The “Laissez Faire” Tao of Hayek

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Recently, I’ve become fascinated with the work of the Austrian/British economist Friedrich Hayek. In particular, I’m intrigued with how his views are closely aligned with a passion of mine, Taoist philosophy.

Hayek is the most prominent 20th century champion of a concept known as Spontaneous Order – the theory that systems, such as economic markets, naturally self-correct and function most efficiently when not meddled with. This essence is captured in the French term laissez faire which means ‘allowing things to take their own course without interference.’

Hayek went on to suggest that complex systems are best created not through design, planning or force, but via synergies facilitated among micro-elements that operate in accordance with a set of basic principles or rules. According to Hayek, this market-based spontaneous order allows things like prices to ebb and flow unencumbered through the process of supply and demand. This natural rhythm is the true essence of how the world works, when left alone.

Just the other day, I was reflecting on how these views can be applied to the art of governing. Amid all the rancor in the U.S. surrounding this election year, there appears to be little in the way of acknowledgment among our political candidates of the virtue of self-restraint. I would argue that good government requires a healthy dose of laissez faire restraint to allowing issues to naturally resolve themselves, a technique that has stood the test of time.

Contrary to the belief of many, Hayek concurred that certain structures and rules were necessary to enforce agreements and resolve disputes. He believed that the foundational patterns and order of a civil society naturally emerge when we, the actors, play by the rules. Furthermore, he argued that these rules, which give rise to structural markets, are not due to government planning but rather they ensue from a somewhat mysterious socio-cultural evolution that naturally brings the pieces together into a whole. In the end, Hayek and his counterpart, Adam Smith, supported this concept of spontaneous order not as a means of opposition to the government, but to argue against intrusively meddling with the economy.

We’ve seen plenty of evidence of how things turn out badly when governments take matters into their own hands. For a clear taste of this, just look back at interventionist efforts on the part of the U.S. government during the housing crisis of 2008. On the other hand, Iceland allowed their bad actors to fail and this led to a much healthier and efficient recovery of that country’s economy.

Charting a New ‘Hayekian Taoist’ Path

Tao which means The Way, symbolizes the natural rhythm and flow of life when unhindered. It is beautifully captured in this verse of the Tao Te Ching, the preeminent Taoist writings of Lao Tzu:

‘Governing a country is like frying a small fish. You spoil it with too much poking. Center your country in the Tao and evil will have no power. Not that it isn’t there, but you’ll be able to step out of its way. Give evil nothing to oppose and it will disappear by itself.’

(Lao Tzu, Tao Te Ching, chapter 60, translation by Stephen Mitchell).

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Oddly, Lao Tzu compares governing a large country to frying a fish. Yet when one takes a deeper look at what he’s attempting to convey, its easy to conclude that, like Hayek, he too is an adherent of non-interference.

As a developing cook, I can totally relate to where Lao Tzu is going with this, given my tendency to poke, prod, mess with and even taste my culinary creation while it’s on the stove or in the oven. My heart is in the right place, because I do mean for it to turn out well. But I’ve come to discover that forcing the issue – however well-intentioned – often leads to a less than stellar outcome for the meal I’m creating.

The same is true for leaders, in their attempts to manage a large business enterprise or even a country. Despite their best intentions, they simply can’t resist the temptation to meddle and intervene at an excessive level. In recent times, the tragic train wreck of Obamacare is just one poignant example of how one leader’s meddlesome (albeit good) intentions can go sideways very quickly.

At the end of the day, what we are extolling here are the merits of free markets. The operative word here is ‘free’, the idea of freeing individuals from intrusive oversight and regulations that hinder the spontaneous  order. Isn’t this the essence of what social and economic freedom is truly about?

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