The 1945 essay “Individualism: True and False” is the opening piece in Friedrich Hayek’s “Individualism and Economic Order.” In it, Hayek addresses two traditions
The 1945 essay “Individualism: True and False” is the opening piece in Friedrich Hayek’s “Individualism and Economic Order.” In it, Hayek addresses two traditions of individualism, but he argues only one of these traditions, known as the skeptical tradition of individualism, will lead to liberty and civic order. This skeptical tradition embraces spontaneous order, which follows that institutions are the result of human action, but not of human design. Not everything can be planned – there are limitations to the human mind. Hayek believes that allowing spontaneous order to flourish is the essence of a free society.
Hayek also addresses the rationalist tradition which he warns leads to a false individualism. The rationalist tradition draws too much emphasis to the power of the human mind, and the individual’s ability to manipulate reality and make comprehensive plans. Hayek argues this can be dangerous – potentially leading to oppression, tyranny, coercion, and centralized control. While the rationalist tradition calls for movement toward collectivist thinking, the skeptical tradition of individualism calls for a better understanding of limits to knowledge, which ultimately leads to a healthier economy, better policies, and a better government.
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I'm curious about the evolution of money and wonder if it was really the result of "trial & error" or more coordinated action. In addition to the classic characteristics of money (i.e., store of value, means of exchange, unit of measure), money requires widespread knowledge & acceptance and high level of trust among its users that it cannot be counterfeited or printed for short-term gain of the printers. The problem of the origions of money would seem to resemble a two-equilibrium assurance game with mutual defection (no one accepts the currency) and mutual cooperation (everybody, or most, accept the currency). (Consider Daylight Savings Time as a similar problem.) While not everyone has to agree to switch equilibrium points, there are certainly increasing economies of scale to everybody accepting the "green rectangles" as money given that the more people who accept and trust the money, the more transactions can take place at a lower cost. The problem, though, is how to get people to shift from one equilibrium to the other. It would seem that "evolutionary migration" from mutual defection to mutual cooperation would be difficult as who would want to be the first or second or third mover? Rather, some kind of coordinated switch seems more efficient -- e.g., a king announcing that green rectangles with his picture on it are now the new currency announced at the New Year's Royal Pageant. What do we know about the very early history of money and how it first appeared? Are there any works that examine whether there was a long-term evolution of a currency's acceptance or whether it tended to occure in a more (centrally) coordinated fashion? Are economists studying the evolution and acceptance of Bitcoin to get some leverage on this question?