Avoiding Utopianism

Our discussion thus far has suggested that the best way to utilize society’s natural resources is to empower individuals to make decentralized decisions about their own assets in the context of a well-functioning market order. Yet it is important to clarify what is meant by the claim that such a solution would be “best.” For one thing, Hayek surely cannot mean that such a scheme would deploy natural resources in ways that all citizens would regard as ideally desirable. Nor can he believe that no one would make mistakes and squander particular resources. In fact, Hayek’s expectation of failure lies at the foundation of his insistence that individuals should bear the costs as well as the benefits of their choices: “The order of the Great Society does rest and must rest on constant undesigned frustrations of some efforts—efforts which ought not have been made but in free men can be discouraged only by failure” (1976, 2-3).

Hayek also cannot be interpreted as supposing that leaving natural resource decisions to private individuals would enable societies to foresee exactly how their future capital needs would be met. Indeed, he explicitly claims:

In a sense . . . most consumption of irreplaceable resources rests on an act of faith. We are generally confident that, by the time the resource is exhausted, something new will have been discovered which will either satisfy the same need or at least compensate us for what we no longer have, so that we are, on the whole, as well off as before. We are constantly using up resources on the basis of the mere probability that our knowledge of available resources will increase indefinitely. (1960, 319)

In saying that the decentralized development of natural resources is best, then, Hayek is making a claim about the best response to circumstances in which impotence and ignorance can never be completely overcome. In his view, there is no way for societies to act with perfect efficacy and perfect foresight: all available options require us to cope with the limits of human abilities and understandings. It is with this in mind that Hayek characterizes reliance on markets as the best of our options. Allowing market actors to use assets in line with their private understandings is the only way for societies to reap the benefits of knowledge not available to centralized minds. But this does not guarantee perfection: rather, it simply represents the best of a range of imperfect alternatives.6

Hayek makes this point most forcefully through the observation that heeding the past warnings of “expert” conservationists would have likely blocked the prosperity of his own time:

Industrial development would have been greatly retarded if sixty or eighty years ago the warning of the conservationists about the threatening exhaustion of the supply of coal had been heeded; and the internal combustion engine would never have revolutionized transport if its use had been limited to the then known supplies of oil (during the first few decades of the era of the automobile and the airplane the known resources of oil at the current rate of use would have been exhausted in ten years). Though it is important that on all these matters the opinion of the experts about the physical facts should be heard, the result in most instances would have been very detrimental if they had had the power to enforce their views on policy. (320)

Looking forward to the future, Hayek claims as a general phenomenon that our stock of productive assets “does increase in part because we are using up what is available at such a fast rate. Indeed, if we are to make full use of available resources, we must act on the assumption that it will continue to increase, even if some of our particular expectations are bound to be disappointed” (319-20).

Hayek’s core position on natural resource issues can thus be seen as a kind of pragmatic anti-utopianism. In actual practice, the best way for societies to respond to natural resource challenges is to create a political environment in which markets can solve them on our behalf. Admittedly, the “solutions” produced through such an approach do not guarantee against every disappointment or hardship. But the key point is that there is no way to completely eliminate disappointment and hardship in the domain of political economy, and attempts to do so by truncating markets will typically only make things worse.

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