- 1 Boas and Ganz-Morse (2009) underlined that the term often remains undefined.
1In recent years, neoliberalism has received increasing attention from researchers in several disciplines, including philosophy, intellectual history and the history of economic thought. The term itself is often used rather loosely,1 but several works have attempted to define its meaning. Typically, in doing so they refer to two historical events: the Walter Lippmann Colloquium in 1938 (Audier, 2008) and the creation of the Mont Pelerin Society by Friedrich Hayek in 1947 (Mirowski and Plehwe, 2009). These events were indeed significant in the founding story of neoliberalism, as these prominent intellectuals, among others, advocated a reconstruction of liberalism after its alleged failure in the 1929 economic crisis (Burgin, 2012).
2Over this period, neoliberal thinkers such as Friedrich Hayek, Walter Lippmann, Henry Simons, Walter Eucken and Louis Rougier held close theoretical views, which they exchanged frequently (Ebenstein, 2003; Koehler and Kolev, 2011; Audier, 2012; Cristoph, 2012; Jackson, 2012; Beddeleem, 2017; Beddeleem and Colin-Jaeger, 2020). Lippmann and Hayek were two central figures in this network. The historical context of the economic crisis, the rise of fascism and the marginalization of liberals led the latter to unite to develop a new doctrine. Despite their initial divergences (highlighted by Audier, 2013), they agreed on a number of theoretical propositions. They agreed on the dismissal of the laissez-faire principle as it had been theorized and implemented in the 19th century, as well as of economic planning—that was gaining increasing support throughout Europe—as a priority, they favoured ensuring ‘the rules of the game’, while letting the game play out, over direct intervention. Thus, in the wake of these intellectual exchanges taking place in the 1930s and 1940s, neoliberalism emerged as a set of common views preparing the ground for a new political doctrine emphasizing a form of judicial interventionism (Foucault, 1979), which allows the spontaneous social order to be shaped by individual actions under the influence of the price system.
- 2 See Peck (2010), Stedman-Jones (2012), Cahill and Konings (2017), Mirowski and Nik-Khah (2017), Cha (...)
- 3 The most recent studies acknowledging the importance of Lippmann in the formation of the neoliberal (...)
- 4 Most of the correspondence between Lippmann and other neoliberals such as Hayek, Röpke and Rougier (...)
3Although Lippmann’s importance in neoliberalism is less documented than Hayek’s,2 the American journalist is in fact a key intellectual in the birth of neoliberalism. While he is sometimes regarded as an incidental participant in the neoliberal movement, who wrote a ‘black book’ of liberalism (Audier, 2012, 85) and whose views were rather distant from mainstream neoliberalism, his contribution has been acknowledged in a number of recent studies.3 His relationship with Hayek, founder of the Mont Pelerin Society and an indisputably important figure in the birth of neoliberalism, has been the object of scrutiny by Jackson (2012) and Clavé (2015). Jackson highlights, for example, the correspondence between Lippmann and Hayek, arguing that Lippmann, due to his status as a famous journalist and public intellectual, was the most important figure in the neoliberal network at the end of the 1930s. This status proved to be ephemeral, as Lippmann was not in Switzerland for the foundation of the Mont Pelerin Society and his bonds with other neoliberals loosened after 1941.4
4This paper makes two claims, one historical and the other theoretical. The first involves Lippmann’s role in the neoliberal movement of the late 1930s, arguing that Lippmann was a prominent figure not only as an internationally renowned journalist and political thinker, but as a top-tier intellectual whose theoretical contribution stands on an equal footing with Hayek celebrated contribution, at least during those very formative years of neoliberalism.This claim builds on Jackson’s insights and additionally explains the process that generated the encounter between neoliberals such as Hayek and Lippmann and illustrates their long-term convergence. Lippmann’s early work, such as Public Opinion and The Phantom Public, are major elements in understanding the making of Lippmann as a neoliberal. Although these works are often perceived as defending a theory of expertise and the necessity of following leaders rather than a liberal theory of evolutionary rules, I argue that Lippmann’s thinking was consistent from the 1920s to The Good Society (1937) and that his writing cannot be interpreted as a defence of a sort of technocracy, but rather, from Public Opinion (1922) on, as an attempt to reconstruct liberalism.
5My second, theoretical, claim is that Lippmann’s work was important for other neoliberals because it provided an answer to what can be termed the ‘neoliberal problematic’ (Biebricher, 2018). The problems neoliberals seek to address are the same, both historically (e.g. collectivism and planning) and theoretically (how to coordinate the actions of non-omniscient and non-omnicompetent individuals in the absence of authoritarian power), though their understanding of these problems differ in several ways. Thus, neoliberal theory emerges primarily from a reflection about the constitution of society: that is, from a perspective of political philosophy, which brings together a specific anthropological analysis with several theoretical views. The central question is: How can cognitively limited individuals cooperate more efficiently within a society than through control by a sovereign power? I argue that Lippmann provided an answer to this problem with his theory of common law, which can be understood as stemming from his previous works that paved the way to the development of his theories and made his success. In this way, Lippmann contributed to the shaping of neoliberalism as a positive theory of government through rules, which stands in sharp contrast to laissez-faire liberalism and its lack of sociological considerations. Over the long term, the development of Lippmann’s theories put him in a position to inflect neoliberal thinking.
- 5 I have used the term ‘early neoliberalism’ (Beddeleem, 2017) in order to distinguish between differ (...)
- 6 This consensus concerns problems more than solutions and is not intended to gloss over the diversit (...)
6Lippmann’s and Hayek’s approaches to this central question converged for some time, though they by no means shared the same starting point. I argue that this convergence provided the theoretical ground for early neoliberalism,5 forming what I call a ‘neoliberal consensus’ regarding how this political problem is to be addressed, and what kind of solutions are to be found.6
7The first section of this paper sets out the anthropological views of Lippmann and Hayek. Despite coming from radically different theoretical backgrounds, they came to share a number of views, notably as regards the impossibility of a central agency or individual to have access to all available information due to cognitive limitations, and the irreducibly subjective nature of knowledge compared to objectifiable information. This leads to a symmetry between the subject and object of knowledge, as well as between the government and the people governed, which accounts for the flaws of democratic government (in Lippmann’s view) or of centrally planned socialism (in Hayek’s view). The second section of the paper argues that these anthropological views led both thinkers to a problem that has come to be known as the ‘coordination problem’: that is, how to explain the compossibility of expectations subjectively formed by individuals. To effectively coordinate individual behaviour, Lippmann and Hayek emphasized the role of two institutions: the rule of law and the market. The third section of the paper explores three theoretical views that are most representative of the neoliberalism that emerged from these epistemological and anthropological considerations. The first is the criticism of classical liberalism and particularly the principle of laissez-faire and the naturalism on which it is grounded. The second is the criticism of all points of view seeking to promote the ‘common good’ or ‘common interest’ of society from above (which leads both thinkers to support a theory of limited democracy). Finally, the third is an emphasis on the rule of law—the ‘rules of the game’—allowing these to organize interactions between individuals without the direct intervention of the state in the economy. This last point opens the door for positive political theorizing in the writings of both Hayek and Lippmann.
- 7 This agreement in views is expressed by Hayek in 1937 in a letter to Lippmann, after receiving The (...)
8The dialogue between Lippmann and Hayek was rather unexpected. They came from utterly different worlds, despite being only ten years apart in age, as noted by Clavé (2015). Hayek, the Austrian, was educated in Vienna at a time marked by war. His intellectual background was Austrian economics, which he studied under Ludwig von Mises in a private seminar, and he was initiated to logical positivism and phenomenology by Alfred Schütz and Felix Kaufmann (Caldwell, 2004, 140-141). After studying economics in Vienna and the United States, in 1933, through the support of Lionel Robbins (another prominent liberal thinker of the time), Hayek obtained a position at the London School of Economics, where he waged a war against economic planning. Lippmann, the American, studied at Harvard, and during his university years was a Fabian socialist influenced by the philosophical pragmatism of William James. So how did he and Hayek come to initiate their fruitful dialogue? To understand this, we must return to the root of their intellectual paths. Despite their radically different backgrounds, they came to hold close theoretical views about the status of individual knowledge and the impossibility of a government or a board of elected officials to centralize information.7 I will explore this parallel with a mainly analytical approach, focusing on the theoretical problems that emerge in their work.
- 8 For more on Lippmann’s intellectual journey, see Stiegler (2019) as well as the previously mentione (...)
- 9 Audier (2012, 73) describes these books as ‘elitist’, and neither Dardot and Laval (2009, 176-185) (...)
9As early as 1913, the year his A Preface to Politics was published, Lippmann was concerned with the inadequacy of the political organizations and theories of the time. However, he is mostly known for his criticism of democracy and people’s sovereignty, which he deemed impossible due to his view that ‘the public’ is a theoretical fiction. He put forth these views in The Phantom Public in 1925, which drew on a number of anthropological arguments that he had previously developed in Public Opinion in 1922.8 These works are paramount, since they contain the underlying assumptions on which Lippmann’s later views on liberalism were grounded, yet they have been widely overlooked by commentators.9
- 10 I distinguish between information and knowledge although this distinction does not appear per se in (...)
10Underlying Lippmann’s views was his analysis of the maladjustment of individuals to their environment (1922, 4). He believed that the representations individuals hold of their environment, or ‘fictions’, were no longer appropriate due to insufficient consideration of the increasing complexity of social and economic relations. A key characteristic of the Great Society, a concept that Lippmann borrowed from Graham Wallas, is that the number and complexity of relations within society make every individual representation inadequate. Thus the point of view of individuals is inevitably local and fragmentary: local because it is rooted in a particular social and cultural context, and fragmentary because the total amount of knowledge required for a perfect understanding of one’s environment far exceeds what a human brain can grasp and the degree of attention that an individual in a modern society can maintain, as well as the time available to spend seeking information (Ibid., 60-70).10
11This anthropological diagnosis of human knowledge as necessarily local and limited leads to the impossibility of an omniscient god-like standpoint. Thus, for Lippmann, the whole conception of democracy must be reconstructed. While the omni-competent citizen may have been a fitting fiction for the Ancient Greeks or small Jeffersonian communities, the emergence of the Great Society made this obsolete. Vox populi is not vox dei but the voice of a group of people with cognitive limitations. To Lippmann, representative democracy bears the same marks of failure—nothing guarantees that democratic discussion in Congress will spontaneously create knowledge about the social world: “A Congress of representatives is a congress of blind men in a vast and unknown world,” (Ibid., 287). As knowledge is limited and fragmented, even well-intentioned representatives are doomed to the same condition. This means that any decisions taken are destined to follow a blind trial-and-error process.
12Lippmann’s anthropological view recognizes the inherent complexity of the social world, which cannot be grasped by either an individual or an assembly of representatives. This quantitative diagnosis, based on the quantity of information a human mind must be capable of accumulating in order to know everything, was qualitatively refined by Lippmann in 1925. The problem he sets out in The Phantom Public also concerns the nature of knowledge, as shown in the following passage:
The farmer decides whether to plant wheat or corn, the mechanic whether to take the job offered at the Pennsylvania or the Erie shops, whether to buy a Ford or a piano, and, if a Ford, whether to buy it from the garage on Elm Street or from the dealer who sent him a circular. These decisions are among fairly narrow choices offered to him; he can no more choose among all the jobs in the world than he can consider marrying any woman in the world. These choices in detail are in their cumulative mass the government of society. (Lippmann, 1925, 35)
13Lippmann does not focus on the quantity of information, but on the type of knowledge possessed by individuals. The ‘government of society’ is led by individual choices that are highly subjective: personal preferences (the Ford or a piano), knowledge of a local situation (where to buy a car), and of opportunities (what job can one do, or plant can one grow). For the most part, society is not organized from the top down, but by these day-by-day decisions. Normatively, the result is that the majority of human activities remain out of reach: the ‘government of society’ does not need the political intervention of the state. The nature of the knowledge taken into consideration is what is of the utmost importance. This is neither scientific knowledge nor objective information that can be communicated to a central office, but a subjective knowledge of the situation, often absorbed through the repetition of experience (we know where to buy goods without thinking about it and can find opportunities in a well-known environment). This type of knowledge is based on conditions known only to the individuals in the environment, implying a symmetry between the cognitive capacities of the individuals and their representatives, the governed and the government. Everyone is blind concerning the whole, but everyone is competent regarding his or her own situation, and this local knowledge produces the ‘government of society’ as a blind order, not directed by any particular agent. Lippmann goes on to underline how the locality of the knowledge is privileged over scientific knowledge—indeed, that it is the only type of knowledge possible:
Modern society is not visible to anybody, nor intelligible continuously and as a whole. One section is visible to another section, one series of acts is intelligible to this group and another to that. (Ibid., 32)
14Since there is no disengaged standpoint, the society as a coherent entity cannot be known. As the environment that produces knowledge also influences the sensibility of the individuals forged by continual interactions with the environment, much of this knowledge is uncommunicable to a representative or a central authority such as a government.
15The cognitive limitations of individuals have important consequences on democracy. Lippmann expressed this corollary in 1922 and even more strongly in 1925. The symmetry implied by the locality of knowledge and its subjective nature led Lippmann to emphasize that a representative—and more generally, a government—does not possess an epistemic superiority. Consequently, it is not possible to define a ‘common good’ or ‘general interest’: rather than a ‘public’ there are only groups of individuals that, knowingly or not, defend their own interests or visions. Moral norms and values are relative to social, economic and, more broadly, environmental contexts. The deep pluralism of Lippmann leads to a perspective inherited from Nietzsche: moral values are produced by the situations that shape individual preferences and desires. No data or central authority can legitimately decide for the whole; rather, the goal of the state is to recognize the irreducible diversity of interests that makes up society.
- 11 The concept of ‘public’ in Lippmann’s work is a synonym of ‘people’.
16The public,11 formed of a mass of individuals who cannot know the overarching situation and often do not have the time to study it, possesses no sovereignty, which means that it cannot intervene directly in the life of others. Yet this situation does not result in chaos, as society governs itself for the most part:
The work of the world goes on continually without conscious direction from public opinion. At certain junctures problems arise. It is only with the crises of some of these problems that public opinion is concerned. And its object in dealing with a crisis is to help allay that crisis. (Ibid., 56)
17This illustrates Lippmann’s view that the ‘work of the world’ is not directed, that the process that governs society is for the most part unconscious. The ‘public’ is only given form as a concept in times of crisis, when a conflict of interest must be solved, for example. Problems emerge during the social process through the encounter of individuals with incommensurable interests. Thus, Lippmann’s conception of democracy is deflationist, defending the diminution of the role of the public in a democracy. The public does not intervene in order to take a decision or solve the crisis itself, but to support an individual who proposes an improvement or a modification of the social rules in crisis—thus the public follows a leader. In his theory, Lippmann (Ibid., 134-135) clearly explains the function of the public: it does not judge the merits of a rule, or evaluate or predict the results of its modification, but judges if the agents in the situation respect the procedure, i.e. the rule, to be created, modified or reformed. Section two will go into more detail about the importance of the concept of rules in Lippmann’s epistemology; here the goal is to underline that Lippmann’s anthropological analysis implies a redefinition of democracy and public opinion, based on the limitation of an individual’s capacity to possess information and the subjective nature of knowledge.
- 12 The status of leadership is one of the key interrogations of Milanèse’s work. He argues that Lippma (...)
18Public Opinion and The Phantom Public have often been interpreted as defending technocracy and centralized expertise. How can this be reconciled with a liberal reading of Lippmann? One important argument is that the role of expertise in Lippmann’s work has been overestimated. Milanèse (2020) argues that Lippmann’s social philosophy should be viewed in its continuity rather than rather than focused on his thoughts about technocracy. Technocracy claims that the expert should obtain the power, whereas Lippmann always subordinated experts to leaders. In fact, even in Public Opinion Lippmann did not argue in favour of the power of experts, but only to the necessity of being advised by the representatives of the new scientific fields exploring the current complexity of society. Experts would thus always be subordinate to the leaders.12 Even Public Opinion Lippmann does not defend technocracy as a political organisation.
- 13 This liberal shift between 1922 and 1925 is also identified by Stiegler (2019). However, Stiegler d (...)
19Furthermore, The Phantom Public develops a scepticism towards expertise.13 In Public Opinion, Lippmann laid out the anthropological foundations for his theory, but he still believed that expertise could provide guidance for the otherwise erratic impulses of the masses. By 1925, Lippmann had abandoned this belief, giving experts a limited role in public debates, which was restricted to aim to select which individual to follow in order to modify a contested rule (a leader). However, while the leader was, in 1922, mostly the Statemen or the important members of a globalized wealthy class, it becomes, in 1925, a local figure that people follow to transform a rule. The leader can then be the leader of a group opposing pollution in the city’s river, the head of a local trade-union or the director of a local company. In 1925, the anthropological theory proposed by Lippmann involved a radically anti-technocratic doctrine that stressed the role of situational leaders and individual choices. In this context, the rational government of society is impossible, as well as the sovereignty of public opinion. This analysis laid the groundwork for a liberal theory of government, even if Lippmann explicitly addressed the liberal doctrine only in 1933, following the economic crisis of 1929.
20The question that interested Hayek during the 1930s was the problem of socialist planning. Is it possible, theoretically and practically, to efficiently plan the economy of a country from the top? In answering this question, Hayek developed the view of the limitations of individual cognition in which the technical problem of the centralization of information by a government is compounded by the subjective nature of knowledge. Thus Hayek, while coming from a different standpoint to Lippmann, formulated a similar theory. In his article ‘Economics and Knowledge’, published in 1937, he also questioned the status of knowledge in our societies.
21Hayek entered a debate that had started in 1919. This was the year Otto Neurath published Durch die Kriegwirtschaft zur Naturalwirtschaft (‘From War Economics to Natural Economics’), in which he defended the possibility of a central agency to rationally meet the needs of individuals without the need for money. Mises (1920) quickly responded to this publication, arguing that it is impossible to rationally, centrally organize society without money, because money allows the comparison of heterogeneous goods (such as capital and work). He argued that without money, prices cannot react to changes in the offers or demands for a good, thus signalling its scarcity. In such a society, the planner would have to act irrationally and blindly. In his argument, Mises highlighted the necessity of money, competition and an entrepreneurial dynamic. This position provoked a response from neoclassical economists, such as Dickinson and Lange, who defended and refined the idea—already put forward by Pareto and Barone—of the general equilibrium theory (see Lavoie, 1981 and Jael, 2018).
- 14 For a more detailed analysis of this topic and a recent view of the posterity of Hayek’s theories i (...)
22In 1935, Hayek released Collectivist Economic Planning, in which he wrote two articles. As noted by Kirzner (1988), this debate can be considered a catalyst for Hayek, who used it to refine his position, particularly on information and knowledge. In these articles, Hayek distinguished between the technical issue (a good use of a resource to attain an end) and the economic issue (a choice between scarce resources that can be used for alternative ends) (Hayek, 1935a, 122). The error of the planner is to think an economic problem can be solved as a technical problem. Without prices, which are the result of competition, the market cannot play its role of allocating goods. Prices reflect information available on the market.14 However, the planner is surpassed by the abundance of information, which changes rapidly.
23Hayek also identified an additional problem to that of scarce resources for alternative goods that would require a lot of information to solve. In his view, the failure of general equilibrium theory is not only to believe that a central office can centralize information, but to believe that this information is ready-made, already available without the process of competition, in which individuals have economic interactions that forge their knowledge:
But much of the knowledge that is actually utilized is by no means ‘in existence’ in this ready-made form. Most of it consists in a technique of thought which enables the individual engineer to find new solutions rapidly as soon as he is confronted with new constellations of circumstances. To assume the practicability of these mathematical solutions, we should have to assume that the concentration of knowledge at the central authority would also include a capacity to discover any improvement of detail of this sort. (Hayek, 1935b, 168)
24Thus, the planner must not only centralize the information possessed by individuals—on the goods they want, for example—but also the subjective knowledge of the individuals that govern the market process. Yet this knowledge is situational, produced by circumstances, as the agents are faced with local problems in the competition process. Hayek argues that the knowledge in question does not concern ‘what’—scientific knowledge, for example—but ‘how’ to use the information possessed (Oguz, 2010). The economy—and more broadly the social world—works by virtue of local and practical knowledge: information is of no use if a person does not know how to use it. This is not only a problem of the transmission of pre-existing information, but also the subjective nature of knowledge, which is inarticulate and practical, learned through the continuous confrontation of an individual with his or her social and economic environment. Hayek underlines the difference between having information from the outside and living the situation from the inside.
25The question is not only “can we solve an existing system of equation”, which involves the technical difficulty of centralizing a lot of information, but also a deeper problem, relative to the subjective nature of knowledge: how to replace the process of competition conducted by individuals informed by local and practical knowledge, and thus the production of the equations themselves. The difficulty of planning is both quantitative and qualitative. There is a symmetry here: the planner does not know any more about the totality of the system than the individual situated in his or her circumstances.
26In ‘Economics and Knowledge’, published in 1937, Hayek developed the theoretical implications of his subjectivism, breaking with the neoclassical perspective. This article took up in a systematic way the problem arising from the subjectivist stance on knowledge. Although his answers were only embryonic in this article (Caldwell, 2004, 217), Hayek underlined the necessity of understanding information as produced from the subjective knowledge of individuals. Objective information, which can be used to organize human action, is thus the result of a process. The passage between the individual and the collective level is at the heart of Hayek’s article:
There ‘data’ meant those facts, and only those facts, which were present in the mind of the acting person, and only this subjective interpretation of the term ‘datum’ made those propositions necessary truths. ‘Datum’ meant given, known, to the person under consideration. But in the transition from the analysis of the action of an individual to the analysis of the situation in a society the concept has undergone an insidious change of meaning. (Hayek, 1937, 39)
27Is data subjective knowledge or objective information available to everyone? The question of how data is produced remains problematic. If we can easily envision what data is for a human mind, what is the data of collective analysis? The word ‘data’ generates confusion between objective data and subjective needs, wishes or knowledge. How does a situation of “correct foresight” (Ibid., 42) emerge, in which individuals know that they do not have to change their plans? How does society spontaneously organize itself when individuals follow their distinct desires with their subjective, incomplete, local and fragmented knowledge—which is not the same as objective data—leading to compossible outcomes?
28Planning cannot provide the solution: not only is it impossible for planners to have general knowledge of the social organization, which is based on data that they cannot possess, they are also confronted by the problem of complexity: that is to say, the profusion of information and the inventiveness of the economic system, driven by individual choices (Ibid, 51). The starting point of Hayek’s theory is thus an acknowledgment of the partial and local knowledge of the individual. Each person only knows what is relative to his or her environment, learning, milieu. Knowledge is then different for every person, and the knowledge of the whole is thus divided between all the members of society, which Hayek describes as the “division of knowledge” (Ibid., 50).
29Where Hayek differs from the neoclassical theorists, particularly Oskar Lange, who was the most important in the period, is his accounting of the local nature of knowledge, and its production by individuals during the economic process. The figure Hayek emphasizes is the entrepreneur:
What is forgotten here is that the method which under given conditions is the cheapest is a thing which has to be discovered, and to be discovered anew sometimes almost from day to day, by the entrepreneur, and that, in spite of the strong inducement, it is by no means the regularly established entrepreneur, the man in charge of the existing plant, who will discover what is the best method. (Hayek, 1940, 196)
30Here the entrepreneur is not a descriptive theory of a specific person, but a theory of action: every human can demonstrate entrepreneurship: that is, the capacity to identify and capitalize on opportunities. To produce at low cost, entrepreneurs would be wise not to rely on a planner, who at best may possess all the existing information, but not the knowledge of the circumstances that allow profits, and rather on their own knowledge of the opportunities present in their environment. Hayek argues that innovation is only possible locally, through entrepreneurship, thus privileging locality. The core of Hayek’s argument against planning enlists a subjective understanding of knowledge that has two consequences. First, the transmission of this knowledge is impossible, even for a quasi-omniscient and omnipotent planner, and secondly, this subjectivity implies a dynamic conception of individual innovation that cannot be embodied by the planner. In this perspective, the market is a creative process (Buchanan and Vanberg, 1991).
31Thus, Lippmann and Hayek, from different starting points and periods and independently from each other ultimately developed a similar conception regarding the difficulty of centralization. In both their positions, I argue there is a distinction between information and knowledge. Information is objective and transmissible—to borrow Hayek’s language, it is ready-made data that a planner cannot accumulate due to practical reasons (cognitive limitations, increasing complexity, etc.), while knowledge is subjective, relative to the cognitive content of the brain, forged by interactions with the environment. In Lippmann’s work, this position is defended in an evolutionist fashion: individuals’ relations with their environment shape the way they think and act and are local. In Hayek’s work this position is defended from a subjectivist standpoint inherited from Carl Menger, and is embodied by the figure of the entrepreneur, who possesses a practical and incorporated knowledge of his or her environment.
32These two positions are obviously not homogeneous, each formulated from different starting points, traditions and sensibilities. However, they produce a theoretical compossibility: Hayek and Lippmann arrived at the same type of problem, namely the social coordination of individual behaviour. Both theories break with abstraction to develop a social conception of the production of knowledge that contrasts sharply with laissez-faire liberalism. The next section discusses this shared conception of the problem that arose from the similarities in their anthropological analyses.
33The problem of social coordination appears clearly in Lippmann’s work in 1925. How can individuals constrained by their cognitive limitations and their local knowledge effectively coordinate their existence? Hayek addresses a similar question in ‘Economics and Knowledge’, to such an extent that the problem of coordination between individuals possessing only limited information in a context of incertitude is defined as the ‘Hayek problem’ by scholars (Van Zjip, 1990; Birner and Van Zjip, 1994). However, these thinkers addressed this problem differently. Lippmann defended coordination by price, while Hayek defended the importance of rules, based on Lippmann's legal theory. Lippmann also stressed the necessity of a non-economic solution to the coordination problem, which was a condition for the formation of a positive neoliberal theory that distinguished itself from laissez-faire liberalism. The similarities between Lippmann and Hayek's social philosophies are striking. They do not only defend the necessity of the rule of law for the preservation of liberty, but share a broader social philosophy, regarding rules as practical and hermeneutical preconditions for the working of human society.
34The importance of the concept of rules in Lippmann’s work is undebatable. If individuals have limited, local, fragmented knowledge, and if the same is true of their rulers, how do individuals coordinate their actions? Lippmann’s answer in 1925 can be interpreted in two ways. It could be considered that the acknowledgment of autonomy in civil society, in the lineage of Scottish liberalism, is enough to answer the problem of coordination. Yet Lippmann’s anthropological analysis suggests that expectations are local and forged by the environment, which can lead to incommensurability between different expectations. He expresses this difficulty clearly:
For the order which we recognize as good is an order suited to our needs and hopes and habits. There is nothing universal or eternal or unchangeable about our expectations. (Lippmann, 1925, 23)
35A social order can only be established on a common basis. Yet this common basis is lacking, precisely because there is no possible overarching point of view. If one person is transported to another environment, he or she may be maladjusted to it, with his or her habits not producing the expected results. How can a common world be made possible for individuals with diverse experiences?
36If the autonomy of the ‘government of society’ is recognized by Lippmann as being constructed by the multiple choices of individuals, we must understand it as being the consequence of rules. In fact, individual choices are guided and coordinated by environmental stability, allowing common expectations and the possibility of understanding the actions of someone else. Without rules it would be impossible for an agent to understand another’s action. The ‘crisis’ for Lippmann starts when the element of common understanding is rejected by individuals.
37Rules allow individual expectations: they are constitutive of economic and social order. Rules work as information signals, compensating for the cognitive deficiencies of individuals. They stabilize the environment so people can anticipate what others will do and what the consequences of their actions will be. The existence of rules is consequently more important than their content: method more than substance. Lippmann defends a non-substantial conception of rules, whose purpose he sees above all as to allow the coordination of individual plans:
The interest of the public is not in the rules and contracts and customs themselves but in the maintenance of a regime of rule, contract and custom. The public is interested in law, not in the laws; in the method of law, not in the substance; in the sanctity of contract, not in a particular contract; in understanding based on custom, not in this custom or that. It is concerned in these things to the end that men in their active affairs shall find a modus vivendi; its interest is in the workable rule which will define and predict the behavior of men so that they can make their adjustments. (Ibid., 95)
38What is of utmost importance is that the rules are known, which allows the correct foresight of individuals. The public’s function is not to decide the content of the rules: indeed, Lippmann clearly says that the public is not competent for this task and that it takes the risk of being subordinated by interests when it attempts to (Lippmann, 1925, 96). The public must rather identify an agent in a situation that is liable to be more competent in order to improve the rule when it is defective, that is to say a local leader (Lippmann, 1925, 98). This is symmetry at its best: the content of the rule interests only those involved, and they are the only ones competent to modify it. The roles can then be exchanged considering the case. Everyone is an expert of their own situation, but no individual is in the situation of being a permanent actor: “each special interest is forever proclaiming itself the voice of the people and attempting to impose its purpose upon everybody as the purpose of all mankind” (Ibid., 151). The substantiality of the rule is secondary except for people involved in its content:
The individual whose action is governed by a rule is interested in its substance. But in those rules which do not control his own action his chief interest is that there should be workable rules. It follows that the membership of the public is not fixed. It changes with the issue: the actors in one affair are the spectators of another, and men are continually passing back and forth between the field where they are executives and the field where they are members of a public. (Ibid., 100)
39Lippmann’s whole theory of democracy is thus determined by this end: to guarantee the persistence or the improvement of the rules, in order to allow the coordination of individual actions and favour the government of society by society. The rules overcome the defaults inherent to human intelligence: “A rule, in other words, must include the means of its own clarification, so that a breach shall be undeniably overt. Then only does it take account of experience which no human intelligence can foresee” (Ibid., 126). This would make collective intelligence, god-like and omniscient—what socialists defend—out of the question.
40In the debate about socialist planning, Hayek, following Mises, defended competition over planning. He viewed competition not only as the best way to allocate resources, but also to convey information throughout all of society through prices. In this way, prices are a device to coordinate individual actions. This issue of coordination appears clearly in Hayek’s work:
The problem which we pretend to solve is how the spontaneous interaction of a number of people, each possessing only bits of knowledge, brings about a state of affairs in which prices correspond to costs, etc., and which could be brought about by deliberate direction only by somebody who possessed the combined knowledge of all those individuals. (Hayek, 1937, 51)
41Hayek’s answer, anticipated in his articles on the socialist question but developed explicitly only from 1944, is that individual expectations are coordinated by external and objective information provided by an institution, namely the market. Each person with his or her local knowledge tries to reach their own ends. There is no metaphysical necessity that the expectations should be compossible as in Leibniz’s pre-established harmony, thus the society is not in a situation of chaos. I may want to use a scarce resource—for example, a book—in order to realize my own ends, research, while someone else may want this book to wedge under a table leg. In this situation there is no necessity that the book, if it is the only one, belongs to me or to the other person. This type of case may seem trivial, but is extremely abundant in a society structured by complex relations between individuals who want to reach ends that are mutually discordant.
42This makes the function of prices crucial. This can be illustrated with a simple example. For a trip, Bob has three possibilities: going by airplane, carsharing or train. Each of these means of transportation is limited in its capacity. Bob may prefer flying, but it is very likely that not everyone will get a ticket. Price allows the seats to be allocated to those who value them most, thus making individual plans compossible: if Bob sees the price of flying increasing, he chooses another means of transportation: train or carsharing. Without the price, Bob would wait at the airport without a ticket and his expectations of being able to get on a plane may be wrong. Prices inform us of the relative scarcity of a good and of the choices other individuals make—choices that would otherwise remain unknown to us.
43The effect of prices on a market is for Hayek an unintentional consequence of intentional actions. This theory is developed in ‘The Use of Knowledge in Society’, an article published in 1945 and written after Lippmann’s The Good Society. However, as noted by Kirzner (1988) and Caldwell (2004), this article is a more explicit framing of implicit positions Hayek took in previous articles. The 1945 article clearly illustrates his view:
Fundamentally, in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to co-ordinate the separate actions of different people in the same way as subjective values help the individual to co-ordinate the parts of his plan. (Hayek, 1945a, 85)
44Prices in a market act like a telecommunication system of information (Desai, 1994, 43), replacing at a macro level the individual values that coordinate individual choices. This view sees the competitive market as superior to a planned economy because it allows actions to be coordinated without interventions in human affairs that can cloud expectations. It is thus the first principle of liberalism, for economic as well as political reasons. It is seen to preserve the realm of individual action against the irruption of coercive power from the state.
45Considering the question of coordination of the actions of individuals, Lippmann and Hayek both thought that expectations are regulated by external institutions that allow the compossibility of actions, as this allows a stable horizon of predictability. After 1936, Lippmann and Hayek would exchange views on this question, a dialogue that enriched their respective positions.
- 15 This was a mutual exchange, as Rougier also sent his book Les mystiques économiques to Lippmann, wh (...)
- 16 A few exceptions are worth noting, such as the non-attendance of Walter Eucken, who was stuck in Ge (...)
46Lippmann referred explicitly to Hayek in the first part of The Good Society, published in the autumn of 1937. Ben Jackson (2012) has shown the links between the authors during this period. It is worth noting that the publication came at a crucial moment and drew the attention of many liberals around the world: not only Hayek, but others such as Robbins, Wilhelm Röpke and Rougier. Its favourable reception was encouraged by Hayek, who informed Rougier of the upcoming publication of the book (Rougier to Lippmann, letter of July 8, 1937), leading Rougier to promptly propose a translation of the book into French (Rougier to Lippmann, letter of July 22, 1937) based on the sections already published in The Atlantic Monthly. Rougier was an intellectual and institutional entrepreneur who was frequently in contact with Lippmann.15 In September, Röpke offered to translate the book into German with Alexander Rüstow (Röpke to Lippmann, letter of September 16, 1937), which Lippmann accepted (Lippmann to Röpke, letter of October 11, 1937). Röpke also wrote a review of the book, which Lippmann read with the aid of Gottfried Haberler (Lippmann to Röpke, letter of January 20, 1938), and invited Lippmann to an afternoon meeting in Geneva with Mises, Rougier and William Rappard during Lippmann’s trip to Europe (Röpke to Lippmann, letter of June 34, 1938). In August 1938, Rougier organized the Walter Lippmann Colloquium in Paris, which gathered almost all of the neoliberals of the time.16 In 1939, he created the International Centre for the Renewal of Liberalism (Centre International pour la Rénovation du Libéralisme), which explicitly claimed the term ‘neoliberal’.
47The Good Society starts from the problem of coordinating individual expectations, but the example Lippmann gives is more directly economic, when he parodies the attitude of the revolutionary intellectual:
He knows that his breakfast depends upon workers on the coffee plantations of Brazil, the citrus groves of Florida, the sugar fields of Cuba, the wheat farms of the Dakotas, the dairies of New York; that it has been assembled by ships, railroads, and trucks, has been cooked with coal from Pennsylvania in utensils made of aluminum, china, steel, and glass. But the intricacy of one breakfast, if every process that brought it to the table had deliberately to be planned, would be beyond the understanding of any mind. Only because he can count upon an infinitely complex system of working routines can a man eat his breakfast and then think about a new social order. (Lippmann, 1937, 30)
48The established routines—here the economic routines of production and exchange, which allow the organization of social life—are the result of coordinated actions. Lippmann uses the concept of order to refer to this spontaneous organization of individual activities: the social order is the coordination of routines and habits without planning. This is a clear reference to a classical liberal theme: Adam Smith’s division of labour.
49Since he criticizes collectivism and communism as well as fascism (and specifically Nazism), Lippmann is led to defend, by opposition, the efficiency of the competitive market in coordinating individual actions. This is the first time he expresses such an economically liberal viewpoint. On a page quoting Hayek, he writes: “There must be some power which induces or compels everyone to choose a specialty which fits in with the other specialties. The prices offered in the market do just that,” (Ibid.,170). Lippmann goes on not only to stress the division of labour but also the function of prices to “regulate what man shall produce” and what specialty he shall choose. If the trademark of Smith’s liberalism is the division of labour, illustrated with the pin factory in the first chapter of The Wealth of Nations, the trademark of Hayek’s liberalism is the division of knowledge and the function of the price system in order to solve the problem of coordination. The strength of the price system is to allow social organization without any coercive or collective intelligence. It is a tool that incites the individual to redirect their activities to other fields. The price system acts like a social signal pointing out opportunities to individuals. It thus has great power, but this power is not the power of any individual.
50Yet Lippman does not claim that the price system always works smoothly, because “most markets are imperfect” (Ibid., 170). Like Hayek, he rejects the abstract concept of pure and perfect competition (with its five conditions: atomicity, homogeneity of goods, free access to the market, transparency of information and free circulation of the means of production). In fact, Hayek broke with the static neoclassical model of general equilibrium and thought of the market as a dynamic process of competition, in which frictions are possible. So while prices are powerful, they are sometimes ‘roughly’ powerful, to use the expression of Lippmann (Ibid., 170).
51The market, driven by competition and the entrepreneurial choices of individuals, is not a perfect order, as individuals can make the ‘wrong’ choices according to the state of affairs. Its order is non-intentional and blind, making the market ‘rough’. While the market participates in the formation of the social order and the coordination of expectations, it is nonetheless not untouchable in Lippmann’s view. The positive agenda he set out aimed to improve the social order without denying the market as the “first principle of liberalism” (Ibid., 174).
52As Cristoph observes (Cristoph, 2012, 227), in 1933 Hayek formulated the idea that it was necessary to renew liberalism. Hayek particularly focused on the question of the legal rules framing the market. In The Road to Serfdom in 1944 (Hayek, 1944, 28-29 and 248), he explicitly referred to Lippmann, who had provided a legal theory compatible with the market. Hayek underlined the necessity of formal rules, especially with the concept of the rule of law:
Stripped of all technicalities this means that government in all its actions is bound by rules—fixed and announced beforehand-rules—which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances, and to plan one’s individual affairs on the basis of this knowledge. (Ibid., 75)
- 17 Caldwell (1988) also argues that Hayek left economics, but this conclusion is debated. As Boettke ( (...)
53The argument here, which refers to the problem of coordination, is similar to that found in The Good Society, and it is very likely that Hayek followed on from the path forged by Lippmann on this matter. For Jackson (2012), Lippmann’s influence on The Road to Serfdom is evident—he claims that Lippmann even prompted Hayek’s transition from economics to philosophy.17 In my view, this seems to deny the fact that Hayek had his own motivations to address the problem of social coordination and institutions, yet Hayek’s debt to Lippmann is unquestionable. The value of rules is their ability to allow coordination: they allow individuals to foresee the consequences of the actions of others, especially the actions of the government and the sanctions it can apply. The necessity of rules is more than practical, but hermeneutic. Without shared rules, individuals cannot understand others’ behaviour:
As we go from interpreting the actions of men very much like ourselves to men who live in a very different environment, it is the most concrete concepts which first lose their usefulness for interpreting the people’s actions and the most general or abstract which remain helpful longest. My knowledge of the everyday things around me, of the particular ways in which we express ideas or emotions, will be of little use in interpreting the behavior of the inhabitants of Tierra del Fuego. (Hayek, 1942, 66)
54As in Lippmann’s work, Hayek sees rules as not only external to the individual, but that action is rule-based, and that action has meaning only if we have rules to interpret it. The example of Tierra del Fuego, at the tip of South America, extends the inter-individual problem Lippmann described to an international level.
55Thus, while the market is admittedly the first principle of liberalism, for epistemological, economic and political reasons, it is not the only institution needed. In order to fulfil its role, the market needs other institutions, and it needs rules. In 1937, in a letter to Lippmann, Hayek explicitly recognized that not only does the market need a “semi-permanent framework” in order to work (one cannot exchange without laws on contracts or property rights enforced by the state), but that this framework needs to be refined and improved:
I have always regarded it as the fatal error of classical liberalism that it interpreted the rule that the state should only provide a semi-permanent framework most conducive to the efficient working of private initiative as meaning that the existing legal framework must be regarded as unalterable. Surely the concrete content of the law of property and contract is capable of considerable improvement. (Hayek to Lippmann, August 11, 1937)
56Indeed, exchange and trade require confidence: an institutional context that guarantees the absence of dispossession. Rules can also facilitate the transmission of information in order to limit the retention of information by industries.
57Hayek thus has two conceptions of rules. The rule as a legal framework to organize or improve the market, and the rule as an institution, which fulfils two functions: allowing the coordination of individual actions with the stability of an institutional background, and the existence of a shared world that permits mutual understanding. While the rules that constitute the ‘legal framework’ on which the market performs may owe their genesis to Hayek, the concept of the rule of law, understood as a means of coordination and common understanding certainly has a debt to Lippmann.
58The similarities between the anthropological analyses of Hayek and Lippmann imply a similar epistemological conception: namely the problem of social coordination given imperfect knowledge. The fact they both addressed this question allowed the possibility of the mutual enrichment of their ideas. In 1937, Lippmann based his liberalism on the principle of the efficiency of the market to coordinate individual actions, refining his conception of the ‘government of society’ that he had put forward since 1925. He did not abandon the concept of rules but proposed a reconstruction of liberalism based on a perspective of social anthropology and pragmatic epistemology. Hayek, leaving the institutional field of economics at the end of the 1930s (for multiple reasons, internal as well as external, see Caldwell, 1988, 1997), incorporated aspects of Lippmann’s philosophy, especially on the importance of rules for coordination. Their exchange of ideas allowed agreement on a fundamental thesis and their consequent shared position on three points: (1) a critique of the principle of laissez-faire, (2) a critique of the ‘common good’ or general interest, and (3) the promotion of the rule of law, differentiating the ‘rules of the game’ from the specific ‘plays of the game’. The core of neoliberal theory (a theory of the rules of the game), is thus better understood in light of Lippmann’s contribution and his and Hayek’s emphasis on the importance of social and judicial preconditions to the effective working of the market. The three common features have to be understood as the consequence of a broader agreement between the social philosophies of Hayek and Lippmann.
59The principle of laissez-faire is generally associated with 19th-century liberalism. First formulated by the Marquis d’Argenson in 1751, laissez-faire originally expressed the idea of the spontaneous auto-organization of the realm of civil society. Later in the 17th century Turgot formulated laissez-faire as the sole principle for an enlightened government. The idea behind this principle was clear: the role of the government is to remove all obstacles to trade in order to allow the unimpeded operation of the economy, which exists independently to legal coercion. This conception falls under a form of naturalistic optimism in the spontaneous power of civil society. Famously, Élie Halevy (1904) coined the expression “natural harmony of interests” in order to describe this position.
60For Lippmann, the doctrine of laissez-faire, although it had positive effects historically as it limited the coercive power of the state, had been perverted. From a principle of limitation of power, it had become a normative principle of legislation:
The latter-day liberals who made a political dogma out of laissez-faire had merely elevated the historical objection to antiquated laws into the delusion that no new laws would or should replace them. (Lippmann, 1937, 186-187)
61Lippmann felt that the person responsible for this was Herbert Spencer, whose fatal error was to think that there was a natural order behind legal organization. This confusion led to a defence of the powerful and the establishment. If the only function of the state is to punish violations and to protect property, then the definition of a violation or a property always falls to the state. Furthermore, the state must actively defend the owner against others; the liberal order becomes conservative. Lippmann expressed this critique clearly:
So if a man “contaminates the atmosphere breathed by his neighbor,” he is “infringing his neighbor’s rights” and the government may be called upon to deal with him as a trespasser. But for the state to “interpose between quacks and those who patronize them” is, said Spencer, “directly to violate the moral law.” Thus he was arguing that if I annoy my neighbor by blowing smoke into his house, I may be punished, but if I kill him by deceiving him into thinking that I am a physician, I go scot-free, and my victim’s widow is forbidden to shoot me. Spencer thought he was distinguishing between two realms, one where the state intervenes and one where it does not. But actually the state intervenes in both instances. The only difference is that in the case of the trespasser Spencer would have the law protect the victim, in the case of the quack he would have the law protect the aggressor. (Ibid., 188)
62What is at stake here is the concept of property. In the first case Lippmann outlines, the concept of property is not natural: it owes its existence to the state that recognizes it. If the state adopts a ‘laissez-faire’ approach and does not intervene, this non-intervention is also political, in fact it is an intervention supporting the rights of the murderer. In Lippmann’s view, there is no such thing as a natural order, but only political arrangements. Lippmann parodied the followers of Spencer, saying that even they would call the police if they feel threatened. Today Lippmann’s argument is very classical: he said that property does not exist naturally but requires legal definition and political support to have meaning. The fallacy of laissez-faire is to naturalize a condition that is in fact social in order to justify existing inequalities. Therefore, it becomes a doctrine of domination:
The latter-day liberals became mired in statu quo by the political dogma of laissez-faire which held them to the idea that nothing should be done, by the confusion of the classical economics which held them to the idea that nothing needed to be done. (Ibid., 207-208)
63Some years later, Hayek defended a similar position, with the same criticism of the principle of laissez-faire and of Spencer. In The Road to Serfdom he argued that “Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez-faire” (Hayek, 1944, 18). He went on to argue that governmental activity is not contradictory to liberalism, but allows its functioning:
Neither the much abused and much misunderstood phrase of “laissez faire” nor the still older formula of “the protection of life, liberty, and property” are of much help. In fact, in so far as both tend to suggest that we can just leave things as they are, they may be worse than no answer; they certainly do not tell us what are and what are not desirable or necessary fields of government activity. (Hayek, 1945b, 17)
64Improving the legal framework is certainly one of the ‘necessary’ areas of government. The theoretical position of Lippmann and Hayek has a direct link with later criticism of the principle of laissez-faire. Lippmann theorized that laissez-faire cannot work because of the imperfect nature of the market, which must be perfected by a legal framework. Furthermore, the rules must be evaluated as ‘good’ or ‘bad’, which is precisely what Spencer claimed could not be done. The legislator must promulgate laws that allow and improve the coordination of individuals. Hayek also insisted on the importance of a legal framework and rules to allow coordination, which are the consequences of his anthropological perspective. For both these thinkers, their conception of liberalism distinguished itself logically from the laissez-faire principle.
65If laissez-faire is ruled out as a credible option, the classical alternative is the political determination of the means that must be followed to achieve the ends. For example, if one wants equality, one will accept the taxation of the wealthiest to accomplish this. In the name of social goals—for instance, social justice—intervention should be made in the social and economic order. This position seems logical: if we know what is good, we should intervene to accomplish it.
66Yet both Hayek and Lippmann denied the possibility of an epistemic position that would allow judging what the common good is. Society is above all individuals following their own ends with personal preferences and values. Moreover, the values they defend are contradictory about what is good and what is bad. One person may think the goal of society is to develop art, another the search for pleasure, and another a relationship with god. On an anthropological and epistemological basis, there is no situation that would allow placing oneself above others: not only am I limited in what I know and the consequences of my actions, but my preferences and values have been shaped by my environment—my perspective is only partial. As Lippmann expressed in 1925, when a group claims it has a universal standpoint, it often hides its specific interests.
67The problem of this impossibility of a common good is similar to the problem of planning: it is impossible to centralize. Liberalism thus implies pluralism and tolerance. For this reason, these thinkers consider the concept of ‘common good’ as empty:
The ‘social goal’, or ‘common purpose’, for which society is to be organised, is usually vaguely described as the ‘common good’, or the ‘general welfare’, or the ‘general interest’. It does not need much reflection to see that these terms have no sufficiently definite meaning to determine a particular course of action. The welfare and the happiness of millions cannot be measured on a single scale of less and more. (Hayek, 1944, 60)
68Hayek’s and Lippmann’s social ontology, stating that existence can only be that of individuals, disallows the possibility of a point of view of society as a whole. To them, to believe otherwise is an epistemological error, related to the capacity of the human mind, and an ontological error, related to the ontology of society:
The source of that bewilderment lies, I think, in the attempt to ascribe organic unity and purpose to society. We have been taught to think of society as a body, with a mind, a soul and a purpose, not as a collection of men, women and children whose minds, souls and purposes are variously related. Instead of being allowed to think realistically of a complex of social relations, we have had foisted upon us by various great propagative movements the notion of a mythical entity, called Society, the Nation, the Community. (Lippmann, 1925, 146)
69It is only possible to ascribe a ‘common good’ if we consider that entities such as ‘the society’, ‘the nation’, or ‘the community’ have preferences and values, which is an ontological error. Therefore, democratic policymaking should be limited in order to protect individual freedoms against the coercion of this type of position. Hayek expresses it clearly:
It is not difficult to see what must be the consequences when democracy embarks upon a course of planning which in its execution requires more agreement than in fact exists. The people may have agreed on adopting a system of directed economy because they have been convinced that it will produce great prosperity. In the discussions leading to the decision, the goal of planning will have been described by some such term as ‘common welfare’ which only conceals the absence of real agreement on the ends of planning. (Hayek, 1944, 64-65)
70Since democracy cannot provide real agreement on values (because of the diversity of values defended by individuals) it bears the risk of being an instrument of one group in order to exploit other groups. Thus, Hayek and Lippmann both argued that it was necessary to limit purely democratic government, based on the concept of general rules. Hayek’s emphasis on the rule of law and Lippmann’s emphasis on the ‘rules of the game’ can be understood in this perspective.
71The general rules of law offer an alternative both to the theory of laissez-faire and to the determination of a social objective by a government. Rules not only allow the coordination of individual expectations, but should also be a government’s aim. Both authors insisted on the promulgation by the state of sound ‘rules of the game’, as opposed to the ‘plays in the game’, made by individuals in their lives (see Köhler and Kolev, 2011; Kolev, Goldschmidt and Hesse, 2019).
72A rule should be distinguished from a commandment or a decree. Lippmann emphasized the difference: a decree is a discretionary intervention in a situation (for example, a monarch commands certain people to pay a new arbitrary tax), whereas a rule is general and abstract: it does not target a particular individual or group but applies to everyone, including the ruler. For Lippmann, historically this conception is embodied by English Common Law. His view was that this allows the preservation of individual freedom, as one individual can develop his plans without being frustrated by arbitrary decisions from the sovereign. The ideal of the rule of law is clearly formulated in a sentence that Hayek quoted in his later works:
Because democratic philosophers in the nineteenth century did not see clearly that the indispensable corollary of representative government is a particular mode of governing, they were perplexed by the supposed conflict between law and liberty, between social control and individual freedom. These conflicts do not exist where social control is achieved by a legal order in which reciprocal rights are enforced and adjusted. Thus in a free society the state does not administer the affairs of men. It administers justice among men who conduct their own affairs. (Lippmann, 1937, 267)
73Thus, the legal order does not stand in opposition to the economic order and freedom, since law is not a commandment but a general rule. The activity and interventions of the state are then situated in the field of legislation. This position is highlighted as a major innovation of neoliberalism by Foucault (1979) and many of his followers. Yet the rule of law is a classical theme: we find the concept in John Locke’s writings, and later the idea was developed by Immanuel Kant and popularized by Albert Venn Dicey at the end of the 19th century. What is specific to Lippmann’s and Hayek’s writing is the reappropriation of this classical theme through an anthropological and an epistemological perspective: that is to say, that the concept of the rule of law is not only defended as a way to avoid state coercion and preserve freedom, but as a consequence of the limitation of human capacities. For these thinkers, general rules are necessary because it is impossible to identify a ‘common good’ that would legitimate government actions. These general and abstract rules are a crutch for our ignorance. This means that justice is above all procedural: when the general rules are respected, the outcome is outside the reach of government action. States have to administer justice—i.e. they must prevent harm during the ‘game’—but they shall not play the game and must let people conduct their own affairs.
74This conception that the state should above all be concerned with the institution of the rules of the game (Lippmann, 1937, 266) is illustrated by his famous—and often used since—argument of road safety rules.
Officials can, for example, regulate the traffic on the roads: they can see to it that the ruthless and the reckless do not interfere with the other drivers. By progressive refinements of the rules, they can make it more and more possible for all the drivers to reach their destinations as safely and as conveniently as circumstances permit. But if, instead of defining the rights of all the drivers, the officials seek to prescribe the destination of each driver, telling him when he must start, by what route he must go, and when he must arrive, some few, those who have the ear of the authorities, will undoubtedly go just where they want to go, more swiftly, more pleasantly, than under a free system of equal rights. But the rest will be going where they do not wish to go, and it must become their ambition to oust the existing traffic officers and install officers who will direct the traffic to their advantage. (Lippmann, 1937, 283)
75In this view, the purpose of the legislator is to create and improve the rules. The road is a good example as it is an immediate example of a case where order is created by continual expectations about what others will do. This order is created by accepted rules, which allow drivers with their own destinations to coordinate their actions. The rules perform the marvel of drastically reducing the risk of accidents. With society’s increasing complexity, the rule of law becomes more and more necessary, a view that was widely accepted at the Lippmann Colloquium. For example, Rougier made this example a central element of the new doctrine coined as neoliberalism (Audier, 2008, 254). If an overarching standpoint is impossible and the government of society by an authority is viewed as suspicious, general rules—which allow rather than coerce individual choices—are a convenient solution. Both Lippmann and Hayek substituted obedience to rules in place of obedience to an individual, arbitrary commandment.
76In 1944, Hayek additionally explicitly defended the rule of law, quoting Kant and Voltaire: “As Immanuel Kant put it (and Voltaire expressed it before him in very much the same terms), ‘Man is free if he needs to obey no person but solely the laws’” (Hayek, 1944, 86). Consequently, the legal conception of Hayek drew on Lippmann’s work. The advantage of this conception of the law is that the state is limited by its own rules: it is thereby an instrument of disempowerment of the state (not of citizen). For Hayek, the rule of law was equivalent to the rules of the game:
Within the known rules of the game the individual is free to pursue his personal ends and desires, certain that the powers of government will not be used deliberately to frustrate his efforts. (Hayek, 1944, 75)
77The major consequence of this for Hayek is that the state should not intervene in the economic process: the general rules promulgate equality before the law and recognize the laws of property—which create the market—but forbid interventions with a substantial and determinate end (because if a specific end is targeted that implies that we know what is good). As Hayek expressed it:
A necessary, and only apparently paradoxical, result of this is that formal equality before the law is in conflict, and in fact incompatible, with any activity of the government deliberately aiming at material or substantive equality of different people, and that any policy aiming at a substantive ideal of distributive justice must lead to the destruction of the Rule of Law. (Ibid., 82)
78In order to be egalitarian, the law must be blind. As redistribution implies that the government targets a specific group, for Hayek this is not consistent with the concept of rule of law.
79Lippmann’s and Hayek’s emphasis on general laws and the rules of the game has three roles: (1) an epistemic role, as general rules provide a point of reference for individual expectations, (2) a constitutive role, as the legal framework shapes the economic order with the recognition of rights and enforceable contracts, and (3) a political role, as rules protect individual freedoms against coercion from the state or the democratic decisions of the majority.
- 18 A knowledgeable reader of Lippmann (Audier, 2012, 85; Slobodian, 2018, 79) may object here that Lip (...)
80Consequently, general rules of law acquired central importance at every level of this new liberal philosophy. These thinkers defend the concept based on a new anthropological and epistemological diagnosis and enlarge its function compared with the traditional concept—running from the Magna Carta in 1215 through Edward Coke to John Locke and many others. This concept not only limits sovereign power, but is seen as a norm of government in order to avoid the dangers of democracy. Rules are not solely limiting, but conditions that make possible the functioning and existence of society. They not only enable the coordination of individual desires and needs, but first and foremost create a common affiliation to the community that shares these rules, which shape the behaviour and expectations of the individuals. Thus, Lippmann’s emphasis on the role of social and legal rules contributed to the neoliberal questioning of the necessary preconditions for the working of the market that appeared after 1938.18
81The relations between Lippmann and Hayek, two important contributors to the renewal of liberalism, are illuminating in understanding their defence of liberalism on new anthropological and epistemological grounds. Hayek in particular acknowledged the importance of Lippmann in his own intellectual trajectory. For instance, when Hayek wrote to Lippmann in 1959 to send him a copy of The Constitution of Liberty, he added: “This book is the final outcome of a trend of thought which may be said to have started twenty-years ago when I read The Good Society” (Hayek to Lippmann, December 18, 1959).
82Indeed, I argue that Lippmann was a major contributor to the reconstruction of liberalism, not just loosely ‘influencing’ other neoliberals, but actively exchanging with them, a connection that has also been demonstrated by the works of Jackson (2012) and Clavé (2015). Lippmann’s importance must be understood theoretically, as his social philosophy provided answers for key neoliberal questions, namely with his theory of rules. As he expressed in a letter to Lionel Robbins, while the previous works of Hayek and Mises were of paramount importance in criticizing collectivism, “they did not, it seems to me, arrive at a positive theory of liberalism which gives a method of social control consistent with the exchange economy” (Lippmann to Robbins, March 24, 1937). This method of social control is the result of Lippmann’s own social philosophy developed during the 1920s and explains why the neoliberals were so enthusiastic about his work.
83Nevertheless, Lippmann was a shooting star in the neoliberal nexus. He did not participate in the foundation of the Mont Pelerin Society, nor did he attend its other meetings. His secretary cancelled his membership to the society in 1967. Moreover, between 1937 and 1967 Lipmann’s interest in neoliberalism faded quickly. In 1941, most of the correspondence he initiated shortly before or after the publication of The Good Society was over, and his intellectual interest shifted to international politics and affairs. He did not engage in the institutional construction of neoliberalism, in contrast to Rougier or Hayek, who could be considered the architects of early neoliberalism. Nevertheless, his importance should not be underestimated, as his work shaped the key neoliberal question, made explicit in 1947 in the Statement of Aims of the Mont Pelerin Society, namely the problem of the appropriate rules liberals should promote in order to introduce and refine competition and the working of the market.
- 19 The recent work of Boettke and Candela (2019), and more broadly the symposium ‘Lessons for Liberali (...)
84Hayek and Lippmann exchanged ideas because they shared similar anthropological and epistemological perspectives that allowed a new defence of liberalism during the 1930s and 1940s. The term ‘neoliberalism’, coined in 1938, seems appropriate to describe this new liberal position. The thinking they developed in this context fed into the thinking of other liberals—who sometimes developed very similar positions (for instance, Eucken and Simons: see Koehler and Kolev, 2011). For instance, the concept of the rules of the game related to the problem of social and economic coordination was largely incorporated in the works of other liberals: James Buchanan drew extensively on these conceptions in his own economic and philosophical work, using the same metaphors. This period of neoliberal thought left to posterity not only answers but also ambiguities: for example, the question of how ‘good rules’ of the game can be determined if an overarching standpoint is impossible. In this perspective, Hayek’s later work, The Constitution of Liberty as well as Law, Legislation and Liberty, can be read as a continuation of this conversation with Lippmann.19
This paper benefited from the readings and feedbacks of Thomas Delcey, Martin Beddeleem, Arnaud Milanèse and Claude Gautier, as well as from the participants to the HES 2019’s session on liberalism, specifically Scott Scheall and José Ricardo Fucidji. I want to thank the two reviewers and the editors of the journal, who helped me to improve the article significantly. I am indebted to Bruce Caldwell, who invited me to the Center for the History of Political Economy, in Duke University, in February 2020, which allowed me to access the Lippmann’s microfilms and to Stefan Kolev, for his help and advices while I was doing archival work. Finally, I want to thank Félix Zourabichvili, Elise Bradbury and François Allisson for the copyediting.