Objectivism & Politics, Part 54

Ayn Rand contra Conservatism 8. I detailed in my last post the differences between Objectivism and the Tragic Vision of non-ideological conservatism. I now examine the extent to which Rand’s philosophy accords with Sowell’s “unconstrained” vision, which Steven Pinker renamed the Utopian Vision:

In the Utopian Vision, psychological limitations are artifacts that come from our social arrangements, and we should now allow them to restrict our gaze from what is possible in a better world. Its creed might be “Some people see things as they are and ask ‘why’?; I dream things that never were and ask why not?’” The quotation is often attributed to the icon of 1960s liberalism, Robert Kennedy, but it was originally penned by Fabian socialist George Bernard Shaw (who also wrote, “There is nothing that can be changed more completely than human nature when the job is taken in hand early enough”)….

In the Utopian vision, human nature changes with social circumstances, so traditional institutions have no inherent value. That was then, this is now. Traditions are the dead hand of the past, the attempt to rule from the grave. They must be stated explicitly so their rationale can be scrutinized and their moral status evaluated. And by that test, many traditions fail….

Radical political reform … will be more or less appealing depending on one’s confidence in human intelligence and wisdom. In the Utopian Vision, solutions to social problems are readily available…. If we already know the solutions, all we have to do is choose to implement them, and that requires only sincerety and dedication. By the same logic, anyone opposing solutions must be motivated by blindness, dishonesty, and callousness. [The Blank Slate, 289-292]

While at first glance Rand may not be exactly a perfect fit for the Utopian Vision, she does have several points in common. Indeed, we could argue that she represents a unique position within the Utopian Vision fold. Whereas most Utopians tend to be collectivist in orientation, Rand swings to the other extreme, adopting an atomistic form of individualism. Another important difference is that Rand explicitly rejects the social determinism of the Utopian Left. Yet these two divergences on Rand’s part, instead of pushing her closer to the Tragic Vision, merely lead her to refashion the Utopian Vision to suit her own personal tastes. Instead of human nature changing with social circumstances, for Rand, human nature (i.e. the psychological attributes widespread and distinctive within the human species) changes via the philosophical premises that dominate society. Human beings may have free will, but, according to Rand, most people fail to make use of it. Because they don’t sufficiently focus their minds, they end up letting themselves become pawns of the dominant intellectual trends of their age. If a man refuses to think for himself, he becomes a dupe of those who do. And since the premises that are most critical in developing the character and beliefs of the individuals who make up society must ultimately have been developed by some philosopher, philosophy becomes the prime determinant of character and society. Hence, Rand shares with Utopians on the Left the belief that there exist few if any biological constraints to the development and even the direction of psychology. She simply differs with the Left on how means by which an individual’s psychology is determined.

Rand also shares the Utopian’s derision of any tradition or customary usage that can’t provide an explict rationale. Consider Rand’s take on Common Law. "Common law is good in the way witchdoctors were once good,” she once insisted: “some of their discoveries were a primitive form of medicine, and to that extent achieved something. But once a science of medicine is established, you don't return to witchdoctors. Similarly, common law established--by tradition or inertia-- some proper principles (and some dreadful ones). But once a civilization grasps the concept of law, and particularly of a constitution, common law becomes unnecessary and should not be regarded as law. In a free society, anyone can have customs; but that's not law." [Ayn Rand Answers, italics added]

Compare that to Hayek’s view of common law, as elucidated by Peter J. Boettke:

[Hayek’s] political and legal theory emphasized that the rule of law was the necessary foundation for peaceful co- existence. He contrasted the tradition of the common law with that of statute law, i.e., legislative decrees. He showed how the common law emerges, case by case, as judges apply to particular cases general rules which are themselves products of cultural evolution. Thus, he explained that embedded within the common law is knowledge gained through a long history of trial and error. This insight led Hayek to the conclusion that law, like the market, is a “spontaneous” order—the result of human action, but not of human design.

Rand’s rationalism blinds her to the wisdom and experience embedded in common law, while at the same time making her over-estimate the degree to which “reason” can figure out the complexities involved in developing the laws necessary to maintain and free and prosperous social order.

Adherents of the Utopian Vision tend to regard their those who don’t share their vision as guilty of stupidity or dishonesty. We find a correlate of this view in the Objectivist view that everyone who disagrees with them is either guilty of an “error of knowledge” or “evasion.” In practice, Objectivist tend to believe that most people who differ with them are guilty of evasion and hence are worthy of moral condemnation. Although a reasonable person might have doubts at to whether a given individual is guilty of an error of knowledge or an evasion (after all, no individual can get inside another person's head), Objectivists seem to believe that they have special powers in this arena, and don't shrink from drawing conclusions about the inner psychology even of people they hardly know. As Peikoff explained:

[Errors of knowledge] are not nearly so common as some people wish to think, especially in the field of philosophy. In our century, there have been countless mass movements dedicated to inherently dishonest ideas — e.g., Nazism, Communism, non-objective art, non-Aristotelian logic, egalitarianism, nihilism, the pragmatist cult of compromise, the Shirley MacLaine types, who “channel” with ghosts and recount their previous lives; etc. In all such cases, the ideas are not merely false; in one form or another, they represent an explicit rebellion against reason and reality (and, therefore, against man and values).… The originators, leaders and intellectual spokesmen of all such movements are necessarily evaders on a major scale; they are not merely mistaken, but are crusading irrationalists [and therefore are evil]. [“Fact and Value”]

So, in conclusion, although Rand and her philosophy of Objectivism do not perfectly accord with the sort of Utopian Vision advocated by the political Left, the similarities are more striking and important than the differences. Rand accepts the view, common to utopian leftists, that human character is malleable and perfectible; she demands a rationale for everything in law and morality, even when this is either impractical or inappropriate; and she (and her orthodox followers) tends to demonize her opponents as evil. It is no exaggeration to suggest that Objectivism, in at least some respects, dangerously veers toward the Utopian Vision.

Objectivism & Politics, Part 46

Individual Rights 5: Burke contra Rand. Edmund Burke regarded with great suspicion any theory of rights which appeared founded, not on extensive experience, but merely on rationalistic speculation and “metaphysics”:

Government is not made in virtue of natural rights [Burke wrote], which may and do exist in total independence of it, and exist in much greater clearness and in a much greater degree of abstract perfection; but their abstract perfection is their practical defect…. Government is a contrivance of human wisdom to provide for human wants [such as protection against force and fraud]. Men have a right that these wants should be provided for by this wisdom. Among these wants is to be reckoned the want, out of civil society, of a sufficient restraint upon their passions. Society requires not only that the passions of individuals should be subjected, but that even in the mass and body, as well as in the individuals, the inclinations of men should frequently be thwarted, their will controlled, and their passions brought into subjection. This can only be done by a power out of themselves, and not, in the exercise of its function, subject to that will and to those passions which it is its office to bridle and subdue. In this sense the restraints on men, as well as their liberties, are to be reckoned among their rights. But as the liberties and the restrictions vary with times and circumstances and admit to infinite modifications, they cannot be settled upon any abstract rule; and nothing is so foolish as to discuss them upon that principle.

Here we have a passage that most Objectivists are incapable of understanding. The typical Objectivist will read the passage “Government is a contrivance … to provide for human wants” as a license to provide for any and all wants; but this is not at all what Burke means, as anyone familiar with writings will understand at an instant. Burke is merely reiterating the view, common among the English in the 18th century, that the purpose of the government is to serve the citizens of the community, rather than the citizens serving the government.

Objectivists would also likely misinterpret Burke’s assertion that “the inclinations of men should frequently be thwarted” as a license to tyranny. Again, this would be an error. Burke is merely stating a political fact. Human passions cannot be allowed to run wild in a civilized society. As Burke put it: “Men are qualified for civil liberty in exact proportion to their disposition to put moral chains on their own appetites. Society cannot exist unless a controlling power upon will and appetite be placed somewhere, and the less of it there is within, the more there is without. It is ordained in the eternal constitution of things that men of intemperate minds cannot be free. Their passions forge their fetters.”

Burke is here asserting a different view of human nature, one that clashes with Rand’s view that man is a “rational animal.” For Burke, human civilization is a delicate contrivance that, if mismanaged, can easily dissolve into anarchy. This is why Burke favors cautious reform . In politics, it is so easy to make things worse, yet very difficult to make things better.

But the most important statement in the passage is where Burke writes “ as the liberties and the restrictions vary with times and circumstances and admit to infinite modifications, they cannot be settled upon any abstract rule.” This statement constitutes one of the essential differences between Burke and Rand. Rand believes (at least implicitly) that political and social reality is simple enough to be adequately represented in abstract principles derived from “reason” (i.e., conscious deliberate reasonings guided by “logic”). Burke, as an experienced statesmen, knows that Rand’s view of political and social reality is false: the reality confronting the statesman is simply far too complex to be summed up in a few abstract rules.

With this insight in hand, Burke resumes his disquisition on rights:

The science of constructing a commonwealth, or renovating it, or reforming it, is, like every other experimental science, not to be taught a priori. Nor is it a short experience that can instruct us in that practical science, because the real effects of moral causes are not always immediate; but that which in the first instance is prejudicial may be excellent in its remoter operation, and its excellence may arise even from the ill effects it produces in the beginning. The reverse also happens: and very plausible schemes, with very pleasing commencements, have often shameful and lamentable conclusions. In states there are often some obscure and almost latent causes, things which appear at first view of little moment, on which a very great part of its prosperity or adversity may most essentially depend. The science of government being therefore so practical in itself and intended for such practical purposes — a matter which requires experience, and even more experience than any person can gain in his whole life, however sagacious and observing he may be — it is with infinite caution that any man ought to venture upon pulling down an edifice which has answered in any tolerable degree for ages the common purposes of society, or on building it up again without having models and patterns of approved utility before his eyes.

These metaphysic rights entering into common life, like rays of light which pierce into a dense medium, are by the laws of nature refracted from their straight line. Indeed, in the gross and complicated mass of human passions and concerns the primitive rights of men undergo such a variety of refractions and reflections that it becomes absurd to talk of them as if they continued in the simplicity of their original direction. The nature of man is intricate; the objects of society are of the greatest possible complexity; and, therefore, no simple disposition or direction of power can be suitable either to man's nature or to the quality of his affairs. When I hear the simplicity of contrivance aimed at and boasted of in any new political constitutions, I am at no loss to decide that the artificers are grossly ignorant of their trade or totally negligent of their duty. The simple governments are fundamentally defective, to say no worse of them. If you were to contemplate society in but one point of view, all these simple modes of polity are infinitely captivating. In effect each would answer its single end much more perfectly than the more complex is able to attain all its complex purposes. But it is better that the whole should be imperfectly and anomalously answered than that, while some parts are provided for with great exactness, others might be totally neglected or perhaps materially injured by the over-care of a favorite member.

The pretended rights of these theorists are all extremes; and in proportion as they are metaphysically true, they are morally and politically false. The rights of men are in a sort of middle, incapable of definition, but not impossible to be discerned. The rights of men in governments are their advantages; and these are often in balances between differences of good, in compromises sometimes between good and evil, and sometimes between evil and evil. Political reason is a computing principle: adding, subtracting, multiplying, and dividing, morally and not metaphysically or mathematically, true moral denominations.

Burke would regard Rand’s politics as merely “metaphysical” (by which he would mean: founded, not on experience, but on rationalistic speculation). Rand’s notion of establishing the state on her very simple concept of individual rights—a concept, moreover, which can never be compromised upon, regardless of the consequences—Burke would find as “fundamentally defective.” And Rand’s implicit confidence in her own reasoning powers, which allowed her to arrive at principles concerning matters that she knew little if anything about, Burke would view with dismay. In contradistinction to the speculative rationalism of Rand’s politics, Burke would assert his most element insight—namely, that the science of government requires extensive (and intensive) experience, “even more experience than any person can gain in his whole life, however sagacious and observing he may be.” This is the key insight that most differentiates the political thinking of Burke, Hayek, Oakeshott, Sowell, Michael Polanyi, and other sophisticated conservatives from Rand and her disciples.

Objectivism & Politics, Part 27

Politics of Human Nature 11: Humanitarianism and tribalism. In an earlier post, I quoted Rand characterizing “ the morality of altruism” as ”a tribal phenomenon.” Here we find an example of Rand being right for the wrong reasons. Yes, it is likely that the altruist-humanitarian syndrome has its roots in our tribal process; but it is not, as Rand suggests, a “psycho-epistemological” issue deriving from “self-arrested, perceptual mentality.” On the contrary, it is probably an evolutionary phenomenon. Those beliefs that Rand associates with “altruism” (e.g., socialism, collectivism, tribalism, coercive humanitarianism) were nurtured in the crucible of evolution, in that long period when human beings foraged and hunted for food in small bands of warring tribes. As Hayek, in The Fatal Conceit puts it:

… man’s instincts … were not made for the kind of surroundings, and for the numbers, in which he now lives. They were adapted to life in the small roving bands or troops in which the human race and its immediate ancestors evolved during the few million years while the biological constitution of homo sapiens was formed. These genetically inherited instincts served to to steer the cooperation of the members of the troop, a cooperation that was, necessarily, a narrowly circumscribed interaction of fellows known to and trusted by one another…

Although longer experience may have lent some older members of these bands some authority, it was mainly shared aims and perceptions that coordinated the activities of their members. These modes of coordination depended decisively on instincts of solidarity and altruism… The members of these small groups could thus exist only as such: an isolated man would soon have been a dead man. [11-12]

Now if, as nearly all of science concedes, human beings are largely (if not entirely) the product of evolution, Hayek’s view would seem to be, at the very least, highly probable. In any case, it explains a great deal of what we find in the altruist-humanitarian complex of motivations that animating much of the non-revolutionary left. Combine Hayek’s insight with those of Pareto and Sowell, and we can begin to form a psychopathology of left-wing humanitarianism. This psychopathology provides a far more convincing explanation of the “democratic” forms of socialism, collectivism, and leftist “progressivism” than Rand provides us, with her emphasis on philosophical premises and other will-of-the-wisp abstractions that are too topical to mean anything definite.

Rand seems to have sensed the danger that an evolutionary explanation of social attitudes posed to her philosophy, for she created several rather inept strategies to combat it. Her favorite was her rather absurd definition of “instinct.” Rand held that instincts are an unerring and automatic form of knowledge. This is obviously a definition Rand invented for the purposes of debate. No natural scientist has ever defined instinct in that way. Instincts can refer to any unlearned behavior or emotional propensity, whether in animals or human beings. The assumption that human beings don’t have any such instincts, that their minds are “blank slates” at birth, is not supported by science. Nor does the evidence support Rand’s notion that emotions are the product of ideas. Ideas may influence emotions, but they don’t produce them, as anyone familiar with the most basis psychological evidence regarding infants knows. Human beings do in fact have innate tendencies. The strength and intensity of these tendencies may differ between individuals. But the fact of these tendencies soon becomes obvious to anyone who observes human behavior.

In some people, these tendencies cause them to wish to see their altruistic instincts writ on society at large. Recall what the good people over altruists.org wrote: “We believe that [altruistic modes of behavior] can represent a more stable, sustainable solution than the money-focused, model of competitive capitalism.” Why do altruists, humanitarians, and other so-called do-gooders believe in such a thing? It is neither a rational nor an evidence-based conviction. All logic and fact point to the inescapable conclusion, as Hayek puts it, that to follow the altruist-socialist path “would destroy much of present humankind and impoverish much of the rest.” So it should be obvious that these altruists, these humanitarians, these socialists (call them what you will: the name’s not important, only the thing in reality that the name represents) are animated by a non-rational source—that is, by (again to quote Hayek) “an atavistic longing after the life of the noble savage”—a life which is, after all, more more gratifying to innate human instincts and tendencies. These instincts and tendencies are not implanted in the minds of men by intellectuals following the pedant of Königsberg. Thousands of years of evolution put them there. Bad arguments against Kant in the manner of Rand will do little to mitigate their pernicious influence.

Objectivism & Politics, Part 6

Politics and the non-rational 2: constructivism. In the last "Objectivism and Politics" post I introduced the concept of non-logical conduct, which I contended is an important element in what happens in society. Now while Rand probably might not have much cared for the notion of non-logical conduct, it is not, in and of itself, contrary to Objectivism. An Objectivist, for instance, could easily accept the fact of non-logical conduct and its important affect on society. What he would have to add, as a sort of caveat to this acceptance, is the conviction that this non-logical conduct is bad society; that is, indeed, primarily what is wrong with society. “Yes, non-logical conduct is an important fact about society,” this Objectivist might admit. “But it’s precisely because people are ‘non-logical’ that things are so bad. If we could teach people not to be non-logical in their conduct, we would have a much better world.”

There are two problems with this view of non-logical conduct.

1. It is not clear, and certainly cannot be assumed a priori, that non-logical conduct in all instances is “bad.”
   
2. A society based solely on logical conduct and “reason” simply is not possible.
   

In this post, I will examine the first of these two problems.

Despite Rand’s vehement denial, it simply isn’t true that “reason” (i.e., consciously deliberated reasoning which applies logical reasonings to facts) can be the only guide to one’s life. Reason tends to break down and falter whenever it is facing any issue of great complexity and uncertain outcomes. Few things are quite so complicated as the social order. To believe that one can, through “reason,” construct a rational social order is to commit what F. A. Hayek called “the fatal conceit.” Civilization itself is the product of “non-logical” conduct. Nor does can it be otherwise. As Hayek notes:

We flatter ourselves undeservedly if we represent human civilization as entirely the product of conscious reason or as the product of human design, or when we assume that it is necessarily in our power deliberately to re-create or to maintain what we have built without knowing what we are doing…. Many of the greatest things man has achieved are the result not of consciously directed thought, and still less the product of a deliberately coordinated effort of many individuals, but of a process in which the individual plays a part which he can never fully understand. They are greater than any individual precisely because they result from the combination of knowledge more extensive than a single mind can master….

[The] belief that processes which are consciously directed are necessarily superior to any spontaneous process is an unfounded superstition…. [The] spontaneous interplay of social forces sometimes solves problems which no individual mind could consciously solve, or perhaps even perceives, and if they thereby create an ordered structure which increases the power of the individuals without having been designed by any one of them, they are superior to conscious action… Insofar as such processes are capable of producing a useful order which could not have been produced by conscious direction, any attempt to make them subject to such direction would necessarily mean that we restrict what social activity can achieve to the inferior capacity of the individual mind….

It may prove to be far the most difficult and not the least important task for human reason rationally to comprehend its own limitations. It is essential for the growth of reason that as individuals we should bow to forces and obey principles which we cannot hope fully to understand, yet on which the advance and even the preservation of civilization depend. Historically this has been achieved by the influence of the various religious creeds and by traditions and superstitions which made men submit to those forces by an appeal to his emotions rather than his reason. The most dangerous stage in the growth of civilization may well be that in which man has come to regard all these beliefs as superstitions and refuses to accept or to submit to anything which he does not rationally understand. The rationalist whose reason is not sufficient to teach him those limitations of the powers of conscious reason, and who despises all the institutions and customs which have not been consciously designed, would thus become the destroyer of the civilization built upon them. This may well prove a hurdle which man will repeatedly reach, only to be thrown back into barbarism. [The Counter-Revolution of Science, 149-163]

Hayek’s discussion is rather abstract, so we might do well to flesh it out a bit. His focus is primarily on those who believe that all institutions ought to be based on “reason” (i.e., “conscious direction”). He believes that the desire to found the institutions of society entirely on “reason” is incompatible with freedom. “Those who believe that all useful institutions are deliberate contrivances [of reason] and who cannot conceive of anything serving a human purpose that has not be consciously designed [i.e., not product of logical conduct] are almost of necessity enemies of freedom.” [Constitution of Liberty, 61]

Now while Rand is not an enemy of freedom, her belief in the “supremacy” of reason leads her to a kind of social constructivism that is more compatible with the social views of the political left. Rand’s constructivism arises mostly clearly in remarks she made about common law:

Common law is good in the way witchdoctors were once good: some of their discoveries were a primitive form of medicine, and to that extent they achieved something. But once a science of medicine is established, you don’t return to witchdoctors. Similarly, common law established—by tradition or inertia—some proper principles (and some dreadful ones). But once a civilization grasps the concept of law, and particularly of a constitution, common law becomes unnecessary (p. 44). [because "reason" provides a better guide than established usage.]

In other words, Rand is admitting that in the past there was some real utility in non-logical conduct, but now that “rational” law has been (or ought to be) established, we can do away with Hayek’s spontaneous formations and found everything on “reason.” But if this is true, why stop with the law? Why not found economic policy on “reason.” Yes, I know, Objectivists believe that a rational economic policy entails laissez-faire. But that is a minority opinion among those believing in the supremacy of reason, most of whom are interventionists or socialists of one stripe or another. Before World War II, many intellectuals were convinced that “reason” supported socialism, because a system of production consciously directed and planned by experts seemed more “rational” then the “anarchy” of the market. Yet the fact remains that the so-called “blind” forces of the market do a much more efficient job of coordinating the factors of production than conscious reasoning on the part of a central planner ever could. An economy is far too complex to be governed by “reason.” Non-logical conduct therefore has an important place and society, and the prejudice against it is simply that: a prejudice.

Objectivism & Economics, Part 17

Laissez-faire as a rationalization for fraud. In her essay “The Nature of Government,” Ayn Rand wrote,

A unilateral breach of contract involves an indirect use of physical force: it consists, in essence, of one man receiving the material values, goods or services of another, then refusing to pay for them and thus keeping them by force (by mere physical possession), not by right—i.e., keeping them without the consent of their owner. Fraud involves a similarly indirect use of force: it consists of obtaining material values without their owner’s consent, under false pretenses or false promises.

We will ignore Rand’s odd decision to describe fraud as an “indirect use of physical force” and instead merely note that Rand opposed fraud. While we congratulate Rand for opposing fraud, nonetheless there are serious questions at to her willingness to effectively combat it. It is one thing to oppose fraud verbally; the real question is: What are you willing to do about it?

Alex Epstein and Yaron Brook attempt to answer this question when they write:

In an unfettered free market the desire for profit is satisfied by honest, long-range, rational behavior.... As for the real swindlers, existing laws against force and fraud are sufficient to protect us. If our politicians are indeed concerned about the stock market, let them demonstrate it by eliminating, not adding, regulations and making the market truly free.

Epstein and Brook would have us believe that enforcing “existing laws” is “sufficent” in the sempeternal war against fraud. Yet what does this mean? What specific laws are Epstein and Brook talking about? And why, in the very next sentence, do they insist on the elimination of regulations (that is, of laws) in order to make markets “free”?

One of the main goals of regulation is to increase the integrity and transparency of markets. As Charles Morris explains in Trillion Dollar Meltdown:

It is the transparency and integrity of American financial markets that has made them such a magnet for foreign investment… That hard-won reputation was, to a great extent, the consequence of generally superb American market regulations, epitomized by the SEC.

The American regulatory scheme is based on the insight that government can best support financial markets by ensuring that investors get accurate information…. After a quarter century of antiregulatory zealotry, however, and a parade of fiascos from the S&L crash through the Enrons and WorldComs … the credibility of that system, and with it the attractiveness of American markets, is at risk.

Naive intellectuals like Rand, Epstein and Brook apparently believe that, as long as they ennuciate their disapproval of fraud, they won’t have to worry about anyone using their laissez-faire ideology as a rationalization for crippling the ability of the government to combat fraud. Yet this is part of what happened in the current economic crisis. The deregulation of markets and hostility toward government oversight is an important factor in credit market meltdown of the last year. Many unscrupulous operators in the markets become anti-regulatory and laissez-faire zealots for the simple reason that they wish to do as they like, even if doing as they like means committing fraud. They use laissez-faire ideologies such as Rand’s to rationalize crippling the government’s ability to combat fraud.

While Rand and her disciplines may consider themselves opposed to fraud, they certainly do not appear particularly eager to prevent such abuses. Indeed, they seem to oppose many of the attempts on the part of the government to embattle fraud. Take, for example, Leonard Peikoff’s hostility toward the SEC. On his nineties radio show on KIEV in Los Angeles he stated his desire to see the SEC abolished and declared his approval for insider trading.

What Rand, Peikoff, and other Objectivists fail to understand how difficult it is to enforce laws against fraud. Not every act of fraud is easy to detect or, even when detected, easy to prove in a court of law. White collar criminals, in contradistinction to common street criminals, are usually very intelligent and are very good at hiding their tracks. Corporations in which criminal activity has occurred sometimes, out of embarrassment and fear of Stock Market repercussions, try to conceal the criminal act. Investigations and trials of corporate criminals are very complex and expensive. The complexity of market transactions can serve as cover for fraudulent activity—which is one of the reasons why the SEC tries to keep markets as transparent as possible. They also make government oversight a necessary component to government regulation of markets.

In the laissez-faire model embraced by Rand, the courts are assigned the function of protecting private property and contracts from “breach or fraud.” In other words, the primary (if not sole) weapon for combatting fraud is the lawsuit. Fraud would, presumably, under such a vision of things, become an entirely civil matter, which of course would make easier for fraudulent economic behavior, along with other acts of questionable honesty, to go unpunished. The government and its citizens would be powerless to deal with any types of fraud that are not easily identified by the courts. As any in depth analysis of the relevant economic facts would demonstrate, it is not possible to regulate economic action solely (or even primarily) through lawsuits. That would merely bring about a society sunk in a morass of legal pettifoggery.

The role of the government in combatting fraud must go well beyond the old laissez-faire model of property rights and “freedom of contract.” As F. A. Hayek expressed it in The Road to Serfdom:

To create conditions in which competition will be as effective as possible, to supplement it where it cannot be made effective, to provide services which, in the words of Adam Smith, “though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expense to any individual or small number of individuals”—these tasks provide, indeed, a wide and unquestioned field for state activity. In no system that could be rationally defended would the state just do nothing [beyond protecting property rights and enforcing contracts]. An effective competitive system needs an intelligently designed and continuously adjusted legal framework as much as any other. Even the most essential prerequisite of its proper functioning, the prevention of fraud and deception (including exploitation of ignorance), provides a great and by no means yet fully accomplished object of legislative activity.