Spontaneous order or central planning? The choice is ours

This speech was delivered in a slightly abridged form on 21 September 2026 in Zurich at the launch of the new book Wer ist der grössere Versager: Markt oder Staat?, co-authored by Štěpán Drábek and Olivier Kessler and published by the Swiss think tank Liberales Institut. The book is available, among other places, from the Liberales Institut: https://www.libinst.ch/product/wer-ist-der-groessere-versager-markt-oder-staat/

“The dispute between the market order and socialism is no less than a matter of survival.”

 

When Friedrich August von Hayek made this assertion in his final book, the fatalistic tone of his words was not accidental. Dealing largely with abstract issues, economists often tend to forget that their ideas exercise a profound influence upon the whole of society. And even more rarely is this fact acknowledged by the public. It is, therefore, our task to remind ourselves that very little else affects the course of the world so significantly as the problems addressed by economists. The most important and consequential among them is indeed the one concerning the choice of social order.

The adoption of the market order, on the one hand, brought about unparalleled prosperity, inconceivable in its achievements to previous generations. There is no exaggeration in saying that the recognition of and support for the institutions of private property, voluntary exchange and division of labour, which ultimately led to the abolition of serfdom and the replacement of the arbitrary power of superiors by the rule of law, saved more lives than Sir Alexander Fleming’s discovery of penicillin. A ridiculous statement? Well, it may appear so only because, while the discovery of antibiotics had tangible benefits, the effects of a spontaneous order are abstract and must be traced deductively by deliberate intellectual effort. However, the abstract nature of economic phenomena by no means diminishes their significance. On the contrary, it makes their sound understanding all the more critical.

On the other hand, history offers countless examples of boundless human misery caused by the application of sick economic conjectures. Economists can commit errors of such a magnitude that the adverse effects of their flawed inference may still be felt several generations later. We need not delve too deeply into history to support this statement. The social engineers and constructivists of “the better worlds”, zealously following the thoughts of Comte, de Saint-Simon, Marx, Lenin or Schmitt, have produced a system which wilfully ordered the murder of millions. In this sense, Ludwig von Mises was entirely right to maintain that “more dangerous than bayonets and cannon are the weapons of the mind.”

The nature of the conflict

Let us not forget that the subject of our debate is, in its essence, a conflict between two kinds of order. One is a system in which people pursue their own wishes and are bound by general rules in their actions aimed at fulfilling them, a system that evolved spontaneously without anyone directing the endeavours of individuals, and yet a system of harmonious coordination.

The other is an imposed arrangement in which individuals are forced to serve goals which they did not choose themselves, but which were – so to speak – chosen for them by an authority that presumes the right to determine the destiny of people, believing that in so doing it will bring about a more satisfactory state of affairs. It is an arrangement that purposely ascribes roles to individuals, hoping that only in this way can society possess a sense of organisation, as otherwise it would be doomed to struggle in chaos.

The former is an order founded on the principles of private ownership, personal responsibility with all its implications, mutually advantageous voluntary exchange, peaceful cooperation, entrepreneurship and – to use the words of Wilhelm von Humboldt – “human development in its richest diversity.” The latter, by contrast, rests on the notions of an arbitrary use of force, coercion, centralisation of power, blind obedience to regulations and an artificially imposed hierarchy pretending to be true equality. Here – as Trotsky himself boldly put it – “opposition means death by slow starvation.” At this point, it is clear that the contrast between the two kinds of order can hardly be starker. In fact, far from being merely different from each other, the two constitute the very opposites and are founded on principles which are not only distinct, but intrinsically irreconcilable.

No third or middle way

It may now sound as if I have committed a logical fallacy by artificially suggesting that there is a binary choice between only two alternatives. Following Aristotle’s aurea mediocritas, it is often contended that neither the extreme of a fully free market, on the one hand, nor that of a purely state-dependent economy, on the other, ought to be maintained. It is commonly believed that the reasonable path must lie somewhere in between. However, this notion – despite most sensible people probably believing it to be true – is nothing short of erroneous. Indeed, what may appear to be an unjustified dichotomy is, in fact, the case: no middle way exists.

Such an audacious claim cannot be left undefended. For the contemporary world seems to offer countless examples that would imply its refutation. How can such a position be seriously maintained, you may ask. My argument should be restated in more precise words in order to withstand this intuitive critique. Although a third system combining individual elements of the two can be sustained for a certain period of time, in the long run society tends inevitably to converge towards one of the two orders. This assertion, however, needs further support.

As Mises put it, “there is no such thing as a mixed economy, a system that would stand midway between capitalism and socialism.” Essentially, there are only two methods of organisation of the economic process, as the means of production can either belong to individuals or be controlled collectively, but these principles can never be reconciled with each other. Any compromise between the two – albeit a tempting solution – is but a temporary one. There is no third principle, and therefore no stable balance between the free-market system and central planning. And as Hayek remarks, “whichever principle we make the foundation of our proceedings, it will drive us on, no doubt always to something imperfect, but more and more closely resembling one of the two extremes.” Some steps that place society midway necessitate other measures which move it towards one of the two extremes. This process is likely to continue gradually until one of the extremes is nearly approached.

Every extension of government beyond its principal function of maintaining and enforcing justice tends, however gradually, to move society away from individual freedom and towards a greater concentration of coercive power. Every privilege it grants, every attack it makes on private property, every discriminatory regulation it imposes, every disturbance of the price system it causes, and many other interventions set society on a path that diverges from freedom and draws closer to an omnipotent Leviathan.

This is precisely the state of our society, which no longer treats the ideals of justice, the rule of law, private property and free enterprise as sacred values, but rather as anachronisms. However long it may take, if we are to continue following these tendencies, we will end up with a system that almost nobody would have wished for, but which is nevertheless the inescapable conclusion of the subtle and continuous attacks on the foundations of a free society; attacks which only a few enlightened minds have foreseen and have had the courage actively to oppose.

The alleged market failures

A superficial observer might get the impression that our book praises the free-market system as a perfect, flawless method of organisation in which, magically, everything happens to function properly and in a synchronised way. This is, however, far from the case. Rather than idealising the free-market system, the objective of this publication was critically to assess market failures as well as state failures. It is significant that every student of economics can – unconsciously, as it were – list all the market failures commonly presented in textbooks, but would struggle to name just one state failure, or even to consider such a possibility. This double standard is unjustified.

Yet more striking, however, is the present-day practice of teaching students, in courses on economics, about market failures before they come to learn about the nature of the market order, its mechanisms and its significance. A parallel may be useful here to illustrate the sheer absurdity: it is as if students of medical science were supposed to learn all the pathological states of the human body before acquiring a sound comprehension of how a healthy body ought to perform. Indeed, a doctor with such an education would be apt to diagnose even many harmless findings as defects. On this flawed basis, a risky treatment can be recommended which will be more dangerous than the alleged illness itself. That is exactly why faulty diagnoses of market failures are potentially so dangerous.

The spontaneous order of a free society, which our book defends, is far from being an ideal system. In our world, the ideal is synonymous with utopia and is, therefore, unattainable. Our inquiry, on the other hand, is after that which is attainable. It would be dubious to deny that a free-market system brings about outcomes with which many people may be dissatisfied. But it would be no less foolish in such cases immediately to call for government intervention without carefully examining its overall consequences. It can be said that economists all too often focus on simplified theoretical models in which the free-market system really appears to be imperfect. However, they make a fatal error when they assume, without any supporting evidence, that the government is capable of addressing these so-called market failures and has sound incentives to do so. Such a belief is simply naïve. How can one system be criticised for its imperfections on the grounds that they should be eradicated with the help of another system in which flawlessness is assumed without any prior consideration, almost in an axiomatic way, as if it were?

Paul Samuelson was entirely right to affirm that “imperfections of one arrangement must be weighed against imperfections of another.” Yet Samuelson himself constitutes the very denial of his own words. In his textbook, as in many others, market failures are presented as inherent defects that the government can not only tackle but is even entitled to tackle. Meanwhile, no attention is given to the question of whether the alleged solutions the government proposes may in fact pose other problems of greater severity. Such a possibility is somehow ruled out. Still less is there any consideration of whether politicians are really motivated enough to handle these problems in the right way. The shortcomings and pitfalls of government interventions – even when they are pursued bona fide – cannot simply be ignored. Far from being absent, state failures are at least as relevant as market failures and must be treated seriously. For it would be a tragedy if what is promised to us as a solution were actually more harmful than the problem it is intended to address. But in practice, this is often the case!

It is no coincidence that one of the principles most closely associated with Hippocratic ethics is the Latin maxim primum non nocere: first, do no harm. This should also serve as guidance for economic policy: before we hastily set ourselves to tackling possible market failures, we should be conscious of state failures, which may well outweigh the former.

In a word, the aim of this book was to show that even in cases where mainstream economics tends to think of the free-market system as being doomed to fail, its results need not be so unsatisfactory after all. Furthermore, we emphasise that even where the positive effects of the government’s solutions to market failures might seem to outweigh their costs, it does not follow that the government should acquire a monopoly in the relevant field. A state monopoly implies the elimination of competition, which remains the principal driving force of innovation. Without the
element of competition, the pressure to persist in efforts towards further improvement fades away.

Concluding remarks

Let me now turn briefly to a more practical discussion of the implications of the points hitherto outlined for the future. And I can open this part in no better way than with the sagacious words of Karl Popper: “Optimism is a duty. The future is open. It is not predetermined. No one can predict it, except by chance. We all contribute to determining it by what we do. We are all equally responsible for its success.”

It is naïve to conceive of history as a series of inevitable events whose occurrence was, through the operation of some superior forces, foreordained. In the history of human affairs, no such thing as an inescapable destiny exists. We, the individuals, possess the power to change the direction of future events. We can each exercise this power through our efforts, both in everyday practical decisions and in intellectual endeavours. In fact, the latter – that is, the realm of our ideas – is of greater significance. For the leading ideas are what really determine the future, through their effect on prevailing beliefs. Once an idea becomes the majority view, it is but a matter of time before it also finds, through politics, its way into practice.

Unfortunately, the realm of ideas has, in recent decades, been dominated by collectivist notions, whether they be of a socialist or a nationalist nature. It is only logical that politics has shifted in the very same direction, which can properly be described as a liberticidal one. After all, politics – at least in representative democracies – reflects the median opinion and cannot transcend the boundaries delimited by the views of the majority. Yet, as frustrating as this fact may currently seem, it should also fill us with a certain hope.

And here comes my appeal to you. Together, you carry the future of our civilisation. We are not bound to continue following the road to serfdom along which we have inadvertently been proceeding. But to step off this path requires considerable courage and a heroic effort. In order to preserve our very civilisation, the idea of a free-market economy combined with a narrowly limited sphere of the state must again become attractive to the masses and eventually prevail on a larger scale.

Olivier’s and my book attempts to contribute to the renaissance of the rich intellectual tradition of classical liberalism, which in today’s world is notoriously neglected and, I shall say, intentionally disregarded. Yet although we may assure you that we will continue to do our best in our efforts to spread the ideas of our book, it is certain that this alone will not suffice. Our joint efforts must be strengthened and amplified by your endeavours. You have the opportunity to persuade others and thus gradually shape majority opinion so as to bring about the desirable change.

Do not lose this opportunity, as there is no guarantee that there will be another one. For otherwise, it may indeed become too late for us to act and to counter the destructive forces of an omnipresent collectivism. You must not let that happen, for what is at stake is far too precious to be lost.

Thank you for your attention, and enjoy the event!