Two Views On Social Stability (Birner & Ege)

American Journal of Economics and Sociology, Inc.
Two Views on Social Stability: An Unsettled Question

Author(s): Jack Birner and Ragip Ege
Source: American Journal of Economics and Sociology, Vol. 58, No. 4 (Oct., 1999), pp. 749-780
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Two Views on Social Stability:
An UnsettledQuestion
and RAGIPEGE
ByJACKBIRNER
ABSTRACT.EmilDurkheimpublished TheDivision of Labourin Societyas

partof his strategyto create a place for sociology as a science independent
from economics. The book describes how social cohesion and coopera-
tion evolve spontaneously in the course of the process of the division of
labour. FriedrichHayek developed a theory of markets and competition
which was later extended into a theory of society, in which spontaneous
evolution is a central element. The main force behind this process is
competition and the evolution of coordination. Both authors address the
problem of social stability.Hayek rejectsDurkheim'sanalysis as construc-
tivistic,but his criticismis unjustified.Furtheranalysis reveals many simi-
laritiesbetween the two authors'theories of societal evolution. A striking
point of convergence is thatHayek'stheory of marketsis a networktheory,
and that sociological network theory is directly inspired by Durkheim's
work. The main differences are Hayek's emphasis on the division of
knowledge and on coordination as the fundamentalstabilizingforces as
opposed to Durkheim'sstress on the division of labour and cooperation.
The network approach, together with an elaborationof Hayek's psychol-
ogy, offer perspectives for integratingcoordinationand cooperation into a
unified theory of social stability.
*
Jack Birner is Professor of Economics at Maastricht University and the Labora-
tory of Cognitive Science at the University of Trento. His publications include
Hayek, Co-ordination and Evolution: His Legacy in Philosophy, Politics, Econom-
ics, and the History of Ideas, co-editor with Rudy van Zijp, Routledge, 1994; and
"Cambridge Histories True and False," in C. Marcuzzo, L. Pasinetti and A. Roncaglia
(eds.), The Economics ofJoan Robinson, Routledge, 1996. Ragip Ege is Professor of
Economics at BETA, Universit6 Louis Pasteur, Strasbourg, France. Ege has pub-
lished articles about Friedrich A. Hayek and Karl Marx in Revue Economique and
Revue dEconomie Politique. Recently he has co-authored with R. dos Santos
Fereira, "LeTemps et la conception du capitalisme chez Marx," in the 1998 volume
of Revue dEconomique Politique.
American Journal of Economics and Sociology, Vol. 58, No. 4 (October, 1999).
C 1999 American Journal of Economics and Sociology, Inc.
750 AmericanJournal of Economics and Sociology
Introduction
THE QUIP ABOUT ECONOMISTSshowing that something works and sociologists

showing why it doesn't is usuallypassed off as justa joke. But like so many
jokes, it contains a kernel of truth.A methodologist might point out that it
captures the idea that sociologists think of themselves as offering a more
general theory of society than economists do. Tolerantsociologists leave a
place for economic explanationswhere they are applicableand true.At the
same time they claim their theories to be more general than economics in
that they specify the special conditions under which economic explana-
tions are true, while also providing an explanation of what happens
outside the domain of validityof economics. In the Popperian and Polish
traditionsin the philosophy of science this is known as the correspon-
dence principle.1
Establishinga correspondence relation would be an accurate descrip-
tion of the aim of EmilDurkheimwhen he published his firstbook in 1893,
La division du travail social [Tbhe division of labour in society].Its content
and method are direct consequences of Durkheim's problem situation.
This is defined by his objective of placing sociology on the map as a
scientific discipline in its own right. In order to create this intellectual
space, Durkheim meets sociology's nearest rival, classical political econ-
omy, in the doctrine that constitutes its cornerstone,the division of labor.
He does so by saying that the most importantconsequence of the division
of labor is not efficiency, but solidarity.Given the intellectualsituationin
the "moralsciences" at the end of last century, this compels Durkheimto
define his position vis-A-visAdamSmith.Accordingto TheTbeoryof Moral
Sentiments,what makes a civil society possible is sympathy,the human
capability of imagining the others' position. Sympathy is based on the
similarity of human beings. However, the division of labor, which is the
subject of The Wealthof Nations, presupposes that humans are different
from each other. This is an internalcontradictionin Smith'sthought, and
for Durkheimits solution constitutesthe birthrightof sociology. However,
the fact that he explicitly seeks to create a place for a new social science
that is independent from economics does not mean that he denies that
economics has its merits. On the contrary:
SocialStability 751
C'estaux6conomistesque revientle m6rited'avoirles premierssignalele caractere

spontanede la vie sociale,d'avoirmontreque la contraintene peutque la fairedevier
de sa directionnaturelleet que, normalement,elle r6sulte, non darangements
exterieurset imposes,mais d'une libreelaborationinterne(DTS,p. 380). [Creditis
due the economistsforfirsthavingseen the spontaneouscharacterof sociallife, and
havingshownthatconstraintcouldonly makeit deviatefromitsnaturaldirectionand
that,normally,it resultsnot in arrangements
which are externaland imposed,but in
a free internalelaboration.(Durkheim1964,p. 386)].2
Despite this generous recognition, Durkheim skillfullymaneuvers into

the position of secondaryfactors the mechanisms that "the economists"
(except for Smithand Spencer he is never explicit who they are) think are
sufficientto explain social stabilityand harmony.The whole of Book II of
DTSis devoted to a systematicanalysis to "the causes and conditions"of
the division of labor. By causes Durkheimmeans the sufficientconditions,
and by (secondary) conditions the necessary conditions. This reveals a
rathermodern approach to causality.But for Durkheimthe main function
of the distinction is methodological and strategic:it serves to define his
own position with respect to economics. All that he finds of value in
economics is relegated to the domain of necessary conditions, while his
own explanatory factors constitute the sufficient conditions. Thus, he
obtains what he regardsas an incorporationof the economic theory of the
division of labor and of the emergence of modern society into his own
theory.
On the casual observer modern society leaves an impression of a
confusing complex of millions of actions of disconnected individuals,each
of whom is motivated by his own goals, ratherthan a relativelyharmoni-
ously evolving and stable whole of coordinated behaviors. The scientific
object of Durkheim's investigation in DTS is the explanation of social
stability.He is fascinatedby the capacityof the industrializedsociety of his
time to grow without a centralorganizinginstitutionto keep it from falling
apart.Durkheim'sanalysis is inspired by the search for the conditions for
the surprising stability of society in the face of its apparently anarchic
structure.
Not only is modern society highly stable, it also harboursmechanisms
that enable its membersto benefit from its possibilitiesfor self-deployment
whose scope and level are unmatched in human history. One of
Durkheim'sgreat merits is that he has given expression to this sense of
wonder about the fact that a social structurethat has not been rationally
and deliberatelyorganized does not fall apart.
We find the same sense of wonder and the same fascinationat industrial
society's capacity for self-organizationand stability in the work of the
economist and social theoreticianFriedrichHayek. Fromthe late 1920s to
the early '40s Hayek's main occupation was to find an explanationfor the
lack of coordinationand the economic instabilitythat characterizesbusi-
ness cycles. Graduallyhis interest moved to the greater question of the
stabilityof society as a whole, and to the problem of how to preserve the
freedom of the individual.His most importantpublicationsin this field are
The Constitutionof Liberty(1960) and Law, Legislationand Liberty(LLL),
published in three volumes in 1973, 1976, and 1979. The similarities
between Hayek and Durkheimdo not stop here. They both share a more
"practical" concern:the intellectual,moral and social crisisthat they detect
in their contemporarysociety. Durkheim speaks of the state of legal and
moral anomy in which the economy finds itself (see, for instance, DTS,p.
II): conflicts and economic crises, due to the lack of rules within certain
professionalgroups. The theme that inspiresHayek'swork from TheRoad
to Serfdom(1944) to his very last book, The Fatal Conceit (1988), is his
sense of alarmat the intellectualhubris that makes modern humans think
they can organize the complex processes thatcharacterizethe evolution of
social institutionsaccording to their desires. Hayek fears that this attitude
may destroy everythingthat has been achieved in the domain of freedom
of the individual.As to the question of how to solve the social problems
they analyze, both authorsshare the conviction that a-possibly violent-
solution imposed from the outside would not work.3There are many more
similaritiesbetween Durkheimand Hayek, as we hope to make clear.
The same sense of wonder about the stabilityof society, which is the
root of political economy and sociology, inspiredAdam Smithto develop
the idea of the invisible hand. Both Durkheim and Hayek declare them-
selves to be the intellectualheirs of the Scottishphilosopher, althoughthey
emphasize different aspects of his thought. This is closely related to the
differentintellectualtraditionsin which the two authorsplace themselves.
The traditionto which Durkheim belongs emphasizes the role of law in
society, while Hayek's lineage pays particularattentionto the competitive
market.The differencecan be formulatedas thatbetween cooperationand
coordination. Our point of departurein this article is that the similarities
Social Stability 753
and differencesbetweensociologistDurkheim'sand economistHayek's

theoriesof socialstabilityjustifyour choosingthemas representatives of
explanationsof socialstability.Ourgoal
alternative is to give an answerto
the questionsof whateach has to contribute,how thesecontributions are
related,andhow we mayuse themto makeprogressin the explanationof
socialstability.
II
The Division of Laborand Social Cohesion
DURKHEIM TO MAKE
TRIES societyclear
of modernindustrial
the characteristics
by contrastingit with earlier,moreprimitiveformsof socialorganization.
Thisis moreof a methodological devicethana realhistoricalanalysis.His
"segmentary society"is a fictionor conceptualartifactthatallowshim to
definethe institutionsand mechanismsof modernsociety,ratherthana
truthfuldescriptiveaccount.In Durkheim'sconjecturalhistory,the most
primitivestate of society is the horde.It is characterized
by a type of
cohesionthatis due to similarity:
Si Ion essaye de constituerpar la pensee le type ideal d'une soci&t6dont la
cohesionresulteraitexclusivementdes ressemblances,on devrala concevoircomme
une masseabsolumenthomogenedont les partiesne se distingueraient pas les unes
des autres,et parconsequentne seraientpas arrangeesentreelles, qui, en un mot,
seraitdepourvueet de toute formedefinieet de toute organisation.Ce seraitle vrai
protoplasmesocial, le germe d'ou seraient sortis tous les types sociaux. Nous
proposonsd'appelerhordel'aggregatainsi caracterise(DTS,p. 149). [If we try to
constructintellectuallythe idealtypeof a societywhose cohesionwas exclusivelythe
resultof resemblances,we shouldhaveto conceiveit as an absolutelyhomogeneous
mass whose parts were not distinguishedfrom one another.Consequentlythey
would have no arrangement; in shortit would be devoid of all definiteformand all
organization.It would be the veritablesocial protoplasm,the germwhence would
ariseall socialtypes.We proposeto call the aggregatethuscharacterized, horde.(p.
174)].
Primitivesociety is a repetitionof identicalaggregatesof hordes.Its
structureis, in termsthat we borrowfrom HerbertSimon,maximally
redundant.4 The next step in the developmentof society is the clan: a
hordethathas ceasedto be independentand has becomethe elementof
a moreextended("plusetendu")group:segmentarysociety.Clanchiefs
are the only formof socialauthorityin this structure,markingthe begin-
societies,"the onlyformof
Still,in these "inferior
ningof a diversification.
solidarityis thatwhichderivesfromsimilarity. Thistype of societyis no

longerpurelyhypothetical.Drawingon Fustelde Coulanges,Durkheim
gives the examplesof Australianaborigines,Indiantribes,etc. In such
Becausein a smallsocietyeverybodyis
societies,religionis all-pervasive.
facedwiththe sameconditionsof existence,the collectiveenvironment is
essentiallyconcrete.Individual experiencesarethe sameandhaveas their
objects(thesame)specificthings.Thecollectivecharacter is well-defined.
Durkheim's segmentarysocietyis ruledby "droitr6pressif."Repressive
law punishesthoseactsthatoffendthe collectiveconvictionsandthatare
an infringement on the rulesandvaluesthataresharedby the community
as a whole. So, repressivelaw is the rule in those societies in which
criminalactsneed not be explicitlycodified.Its rulesarefirmlyrootedin
the collectivememorythateach individualcarrieswith him. In such a
society there is no room for individualvariations.Eachsegmentis the
bearerof the same strongfeelings,the same traditional values,and the
same social rules the infractionof which justifiesthe severestform of
punishment.
Sincethe segmentsare autarchic,there is no need (or incentive)for
exchangebetween them. The solidarityin this society is solidarityby
likeness("parsimilitudes"), whichDurkheimcalls mechanicalsolidarity.
Thissocietyis characterized by "communism":
Lecommunisme,en effet,est le produitnecessairede cette cohesionspecialequi
absorbe l'individudans le groupe, la partie dans le tout. La propriet6n'est en
definitiveque l'extensionde la personnesur les choses. Ladonc oP la personnalit6
collective est la seule qui existe, la proprieteelle-memene peut manquerd'etre
collective.Ellene pourradevenirindividuelleque quandl'individu,se degageantde
la masse,seradevenu,lui aussi,un etre personnelet distinct,non pas seulementen
tant qu'organisme,mais en tant que facteurde la vie sociale (DWS,pp. 154-55).
[Communism,in effect, is the necessaryproductof this special cohesion which
absorbsthe individualin the group,the partin the whole. Propertyis definitiveonly
of the extensionof the person over things.Wherethe collectivepersonalityis the
only one existent,propertyalso must be collective.It will become individualonly
when the individual,disengaginghimself from the mass, shall become a being
personaland distinct,not only as an organismbut also as a factorin social life. (p.
179)].
Thereis no possibilityforindividualpersonalityto developin a society

wherecollectiveconsciencerulessupreme.
As we observedabove, in Durkheim'sdiscussionof the necessary
SocialStability 755
conditions for the division of labor to progress we find the more typically
economic factors, such as the need for individualsto develop their indi-
vidual traits, innovation, and, most fundamentally,rationality.This last
factorappearsin the form of an explanationof the development of rational
thought. Individualsbecome more independent from the groups to which
they belong when the members of a society increase in number. When
societies become more voluminous, i.e., when their physical and hence
their social density increases, this collective conscience changes. It is
forced to elevate itself above local differencesand to cope with space and
distance; hence it has to become more abstract. It is thus that abstract
concepts arise (DTS, p. 272). For Durkheim, the more general collective
conscience becomes, the more room it leaves for individual variations
(DTS, p. 275). Since collective conscience is almost entirely a product of
the past (so, of tradition),its role diminishes as segmentarysociety is left
behind. Withinthe extended group there is more individualliberty (DTS,
p. 284). When society becomes dispersed over a larger area it has to
become more abstract:
[elileest elle-memeoblig&ede s'e1everau-dessusde touteles diversiteslocales,de
dominerdavantagelespace et, par consequent,de devenirplus abstraite.Caril n'y
a gubreque des choses g6neralesque puissentktrecommunesa tous ces milieux
divers.Ce nest plus tel animal,maistelle espece; telle source,maisles sources;telle
forkt,mais la forkt in abstracto(DTS,p. 272). [the common conscience "is itself
obligedto riseabove all localdiversities,to dominatemorespace, and consequently
to become more abstract.Fornot manygeneralthingscan be commonto all these
diversenvironments.It is no longersuch animal,but such a species;not thissource,
but such sources;not this forest,but forest in abstracto"(p. 287)].
This also explains the increasingrationalizationof society:

Celaseul est rationnelce qui est universel.Ce qui deroutelentendement,c'estle
particulieret le concret.Nous ne pensonsbien que le general.Parconsequent,plus
la conscience commune est proche des choses particulibres,plus elle en porte
exactementlempreinte,plus aussielle est inintelligible(DTS,p. 275). [Thisalone is
rationalwhich is universal.What baffles understandingis the particularand the
concrete.Onlythe generalis thoughtwell of. Consequently,the nearerthe common
conscienceis to particularthings,the more it bearstheirimprint,the more unintel-
ligibleit also is. (p. 289-290)].
Once rational thought has emerged, there is no way of keeping it in

check. This is a mixed benefit, as instinct always has a more compelling
force than reason: "Parcequ'elle devient plus rationnelle, la conscience
collectivedevientdoncmoinsimperative, et, pourcetteraisonencore,elle

gene moins le libredeveloppementdes varietesindividuelles" (DTs,p.
276). ["Becauseit becomes more rational,the collectiveconsciencebe-
comesless imperative, andforthisveryreason,it wieldsless restraintover
the freedevelopmentof individualvarieties." (p. 290-291)].However,the
mainforceof collectiveconsciousnessderivesnot so muchfromthe fact
thatit is sharedby contemporariesas fromthefactthatit is a productof the
pastwhichtook a long timeto develop.
L'autorit6de la consciencecollectiveest doncfaiteen grandepartiede l'autoritede
la tradition.Nous allonsvoir que celle-cise diminuen6cessairementa measureque
le type segmentaires'efface(DTS, p. 277) [Theauthorityof collectiveconscienceis,
then, in largepartcomposedof the authorityof tradition.We shallsee thatthe latter
necessarilydiminishesas the segmentaltype is effaced(p. 291)].
As societybecomesmoreopen and mobile,traditionloses its sway.For

instance,the more advanceda society, the less the aged are held in
reverence.It is fromthe young thatchangeis to be expected,provided
theyhavedissociatedthemselvesfromthe erroneouspracticesof the past.
Modernsocietyis characterized "nonparune repetitionde segments
similaireset homogenes,maispar un systemed'organesdifferentsdont
chacuna un rolespecial,et qui sontformeseux-memesde partiesdiffer-
enciees"(157)["notby a repetitionof similar,homogeneoussegments,but
by a systemof differentorganseachof whichhasa specialrole,andwhich
arethemselvesformedof differentiated parts"(p. 181)].Industrial
society
rests on an advanceddivisionof labor,a degree of specializationand
whichis inconceivablein segmentary
differentiation society.Theelements
of whichmodernsocietyconsistsno longerexistside by side as the links
of a chain,butshowa morecomplicated,hierarchic patternthatis defined
by the logicalrequirementsof theirfunction.They are "coordonneset
subordonnesles uns aux autresautourd'unmemeorganecentral"(157)
["co-ordinated and subordinatedone to anotheraroundthe samecentral
organ"(p. 181)].However,individualsarenot passivelysubjugatedto the
moralprescriptionsof collectiveconscience,as they were in primitive
society,wheretheywereinterchangeable andwheremechanicalsolidarity
cementedthe socialbonds.The type of cohesionwhichrulesin modern
society is organicsolidarity.Durkheimagreeswith Spencerthat social
harmonyderivesfromthe divisionof labor,butcriticizeshim(in ch. LVII)
for thinkingthatindustrialsolidarityis characterizedby spontaneity-so
that there is no need for a repressive apparatus-and for thinkingthat the

only link among individualsis that of absolutely free exchange and hence
competition.But neither is it true thatself-interestis the only basis of social
stability(DTS,pp. 180-81). The growing number and complexity of legal
rules that develop as society progresses is sufficient to make this clear.
Nevertheless, Durkheim observes that the idea of a social contractin the
sense of Rousseau is also hard to defend. More specifically,repressivelaw
cedes more and more to restitutive law, which aims not at punishing
infractions of a generally valid moral code, but serves as a means for
redress so as to put things back into the order that they should have been
(DTS,p. 79). The situationsto which restitutivelaws apply are usuallyvery
specific, so that most members of society remain in complete ignorance
about these legal rules. As the division of labor advances, so does the
technicalityof the legal rules. The increasingcomplexity of social relation-
ships in modern society has necessitated an ever more complex system of
laws to manage them. This does not mean that judges can decide arbi-
trarily;they remain bound by the rules that are generally accepted in
society.
Like Comte, Durkheim believes that what is really spontaneous is
society itself. Neither the division of labor nor competition can be consid-
ered as spontaneous phenomena in the truesense of the word. Admittedly,
when the organic division of labor emerges, it solidifies the social bonds.
But that does not mean that it createsthem. "Cetteinteractionen suppose
une autre qu'elle remplace" (DTS, p. 262) ["this integration supposes
another which it replaces"(p. 278)]. And furtheron we read:
Les organismesplus complexes se formentpar la repetitiond'organismesplus
simples,semblablesentreeux, qui ne se differencientqu'unefois associes.Enun mot
lassociationet la cooperationsont deux faitsdistincts,et si le second, quandil est
developpe,reagitsurle premieret le transforme,si les societeshumainesdeviennent
de plus en plus des groupesde cooperateurs,la dualitedes deux phenomenesne
s'evanouitpas pourautant(DTS, pp. 262-63). [morecomplexorganismsareformed
by the repetitionof more simple,similarorganismswhich are differentiated only if
once associated.In short,associationand co-operationare two distinctfacts,and if
the second, when developed,reactson the firstand transformsit, if humansociety
become groupsof co-operators,the dualityof the two phenomenadoes not vanish
for all that(p. 278-279)].
Specializationand differentiationtake place on the basis of association.

For Durkheim,the social whole always precedes the individualparts. See
forexampleDTS,p. 264,wherehe writes:"Lavie collectiven'estpas nee

de la vie individuelle,maisc'est,au contraire,la secondequi est nee de la
premiere" ["Collectivelife is not bornfromindividuallife,but it is, on the
contrary,the secondwhichis bornfromthe first"(p. 279)].
Comtebelievesthatthe divisionof labor,if pushedtoo far,will resultin
the disintegrationof society. Individualswho specializein ever more
narrowlydefinedand abstracttaskswill retireintotheirown privateand
solitaryuniverses.Here,the divisionof laborbecomesa centrifugal force
that makes society fall apartinto isolatedatoms. A differentunifying
principleis needed to counterbalance force.The gov-
this disintegrating
ernmentor the statemustintervene:
I1 est clair, en effet, que le seul moyen reel d'empkcherune telle dispersion
consiste a 6rigercette indispensablereactionen une nouvelle fonction speciale,
susceptibled'intervenirconvenablementdans laccomplissementhabituelde toutes
les diversesfonctionsde 1'6conomiesociale,poury rappelersans cesse la pens6e de
lensemble et le sentimentde la solidaritecommune(DurkheimquotingComte,DTS,
p. 349). [Itis clear,in effect,thatthe only realmeansof preventingsuch a dispersion
consistsin this indispensablereactionin a new and specialfunction,susceptibleof
fittinglyinterveningin the habitualaccomplishmentof all diversefunctionsof social
economy,so as to recallto themunceasinglythe feelingof unityand the sentiment
of commonsolidarity(p. 358-359)].
Accordingto Comte,the solidaritythatis producedby the divisionof

labor is more fragilethan the cohesion of a society that rests on the
principleof likenessor homogeneity.For this reasonhe advocatesthe
consciousintervention of the statein creatingsolidarity,and,in "Notesur
la definition du socialisme"(Durkheim 1893), socialism. Whereas
Durkheimsharesthe idea that there must be rules,he does not share
Comte'spessimism.DurkheimthinksComte'spessimismis basedon his
failureto recognizetherealnatureandthe powerof organicsolidarity. The
malfunctions andanomaliesof modernsocietyarenot so muchdue to the
disappearance of the pervasivenessof the commongoals of segmentary
society as to the slownesswith which individualsadopt the rules and
regulationsthatarenecessaryfor a peacefulandharmoniouscoexistence
of functionsthat have become separatedby the divisionof labor.The
highlyefficientmechanismsthat createdcohesion in traditionalsociety
have been destroyedby the progressof specialisationin modernsociety
and a new equilibrium has not yet been found:
Des changementsprofondsse sont produits,et en tres peu de temps, dans la

structurede nos societes; elles se sont affranchiesdu type segmentaireavec une
rapiditeet dans des proportionsdont on ne trouvepas un exemple dans ihistoire.
Parsuite,la moralequi corresponda ce type sociala regress6,maissans que lautre
se developpatassez vite pourremplirle terrainque la premierelaissaitvide de nos
consciences(DTS,p. 405) [Profoundchangeshave been producedin the structureof
oursocietiesin a veryshorttime;they havebeen freedfromthe segmentaltypewith
a rapidityand in proportionssuch as have never before been seen in history.
Accordingly,the moralitywhich correspondsto this social type has regressed,but
withoutanotherdevelopingquicklyenoughto fillthe groundthatthe firstleftvacant
in our consciences(p. 408)].
Hence the crises and anomalies to which Durkheim devotes the third
and last book of DTS. Durkheim repeatedly and explicitly mentions that
the system of rules which serve to avoid malfunctions and anomies in
modern society must be the productof a spontaneous process, lest it create
instability:"lavie sociale, partoutou)elle est normale, est spontanee; et si
elle est anormale, elle ne peut pas durer"(180) ["sociallife, wherever is
normal, is spontaneous, and if it is abnormal,it cannot endure"(p. 202-
203)]. This is a very importantpoint in his thought. He also argues that
rules that do not suit the individualsin their specific situationsand which
are imposed from above create the anomaly of the "division du travail
contrainte."As we have seen, Durkheimopposes the idea thatcompetition
alone can lead to a stable institutionalframework.
Competitionhas a centrifugaleffect on society if it occurs in a situation
in which there is no social cohesion; only in conditions of solidaritydoes
it contributeto social stability.This conclusion serves to furtheremphasize
the difference with the economic theory according to which cooperation
emerges as a consequence of competition:
Puisquela concurrencene peutpas avoirdeterminece rapprochement, il fautbien
qu'ilait pr6existe;il fautque les individusentrelesquelsla luttes'engagesoientdeja
solidaireset le sentent, c'est-a-direappartiennenta la meme societe (DTS, pp.
259-60). [Sincecompetitioncannothave determinedthis conciliation,it musthave
existedbefore.The individualsamongwhom the struggleis waged mustalreadybe
solidaryand feel so. Thatis to say, they mustbelong to the same society (p. 276)].
But despite the fact that he thinks he has incorporatedeconomics in his

own theory, he gives no descriptionof the institutionwhich, accordingto
Smith,determines the extent of the division of labor:the market.6That is
understandable since even economists rarely offer an analysis of the
functioning of markets.Among the few exceptions is FriedrichHayek, to

a discussion of whose work we now turn.
III
Equilibrium, Markets, and Coordination
THE STANDARDNocL~ssicAL AAYsis

HAYEK REJECTS of marketsbecause it is static
and tautological.Static,because it providesa classificationof varioustypes of
marketsthatare defined in termsof staticconditions,such as the numberof
sellers or purchasersand the shape of the demand and supply curves.Tau-
tological,because it makes a numberof assumptionsthatdepriveits models
of empiricalcontent.As faras thislatteraspectis concemed, Hayeksinglesout
the assumptionsof perfectcompetitionand perfectinformation.The neoclas-
sical assumptionof perfectcompetitiondescribesa situationin which goods
and sellersor producersare completelyhomogeneousand the priceis given.
Thischaracterizesthe absenceof any competition.The assumptionof perfect
informationis one of the conditions of marketequilibrium.Here Hayek's
criticismis that equilibriumis defined as the state in which all buyers and
sellershave perfectinformation.
The concept of equilibriumis centralto Hayek'salternativeexplanation
of the way in which markets work.7 The basic unit of analysis is the
planning individual.The idea of a plan logically presupposes time. Hayek
defines equilibriumas the correspondence between the expectations on
which each individualbases his or her plans and the informationalinput
which serves as feedback. The individualapplies the "purelogic of choice"
to his or her own preferencesand his or her perception of the environment
when planning his or her behavior. An economic system is composed of
a multitude of such perceiving, planning, and utility-maximizingindivid-
uals who interact and communicate with each other. The system is in
equilibriumif the plans of all individualsare compatiblewith one another.
Marketsare the social institutionsin which individuals exchange goods
and services using their prices as guidelines. The interactionon markets
creates a communication structurethat transmitsprice informationeffi-
ciently and rapidly since individuals' fields of perception are partially
overlapping. Competition is a crucial element in the spreading of infor-
mation; it consists of a process in which individuals actively seek to
discover new and so faruntriedopportunities.Hayek emphasizes the role
SocialStability 761
of learningand knowledgeby sayingthatthe divisionof knowledgeand

its coordinationaremorefundamental thanthe divisionof labor.Markets
are social that
institutions have arisen and survivedin an evolutionary
processbecausethey respondedto the need for coordinatingdispersed
knowledge.They createthe high degreeof availability of knowledgeto
everyonethatcharacterizes developedeconomies.8Theirfunctioningre-
lies on an efficientcommunication structure.
Theinclusionof the structureof communication in the analyticalframe-
work is very unusualin economics,9and has a numberof far-reaching
consequences.One is that it highlightsthe importanceof an agent's
positionfor the acquisitionof the knowledgewhichis necessaryfor the
economicsystemto show a tendencyto an equilibrium:"therelevant
knowledgewhichhe mustpossessin orderthatequilibrium mayprevailis
to
the knowledgewhich he is bound acquire in view of the positionin
whichhe originallyis, andthe planswhichhe thenmakes"(Hayek1937,
p. 53). This introducesthe element of what we may call position-
constrainedlearning.The passagejustquotedcontinues:
It is certainlynot all the knowledgewhich,if he acquiredit by accident,wouldbe
useful to him and lead to a changein his plan. We may thereforevery well have a
positionof equilibriumonly becausesome people have no chanceof learningabout
factswhich, if they knew them,would inducethemto altertheirplans.Or,in other
words,it is only relativeto the knowledgewhicha personis boundto acquirein the
courseof the attemptto carryout his originalplan thatan equilibriumis likelyto be
reached(Hayek,1937,p. 53).
Anotherfactorthatwe findhereispath-dependency.Hayekalsodiscusses
theamount of knowledge which wouldbe neededin a system
decentralized
thatan omniscientdictator
in orderthatit mayreachthe sameequilibrium
would impose as "asort of optimumposition"(Hayek 1937, p. 53)10:
One condition[forthe decentralizedsystemequilibriumto coincidewith thatof
wouldprobablybe thateachof the alternativeuses
the centralizeddictator-economy)
of any sortof resourcesis knownto the ownerof some such resourcesactuallyused
for anotherpurposeand thatin thisway all the differentuses of these resourcesare
connected,eitherdirectlyor indirectly(ibid.).
The note to this sentenceelaborates:

Thatit is not necessary,as one mightthink,thateverypossibleuse of any kindof
resourcesshouldbe knownto at leastone amongthe ownersof each groupof such
resourceswhich are used for one particularpurpose is due to the fact that the
alternativesknown to the ownersof the resourcesin particularuses are reflectedin
762 AmericanJournalof Economicsand Sociology
the prices of these resources.In this way it may be a sufficientdistributionof

knowledgeof the alternativeuses, m, n, of . . . y, z, of a commodity,if A, who uses
the quantityof these resourcesin his possessionfor m, knowsof n, and B, who uses
his for n, knows of m, while C, who uses his for o, knows of n, etc., untilwe get to
L,who uses his for z, but knows only of y.11
Aswe haveobserved,Hayekscriticismof traditional equilibrium theory

it
is that is circular:"Correct foresight is ... not, as it has sometimes been
understood,a precondition whichmustexistin orderthatequilibrium may
be arrivedat.Itis ratherthedefiningcharacteristic of a stateof equilibrium"
(1937,p. 42).12 Thiscriticismmaybe reformulated as follows:Theassump-
tion of correctforesightimpliesthat individualshave full access to all
availableknowledgeaboutthe future.Inotherwords,thereareno gapsor
other imperfectionsin the intertemporal communicationstructure.For
theircurrentexchangerelationships the assumptionof perfectinformation
impliesa similarperfectionof the presentcommunication structure.Nei-
theris the case in reality.So, the perfectinformation assumptionrelegates
the standardneoclassicalanalysisat the most to the statusof a limiting
case,or an idealizingmodelwithoutempiricalcontent.Ontheotherhand,
marketsandcompetitionareconsideredto be crucialelementsin creating
an efficientstructureof communication. Neoclassicalanalysishas littleor
nothingto sayaboutthis.Hayekdoes:"Thewhole actsas one market,not
because any of its memberssurveythe whole field, but because their
limitedindividualfieldsof visionsufficiently overlapso thatthroughmany
intermediaries the relevantinformation is communicated to all"(1945,p.
86). However,Hayekdoes not see thatthis definesa researchproblem
ratherthana solution(whichhe presentsin the formof the pricesystem).
To mentionone problem,the speed withwhichthe information is trans-
ferredobviouslymatters.Ifthe localinformation spreadsslowly,theremay
be no tendencytowardsequilibrium.
The acquisitionof implicitknowledgeand experienceby means of
personalcontactsis anotherelementthatis introducedwith the commu-
nicationstructure.Hayekspeaksof "abody of very importantbut unor-
ganizedknowledge"(1945, p. 80) which is not scientific."Weneed to
rememberonly how muchwe have to learnin any occupationafterwe
havecompletedourtheoreticaltraining,how biga partof ourworkinglife
we spendlearningparticular jobs,andhow valuablean assetin all walks
SocialStability 763
of life is knowledge of people, of local conditions, and of special circum-

stances"(Hayek, 1945, p. 80).
A great merit of Hayek's analysis of markets is that he has called
attention to the crucial role of an economy's interactionand communica-
tion structure.In fact, Hayek's explanation is one of the earliest instances
of a network analysis of markets, whose explanatory factors include
connectivity,13the strength and frequency of interactions,the develop-
ment of personal relationships,and the transmissionof information.It is
one of the curious facts of intellectualhistory that until recently Hayek's
type of analysisof marketswas only taken furtherby one economist, G. B.
Richardson,14and that this work, too, failed to produce a research tradi-
tion. Network analyses of marketsby economists firstbegan to reappear,
uninfluenced by either Hayek or Richardson, with the work of Alan
Kirmanand Rob Gilles.15Network analysis is a much more flourishing
research traditionin sociology. The most importantapplications of net-
work models to markets and competition can be found in the work of
Mark Granovetter, Harrison White, and Ronald Burt.16Although very
similarin spirit to Hayek's approach, these sociologists do not refer to it
either. This is apparently an instance of disconnected intellectual net-
works. What can be the reason for this lack of influence on economics of
network analysis by sociologists and economists?
The hypothesis that seems to arise from our previous analysis is the
following. Sociological network analysis is directlyinspired by Durkheim.
He introduced an approach that is different from that of economics.
Network analysis has inheritedthis difference. This would explain why it
has failed to create an analytical tradition in economics. In order to
examine the validity of this idea we propose a comparison between
Durkheim'ssocial theory in DTS and Hayek's theory of society. But, we
will firstdevote a couple of paragraphsto showing how Hayek'seconomic
theory developed into a theory of society.
IV
Social Institutions as Coordinating Devices
THECENTRALPROBLEMof Hayek's analyticaleconomics is the explanation of

the lack of coordinationwhich causes disequilibriumgrowth.The problem
arises because individuals only perceive their direct economic environ-
ment. Pricesare partof this environment.The monetarysystemhas a

dynamicsof its own whichpermitsthe amountandthe divisionof means
of exchangein societyto divergefromthe barterratiobetweengoods that
reflectthe conditionsof realscarcities.Wheneverthisdivergenceoccurs,
the decisionsto consume,saveandinvest,whicharenecessarilybasedon
the only pricesthatcan be perceived,viz. money prices,are mistaken.
Whenthe realconditionshave revealedthe mistakes,it is too lateto put
thingsrightimmediately,and the resultarebusinesscycles(i.e., disequi-
libriumgrowth).Likethe market,the monetarysystemhas evolvedspon-
taneouslyas a solutionto the need to enterinto exchangerelationships
withevermoredistanteconomicunits.In thatsense it is a solutionto the
problemof social complexity.However,this particularsolutionhas its
cost:economicfluctuations.
Herewe have in a nutshellthe threeelementsthatHayekgeneralized
graduallyinto a theoryof society:
1. the basicproblemof an economy(society)is the problemof coor-
dination;
2. individuals haveonly limitedknowledge; one consequenceis thatthe
economy(society)as a whole appearsto themas a phenomenonof
sucha degreeof complexitythatindividuals by themselveswillnever
be able to oversee,to understandall the detailof, norto coordinate
all the individualtransactions
withothersthatmakeup an economy
(a society);
3. markets (social institutions) are solutions to the problem of social
complexitythat have spontaneouslydevelopedin an evolutionary
process.
It is with respectto the economicsystemthatHayekfirstexpresseshis
sense of wonder at the fact that the millionsof interactionsbetween
individualsdo not resultin totalchaos;instead,whatwe usuallyobserve
is a relativelystableset of repeatedinteractionsthatoccuraccordingto
some set of rulesthatare sharedby most.'7The factsthathumanknowl-
edge is so severelylimitedand that the spontaneouslyevolved social
institutionshave apparentlymasteredthe complex problemof social
coordinationleads Hayekto defendnon-interventionism and liberalism.
He contraststhis with the traditionwhich he calls "constructivism"
and
which he identifieswith the traditionof Cartesianrationalismand the
French School of Engineers. He accuses it of seeing only one solution to

social complexity, conscious interventionand regulation.Prominentrep-
resentativesof this traditionare Saint Simon and Comte.
In Hayek's social philosophy, history plays a role that is very similarto
that in Durkheim's.He introducesthe "tribalsociety,"not as a description
of a real historicalpast, but as an analyticaldevice to lend contrastto his
analysis of what makes modem society work. He also develops an evo-
lutionary theory of society which culminates in his theory of cultural
evolution. It may be considered to be the scientific underpinning of the
contrastbetween the mechanisms that rule the tribaland the open soci-
eties. Hayek develops his evolutionarytheory in, for example, "Noteson
the Evolutionof Systemsof Rulesof Conduct"(1967), Law,Legislationand
Liberty,and his last book, TheFatal Conceit (FC, 1988). There are three
kinds of evolution in human affairs:genetic evolution, which produces
instincts and instinctive behavior; the evolution of rational thought; and
cultural evolution. Culture occupies an intermediate position between
instinctand rationalthought, not only in the course of the development of
the species, but also logically and psychologically. This is Hayek's rudi-
mentary explanation of the emergence of rational thought.18Instinctive
behavior is sufficient for the coordination of the actions of individuals
within small primitive groups, the members of which have common
perceptions and objectives. On the other hand, within the developed and
"abstract"society (or, which is the same, the "extended order"),which is
too complex to be fully understood by the human mind, coordination is
ensured by abstract rules that have developed gradually. These rules
govern private property, honesty, contracts, exchange, commerce, com-
petition, profit,and the protectionof privacy.So, they have very much the
same function as solidaritydoes in Durkheim.Those rules are transferred
by tradition, learning, and imitation (FC, p. 12). There is a continuous
tension between the rules governing individual behavior and those gov-
erning the functioning of social institutions. The formation of abstract
systems and institutionsof coordinationhave forced individualsto change
their natural or instinctive reactions (ibid., p. 13). The fact that their
behavior is still largely ruled by the instincts of the tribalsociety and has
not kept pace with the development of the abstractsociety explains why
they tryto oppose these systems. "Dislikingthese constraintsso much, we
hardlycan be said to have selected them; ratherthese constraintsselected
us: theyenableus to survive"(p. 14).Theinstitutions

thatemergearethe
resultof certainindividualsstumblingupon solutionsto particular
prob-
lems in a processof competition.Indeed,competitionas a processof
discoveryis partof everyevolutionaryprocess(p. 19).
Forunderstanding Hayek'sdevelopmentfroma technicaleconomistto
a philosopherof society,"Individualism:
TrueandFalse"(IT, 1945)is an
importantarticle.It is also one of the few places where he refersto
Durkheim,two reasonsforpayingattentionto it. In ITEHayekworksout
the consequencesof the theoryof societyof the ScottishEnlightenment
and its individualist
methodology.
Thisargumentis directedagainstthe properlycollectivisttheoriesof societywhich
pretendto be able directlyto comprehendsocialwholes like society,etc., as entities
sui generiswhich exist independentlyof the individualswhich compose them (I7T,
p. 6).
This has to be distinguishedfromthe so-calledindividualism of the
Cartesianschool,which is usuallyreferredto as rationalism.
Thisis why
Hayek calls the true individualismof the ScottishEnlightenment anti-
rationalism.
The antirationalisticapproach,which regardsman not as a highly rationaland
intelligentbut as a very irrationaland falliblebeing, whose individualerrorsare
correctedonly in the courseof a socialprocess,andwhich aimsto makethe best of
a very imperfectmaterial,is probablythe most characteristicfeatureof English
individualism(ITE,pp. 8-9).19
This insightis due to Mandeville.The maindifferencesbetween the

pseudo-individualism of the rationalistic
or engineeringtraditionon the
one handand the trueindividualism of the Scotsare that"trueindividu-
alismis the only theorywhichcan claimto makethe formationof spon-
taneoussocial productsintelligible,"and which "believes... that,if left
free, men will often achievemore than individualhumanreasoncould
designor foresee"(pp. 10-11). Thishas consequencesfor politicalphi-
losophy:
The greatconcern of the greatindividualistwriterswas indeed to find a set of
institutionsby whichmancouldbe induced,by his own choiceandfromthe motives
which determinedhis ordinaryconduct,to contributeas much as possible to the
need of all others... (1f, pp. 12-13).
Hayekemphasizesthe anti-rationalistic
characterof this philosophy,
whichis
a view which in generalratesratherlow the place which reasonplays in human

affairs,which contendsthatmanhas achievedwhathe has in spiteof the factthathe
is only partlyguided by reason,and that his individualreasonis very limitedand
imperfect... One mighteven say that the formeris the productof an acute con-
sciousness of the limitationsof the individualmind which induces an attitudeof
humilitytowardthe impersonaland anonymoussocialprocessby which individuals
help to createthingsgreaterthanthey know ... (ITE, p. 8).
The great discovery of the classical economists is that

manyof the institutionson which humanachievementsrest have arisenand are
functioningwithout a designingand directingmind. . . and that the spontaneous
collaborationof freemen often createsthingswhich aregreaterthantheirindividual
mindscan ever fullycomprehend(ITF, p. 7).
The Relationship between Sociology and Economics Revisited
WE HAVEOBSERVED
THATSmith is an intellectual ancestor that Hayek and
Durkheim both share. Hayek would not have been happy with this
common heritage. In ITE (as well as in other publications, the most
importantof which here is The Counterrevolutionof Science) he criticizes
"rationalistconstructivism,"the traditionthat he identifies with Descartes
and Comte.He presents this traditionas diametricallyopposedto the ideas
of the ScottishEnlightenment.The fact thatDurkheimexplicitlyrecognizes
his intellectualdebt to Comte may explain why Hayek condemns him as a
constructivist:"Itis in the insistence on social 'solidarity'that the construc-
tivist approach to sociology of Auguste Comte, Emil Durkheimand Leon
Duguit shows itself most clearly"(LLLII, p. 11, n. 9). Hayek demonstrates
a fundamentalmistrustof the idea of cooperation and an almost dogmatic
emphasis on the efficiency of coordination as the binding principle in
society. Compare, for instance, the following passage in The Fatal Con-
ceit.20
One revealingremarkof how poorly the orderingprincipleof the marketis
understoodis the common notion that 'cooperationis better than competition'.
Cooperation,like solidarity,presupposesa largemeasureof agreementon ends as
well as on methodsemployedin theirpursuit.Itmakessense in a smallgroupwhose
membersshareparticular habits,knowledgeand beliefsaboutpossibilities.It makes
hardlyany sense when the problemis to adaptto unknowncircumstances; yet it is
this adaptationto theunknownon whichthe coordinationof effortsin the extended
orderrests(FC, p. 19).
Hayek refuses to understandby "cooperation"anythingbut a conscious,

deliberate,and intentionalact of solidarity.As such, cooperation can only
take place in the small face-to-face tribal group with its shared goals.
However, what Durkheimhas in mind when he speaks of cooperation is
not the behavior of individualswho, one day, decide to get together and
agree on common objectives. On the contrary.What he means are the
various forms of interactionand complementaritybetween the "functions"
which emerge with the increasing division of labor in society. The indi-
viduals are no more than the holders or performersof these functions,and
through their relationshipswith other individualsthe various specialized
social organs will be in touch with other organs in society. It would be
entirely justified to apply Ferguson's expression "the result of human
actions but not of human design,"one of Hayek's favouritequotations,to
the durkheimian process of the emergence of cooperation. We have
already seen that Durkheim's idea of cooperation is much subtler than
Hayek thinks. For instance, Durkheim is very criticalof Spencer's thesis
thatevery society consists of cooperation.To this he opposes Comte'sidea
that cooperation does not give rise to society; on the contrary,it presup-
poses its existence.21
We have taken Hayek as a representativeof an economic approach to
social institutions and social stability in which coordination is a central
element. However, the distance between his analysis and Durkheim's,
whom we have chosen as a representativeof the sociological approachin
which cooperation is crucial, seems to exist more in Hayek's subjective
opinion than in his analysis. The conclusion appears to be either that
Hayek has not read Durkheimvery well (or not at all), or that he read him
but forgot the argument. The phrase to the extent that Durkheim is a
constructivist,which we quoted above, is a note to a passage stating that
the Great Society has nothing to do with solidarityin the "true"sense of
conscious unitedness in the pursuitof common goals. Durkheimsays the
exact opposite. Hayek'sinjusticewith regardto Durkheimis compounded
in LLLJII,where he accuses Durkheimof being the originatorof confusing
altruisticwith moral. Yet Durkheim'sstrategyfor creatinga social science
independent from economics startswith his taking issue with exactly this
idea. Ironically,what Hayek presents as criticismis more like a restatement
of Durkheim'sideas, couched in Hayek's language.22
SocialStability 769
VI
Cooperation versus Coordination?
HOWEVER, THIS IS A MATITEROF INTELLECTUALHISTORY. Here we are more

interested in the question of whether there exist fundamentaldifferences
between sociology and economics as represented by Durkheim and
Hayek. We have seen how accordingto Durkheimthe division of labor in
society, accompanied by restitutivelaw as the observable expression of a
growing social cohesion or solidarity,goes hand in hand with the devel-
opment of individualpersonality.This is only possible in a society which
provides the materialand spiritualconditions for individualsto distinguish
themselves from the collective. The form of society that gives individuals
the space for developing theirown personal charactersis a society that has
learned, in a manner of speaking, not to severely punish those who dare
take their distance from the collective values.23 Here, the visions of
Durkheimand Hayek are very close indeed. Hayek's GreatSociety is only
possible if there is a frameworkthat allows individualsto diverge from the
prescriptionsof accepted moralityand learnto pursue theirown individual
objectives, without having to justifythem. The marketorder, or catallaxy,
constitutes such a framework:
The GreatSocietyarosethroughthe discoverythatmen can live togetherin peace
and mutuallybenefitingeach otherwithoutagreeingon particularaimswhich they
severallypursue. The discoverythat by substitutingabstractrules of conduct for
obligatoryconcreteends made it possible to extendthe orderof peace beyond the
smallgroupspursuingthe sameends,becauseit enabledeachindividualto gainfrom
the skill and knowledgeof otherswhom he need not even know and whose aims
could be wholly differentfromhis own (LLLII, p. 109).24
The continuityof the marketorder which makes this peaceful coexist-
ence and the stabilityof the GreatSociety possible presupposes the belief
by its members in the existence and beneficial effects of spontaneous
coordination mechanisms that have not been consciously planned or
programmed. At the very least, it presupposes their willingness not to
tamper with them. Here lies the vulnerabilityof the market order. Like
Durkheim,Hayek argues that since this social organizationform is such a
recent discovery, the individualvalues are still more adapted to the envi-
ronmentof the primitivegroup. The risk that threatensthe marketorder is
"the revival of the organizationalthinking of the tribe" (LLLII,p. 134),
where consciously imposed concrete rules were the norm. In order to
preservethe catallaxy,its membersmust learnto renouncethe sort of

solidaritythat is the resultof the adoptionof common goals. Hayek
condemnssocialismas a reassertionof "thattribalethicswhose gradual
weakeninghas madean approachto the GreatSocietypossible"(ibid.).
Accordingto Durkheim,individualpersonalitydevelopsas the division
of labor and restitutivelaw occupy an ever more importantplace in
society. Accordingto Hayek, its developmentgoes togetherwith the
extensionof the marketand competitionin an evolutionaryprocess.25
Durkheimfindsthe unitythatcharacterized segmentarysocietyback,in a
morestableandmoredeeplyrootedform,in the cooperationbetweenthe
manydifferentfunctionswhichis the essenceof the divisionof laborand
the socialcohesionthatresultsfromthe recognitionof the mutualdepen-
dencein modernsociety.ForHayek,the coordination of individualactions
thatis achievedby marketsand competition,togetherwith the "minimal
justice"of the applicationof abstractrules of behaviorare sufficient
conditionsforthe cohesionthatallowsindividualsto pursuetheirpersonal
goals,providedthey respectthis spontaneousorder.
So, forDurkheimsolidaritycomesaboutthroughcooperation,whereas
accordingto Hayekat least a minimalformof cohesionis the resultof
coordination.
VII
Collective versus Individual?
THIS DOESNOT APPEARto be the only difference.Hayek'smethodologyis

generallyidentifiedwith individualism and Durkheim's with collectivism.
Forexample,his definitionof a socialfactpresupposesthe existenceof a
collectiveconscience,26whereas for Hayek a social fact is based on
individualexpectationsand perceptions.However,for Hayekrulesand
indeedrationality are fundamentally socialphenomena-this is the mes-
sage of, for instance,Tlh27-andfor Durkheimthe collectiveconscience
must be internalizedby the individualsof whom society consists;they
mustfeel thatthey belongto the samesociety(DTS,p. 260).Also,when
Durkheimspeaksof the mechanicalcausesandforcesthatmakemenlive
morecloselytogether,he mentionsconsanguinity, sharingthe sameland,
the cult of ancestors,and havingin commonthe same habits(p. 262).
Perhapswiththe exceptionof the firsttwo, all of thesefactorsaremental
and attitudinalratherthan physical or objective. These are the factors on

the basis of which groups form, and only after groups have formed does
cooperation evolve. So on the matterof the (social) part-whole relation-
ship the two authors are much closer to one another than they appear to
be. The point of contact lies in what Hayek calls the primacy of the
abstract,which is mirroredby Durkheim'sexplanationof the emergence of
abstractthought and rationality.
VIII
The Division of Knowledge
AN ASPECTIN WHICH HAYEKseems to differfromDurkheimis in his theoryof

the distributionof knowledge and its coordination:
Farmoreimportantthanthismoralattitude[ofcaringforoneselfandone's family],
which might be regardedas changeable,is an undisputedintellectualfact which
nobodycan hope to alterandwhich by itselfis a sufficientbasisfor the conclusions
which the individualistphilosophersdrew. This is the constitutionallimitationof
man'sknowledgeand interests,the fact thathe cannotknow morethana tiny part
of the whole society and thereforeall that can enter into his motives are the
immediateeffectswhich his actionswill have in the spherehe knows (ITh,p. 14).
Is this where Hayek'strue originalitywith respect to Durkheimlies?The

next passage creates the impression that Hayek himself thinks so:
Allthe possibledifferencesin men'smoralattitudesamountto little,so faras their
significancefor social organizationis concerned,comparedwith the fact that all
man'smindcan effectivelycomprehendarethe factsof the narrowcircleof whichhe
is the center;that,whetherhe is completelyselfishor the most perfectaltruist,the
humanneeds for which he can effectivelycare are an almostnegligiblefractionof
the needs of all membersof society (ibid.).
The division of knowledge as such is not discussed by Durkheim.
However, it is obvious thatwith increasingspecializationthere takes place
a fragmentationand localizationof knowledge. For Durkheimthe growth
of knowledge, both in the sense of local, possibly tacit knowledge, and in
the sense of explicit and scientific knowledge, is a consequence of the
division of labor. He only needs to explain the initial"jump"in the level of
knowledge which sets the process of diversificationof the social structure
in motion, i.e., the higher intelligence thatturnsa particularindividualinto
a leader within the horde. This, however, seems to belong to the domain
of necessary conditions that allow the effects of a greatersocial density or
volumeto startcreatingthe divisionof labor.ForHayek,too, the division

of laborandthelocalizationof knowledgedeveloptogetherin whatwould
now be calleda processof co-evolution.Thisdoes not seemto distinguish
himfromDurkheim.Hayek'soriginalitylies in the way in whichhe links
the existenceof dispersedknowledgeandthe problemof its coordination
with the conceptof equilibrium, whichis the subjectof "Economics and
Knowledge." Thisshows a way forwardthatpromisesto add something
substantialto Durkheim'sanalysiswithoutjustifyingHayek'sharshjudg-
ment(whichwe may readas an implicitreplyto Durkheim'sclaimthat
sociologyis moregeneralthaneconomics)"that,howevergratefulwe all
mustbe for some of the descriptivework of the sociologists,for which,
however,perhapsanthropologists andhistorians
wouldhavebeen equally
qualified,there seems to me still to exist no more justificationfor a
theoreticaldisciplineof sociologythantherewould be for a theoretical
disciplineof naturologyapartfromthe theoreticaldisciplinesdealingwith
particularclassesof naturalor socialphenomena"(LLLIII, p. 173).
Ix
Psychology
HOWthis "cognitive"
BEFOREINDICATING partof Hayek'sresearchprogram
may be developed further,we have to dwell upon a part of his work that
has remained relativelyunknown. We mean his theoretical psychology,
which, in fact, was his earliest contributionto science. In 1920, when he
was stilla student,Hayekwrotean analysisof themechanismby whichthe
human brain transformssensory perceptions into knowledge about the
world. Using the latest results in brain research and the psychology of
perception, he constructeda theory thatwas ahead of its time. So much so,
that when he published an extended version of the manuscriptin 1952,
under the title The Sensory Order.An Inquiry into the Foundations of
TheoreticalPsychology, it was as much ignored as Donald Hebb's The
Organization of Behaviorthree years earlier,which contains a theory that
is very similarto Hayek's.28We have mentioned earlier that perceptions
play a crucialrole in Hayek's economics. It is thereforesurprisingthat he
did not use, or even refer to, his earlierpsychological analysis of human
perception. Indeed, like his friendthe philosopher KarlPopper, he explic-
itly rejects psychological analysis in social science explanations.
Nothing compels us to take over this anti-psychologism.Indeed, in his

analytical economics Hayek himself seems less dogmatic than in his
methodology. In Price Expectations,MonetaryDisturbances and Malin-
vestments,he declares himself "incomplete agreementwith [Myrdal]when
he stresses the great importance of this element [expectations] in the
further development of the theory of industrialfluctuations"(1933, pp.
155-56). This seems to imply that he did not exclude psychological
explanations from the domain of economics. By a complicated series of
transformationsin his thought,29a number of elements of his psycholog-
ical theory ended up as ideas centralideas in his methodology and theory
of society. Among the former are subjectivism,i.e., the principle that the
facts of the social sciences are the opinions of the agents; the compositive
method, according to which all social phenomena have to be recon-
structedfrom these social facts; and the idea that an importantdifference
between the social and the natural sciences is that in the former the
scientist is equipped with a mind that obeys the same principles as the
minds of his objects of study. The most importantideas in his social theory
that were inspired by his psychology include that of social institutionsas
self-organizing systems; the market system as a structureof distributed
knowledge; and social institutionsas containingthe implicitknowledge of
earliergenerations (and hence being path-dependent).Fromthe idea that
the facts of social sciences are the productsof human minds, togetherwith
the idea thatno entitycan explain anythingthatis more complex than itself
(another of the philosophical consequences of Hayek's psychology), fol-
lows the core of Hayek's theory about the limits to human understanding
of social phenomena, and hence to the possibility of intervention.
We mention these factsabout Hayek'spsychology for two reasons. First,
because Hayek, in a process of intellectual development that is very
differentfrom Durkheim's,arrivesat a numberof conclusions that are very
similarto Durkheim's.Second, because Hayek's work harboursan as yet
unexplored potentialfor improvingour understandingof social processes.
To this we turn next.
X
Minds, Networks, and the Reintegration of Sociology and Economics
WE HAVE SHOWN ABOVE how Hayek generalized into a theory of social

institutions a number of ideas that are central to his economic theory.
Curiouslyenough, he failed to do so with what we may rightfullycall the
centralelement of his economics, the concept of equilibrium.Hayek (like
Durkheim) is a moral scientist in the sense of Mill in that he considers
social institutions as owing their existence to the perceptions, expecta-
tions, and ideas of individuals (Durkheim speaks of the collective con-
science). Hayek defines economic equilibriumas the compatibilityof the
perceptions and expectations on which individuals base their economic
plans. To explain social stability,this equilibriumconcept can be extended
straightforwardlyto include all perceptions and expectations, not just
those that concern economic matters.Hayek never makes this extension,
although it seems a natural way to link his theory of society with, for
example, the sociological traditionof symbolic interactionism,which has
as central concept the definition of the situation. The advantages of this
extension of the equilibriumconcept become clear when we include the
role of the structureof communication.In order for a set of social institu-
tions to be stable, it is necessary that the individuals who populate the
social framework continue to have perceptions and expectations (from
now on we will use the word ideas) that are sufficiently compatible or
congruous. In order for that to be the case, they need to calibrate these
ideas. This can only take place when they can communicate with one
another, which presupposes a structureof communication.Their location
in that structure and the number, the type, and the intensity of their
contacts or ties with other individuals influence this calibrationprocess.
Includingthese factorsin the analysisallows us to increase its explanatory
power and empiricalcontent.
Above, we have referredto the work of the network sociologist Harri-
son White. White studies the emergence and stabilityof differenttypes of
marketrelationships(White 1988, 1993). More specifically, he studies the
market of products that are purchased by industry. These markets are
established and remain in existence (White speaks of these markets re-
producing themselves) only if the structureof relationshipsamong sup-
pliers and purchasers is such that their perception of the situation is
SocialStability 775
sufficiently congruent. Otherwise, a market will disappear. Thus, these

markets exist by virtue of the mutual compatibilityof the perceptions of
the market parties. White limits his analysis to the congruence of the
perception of the cost and utility functions of the market parties. As in
Hayek's case, this seems an unnecessary restriction.Indeed, including the
perception of more than these traditionallyeconomic factors offers the
perspective of enrichingthe analysiswith elements thatallow us to include
both cooperation and coordination.30
A further extension of Hayek's equilibrium concept builds upon his
cognitive psychology and his theory of culturalevolution. It is the idea that
mental models and their evolution have to be included in the explanation
of social phenomena. While social institutions are the result of mental
models, these mental models have evolved in interactionwith a particular
institutionalenvironment.This enables us to subjectto furtherexamination
Durkheim'sclaim thatcooperation is more fundamentalthan coordination.
A natural point of departure would be the analysis of the effects of
competition. We remind the reader of Durkheim'scomment that whether
or not competition has the beneficial effects that for instance Hayek
ascribesto it (viz. thatby discoveringknowledge it enhances coordination)
depends on the presence or absence of social cohesion. This is a claim that
can be tested empirically.But a more general type of analysismust address
the question of which explanatory factors are fundamental. Economic
theories ultimately invoke rationality.It is not entirely clear what the
fundamentalfactors in sociological theories are. In the recent traditionof
"explanatorysociology," for instance, utility maximization is taken over
from economics to explain social phenomena. In his network analysis of
competition, Burt emphasizes the social structureas an explanatory fac-
tor.31He speaks of "[clausationresid[ing]in the intersection of relations"
(1992, p. 192), which he contrastswith the "debilitatingalternativeof using
[individual]attributesas an ersatz explanation"(ibid., p. 193). However,
entrepreneurialbehavior in Burt'sanalysis is driven by the perception to
"turna profit,"which seems to presuppose a maximizingprinciple. Even
Durkheim,despite his effortsto maximize his distance from economics, in
the end invokes a maximizationprinciple. He does so when he discusses
the division of labour as a result of the struggle for life: "Ladivision du
travailest donc un resultatde la lutte pour la vie . . . (DTS, p. 253)."["The
division of labor is, then, a result of the strugglefor existence ...."]. Every
specializationhas as a resultthe increaseor ameliorationof production

(DTS,p. 255). It is difficultto understandwhy efficiencywould lead to
specializationif its advantageswere not noticedby at leastsome individ-
uals.So, Durkheimat thispointintroducesefficiencyby the backdoorso
to speak. This, in turn, leads us back to utility:"pourque la vie se
maintienne,il faut toujoursque la reparationsoit proportionnee'a la
depense.. ." (p. 255) ["butfor life to be maintained,reparationmustbe
proportionateto the expenditure"(272)].In fact, this is the Friedman-
Alchianevolutionaryargumentfor utilitymaximization(Alchian1950).
Thisstronglysuggeststhatcost-benefitconsiderations aremorethannec-
essaryconditions.So it seems that the questionabout the relationship
betweeneconomicsand sociologythatwas raisedby Durkheimhas not
yet founda definitiveanswer.A recentsuggestionthattheremaybe more
thanone fundamental drivemotivatinghumanbehaviordeservesfurther
It is due to'Hermann-Pillath,
investigation. who distinguishesan egoistic
and an altruisticelement.32This theoryseems to presupposea type of
modularstructure of the humanmindthatcanalsobe found,forinstance,
in the workof Jackendoff(Jackendoff1989).Thissuggeststhatthe study
of mentalstructures,eitherin termsof modulesor models, may be a
necessaryingredientfor answeringDurkheim'squestionaboutthe rela-
tionshipbetween economicsand sociology.Hayekhas pointedto the
directionin whichwe maylook:a studyof mindsconnectedby networks.
Nothingin Durkheim's thoughtis inconsistentwith that.33
Notes
1. ComparePopper1972,ch. 5; Krajewski1977;Birner1994.
2. Exceptwhen statedotherwise,in the case of Durkheimpage referencespreceded
by DTSare to Durkheim1893(1994).Referencesto Hayek'sthreevolumes1973-79will
be givenas LLLI,II, or III.Alltranslations
fromDTSaretakenfromDurkheim1964.In the
sequel we will only give the page references.
3. Comparefor exampleDurkheim,DTS, p. III:"sile vaincupeut se resignerpourun
temps a une subordinationqu'il est contraintde subir, il ne la consent pas, et, par
consequent,elle ne sauraitconstituerun equilibrestable.Des treves imposees par la
violencene sont jamaisque provisoireset ne pacifientpas les esprits"["ifthe conquered,
for a time, mustsuffersubordinationundercompulsion,they do not consentto it, and
consequentlythiscannotconstitutea stableequilibrium. Truces,arrivedat afterviolence,
areneveranythingbutprovisional,andsatisfyno one";pp. 2-3];andHayekLLLII,p. 136:
"theattemptto secure to each what he is thoughtto deserve,by imposingupon all a
systemof commonconcreteends towardswhich theireffortsare directedby authority,

as socialismaimsto do, would be a retrogradestep...."
4. Simon1968.
5. Durkheimadds that this explainswhy we find primitivesocieties so difficultto
understand.
6. Or perhaps because of the fact that Durkheimthought his theory to be more
general.In thatcase, one maysuppose thathe foundthe analysisof marketsin political
economy satisfactory.
7. Itwould be an exaggerationto speakof Hayek'stheoryof markets,since he never
produceda fully-fledgedandcoherentexplanation.However,his workof the 1930sand
'40s containsthe most importantelements for such a theory (compareBirner1999).
Hayek'smost importantpublicationsdealingwith marketsand competitionare Hayek
1937, 1945, 1946, 1947,and 1968.
8. A naturalextensionof Hayek'sideason this issuewould be to say thatthisgeneral
availabilityof knowledge,togetherwith a constructivist philosophy,has led neoclassical
economists to constructtheir highly idealized theory of markets.Indeed, the only
economy to which standardneoclassicalperfect competitionmodels approximately
apply is the now almostcompletelydefunctcentrallyplannedsocialistor communist
system.
9. Hayekis the firsteconomistto do so (1937).
10. Hayekdoes not explainwhat he meansby optimum,but the text makesit clear
thatit is a situationin which no relevantknowledgeis left unusedso thatno individual
has a motiveto change his plan-an indirectway to expressa Paretooptimum.
11. CompareDesai (1994)for a discussionof the revolutionarycharacterof Hayek's
posing the problemof the divisionof knowledge.
12. Comparealso Hayek:"Thestatementthat,if people know everything,they are in
equilibriumis truesimplybecause thatis how we define equilibrium" (1937:46).
13. Desaiis the only one to noticethisaspectof Hayek'sanalysisof markets.CpDesai
1994:41.
14. Cp Richardson1960and 1972.Richardson's sourcesof inspirationare Hayekand
Marshall.
15. Cp Kirman1983, 1985, 1991;Gilles 1990and laterpublishedwork.
16. Cp for instanceGranovetter1982, 1985;White 1988;Burt1992.Amongecono-
mists,the best knownof these is Granovetter, and his work,too, failedto give riseto an
economicnetworktradition.
17. Cp Hayek1937and 1945.
18. UnlikeDurkheim,Hayekneverformulatesa theoryof the developmentof rational
thought.On this compareBirner1995, 1999.
19. Thisis verysimilarto Popper'sapproachto socialscience.Watkinshas coinedthe
fortunateterm"negativeutilitarianism" for this.
20. Given the fact thatHayekdid not himselfcompletethe book, it has to be cited
with caution.However, what Hayek says here is consistentwith his neglect of the
incentiveson cooperationin earlierwork,a neglectforwhichhe has been criticizedby,

for instance,Witt1994,Shearmur1994,and Bianchi1994.
21. "[Llacooperation,bien loin d'avoirpu produirela societe,en supposenecessaire-
mentle prealable6tablissementspontan6"(DTS,p. 262).["co-operation, farfromhaving
producedsociety, necessarilysupposes, as preamble,its spontaneousexistence."-p.
278].
22. Fora more extendeddiscussionof this issue in intellectualhistorycp Birnerand
Ege 1999.
23. Cp Bianchi1994.
24. Thiscan be readas an accuratesummaryof Durkheim'stheoryof the divisionof
labor.
25. Cp Ege 1995.
26. Cp Les r&glesde la methode sociologique. "Estfait social toute maniere de faire,
fix6e ou non, susceptibled'exercersur lindividu une contrainteexterieure;ou bien
encore,quiest generaledansl'etendued'unesocietedonneetouten ayantune existence
propre,ind6pendentede ses manifestationspropres"(p. 14, italics deleted). [In our
translation:"Socialfactsareall typesof behaviour,whetheror not laiddown in rules,that
arecapableof actingas an externalconstrainton the individual;or alternatively,
thatare
general everywherein a particularsociety while having an existence of their own,
independentfromtheirspecificmanifestations"].
27. Cp I7T,p. 15, where Hayekpresentsthe market(order)as a socialtrial-and-error
process, where Reason with a capital R exists only by virtue of many individuals
contributingtheirspecificknowledgeto society in an unplannedmanner.
28. Both became stimulito the developmentof neural network models and the
re-introductionof the study of mentalprocessesinto psychologythat now dominates
research.The publicationof Hebb'sbook almostmade Hayekgive up the projectof
publishinghis own. Fora discussionof Hayek'spsychologyand its (paradoxical)place
in the whole of his work (to which the text below refersbriefly),cp Birner1999a.
29. Forwhich the readermay want to consultBirner1999a.
30. Richardson (1960)is an earlyattemptto includeboththese factors.Cpalso Birner
1999.
31. Burt1992.Thisanalysiscan be consideredas an extensionand a formalization of
a type of competitionthatwas analyzedby Misesand Hayek.Cp Birner1996.
32. The idea is of coursemucholder.One findsit, for instance,in Menger.Compare
Birner1990.
33. Hayek'ssocialtheorywas stronglyinfluencedby his neural-network modelof the
mind;cp. Birner1996and 1999a.In Durkheim,too, we find referencesto physiological
psychology (of Wundt),though they have a differentfunction and seem to play a
marginalrole in the developmentof his thought(DWS, pp. 322-3). Makingcomparisons
with biologyis a traditionthatgoes at least back to Comteand Spencer.However,like
Hayek, Durkheimdoes not succumbto the temptationof an organicistictheory of
society.
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American Journal of Economics and Sociology, Inc.

Two Views on Social Stability: An Unsettled Question

ABSTRACT.EmilDurkheimpublished TheDivision of Labourin Societyas

THE QUIP ABOUT ECONOMISTSshowing that something works and sociologists

C'estaux6conomistesque revientle m6rited'avoirles premierssignalele caractere

Despite this generous recognition, Durkheim skillfullymaneuvers into

and differencesbetweensociologistDurkheim'sand economistHayek's

solidarityis thatwhichderivesfromsimilarity. Thistype of societyis no

Thereis no possibilityforindividualpersonalityto developin a society

This also explains the increasingrationalizationof society:

Once rational thought has emerged, there is no way of keeping it in

collectivedevientdoncmoinsimperative, et, pourcetteraisonencore,elle

As societybecomesmoreopen and mobile,traditionloses its sway.For

that there is no need for a repressive apparatus-and for thinkingthat the

Specializationand differentiationtake place on the basis of association.

forexampleDTS,p. 264,wherehe writes:"Lavie collectiven'estpas nee

Accordingto Comte,the solidaritythatis producedby the divisionof

Des changementsprofondsse sont produits,et en tres peu de temps, dans la

But despite the fact that he thinks he has incorporatedeconomics in his

functioning of markets.Among the few exceptions is FriedrichHayek, to

THE STANDARDNocL~ssicAL AAYsis

of learningand knowledgeby sayingthatthe divisionof knowledgeand

The note to this sentenceelaborates:

the prices of these resources.In this way it may be a sufficientdistributionof

Aswe haveobserved,Hayekscriticismof traditional equilibrium theory

of life is knowledge of people, of local conditions, and of special circum-

Social Institutions as Coordinating Devices

THECENTRALPROBLEMof Hayek's analyticaleconomics is the explanation of

ment. Pricesare partof this environment.The monetarysystemhas a

French School of Engineers. He accuses it of seeing only one solution to

us: theyenableus to survive"(p. 14).Theinstitutions

This insightis due to Mandeville.The maindifferencesbetween the

a view which in generalratesratherlow the place which reasonplays in human

The great discovery of the classical economists is that

The Relationship between Sociology and Economics Revisited

Hayek refuses to understandby "cooperation"anythingbut a conscious,

HOWEVER, THIS IS A MATITEROF INTELLECTUALHISTORY. Here we are more

preservethe catallaxy,its membersmust learnto renouncethe sort of

Collective versus Individual?

THIS DOESNOT APPEARto be the only difference.Hayek'smethodologyis

and attitudinalratherthan physical or objective. These are the factors on

The Division of Knowledge

AN ASPECTIN WHICH HAYEKseems to differfromDurkheimis in his theoryof

Is this where Hayek'strue originalitywith respect to Durkheimlies?The

volumeto startcreatingthe divisionof labor.ForHayek,too, the division

Nothing compels us to take over this anti-psychologism.Indeed, in his

WE HAVE SHOWN ABOVE how Hayek generalized into a theory of social

sufficiently congruent. Otherwise, a market will disappear. Thus, these

specializationhas as a resultthe increaseor ameliorationof production

systemof commonconcreteends towardswhich theireffortsare directedby authority,

incentiveson cooperationin earlierwork,a neglectforwhichhe has been criticizedby,

Alchian, A. (1950), "Uncertainty,Evolution and Economic Theory,"Journal of Political

. (1985). "EconomicAction and Social Structure:The Problem of Embeddedness,"

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