Adam Ferguson’s great insight

Adam Ferguson, who died on February 22nd 1816, was, like myself, a graduate of Edinburgh and St Andrews universities. He was a leading figure of the Scottish Enlightenment, and has a memorial in the East wall of St Andrews cathedral, which I usually visit when I go there. He was a contemporary and friend of Adam Smith and David Hume, fellow members of the Select Society.

He studied civil society and is widely regarded as “the father of modern sociology.” He emphasized innovation and technological progress as more important to growth than capital accumulation, and was a firm believer in the possibility of progress.

His most significant contribution, however, was his recognition that human beings could create, through their uncoordinated actions, outcomes that were never designed or intended. He said:

“Every step and every movement of the multitude, even in what are termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design.”

Hayek took up this notion of spontaneous order, pointing out that markets and economies are the product of human activity, but were never designed in advance from any theoretical blueprint. Hayek developed the point further, showing that the spontaneous order of the market is superior to a centrally planned system. It contains far more information that the minds of any planners could hold, and its information is more immediate, incorporating the day-to-day decisions of millions into its ongoing framework. And it is faster to react, Hayek showed, because it does not need to collect the information centrally in order to respond, but does so immediately at the periphery.

A corollary of this is that when people ask if a planned economy is preferable to “random chaos,” they are asking the wrong question. The alternative to an economy planned centrally by a few is one that emerges spontaneously from individual planning decisions made by millions. The answer is, of course, that the latter is superior, not only at the theoretical level explained by Hayek, but in terms of the practical results it has achieved, results far superior to those achieved by any of the ‘planned’ economies.

Ferguson’s great insight, that human beings create viable systems by the interaction of their individual decisions, lies at the heart of market economics. Instead of having decisions made for them by the ‘enlightened’ planners, people can make their own ones, and in doing so contribute to outcomes that satisfy the many instead of fulfilling the aims of the few.