Hayek versus Habermas

Jurgen Habermas is one of the most influential political philosophers of the last fifty years. Though he has now, thankfully, abandoned the neo-Marxism of his early career, his theory of ‘communicative ethics’ and ‘deliberative democracy’ lurks behind the claim that social institutions should be ‘democratised’ and that market relations based on consumer and producer ‘exit’ should be replaced by those emphasising collective ‘voice’ and ‘citizenship’. According to Habermas, we should judge institutions not on their capacity to respond to the preferences that people currently happen to have but on their ability to challenge these preferences and to facilitate a process of ethical learning. Decisions based on democratic voice are to be favoured because unlike markets, majoritarian systems require people to justify their values in a context of public argumentation. The fact that people have to argue in public and to convince a majority about the virtue of their preferences is precisely what leads unjustifiable and prejudiced beliefs to be weeded from the public realm and the subsequent allocation of resources. Moreover, voice-based procedures are held to be more egalitarian and ‘inclusive’ because they are less reliant on ‘money power’, emphasising the ‘power of the better argument’ over ability to pay.

Influential though Habermas has been, his case for deliberative democracy is undermined by its complete failure to address a point that Hayek made on numerous occasions. Though formal argumentation that takes place in democratic forums is one way in which people can learn from each other, it is by no means the most important. Far more significant is the capacity to observe the lived experience of other individuals and groups. Much of what we need to learn cannot be ‘put into words’ – it is ‘tacit knowledge’, which can only be communicated by observing the practical results of what other people do and imitating successful role models even when the ‘reasons’ for this success cannot be articulated verbally. For such knowledge to be transmitted it is imperative that there is a wide range of ‘experiments in living’ – whether in the production or consumption of goods – on which people can draw. The spread of knowledge in markets, the arts and science does not typically proceed via collective deliberation, but advances best when individuals and groups have a ‘private sphere’ that secures the freedom to experiment with projects that do not conform to majority opinions. Then, incrementally, through a process of emulation the prevailing wisdom may change over time. It is not sufficient for people to be able to talk about their ideas. Rather, they must have scope to act on those ideas – and this requires ‘property rights’, not ‘speech rights’. To restrict private property and the right of exit in favour of collective decisions is to reduce the total number of decisions made and hence limits the range of practical, lived experience from which we may all learn.

Read the rest of the article on the Pileus website.

Mark Pennington is the author of Robust Political Economy: Classical Liberalism and the Future of Public Policy

Isn't there also the usual problem of conflating stated and revealed preferences? Talk is cheap, I wouldn't rely on what people say in a public meeting.
It's not obvious that giving influence to those with the 'gift of the gab' (rather than to those with 'money power') would be an improvement. Some of the wisest people I've known have preferred often to remain silent in public gatherings. Nor is it obvious that what people say in public necessarily represents their real views: even if they are able to articulate their real views, they may not be willing to do so. By the way, children are people too: their actions are reflected in the market, but I don't know if their opinions would 'count' in the kind of public assembly that Habermas appears to have in mind?
"The spread of knowledge in markets, the arts and science does not typically proceed via collective deliberation, but advances best when individuals and groups have a ‘private sphere’ that secures the freedom to experiment with projects that do not conform to majority opinions. " According to my professors, to succeed in a market setting, you have to please others. You have to create the products and services that other people like and offer it at a price they are willing to pay. Supporters of markets go so far as to say that greed is good if it leads people to create goods that society values (the invisible hand aligning self-interest with social interest argument). To me, this suggests that markets promote majority or collective opinions, even though private property rights may offer the property holder a space for experimentation.
@Econ Student. Thanks for the comment. As I see it, the great advantage of markets or other processes that emphasise 'exit' over 'voice', is that they allow both majorities and minorities to pursue their own ideas. It is true that markets may well pander to majority preferences, but minorities can also practice their ideas because they do not first need to secure the permission of a majority. All that is needed for an unconventional enterprise or social practice to get off the ground is for it to secure the minimum support needed for it to cover its costs. The very fact that the minority can put its ideas into practice (rather than just talking about them) may then prompt people who currently hold to the majority view to change their mind. Majoritarian (i.e. social democratic) institutions, by contrast, effectively forbid minorities from trying out their ideas until they have first persuaded a majority. Mark P.
@econ student - I think that some libertarians might well argue that "greed is good". Personally I find that a truth out of context. I think it is better to say that some good will come from greed in a market economy but it will not in a non-market setting (e.g. if you and everybody else in your town likes muffins and I am greedy then I might well open a muffin shop, but if I am greedy and the finance minister in a socialist state I'll just fleece you). The point about a market economy is that it allows people to pursue their different objectives purposefully. We may have different views about the moral good attached to different objectives, of course. But, in a free economy, monks can hold private property in common at the same time as people in the same village might all have BMWs - both are able to pursue their objectives. Furthermore, the monks are free to try to persuade the BMW owners that they would be happier if they were less materialistic. Some people may like BMWs and others might be willing to give up motorised transport and live life as a potter or something. I am not much of a fan of the arts and crafts movement but it could not have happened outside a free economy.
There is a particularly unsatisfactory example of what Mark is talking about in US accounting standard-setting. The SEC, a government agency, says that financial statements that are prepared in accordance with accounting principles for which there is 'no substantial authoritative support' will be presumed to be misleading or inaccurate. It would hardly be possible to invent a requirement that is more likely to inhibit innovation. In contrast, the free market encourages trial and error -- which is why Hayek described competition as 'a discovery procedure'.
Just to follow up on what Philip says. I think that 'greed' is irrelevant. The point is that irrespective of whether people are greedy or altruistic markets faciliate the communication of knowledge that cannot be put into words. I hope to do some more blogs on this in the near future to explore further the implications that follow from this point. Thanks to all for the comments. Mark P.

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