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TGIF: Does the Market Exhibit Cooperation?


The American Heritage Dictionary defines the verb cooperate as “To work or act together toward a common end or purpose” and “To form an association for common, usually economic, benefit.” Note that these definitions seem to require awareness about some joint effort to achieve a common objective.

This would seem to leave little room for the social cooperation that libertarians emphasize when describing what Adam Smith called the “system of natural liberty.” Indeed, F.A. Hayek stressed that what goes on in the market is precisely not the striving for common goals and that individual awareness of all the goals aimed at need not be — and in fact never is — present.

In volume 2 of Law, Legislation, and Liberty (1976), Hayek wrote,

It is often made a reproach to the Great Society and its market order that it lacks an agreed ranking of ends. This, however, is in fact its great merit which makes individual freedom and all it values possible. The Great Society arose through the discovery that men can live together in peace and mutually benefiting each other without agreeing on the particular aims which they severally pursue.

Hayek went on to say,

In the Great Society we all in fact contribute not only to the satisfaction of needs of which we do not know, but sometimes even to the achievement of ends of which we would disapprove if we knew about them. We cannot help this because we do not know for what purposes the goods or services which we supply to others will be used by them.

Considering that the market order itself is not a conscious collaboration on behalf of a unitary set of social ends, may one speak literally of social cooperation? George Mason University economics professor Daniel Klein thinks not. In his provocative book, Knowledge and Coordination: A Liberal Interpretation (a summary of the thesis is here), Klein acknowledges that advocates of the market going back to Adam Smith in the 18th century used the language of cooperation:

Adam Smith said the day laborer obtains his woolen coat by virtue of “assistance and co-operation of many thousands,” an expansive notion of cooperation reiterated by Thomas Hodgskin and Richard Whately, but when Smith observes that man “stands at all times in need of the co-operation and assistance of great multitudes,” he says, “while his whole life is scarce sufficient to gain the friendship of a few persons,” suggesting that it isn’t simply cooperation that yields him the woolen coat. [Emphasis added; citations omitted.]

Many other thinkers, Klein notes, spoke in terms similar to Smith’s, including Edward Gibbon Wakefield (who distinguished deliberate “simple co-operation” from unintended “complex co-operation”), Frédéric Bastiat, Henry George, Philip Wicksteed, H.C. Macpherson, and Milton and Rose Friedman. Ludwig von Mises should be on the list. Indeed, he almost called his grand treatise on economics Social Cooperation rather than Human Action.

In contrast, Klein writes, “Karl Marx rightly emphasized that the capitalist system, in the whole, was not cooperation — and ultimately he condemned it for that. ‘[A]ll labour in which many individuals cooperate necessarily requires a commanding will to coordinate and unify the process … much as that of an orchestra conductor.’”

I’m not sure why Marx should be taken as authoritative on the meaning of cooperation. For that matter, I’m not sure whether Marx here refers to the free market or the mercantilist/corporatist system that has historically been called capitalism.

At any rate, Klein prefers to “define cooperation as entailing mutual consciousness among the cooperators.” But why, if the word has been used more expansively since at least the 18th century? Social cooperation is no neologism. Indeed, Klein quotes Max Hirsch’s 1901 book, Democracy versus Socialism, which stated,

The co-ordination of efforts may, however, take place consciously or unconsciously.… While conscious co-operation utilises only an insignificant part of the intelligence of the co-operators, unconscious co-operation utilises the whole sum of their individual intelligences. The latter, therefore, is a higher and more efficient form of co-operation, and its product must be superior to that of the former.

All of this prompts Klein to ask,

Is it semantically legitimate to regard Wakefield’s “complex cooperation” or Hirsch’s “unconscious cooperation” as cooperation at all? In defending the presumption of liberty, classical liberals need to distinguish mutual and concatenate coordination, so as to clarify the meaning of cooperation. If they wish to praise the free enterprise system as a system of cooperation, if they wish to talk like Hodgskin, Whately, Bastiat, George, Wicksteed, and the Friedmans, they had better be prepared to explain how two people who have no mutual consciousness, who know nothing of each other, can be said to be cooperating.

Fair enough. Clarity is a virtue. There is certainly a difference between the cooperation that goes on within a firm and the cooperation that goes on among distant strangers within a catallaxy. When necessary, we may qualify the term with words like “conscious” or “implicit.” But I see no case for watering down the market-as-cooperation theme by saying, as Klein wishes to do, that it is “allegorical.” When I describe the market order as a grand cooperative process to nonlibertarians, I encounter no confusion.

But perhaps I’ve conceded too much to Klein. While there is surely a difference between the cooperation in a firm and the cooperation in a catallaxy, they may not be quite as different as I’ve allowed. To be sure, parties to a transaction are not united to further a common end, but they are united (if temporarily) to help each other further their separate ends. “I’ll help you if you help me” sounds like cooperation. Since the market is a series of such exchanges, there’s no reason for people not to see themselves as engaging in mutually beneficial activities — that is, cooperating with strangers for purposes they may never know. As Klein himself writes, “They are potentially made aware that they are taking part in mutually coordinated action.”

Going further, there is no reason why people can’t figure out that the catallaxy, “in the whole” — the division of labor, the price system, etc. — provides a framework for cooperation, in which persons who differ over the value of particular goods realize through their trading that, at a deeper level, they have a common interest in the system of private property and free exchange. If such thoughtful men as Frédéric Bastiat and Leonard Read could arrive at this truth, so can all thoughtful people. It doesn’t require highly technical information.

Still, Klein is uneasy at a forthright assertion that “the free economy [is] a system of cooperation.” Why? Because

it entails myriad instances of cooperation, but it also entails myriad instances of competition. It entails myriad instances of deception and misrepresentation. It entails a lot of things, not just instances of cooperation.

I am surprised by this response. The presence of deception and misrepresentation doesn’t refute the insight that the market order, in the whole, is a form of cooperation. As for competition, it’s the complement, not the opposite, of cooperation. Competition is what you have when people are free to choose with whom to cooperate.

Dictionaries are descriptive, not prescriptive; they reflect usage. The word cooperate may predominantly (though as we’ve seen, not exclusively) be used in the sense given in the American Heritage, but this does not mean there isn’t enough of a “family resemblance“ (Wittgenstein’s term) between explicit cooperation and what goes on in the market to justify our application of the term to the catallaxy.

In the end I’m not sure it matters whether social cooperation is an “allegorical kind of cooperation,” an analogy, or a reasonable (and seasoned) extension of the concept. To me, it seems much more than an allegory, and I disagree with Klein that unless we fess up to allegory we will 1) “cut off [our] inquiry,” 2) be unable to “handle … challenges to our talk of communication and cooperation,” and 3) appear “unattuned to the social.” But if social cooperation is “only” allegorical, what is it an allegory for? If you were to describe the referent, I don’t see how you could escape sounding as though you were describing a form of cooperation.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.