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Does Anarchy Have A Bad Rap?

October 23, 2012

Anarchy, Economics, Economy, Markets

Anarchy

The other day someone tried to cut in line at my local Starbucks and although it was probably unintentional, the sense of outrage from the other customers was palpable. It was as if customers had suffered a grievous personal blow, and it was not directed at their grande mocha cookie crumble frappuccino. Their sense of fairness had been violated. An unspoken customary rule about not cutting in line had been broken. However, as far as I know, neither the rule, nor the underpinning for this sense of fairness had ever been written down for customers to read. Yet despite this, Starbucks and the overwhelming majority of its customers, have a firm and justifiable expectation that everyone will wait in an orderly line until they are served. Even the line-jumper knew the rule and complied with it immediately once his faux pas was pointed out. Reflect for a moment on the fact that much of our life is governed by rules like this one, which are the result of human actions but not human design. Such rules are an example of what Nobel Prize winning economist Friedrich Hayek called a spontaneous order. In this context the word ‘spontaneous’ is trying to capture the fact that no one is in charge – the order is organic or emergent, rather than directed or controlled.

Spontaneous orders are actually all around us in physical, biological and social systems, but the concept of a spontaneous order in the social realm is not intuitive because this type of order only emerges when people are left alone, and it’s not obvious that good things happen when people are left to their own devices. A powerful example of a social spontaneous order is a market. For example, nobody brought about the PC revolution by human design. Entrepreneurs alert to the desires of consumers simply responded to market pricing signals telling them what was required, when it was needed and how urgently. The rest is history.

Similarly, Leonard Reed starts his delightful essay on the spontaneous order behind the making of the humble pencil with the sentence “Not a single person on the face of this earth knows how to make a pencil.” He points out that the wood alone requires individuals who know how to grow trees as well as harvest, cut and transport the timber. Then the graphite has to be mined by individuals who probably know very little about forestry. The same thing applies to the eraser and every other component that goes into making a pencil. In the end no one single person knows everything necessary to make a simple pencil. And yet, when all these individuals are finished with their work the result is a pencil, although no one told them what to do. There was no central authority ordering that so many trees be planted for pencil use, that so much timber be harvested, or that any one shipping company deliver the wood at a specific time to a specific location.This is a great essay to discuss with your children, as it’s one of the best and easiest economics lessons available.

It’s not just markets and morality that are examples of social spontaneous orders. It turns out that  law, language, money, mores, cities, customs, culture and even many institutions, are also examples of spontaneous order – that is to say, they are the consequence of human actions but they were not brought into existence by human intention. Now it might be objected that, for example, most of our current laws have been codified into statutes through legislation, which is definitely not an example of a spontaneous order. However, much of this legislation is simply a codification of the common law that evolved spontaneously from the settlement of actual disputes since Anglo-Saxon times. Most tort law, property law, contract law, commercial law and even criminal law evolved in this way. It was pure anarchy in the sense that no one organized it.

While most people associate anarchy with disorder, the literal meaning of the word is without a ruler or government (from the Greek anarkhia). It is as if we believe that in the absence of an order imposed on us from above there could only be disorder, a common but misleading assumption, as we have already seen. The degree to which the spontaneous order of markets can replace the top-down directed order of government is a strictly empirical matter but, to the extent that we rely on spontaneous order for most of what we find useful and meaningful in life, we are all anarchists now.

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“The Internet is the first thing that humanity has built that humanity doesn’t understand, the largest experiment in anarchy that we have ever had.”  Eric Schmidt

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About Malcolm Greenhill

Malcolm Greenhill is President of Sterling Futures, a fee-based financial advisory firm, based in San Francisco. I write about wealth related issues in the broadest sense of the word. When I am not writing, reading, working and spending time with family, I try to spend as much time as possible backpacking in the wilderness.

View all posts by Malcolm Greenhill

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19 Comments on “Does Anarchy Have A Bad Rap?”

  1. Michael Says:

    Malcolm,

    Great essay! Demonstrating how our daily social interactions are carried out peacefully and respectfully without State regulation is a perspective I rarely hear, yet powerful. I forwarded it to my lists. However, contrary to your Schmidt quote, as you point out language was built by humanity and I believe it’s a larger experiment than the internet.

    Michael

    Reply

    • Malcolm Greenhill Says:

      Exactly right. Schmidt was wrong in believing that the internet was the first thing humans created without knowing exactly what they were creating. However, in the quotation I liked the way he recognized the open-ended order of the internet and labeled it correctly as a form of anarchy i.e. there is definitely order but nobody is in control and we don’t know where it’s going.

      Reply

  2. Jeff Hummel Says:

    Hey Malcolm,

    As you might have suspected, this is one of my favorite of your posts. You do a great job of explicating spontaneous order.

    Jeff
    http://www.sjsu.edu/economics/faculty/jeff.hummel.html

    Reply

  3. eideard Says:

    You might consider the same approach and analysis to Sophistry.

    In your spare time. :}

    Reply

  4. WB Says:

    Very good article. Disorder, can only be present when there is order; every society functions by three systems: judicial, economical, and political, though many are under the impression that a socialistic society would be chaos, they can only theoretically speak, where as, there has not been a society to date that has ever attempted to live this way. I must say this, giving the various systems among societies, such as our own, a self-interest based society, this one isn’t so great neither, and if you really think about it, there is a great deal of chaos present already. Ultimately, with our system, with a the very foundation being based on self-interest, we can only keep order and peace by means of our economical system, for we will always be dependent upon the controllers of our resources, and it is they, who determine our system.(Great blog, I like your writing.)

    Reply

  5. Malcolm Greenhill Says:

    “…for we will always be dependent upon the controllers of our resources, and it is they, who determine our system.”

    Thank you. Interesting comments. Both Adam Smith and Karl Marx recognized this to be true and they each thought they knew what needed to be done to counteract the phenomena. For Smith it was limited government and the rule of law and for Marx it is was a proletarian revolution. The financial crisis has given renewed impetus to both strands of thought.

    Reply

  6. Travis B. Says:

    I still find the idea of anarchy discerning to state it lightly. I agree that order can only be achieved when disorder is present, but what does it take for disorder to turn into order? How long must chaos be present before a group would decide as a whole to turn to order? I always associate anarchy with chaos or disorder simply because without a set of laws that state what you can, and cannot do, you will always have people that will take advantage of the situation. Given everything that we are not permitted to do in society, some people would create chaos just out of the thrill of no legal consequences. Anarchy would be great if everyone would work together, but you will always have people that are going to work against the main group, and in that instance, isn’t the idea of anarchy fighting itself? You cannot have a group of people living together without some sort of leader, or elitist group that decides on what the rules may be. What’s to happen people that believe differently from the main group? Would they split to make their own group? Ideas and beliefs have, and always will, clash with each other. To keep peace one would have to submit to the belief of another or possibly lose the chance of survival. Just because we are a “modern” society doesn’t mean we’re ready to work with ideas like anarchy, there will inevitably be wars, and chaos that follows. Not everyone can and will agree on what they believe in, and what they would allow to live by.

    Reply

    • Malcolm Greenhill Says:

      Thank you but if you read the post it is about two different types of order. The internet has no leader but there is still order there, not chaos. It is just a different type of order.

      Reply

    • hunt4thought Says:

      I am not saying that in anarchy that there would be be a utopian society where nothing bad would ever happen but I have a few things to note about your comments here, especially your statements I have qouted below:

      Your Argument : “Just because we are a “modern” society doesn’t mean we’re ready to work with ideas like anarchy, there will inevitably be wars, and chaos that follows. Not everyone can and will agree on what they believe in, and what they would allow to live by.”

      Counter Argument : Do we not have wars, and fueds in todays governed society?

      Your Argument: “I always associate anarchy with chaos or disorder simply because without a set of laws that state what you can, and cannot do, you will always have people that will take advantage of the situation. ”

      Counter Argument: To state it plainly, this is a rediculous concept. This is as silly as saying if someone doesn’t believe in some punishment or Hell awaited them in the afterlife they would be Morally corrupt and evil, uncapable to lead a good and righteous life. Laws do not keep people from doing wrong but give us a set of consequences to place on people who violate them. I will finish this point with a qoute from a great and intelligent man:

      “Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws.”
      – Plato (427-347 B.C.)

      Reply

  7. Hanne T. Fisker Says:

    If spontaneous order is not intuition, is it a form of universal innate knowing permeating everything we touch? If we are all made of stars emerging from the exact same “starting point” could this still be what truly navigate us if we allow it and don’t interfere?

    Reply

    • Malcolm Greenhill Says:

      I don’t think so but see below. Imagine a traditional army. Now imagine the internet. They both have a type of order but the former is an order imposed from above while in the latter case the order seems to emerge spontaneously from what seems like chaos. To understand the workings of the latter requires a great deal of conceptual thought but the order still exists even if we don’t see it or understand it.

      Now, if I take off my rational hat for a minute and put on my ‘earth goddess’ hat (please understand that I am straining very hard to see things as you might be seeing them and it’s not easy) then maybe you are on to something. The way spontaneous orders work (order emerging from chaos, something emerging from nothing) could in some sense be described as an “innate knowing” in the nature of things. I think I had better stop here before my economist friends send me off to a detox institution :-).

      Reply

      • Hanne T. Fisker Says:

        lol!!! I truly appreciate your hard effort to try on another hat and honestly, it fits you too, paradoxically 😉
        It makes me think of Bill Hicks; all his work was to speak to and provoke out our inner “voice of reason” and that as he saw it, is the same voice in us all…

        “To understand the workings of the latter requires a great deal of conceptual thought but the order still exists even if we don’t see it or understand it.”
        This is, obviously by now I think, how I navigate in the world, sensing an undercurrent order/structure in everything, yet rarely knowing where it is going, if anywhere. What I discovered along the way, it was far more precise and intelligent than me, timelessness on time, every-time! It took a great deal of work on trusting it, allowing myself to be really blind in order to “see” and what I also have come to realize is, it cannot be understood, not in my case at least and maybe not in our common way of linear understanding, however it can be sensed. Maybe that’s the catch; it might require a complete surrender of what understanding is in order to look again with new fresh eyes, and here we are back to the artist…. As far as my limited knowledge reaches, most great scientists reached this state of awe and wonder in how little we really know and how great the mystery is. I sometimes think this is exactly one of the key elements, for some, for the interest in our own existence; that it’s a mystery and might stay a mystery, always.

        Reply

        • Malcolm Greenhill Says:

          Hanne, you really do have a mystic frame of mind and yet it is true that “most great scientists reached this state of awe and wonder in how little we really know and how great the mystery is.” As you say, in order “to look again with new fresh eyes” we return to the artist and that is where we started the conversation 🙂

        • Hanne T. Fisker Says:

          A circle is ‘complete’ a new is ready to begin 🙂

  8. Daniela Says:

    What I like best in your writings is how you highlight and examine an idea. While true that most people associate anarchy with disorder, thus invoking negative connotations, it is also true that without ‘an order imposed on us from above’ (irrespective of how we define or understand the ‘above’), natural selection will inevitably take place resulting in survival of the fittest only which, in our modern world, does not only mean biologically fittest. To ensure their supremacy, those surviving fittest would design certain rules … and here we go again! After all, in its primitive form, this is the origin of all our rules and orders. While I am by now means advocate of ‘ever present government’ I do believe that the rule of government is to protect those vulnerable among us, those members of society who are unable to fend for themselves. This is were natural order fails.

    Reply

    • Malcolm Greenhill Says:

      Thank you Daniela. I appreciate the opportunity to try and answer the really hard questions such as this one. The proper response to your comment is to look around. Those of us residing in the U.S. or any of the former British Commonwealth countries, live under rules, very few of which were created by government. Common law is usually associated with ‘judge-made’ law but for most of the formative period of the common law judges did not make the law, but merely presided over proceedings where disputes were resolved according to the accepted principles of customary law.

      Law that arises from the settlement of actual conflicts, does not create a mechanism for social control. Common law is law that is created by non-political forces. Only government legislation, which is law that is consciously created by whoever constitutes the politically dominant interest, can give us rules that facilitate the exploitation of the politically powerless by the politically dominant. Not only is government not necessary to create the basic rules of social order, it is precisely the rules that the government does create that tend to undermine that order. I am sorry to quote myself again but along these lines you might also want to read my post on The People’s Law.

      Nowadays business is contracted around the world among parties from all countries. Although there is neither a world government, nor a world court, businesses don’t go to war with each other over contract disputes. The reason they don’t is that parties to international transactions usually select in advance the dispute settlement mechanism they prefer from among the many options available to them. Few choose trial by combat. It is too expensive and unpredictable. Many elect to submit their disputes to the London Commercial Court, a British court known for the commercial expertise of its judges and its speedy resolution of cases that non-British parties may use for a fee. Others subscribe to companies such as the American Arbitration Association that provide mediation and arbitration services. Most do whatever they can to avoid becoming enmeshed in the coils of the courts provided by the federal and state governments of the US which move at a glacial pace and provide relatively unpredictable results. The evidence suggests that international commercial law not only functions quite well without government courts, it functions better because of their absence.

      But there is no need to focus on the international scene to observe that human beings do not need government courts to settle disputes peacefully. There are labor contracts that create their own workplace judiciary, universities regularly provide judicial processes as do homeowner associations. Stockbrokers agree to submit employment disputes to binding arbitration as a condition of employment and religious groups regularly settle disputes among congregants by appeal to priests or rabbis.

      Reply

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