ABSTRACT
Introduction In his 2002 Nobel Lecture, Vernon Smith refers to “the simultaneous existence of two rational orders,” which “are distinguishing characteristics of what we are as social creatures” (Smith 2003: 466). For Smith, who invokes David Hume and F. A. Hayek in this regard, both orders “are essential to understanding and unifying a large body of experience from socioeconomic life and the experimental laboratory, and in charting relevant new directions for economic theory as well as experimental-empirical programs” (Smith 2003: 466).1 This chapter examines the nature and consequences of Hayek’s concept of human agency by exploring the Hayekian two worlds of human conduct. We argue that Hayek renounced the use of an explicit model of reclusive agency in favor of an implicit model of sympathetic (correlated) agency. In what follows, we show first that, for Hayek, behavior within the small group – the “small band or troop,” or “micro-cosmos” – is correlated, resulting from agents who are sympathetic one with another. We shall argue that sympathy in this context for Hayek entails the projection of one’s preferences onto the preferences of others. With such correlated agency as the default in smallgroup situations, Hayek attempts to explain the transition from small groups to a larger civilization. We consider the role of projection in Hayek’s system at length, because projection from the local group characterized by a well-defined preference ordering to the world beyond the neighborhood may yield mistaken beliefs. We shall argue that Hayek’s recognition of this outcome underlies his pessimism about the democratic attempt to effect “social justice.” Finally, we shall take up the question of whether and how to avoid this temptation to impose one set of preferences on another when local optima differ. We address this question by considering how sympathetic projection can go awry in the Classical tradition, specifically in Adam Smith’s system. The problem is, we shall argue, one of “factions.” Smith famously worried about the destructive nature of factions, their tendency to exploit the larger society (Levy and Peart 2008a). In the case of religious factions – perhaps the most famous example of destructive behavior of this sort – Smith held that competition among small groups might resolve the problem. Central to his argument is the realization that
if the local groups are small enough, individuals in the larger society will belong to overlapping organizations. As they move in their daily lives from one small organization to another, they will find that the organizations differ and they will thus learn to agree to disagree. People will come to accept the incoherence that characterizes life in the larger sphere.
