Hayekian Sifting: The Role of International Competition

Hayek argues that international or inter-society competition will cause regimes to evolve for the better through natural selection:

Most of the steps in the evolution of culture were made possible by some individuals breaking some traditional rules and practicing new forms of conduct – not because they understood them to be better, but because the groups which acted on them prospered more than others and grew.[1]

I take the argument to be that when one or a few societies stumble on sound rules, their innovations will spread to others by competitive selection. My object here is to reflect on how (if at all) international competition might prove to be an evolutionary process that enhances human flourishing, specifically by increasing the prevalence of regimes that do so.

Of course Darwinism posits survival of the fittest, but it defines the fittest species as those best adapted to survive. What we care about is significantly different: social systems that enable individual human beings not merely to live in a surviving polity, but to flourish, and to flourish in a more subtle way than simply accumulation of numbers or living in a powerful state. So Darwin’s evolutionary model doesn’t map directly on to what we really value.

So I was a little surprised to find a statement by Darwin that at first blush seemed to support the idea that competitive selection would lead to improvement in social systems (measured in terms of individual flourishing):

Selfish and contentious people will not cohere, and without coherence nothing can be effected. A tribe rich in the above qualities would spread and be victorious over other tribes: but in the course of time it would, judging from all past history, be in turn overcome by some other tribe more highly endowed. Thus the social and moral qualities would tend slowly to advance and be diffused throughout the world.[2]

But it’s apparent that Darwin’s statement is not necessarily related to individual human flourishing. Suppose it were brutal totalitarian regimes that reduced the prevalence of “selfish and contentious people”? I’m trying to take very seriously Hayek’s assumption that we don’t know in advance, indeed can’t know in advance, what social institutions are best for people. Competitive selection might lead to regimes that are great for the state and miserable for human beings.

There seem to be at least four domains of international competition that might be relevant: (1) war, (2) trade, (3) migration of firms and individuals, and (4) imitation. In all of these domains, one can see advantages for societies that enable individual flourishing, but in all there are caveats, drawbacks, offsets, uncertainty.

1. Military. This seems to be what Darwin had in mind. And one might look at history from 1939 to 1991, for example, as support for the view that “good” societies have an advantage. Smoothing over some rough edges (e.g., the democracies’ alliance with the Soviet Union in 1941-45), one can see this as the triumph of humane social arrangements over strikingly inhumane ones. The triumph over totalitarianism surely owed something to the far greater productivity of free societies, which in turn surely owed something to individuals’ freedom to invent and to develop their inventions. While the rulers of the Soviet Union could devote 25% or more of GDP to arms, with similar pre-World War II figures for Nazi Germany, the western countries, despite allocating far lower percentages of GDP to arms, were able to at least match their adversaries – and prevail. And it would also owe something to the individual initiative that soldiers from a free society seem more likely to take.

But the causal chain between freedom and victory isn’t altogether clear. First, we have to start with the truth that the totalitarian Soviet Union shouldered an enormous share of the costs of the war with Hitler.

Second, as a general matter, the relation between human flourishing and national military prowess seems at best highly contingent. Athens or Sparta? Which of these would we like to win? Surely not the grim Spartan helots. What’s good for a nation’s competitive military position and what’s good for its citizens are (despite some overlap) hardly identical.

Third, serious military competition itself, especially in modern times, is in pretty direct conflict with human flourishing. We start with the obvious cost in blood and treasure. Then there is almost bound to be some militarization of the population. And in modern times the state is sure to grow in response to exigencies of war. It is said that the great Washington law firm of Covington and Burling was born with its founders’ insight that the government, having assumed command over the economy in World War I, was not about to let go. That proved a very good bet.

Of course some of these downsides of war would be less for conflicts that don’t reach “hot war” status, but end with one side’s collapse. Obviously the Soviet regime’s meltdown stemmed in part with the regime’s bad fit with the human mind and spirit: regime fatigue, the quite heroic resistance of dissidents, moral revulsion within the Soviet elite. But cold wars may get hot, and even in the cold form may produce many of the drawbacks of a hot war.

Most fundamentally, however, the problem with military competition as the domain for fulfilling Hayek’s intuition is that it is unclear that there is any necessary connection between the flourishing of a society and the flourishing of the people within.

2. Trade. Of course firms compete in international trade, and, everything else being equal, one can expect a society that allows ingenuity to flourish to have more valuable goods and services for sale. But so what? The point of trade is that it makes both sides better off, so I’m not sure what it would mean to characterize a free society’s productivity as a trading “advantage.” And under Ricardian comparative advantage, it would be no obstacle to trade for one society to be unambiguously less efficient than another in production of all goods; the less efficient society can still gain (as against the no-trade alternative) by offering for sale the goods that it, by its own terms, produces most efficiently (or, more realistically, least inefficiently).

Another angle is that firms in nations A and B may compete with each other to make sales to buyers in C, and trade itself, plus the spur of competition, are likely to benefit people in all three. As between A and B, firms in the state more conducive to human flourishing seem likely to capture more markets, so that these states may become the richer ones.

Finally, international competition in trade may lead to agreements aimed at discouraging protectionist behavior. Thus McGinnis and Movsesian urge that the WTO adopt rules somewhat like the negative commerce clause, and they report that in fact its existing provisions do so to a large extent.[3] But this would seem like a contribution to good governance that we owe more to international cooperation than to competition (except, of course, international competition is trade that precipitated the cooperation.

3. Competition for in-migration of firms and individuals. A free society seems to have a clear advantage in the quest for in-migration of intelligent and dynamic individuals, and the firms that such people start or run. And they will also be attractive for firms deciding where to site new enterprises (and to resite old ones). Thus the reference at the end of the passage from Hayek: the groups acting on good ideas of social organization “prospered more than others and grew.” You couldn’t begin to count America’s benefits from the influx of people threatened by Nazi and Soviet totalitarianism. But those are just the most extreme examples. Beside them are centuries of migration by people whose opportunities in their native countries were stifled by an array of policies that frustrate hard work, risk-taking, and entrepreneurial effort generally. Freedom’s appeal to bright people goes back a long way: The relative freedom of discussion in ancient Athens (and Plato’s brilliant use of that freedom) drew Aristotle to Athens.[4]

Here you have individuals making choices for themselves (and the people they in turn attract to work in their firms). The choices are ones that it would seem we can trust. At least if people can subjectively assess their own welfare, migration – and thus the competition for migrants – tells a powerful tale.

The tale is potentially undercut by the possibility that some immigrants are drawn by welfare entitlements. But to the extent that that may be so, the policy and institutional choices that Hayek believes flourish through competition would seem to include policies and institutions able (where it is important to do so) to screen out that kind of immigration.

4. Emulation. If with Brandeis you see the states as laboratories of experiment, obviously nations in the global system can be experiments on a grander scale, with everyone able to observe and, where they believe a policy or even constitutional innovation to have been successful, to emulate it.

The obvious drawbacks here are the frequent ambiguity of the evidence and the fact that it is policy-making elites who are likely to make the judgments about what policies are worthy of emulation. Individual human flourishing may not be at the top of their priorities. But even if that is the case, evidence accumulated in nation v. nation comparison can at least make rejection of beneficent policies more costly: an example from the United States is the role of intra-Texas and intra-California airline regulation (more accurately non-regulation) in mobilizing the Civil Aeronautics Board and then Congress to deregulate the airlines.

A case nicely combining migration and emulation is the policy of welcoming Jewish immigration adopted by William of Orange, when he took the British throne in 1689. Not coincidentally, some of his military expeditions had been financed by Dutch Jewish army contractors. “[U]nder William, and then under Queen Anne, the precariousness of the existence of Anglo-Jewry melted away.”[5] Evidently, then the new policy encompassed not just immigration but also religious tolerance more broadly.

The hardest part of this exercise (at which I’ve probably failed in places) is to keep one’s eye on individual advantage while looking at international competition. If we do so, competition for immigrants seems to emerge as the grand winner, because it is individual choice that screens the policy or institutional menus offered by nations. Nor need the competition necessarily tend toward a single optimum: just as the Tiebout hypothesis suggests the possibility of multiple suburbs offering different packages of taxes and services, so the world may be led by international competition to offer varying ways for advancing human flourishing, but all advancing under the spur of competition. At least it may do so if direct nation-to-nation competition doesn’t stand in the way (and doesn’t track individual flourishing).

[1]Friedrich A. Hayek, Law Legislation & Liberty, III, 153 (1979) (reprinting a lecture of his published as “The Three Sources of Human Values,” 12-13 (London School of Economics and Political Science 1978)).

[2] Charles Darwin, The Descent of Man and Selection in Relation to Sex, 2d ed. (New York: Appleton, 1898), 132.

[3] John 0.McGinnis and Mark L. Movsesian,“The World Trade Constitution,” 114 Harv. L. Rev. 511 (2000).

[4] See Rebecca Goldstein, Plato at the Googleplex 152 (2014).

[5] Geoffrey Alderman, The Jewish Community in British Politics, pp. 4-5 (Oxford, 1983).