As I wrote here, this isn’t a blog about Ronald Reagan. It’s a blog inspired by a quote from Reagan.
But, chapter seven in F.A. Hayek’s The Fatal Conceit, entitled Our Poisoned Language, reminded me of my second favorite quote from Reagan (my first favorite is at the top of this page).
All systems are capitalist. It’s just a matter of who owns and controls the capital – ancient king, dictator or private individual.
I try to avoid discussion about whether society is socialist, capitalist, communist, fascist or some other common label. I find those discussions to be unproductive red herrings that avoid getting to the root of the matter. Each word has textbook definitions and also has much baggage attached. I find that most discussions about these terms equivocate between the text book definitions and the baggage and rarely apply exactly to any specific group of people.
In his quote, Reagan drops the textbook definition of capitalism and all its baggage to get to the heart of what truly differentiates large groups of people that form political economies — who owns and controls the capital.
In chapter seven of The Fatal Conceit, Hayek explains that the words we use to describe the actions of individuals interacting with each other, words like markets or society, give the impression that these groups of individuals are something they are not — a single unit with a centralized mind or central goal. And this gives rise to some people using that image to convince others that this single unit should have their overall goals.
Steven Landsburg expressed this idea well in his book The Big Questions, which I quoted here, by explaining that folks imagine that organizing an economy is like organizing a birthday party, which it is not.
Here’s Hayek’s words to explain the phenomenon (p. 113):
Thus the word ‘society’ has become a convenient label denoting almost any group of people, a group about whose structure or reason for coherence nothing need be known — a makeshift phrase people resort to when they do not quite know what they are talking about. Apparently a people, a nation, a population, a company, an association, a group, a horde, a band, a tribe, the members of a race, of a religion, sport, entertainment, and inhabitants of any particular place, all are, or constitute societies.
To call by the same name such completely different formations as the companionship of individuals in constant personal contact and the structure formed by millions who are connected only by signals resulting from long and infinitely ramified chains of trade is not only factually misleading but also almost always to model this extended order on the intimate fellowship for which our emotions long.
The crucial difference overlooked in this confusion is that the small group can be led in its activities by agreed aims or the will of its members, while the extended order that is also a ‘society’ is formed into a concordant structure by its members’ observance of similar rules of conduct is the pursuit of different individual perspectives.