Isegoria

We often think of “law” and “legislation” as synonyms, Mike Munger notes, but Hayek argued otherwise:

Habits that are shared might be called “customs,” informal rules that might be written down nowhere. These are agreements, in the sense that we all agree that is the way we do things, even though we never actually sat down and signed anything.

A while back I wrote about the Pittsburgh left turn as an example of such a custom. It is important that the habit of waiting for someone to turn left in front of you be “agreed” on, in the sense that the expectation is widely shared — and met — because otherwise it wouldn’t be effective in making traffic move faster. These customs can come to govern behavior, however, precisely because they shape expectations, and violating expectations may be expensive or dangerous.

Those customs, if they consistently lead to useful outcomes, are “laws.” They are discoverable by experience and emerge in the form of traditions. But it is useful to write them down so that they can be enforced more effectively and can be easily learned by new generations. Laws that are written down are rules, commands, and prohibitions we call “legislation.”

The problem is that legislation need not arise from law at all.

Hayek was rightly concerned about the conceit that experts know what is best for everyone else:

I often illustrate this with what I call the Hayek Sidewalk Plan. Imagine that a new university has been built, and you are on the committee charged with laying out the sidewalks. What would you do?

You might walk around, look at aerial maps of the campus, and draw lines to try to guess where people will want to walk. Or you might want to have a purely aesthetic conception of the problem, and put the sidewalks in places or in patterns that are pleasing to the eye as you look out the windows of the administration building.

But all of that is legislation. No individual, or small committee of individuals, could possibly have enough information or foresight to be able to know in advance where people are going to want to walk. After all, universities are peopled by broadly diverse groups, with heterogeneous plans and purposes. People are often willing to walk on the sidewalks, if that serves their purpose at that point. But you probably don’t want to build a sidewalk from every doorway to every other doorway on the campus.

What would a law look like, in this setting? No one person, after all, has any effect walking on the grass, and all the different plans and purposes, taken one at a time, contain no information that you can use. But there is a physical manifestation of the aggregation of all these plans and purposes working themselves out over time. I don’t intend to make a path, and neither do you. But if enough of us, over time, find it useful to walk in the same place to accomplish our own idiosyncratic purposes, a visible record of the shared pattern emerges: a muddy path.

So, the law for the Hayek Sidewalk Plan committee will be discoverable if we adjourn for six months or so and then have a drone take some overhead photographs. It is clear now where people, acting as individuals but observable together in the shared result called a muddy path, want the sidewalks to be placed. And the task of the committee is simply to “legislate” by paving the muddy paths.

If we think of the process of discovering law as “looking for the muddy paths,” and legislation as “paving the muddy paths,” we have a simple but quite powerful way of thinking about the rule of law.

As you travel the world, some of the local rules you can look up or read about, but often the rules are just assumed because “everyone” knows them:

I described an experience of mine in Erlangen, Germany, in an earlier column, where I didn’t know about the practice of collecting a deposit on shopping carts. No one told me about this, and I thought I recognized the context of “grocery store” as familiar, one where I knew the rules. But I didn’t.

I had another experience in Germany, one that made me think of the importance of what Hayek called “the particular circumstances of time and place.” Erlangen, where I taught at Friedrich Alexander University, is a city of bicycles. There are roads, but most are narrow and there are so many bikes that it can be frustrating to drive.

The bike riders, as is true in many American cities, paid little attention to the traffic lights. Often, there were so many bikes that it was not possible to cross the street without getting in the way. But I noticed that people did cross, just walking right out into the street.

I tried this, several times, in my first time in Erlangen. But being from the southern United States, I’m polite and deferential. So, I would start across the street, but then look up the street, and if a bike was close and coming fast I’d stop.

And get hit by a large, sturdy German on a large, sturdy German bicycle. And then I got yelled at, in German. What had I done wrong? Eventually, I figured it out: there had evolved a convention for crossing the street and for riding bicycles. The pedestrian simply walked at a constant speed, without even looking. The bicyclist would ride directly at the pedestrian, actually aiming at the spot where the pedestrian was at that point in time. Since the pedestrian kept moving in a predictable fashion, the cyclist would pass directly and safely behind the pedestrian.

If some idiot from the southern United States, in an effort to impose his own views of “polite” behavior on people whose evolved rules were different, tried to be polite and stop, the system broke down. Though that idiot (me) was stopping to avoid being hit, I was actually being rude by violating the rules. These rules were not written down and could not easily be changed.

In fact, a number of my German colleagues even denied that it was a rule, at first. But then they would say, “Well, right, you can’t stop. That would be dumb. So, okay, I guess it is a rule, after all.”

More precisely, this rule — like many other important rules you encounter in “foreign” settings — is really a convention. A convention, according to Lewis (1969), is a persistent (though not necessarily permanent) regularity in the resolution of recurring coordination problems, in situations characterized by recurrent interactions where outcomes are (inter)dependent.

Conventions, then, exist when people all agree on a rule of behavior, even if no one ever said the rule out loud or wrote it down. No one actor can choose an outcome, and no actor can challenge the regularity by unilaterally deviating from the conventional behavior. But deviation can result in substantial harm, as when someone tries to drive on the left in a country where “we” drive on the right, or social sanction, as when there is intentional punishment on behalf of other actors if deviation is observed and publicized.

According to David Hume, convention is

a general sense of common interest; which sense all the members of the society express to one another, and which induces them to regulate their conduct by certain rules. I observe that it will be to my interest [e.g.] to leave another in the possession of his goods, provided he will act in the same manner with regard to me. When this common sense of interest is mutually expressed and is known to both, it produces a suitable resolution and behavior. And this may properly enough be called a convention or agreement betwixt us, though without the interposition of a promise; since the actions of each of us have a reference to those of the other, and are performed upon the supposition that something is to be performed on the other part. (Hume, 1978; llI.ii.2)

Notice how different this is from the “gamer” conception of laws and rules. For the gamer, all the rules can be — in fact, must be — written down and can be examined and rearranged. For the world traveler, the experience of finding out the rules can involve trial and error, and even the natives likely do not fully understand that the rules and norms of their culture are unique.

One of my favorite examples is actually from the United States, the so-called Pittsburgh Left Turn. In an article in the Pittsburgh City Paper in 2006, Chris Potter wrote:

As longtime residents know, the Pittsburgh Left takes place when two or more cars — one planning to go straight, and the other to turn left — face off at a red light without a “left-turn only” lane or signal. The Pittsburgh Left occurs when the light turns green, and the driver turning left takes the turn without yielding to the oncoming car.

Pittsburgh is an old city, many of whose streets were designed before automobiles held sway. [That means] that street grids are constricted, with little room for amenities like left-turn-only lanes. The absence of such lanes means drivers have to solve traffic problems on their own. Instead of letting one car at the head of an intersection bottle up traffic behind it, the Pittsburgh Left gives the turning driver a chance to get out of everyone else’s way. In exchange for a few seconds of patience, the Pittsburgh Left allows traffic in both directions to move smoothly for the duration of the signal. Of course, the system only works if both drivers know about it. No doubt that’s why newcomers find it so vexing.

The Pittsburgh Left is a very efficient convention. On two-lane streets, turning left can block traffic as the turning car waits for an opening. And left-turn arrows are expensive and add time to each traffic light cycle. Far better to let the left turners — if there are any — go first. If there are no left turners, traffic just proceeds normally, not waiting on a left arrow.

Of course, if some idiot from the southern United States (yes, me again) is driving in Pittsburgh, that person expects to go when the light turns green. I blew my horn when two cars turned left in front of me. And people on the sidewalk yelled at me, as did the left-turning drivers. Once again, I didn’t know the rules, because I was a foreigner, at least in terms of the rules of the road in Pittsburgh.

Actually, it’s worse than that. The Pittsburgh Left is technically illegal, according to the Pennsylvania Driver’s Handbook (p. 47): “Drivers turning left must yield to oncoming vehicles going straight ahead.” The written rules, the gamer rules, appear to endorse one pattern of action. But the actual rules, the ones you have to travel around to learn, may be quite different. Real rules are not written down, and the people living in that rule system may not understand either the nature or effects of the rules. It is very difficult to change conventions, because they represent the expectations people have developed in dealing with each other over years or decades.

Hayek understood this clearly, and argued for what I have called the “world traveler” conception over what I have called the “gamer” conception of rules and laws. As Hayek said in 1988, in The Fatal Conceit:

To understand our civilisation, one must appreciate that the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices, many of which men tend to dislike, whose significance they usually fail to understand, whose validity they cannot prove, and which have nonetheless fairly rapidly spread by means of an evolutionary selection — the comparative increase of population and wealth — of those groups that happened to follow them.… This process is perhaps the least appreciated facet of human evolution.

The emergence of the middle class was associated with the rise of liberalism and its belief in the supremacy of the individual:

John Locke (1632–1704) is considered to be the “father of liberalism,” but belief in the individual as the ultimate moral arbiter was already evident in Protestant and pre-Protestant thinkers going back to John Wycliffe (1320s–1384) and earlier. These are all elaborations and refinements of the same mindset.

Liberalism has been dominant in Britain and its main overseas offshoot, the United States, since the 18th century. There is some difference between right-liberals and left-liberals, but both see the individual as the fundamental unit of society and both seek to maximize personal autonomy at the expense of kinship-based forms of social organization, i.e., the nuclear family, the extended family, the kin group, the community, and the ethnie. Right-liberals are willing to tolerate these older forms and let them gradually self-liquidate, whereas left-liberals want to use the power of the State to liquidate them. Some left-liberals say they simply want to redefine these older forms of sociality to make them voluntary and open to everyone. Redefine, however, means eliminate. If you make a community truly “open” it will eventually become little more than a motel: a place where people share space, where they may or may not know each other, and where very few if any are linked by longstanding ties — certainly not ties of kinship.

For a long time, liberalism was merely dominant in Britain and the U.S. The market economy coexisted with kinship as the proper way to organize social and economic life. The latter form of sociality was even dominant in some groups and regions, such as the Celtic fringe, Catholic communities, the American “Bible Belt,” and rural or semi-rural areas in general. Today, those subcultures are largely gone. Opposition to liberalism is for the most part limited, ironically, to individuals who act on their own.

In a recent interview, Shane Parrish asked Naval Ravikant, What big ideas have you changed your mind on in the last few years?

There’s a lot on kind of the life level. There’s a couple, obviously, in the business level. I think on a more practical basis, I’ve just stopped believing in macroeconomics. I studied economics in school and computer science. There was a time when I thought I was going to be a PhD in economics and all of that. The further I get, the more I realize macroeconomics is a combination of voodoo complex systems and politics. You can find macroeconomists that take every side of every argument. I think that discipline, because it doesn’t make falsifiable predictions, which is the hallmark of science, because it doesn’t make falsifiable predictions, it’s become corrupted.

You never have the counterexample on the economy. You can never take the US economy and run two different experiments at the same time. Because there’s so much data, people kind of cherry-pick for whatever political narrative they’re trying to push. To the extent that people spend all their time watching the macroeconomy or the fed forecasts or which way the stocks are going to go the next year, is it going to be a good year or bad year, that’s all junk. It’s no better than astrology. In fact, it’s probably even worse because it’s less entertaining. It’s just more stress-inducing. I think of macroeconomics as a junk science. All apologies to macroeconomists.

That said, microeconomics and game theory are fundamental. I don’t think you can be successful in business or even navigating through most of our modern capital society without an extremely good understanding of supply and demand and labor versus capital and game theory and tit for tat and those kinds of things. Macroeconomics is a religion that I gave up, but there are many others. I’ve changed my mind on death, on the nature of life, on the purpose of life, on marriage. I was originally not someone who wanted to be married and have kids. There have been a lot of fundamental changes. The most practical one is I gave up macro and I embraced micro.

I would say that’s not just true in macroeconomics, that true in everything. I don’t believe in macro-environmentalism, I believe in microenvironmentalism. I don’t believe in macro-charity. I believe in micro-charity.

I don’t believe in macro improving the world. There’s a lot of people out there who get really fired up about I’m going to change the world, I’m going to change this person, I’m going to change the way people think.

I think it’s all micro. It’s like change yourself, then maybe change your family and your neighbor before you get into abstract concepts about I’m going to change the world.

Culture matters, Virginia Postrel reminds us:

The mid-20th century period in which the modern libertarian movement arose is now looked upon with great nostalgia, especially in the United States. As my friend Brink Lindsey puts it, the right wants to live there and the left wants to work there.

When Donald Trump says “Make America Great Again,” the again refers to the world in which he grew up. The war was over, standards of living were rising, and new technologies from vaccines to synthetic fibers promised a better future.

Social critics of the day deplored mass production, mass consumption, and mass media, but the general public enjoyed their fruits. The burgeoning middle class happily replaced tenements with “little boxes made of ticky-tacky.” Snobs might look down on the suburbs, but families were delighted to settle in them. Faith in government was high, and other institutions—universities, churches, corporations, unions, and civic groups—enjoyed widespread respect.

It looked like a satisfactory equilibrium. But it wasn’t. The 1950s, after all, produced the 1960s.

Consider a series of best-selling books: The Lonely Crowd, by David Riesman, published in 1950; Atlas Shrugged by Ayn Rand and The Organization Man by William Whyte, both published in 1957; and The Feminine Mystique by Betty Friedan, published in 1963. All of these books, and undoubtedly others I’ve overlooked, took up the same essential theme: the frustration of the person of talent and integrity in a society demanding conformity and what Riesman called “other-directedness.”

These books succeeded in the economic marketplace, as well as the marketplace of ideas, because they tapped a growing sense of discontent with the prevailing social and business ethos. Their audience might have been a minority of the population, but it was a large, gifted, and ultimately influential one. Despite the era’s prosperity—or perhaps because of it—many people had come to resent social norms that demanded that they keep their heads down, do what was expected of them, and be content to be treated as homogeneous threads in the social fabric. The ensuing cultural upheaval, which peaked in the late 1970s, took many different forms, with unanticipated results.

One of the most paradoxical examples I’ve run across comes from Dana Thomas’s 2015 book Gods and Kings, on the fashion designers Alexander McQueen and John Galliano. It’s about Galliano, who was born in Gibraltar and grew up in South London as the son of a plumber. His career, Thomas comments in passing, was made possible by two cultural phenomena: Thatcherism and punk.

How could that be? After all, Thatcherism and punk are usually seen as antagonistic. I asked Thomas about it in an interview. “Both were breaking down British social rules and constraints,” she said. Punk brought together kids of all classes, while Thatcher’s economic reforms encouraged entrepreneurship.

If you had an idea and you had the backing then you could make it happen, no matter what your dad did in life or your mother did in life or where you came from or what your background was, or where you grew up or what your accent sounded like. These were all barriers before. So it double-whammied for Galliano. It was great. Because it allowed him to get out of South London, get into a good art school and be seen as a bona fide talent on his own standing, as opposed to where he came from. And he was also able to get the backing to start his company, because there was more money out there. It gave him more freedom. Before punk and before Thatcherism, chances were the son of a plumber was not going to wind up being the head of a couture house.

If you care about the open society, how could you not be interested in a phenomenon like that? How exactly do such transformations take place, and what are their unexpected ripple effects? What processes of experimentation and feedback are at work? Could a young designer do the same thing today and, if not, why not? Are these moments of cultural and economic opportunity inherently fleeting?

(Hat tip to Arnold Kling.)

Do the rich capture all the gains from economic growth? Russ Roberts explains why it matters how you measure these things:

But the biggest problem with the pessimistic studies is that they rarely follow the same people to see how they do over time. Instead, they rely on a snapshot at two points in time. So for example, researchers look at the median income of the middle quintile in 1975 and compare that to the median income of the median quintile in 2014, say. When they find little or no change, they conclude that the average American is making no progress.

But the people in the snapshots are not the same people. These snapshots fail to correct for changes in the composition of workers and changes in household structure that distort the measurement of economic progress. There is immigration. There are large changes in the marriage rate over the period being examined. And there is economic mobility as people move up and down the economic ladder as their luck and opportunities fluctuate.

How important are these effects? One way to find out is to follow the same people over time. When you follow the same people over time, you get very different results about the impact of the economy on the poor, the middle, and the rich.

Studies that use panel data — data that is generated from following the same people over time — consistently find that the largest gains over time accrue to the poorest workers and that the richest workers get very little of the gains. This is true in survey data. It is true in data gathered from tax returns.