic activity, chooses between the satisfaction of two needs, only one of which can be satisfied, makes judgments of value,â says Mises.Â
For those choices to reveal our ends, our resources must be finiteâunlimited time, for example, would obviate the need for choiceâand our choice of ends unconstrained by external interference. The best, indeed only, method for guaranteeing such a situation is if money (or its equivalent in material goods) is the currency of choiceâand not just of economic choice, but of all of our choices. As Hayek writes in The Road to Serfdom:
So long as we can freely dispose over our income and all our possessions, economic loss will always deprive us only of what we regard as the least important of the desires we were able to satisfy. A âmerelyâ economic loss is thus one whose effect we can still make fall on our less important needsâŠ. Economic changes, in other words, usually affect only the fringe, the âmargin,â of our needs. There are many things which are more important than anything which economic gains or losses are likely to affect, which for us stand high above the amenities and even above many of the necessities of life which are affected by the economic ups and downs.Â
Should the government decide which of our needs are âmerely economic,â we would be deprived of the opportunity to decide whether these are higher or lower goods, the marginal or mandatory items of our flourishing. So vast is the gulf between each soul, so separate and unequal are we, that it is impossible to assume anything universal about the sources and conditions of human happiness, a point Nietzsche and Jevons would have found congenial. The judgment of what constitutes a means, what an end, must be left to the individual self. Hayek again:
Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends. And whoever has sole control of the means must also determine which ends are to be served, which values are to be rated higher and which lowerâin short what men should believe and strive for.Â
While the economic is, in one sense readily acknowledged by Hayek, the sphere of our lower needs, it is in another and altogether more important sense the anvil upon which we forge our notion of what is lower and higher in this world, our morality. âEconomic values,â he writes, âare less important to us than many things precisely because in economic matters we are free to decide what to us is more, and what less, important.â But we can be free to make those choices only if they are left to us to makeâand, paradoxically, if we are forced to make them. If we didnât have to choose, weâd never have to value anything.Â
* * *
By imposing this drama of choice, the economy becomes a theater of self-disclosure, the stage upon which we discover and reveal our ultimate ends. It is not in the casual chatter of a seminar or the cloistered pews of a church that we determine our values; it is in the duressâthe ordealâof our lived lives, those moments when we are not only free to choose but forced to choose. âFreedom to order our own conduct in the sphere where material circumstances force a choice upon us,â Hayek wrote, âis the air in which alone moral sense grows and in which moral values are daily re-created.â
While progressives often view this discourse of choice as either dime-store morality or fabricated scarcity, the Austrians saw the economy as the disciplining agent of all ethical action, a moment ofâand opportunity forâmoral artistry. Freud thought the compressions of the dream world made every man an artist; these other Austrians thought the compulsions of the economy made every man a moralist. It is only when we are navigating its narrow channelsâwhere every decision to expend some quantum of energy requires us to make a calculation about the desirability of its posited endâthat we are brought face to face with ourselves and compelled to answer the questions: What do I believe? What do I want in this world? From this life?Â
While there are precedents for this argument in Mengerâs theory of value (the fewer opportunities there are for the satisfaction of our needs, Menger says, the more our choices will reveal which needs we value most), its true and full dimensions can best be understood in relation to Nietzsche. As much as Nietzsche railed against the repressive effect of laws and morals on the highest types, he also appreciated how much âon earth of freedom, subtlety, boldness, dance, and masterly surenessâ was owed to these constraints. Confronted with a set of social strictures, the diverse and driving energies of the self were forced to draw upon unknown and untapped reserves of ingenuityâeither to overcome these obstacles or to adapt to them with the minimum of sacrifice. The results were novel, value-creating.Â
Nietzscheâs point was primarily aesthetic. Contrary to the romantic notion of art being produced by a process of âletting go,â Nietzsche insisted that the artist âstrictly and subtlyâŠobeys thousandfold laws.â The language of inventionâwhether poetry, music or speech itselfâis bound by âthe metrical compulsion of rhyme and rhythm.â Such laws are capricious in their origin and tyrannical in their effect. That is the point: from that unforgiving soil of power and whimsy rises the most miraculous increase. Not just in the artsâGoethe, say, or Beethovenâbut in politics and ethics as well: Napoleon, Caesar, Nietzsche himself (âGenuine philosophersâŠare commanders and legislators: they say, âthus it shall be!ââ).
One school would find expression for these ideas in fascism. Writers like Ernst JĂŒnger and Carl Schmitt imagined political artists of great novelty and originality forcing their way through or past the filtering constraints of everyday life. The leading legal theorist of the Third Reich, Schmitt looked to those extraordinary instances in politicsâwar, the âdecision,â the âexceptionââwhen âthe power of real life,â as he put it in Political Theology, âbreaks through the crust of a mechanism that has become torpid by repetition.â In that confrontation between mechanism and real life, the man of exception would find or make his moment: by taking an unauthorized decision, ordaining a new regime of law, or founding a political order. In each case, something was âcreated out of nothingness.âÂ
It was the peculiarâand, in the long run, more significantâgenius of the Austrian school to look for these moments and experiences not in the political realm but in the marketplace. Money in a capitalist economy, Hayek came to realize, could best be understood and defended in Nietzschean terms: as âthe medium through which a forceââthe selfâs âdesire for power to achieve unspecified endsâââmakes itself felt.â
* * *
The second challenge confronting the philosophers of capital was more daunting. While Nietzscheâs transvaluation of values gave pride of place to the highest types of humanityâvalues were a gift, the philosopher their greatest sourceâthe political implications of marginalism were more ambidextrous. If on one reading it was the capitalist who gave value to the worker, on another it was the workerâin his capacity as consumerâwho gave value to capital. Social democrats pursued the latter argument with great zeal. The result was the welfare state, with its emphasis on high wages and good benefitsâas well as unionizationâas the driving agent of mass demand and economic prosperity. More than a macroeconomic policy, social democracy (or liberalism, as it was called in America) reflected an ethos of the citizen-worker-consumer as the creator and center of the economy. Long after economists had retired the labor theory of value, the welfare state remained lit by its afterglow. The political economy of the welfare state may have been marginalist, but its moral economy was workerist.
The midcentury right was in desperate need of a response that, squaring Nietzscheâs circle, would clear a path for aristocratic action in the capitalist marketplace. It needed not simply an alternative economics but an answering vision of society. Schumpeter provided one, Hayek another.Â
Schumpeterâs entrepreneur is one of the more enigmatic characters of modern social theory. He is not inventive, heroic or charismatic. âThere is surely no trace of any mystic glamour about him,â Schumpeter writes in Capitalism, Socialism and Democracy. His instincts and impulses are confined to the office and the counting table. Outside those environs, he cannot âsay boo to a goose.â Yet it is this nothing, this great inscrutable blank, that will âbend a nation to his willâânot unlike the father figures of a Mann or Musil novel.Â
What the entrepreneur hasâor, better, isâare force and will. As Schumpeter explains in a 1927 essay, the entrepreneur possesses âextraordinary physical and nervous energy.â That energy gives him focus (the maniacal, almost brutal, ability to shut out what is inessential) and stamina. In those late hours when lesser beings have âgiven way to a state of exhaustion,â he retains his âfull force and originality.â By âoriginality,â Schumpeter means something peculiar: âreceptivity to new facts.â It is the entrepreneurâs ability to recognize that sweet spot of novelty and occasion (an untried technology, a new method of production, a different way to market or distribute a product) that enables him to revolutionize the way business gets done. Part opportunist, part fanatic, he is âa leading man,â Schumpeter suggests in Capitalism, Socialism and Democracy, overcoming all resistance in order to create the new modes and orders of everyday life.Â
Schumpeter is careful to distinguish entrepreneurialism from politics as it is conventionally understood: the entrepreneurâs power âdoes not readily expandâŠinto the leadership of nationsâ; âhe wants to be left alone and to leave politics alone.â Even so, the entrepreneur is best understood as neither an escape from nor an evasion of politics but as its sublimation, the relocation of politics in the economic sphere.Â
Rejecting the static models of other economistsâequilibrium is death, he saysâSchumpeter depicts the economy as a dramatic confrontation between rising and falling empires (firms). Like Machiavelli in The Prince, whose vision Nietzsche described as âperfection in politics,â Schumpeter identifies two types of agents struggling for position and permanence amid great flux: one is dynastic and lawful, the other upstart and intelligent. Both are engaged in a death dance, with the former in the potentially weaker position unless it can innovate and break with routine.Â
Schumpeter often resorts to political and military metaphors to describe this dance. Production is âa history of revolutions.â Competitors âcommandâ and wield âpieces of armor.â Competition âstrikesâ at the âfoundationsâ and âvery livesâ of firms; entrepreneurs in equilibrium âfind themselves in much the same situations as generals would in a society perfectly sure of permanent peace.â In the same way that Schmitt imagines peace as the end of politics, Schumpeter sees equilibrium as the end of economics.Â
Against this backdrop of dramatic, even lethal, contest, the entrepreneur emerges as a legislator of values and new ways of being. The entrepreneur demonstrates a penchant for breaking with âthe routine tasks which everybody understands.â He overcomes the multiple resistances of his worldââfrom simple refusal either to finance or to buy a new thing, to physical attack on the man who tries to produce it.âÂ
To act with confidence beyond the range of familiar beacons and to overcome that resistance requires aptitudes that are present in only a small fraction of the population and that define the entrepreneurial type.
The entrepreneur, in other words, is a founder. As Schumpeter describes him in The Theory of Economic Development:
There is the dream and the will to found a private kingdom, usually, though not necessarily, also a dynasty. The modern world really does not know any such positions, but what may be attained by industrial and commercial success is still the nearest approach to medieval lordship possible to modern man.Â
That may be why his inner life is so reminiscent of the Machiavellian prince, that other virtuoso of novelty. All of his energy and will, the entirety of his force and being, is focused outward, on the enterprise of creating a new order.
And yet even as he sketched the broad outline of this legislator of value, Schumpeter sensed that his days were numbered. Innovation was increasingly the work of departments, committees and specialists. The modern corporation âsocializes the bourgeois mind.â In the same way that modern regiments had destroyed the âvery personal affairâ of medieval battle, so did the corporation eliminate the need for âindividual leadership acting by virtue of personal force and personal responsibility for success.â The âromance of earlier commercial adventureâ was ârapidly wearing away.â With the entrepreneurial function in terminal decline, Schumpeterâs experiment in economics as great politics seemed to be approaching an end.
* * *
Hayek offered an alternative account of the market as the proving ground of aristocratic action. Schumpeter had already hinted at it in a stray passage in Capitalism, Socialism and Democracy. Taking aim at the notion of a rational chooser who knows what he wants, wants what is best (for him, at any rate) and works efficiently to get it, Schumpeter invoked a half-century of social thoughtâLe Bon, Pareto and Freudâto emphasize not only âthe importance of the extra-rational and irrational element in our behavior,â but also the power of capital to shape the preferences of the consumer.
Consumers do not quite live up to the idea that the economic textbooks used to convey. On the one hand, their wants are nothing like as definite, and their actions upon those wants nothing like as rational and prompt. On the other hand, they are so amenable to the influence of advertising and other methods of persuasion that producers often seem to dictate to them instead of being directed by them.Â
In The Constitution of Liberty, Hayek developed this notion into a full-blown theory of the wealthy and the well-born as an avant-garde of taste, as makers of new horizons of value from which the rest of humanity took its bearings. Instead of the market of consumers dictating the actions of capital, it would be capital that would determine the market of consumptionâand beyond that, the deepest beliefs and aspirations of a people.Â
The distinction that Hayek draws between mass and elite has not received much attention from his critics or his defenders, bewildered or beguiled as they are by his repeated invocations of liberty. Yet a careful reading of Hayekâs argument reveals that liberty for him is neither the highest good nor an intrinsic good. It is a contingent and instrumental good (a consequence of our ignorance and the condition of our progress), the purpose of which is to make possible the emergence of a heroic legislator of value.
Civilization and progress, Hayek argues, depend upon each of us deploying knowledge that is available for our use yet inaccessible to our reason. The computer on which I am typing is a repository of centuries of mathematics, science and engineering. I know how to use it, but I donât understand it. Most of our knowledge is like that: we know the âhowâ of thingsâhow to turn on the computer, how to call up our word-processing program and typeâwithout knowing the âthatâ of things: that electricity is the flow of electrons, that circuits operate through binary choices and so on. Others possess the latter kind of knowledge; not us. That combination of our know-how and their knowledge advances the cause of civilization. Because they have thought through how a computer can be optimally designed, we are free to ignore its transistors and microchips; instead, we can order clothes online, keep up with old friends as if they lived next door, and dive into previously inaccessible libraries and archives in order to produce a novel account of the Crimean War.Â
We can never know what serendipity of knowledge and know-how will produce the best results, which union of genius and basic ignorance will yield the greatest advance. For that reason, individualsâall individualsâmust be free to pursue their ends, to exploit the wisdom of others for their own purposes. Allowing for the uncertainties of progress is the greatest guarantor of progress. Hayekâs argument for freedom rests less on what we know or want to know than on what we donât know, less on what we are morally entitled to as individuals than on the beneficial consequences of individual freedom for society as a whole.Â
In fact, Hayek continues, it is not really my freedom that I should be concerned about; nor is it the freedom of my friends and neighbors. It is the freedom of that unknown and untapped figure of invention to whose imagination and ingenuity my friends and I will later owe our greater happiness and flourishing: âWhat is important is not what freedom I personally would like to exercise but what freedom some person may need in order to do things beneficial to society. This freedom we can assure to the unknown person only by giving it to all.â
Deep inside Hayekâs understanding of freedom, then, is the notion that the freedom of some is worth more than the freedom of others: âThe freedom that will be used by only one man in a million may be more important to society and more beneficial to the majority than any freedom that we all use.â Hayek cites approvingly this statement of a nineteenth-century philosopher: âIt may be of extreme importance that some should enjoy libertyâŠalthough such liberty may be neither possible nor desirable for the great majority.â That we donât grant freedom only to that individual is due solely to the happenstance of our ignorance: we cannot know in advance who he might be. âIf there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also our future wants and desires, there would be little case for liberty.âÂ
* * *
As this reference to âfuture wants and desiresâ suggests, Hayek has much more in mind than producers responding to a pre-existing market of demand; heâs talking about men who create new marketsâand not just of wants or desires, but of basic tastes and beliefs. The freedom Hayek cares most about is the freedom of those legislators of value who shape and determine our ends.
The overwhelming majority of men and women, Hayek says, are simply not capable of breaking with settled patterns of thought and practice; given a choice, they would never opt for anything new, never do anything better than what they do now.Â
Action by collective agreement is limited to instances where previous efforts have already created a common view, where opinion about what is desirable has become settled, and where the problem is that of choosing between possibilities already generally recognized, not that of discovering new possibilities.Â
While some might claim that Hayekâs argument here is driven less by a dim view of ordinary men and women than his dyspepsia about politics, he explicitly excludes âthe decision of some governing eliteâ from the acid baths of his skepticism. Nor does he hide his misgivings about the individual abilities of wage laborers who comprise the great majority. The working stiff is a being of limited horizons. Unlike the employer or the âindependent,â both of whom are dedicated to âshaping and reshaping a plan of life,â the workerâs orientation is âlargely a matter of fitting himself into a given framework.â He lacks responsibility, initiative, curiosity and ambition. Though some of this is by necessityâthe workplace does not countenance âactions which cannot be prescribed or which are not conventionalââHayek insists that this is ânot only the actual but the preferred position of the majority of the population.â The great majority enjoy submitting to the workplace regime because it âgives them what they mainly want: an assured fixed income available for current expenditure, more or less automatic raises, and provision for old age. They are thus relieved of some of the responsibilities of economic life.â Simply put, these are people for whom taking orders from a superior is not only a welcome relief but a prerequisite of their fulfillment: âTo do the bidding of others is for the employed the condition of achieving his purpose.âÂ
It thus should come as no surprise that Hayek believes in an avant-garde of tastemakers, whose power and position give them a vantage from which they can not only see beyond the existing horizon but also catch a glimpse of new ones:Â
Only from an advanced position does the next range of desires and possibilities become visible, so that the selection of new goals and the effort toward their achievement will begin long before the majority can strive for them.
These horizons include everything from âwhat we regard as good or beautiful,â to the ambitions, goals and ends we pursue in our everyday lives, to âthe propagation of new ideas in politics, morals, and religion.â On all of these fronts, it is the avant-garde that leads the way and sets our parameters.
More interesting is how explicit and insistent Hayek is about linking the legislation of new values to the possession of vast amounts of wealth and capital, evenâor especiallyâwealth that has been inherited. Often, says Hayek, it is only the very rich who can afford new products or tastes. Lavishing money on these boutique items, they give producers the opportunity to experiment with better designs and more efficient methods of production. Thanks to their patronage, producers will find cheaper ways of making and delivering these productsâcheap enough, that is, for the majority to enjoy them. What was before a luxury of the idle richâstockings, automobiles, piano lessons, the universityâis now an item of mass consumption.
The most important contribution of great wealth, however, is that it frees its possessor from the pursuit of money so that he can pursue nonmaterial goals. Liberated from the workplace and the rat race, the âidle richââa phrase Hayek seeks to reclaim as a positive goodâcan devote themselves to patronizing the arts, subsidizing worthy causes like abolition or penal reform, founding new philanthropies and cultural institutions. Those born to wealth are especially important: not only are they the beneficiaries of the higher culture and nobler values that have been transmitted across the generationsâHayek insists that we will get a better elite if we allow parents to pass their fortunes on to their children; requiring a ruling class to start fresh with every generation is a recipe for stagnation, for having to reinvent the wheelâbut they are immune to the petty lure of money. âThe grosser pleasures in which the newly rich often indulge have usually no attraction for those who have inherited wealth.â (How Hayek reconciles this position with the agnosticism about value he expresses in The Road to Serfdom remains unclear.)
The men of capital, in other words, are best understood not as economic magnates but as cultural legislators: âHowever important the independent owner of property may be for the economic order of a free society, his importance is perhaps even greater in the fields of thought and opinion, of tastes and beliefs.â While this seems to be a universal truth for Hayek, it is especially true in societies where wage labor is the rule. The dominance of paid employment has terrible consequences for the imagination, which are most acutely felt by the producers of that imagination: âThere is something seriously lacking in a society in which all the intellectual, moral, and artistic leaders belong to the employed classesâŠ. Yet we are moving everywhere toward such a position.â
When labor becomes the norm, in both senses of the term, culture doesnât stand a chance.
* * *
In a virtuoso analysis of what he calls âThe Intransigent Right,â the British historian Perry Anderson identifies four figures of the twentieth-century conservative canon: Schmitt, Hayek, Michael Oakeshott and Leo Strauss. Strauss and Schmitt come off best (the sharpest, most profound and far-seeing), Oakeshott the worst, and Hayek somewhere in between. This hierarchy of judgment is not completely surprising. Anderson has never taken seriously the political theory produced by a nation of shopkeepers, so the receptivity of the English to Oakeshott and Hayek, who became a British subject in 1938, renders them almost irresistible targets for his critique. Andersonâs cosmopolitan indifference to the indiscreet charms of the Anglo bourgeoisie usually makes him the most sure-footed of guides, but in Hayekâs case it has led him astray. Like many on the left, Anderson is so taken with the bravura and brutality of Straussâs and Schmittâs self-styled realism that he canât grasp the far greater daring and profundity of Hayekâs political theory of shopkeepingâhis effort to locate great politics in the economic relations of capitalism.
What distinguishes the theoretical men of the right from their counterparts on the left, Anderson writes, is that their voices were âheard in the chancelleries.â Yet whose voice has been more listened to, across decades and continents, than Hayekâs? Schmitt and Strauss have attracted readers from all points of the political spectrum as writers of dazzling if disturbing genius, but the two projects with which they are most associatedâEuropean fascism and American neoconservatismâhave never generated the global traction or gathering energy that neoliberalism has now sustained for more than four decades.Â
It would be a mistake to draw too sharp a line between the marginal children of Nietzscheâwith political man on one branch of the family tree, economic man on the other. Hayek, at times, could sound the most Schmittian notes. At the height of Augusto Pinochetâs power in Chile, Hayek told a Chilean interviewer that when any âgovernment is in a situation of rupture, and there are no recognized rules, rules have to be created.â The sort of situation he had in mind was not anarchy or civil war but Allende-style social democracy, where the government pursues âthe mirage of social justiceâ through administrative and increasingly discretionary means. Even in The Constitution of Liberty, an extended paean to the notion of a âspontaneous orderâ that slowly evolves over time, we get a brief glimpse of âthe lawgiverâ whose âtaskâ it is âto create conditions in which an orderly arrangement can establish and ever renew itself.â (âOf the modern German writingsâ on the rule of law, Hayek also says, Schmittâs âare still among the most learned and perceptive.â) Current events seemed to supply Hayek with an endless parade of candidates. Two years after its publication in 1960, he sent The Constitution of Liberty to Portuguese strongman AntĂłnio Salazar, with a cover note professing his hope that it might assist the dictator âin his endeavour to design a constitution which is proof against the abuses of democracy.â Pinochetâs Constitution of 1980 is named after the 1960 text.Â
Still, itâs difficult to escape the conclusion that though Nietzschean politics may have fought the battles, Nietzschean economics won the war. Is there any better reminder of that victory than the Detlev-Rohwedder-Haus in Berlin? Built to house the Luftwaffe during World War II, it is now the headquarters of the German Ministry of Finance.