Indispensable Economics Cosmos and Taxis

Jan 9, 2009

Many people cannot get the idea into their heads that society was not created nor is run by a single authority. Now someone objected to this idea once by saying that since God created everything, He is effectively the creator of society as well. That is true in a sense, but one thing I have insisted on, along with the late Pope John Paul II, is that God made man a co-creator with him. This applies to inventions, etc., but also applies to society and the market as well. Remember, John Paul II held that we humans have self-possession and self-governance which give us self-determination. Men are in control of their actions (assuming they are not a slave to their passions or public opinion, or something else), and therefore are responsible for those actions. This includes the setting up of institutions, usually occurring over long periods of time, and resulting from trial and error. These institutions serve the function of human flourishing. For example, look at the way universities evolved since the later middle ages. They went from monastic schools, meant for monks, to being open to others, to the great universities in the major cities, to the institutions we have today. Are they perfect? Of course not—nothing man does can be so. But one cannot argue that they have not been centers of great learning and progress for the benefit of the human race.

The same is true of the growth of markets. Agricultural inventions in the middle ages allowed more than minimal food to be grown, thus allowing people to travel. They traveled to the great trading cities and brought back things never available to people in the medieval non-costal areas before. These folks set up bazaars, which the people visited and bought things which enhanced their quality of life. These turned into towns when the patterns of trade became habitual. The towns became cities, etc.

The great Austrian economist Friedrich Hayek uses the Greek terms “cosmos” and “taxis” to describe the difference of worldview between those who see the spontaneous order of society and the market and those who do not. Cosmos describes the self-governing order of things—like the cosmos. Did you know that the Andromeda galaxy and our Milky Way galaxy are on a collision course—and there is nothing we can do about it? This is an example of cosmos in the area of space. Think of taxis in the sense of hailing a taxi cab, and then telling the driver where to take you. In this case, you are directing the cab. In the first instance, the cosmos is self-directing.

Society and the market conform to the cosmos rather than the taxis. Both are self-generating by the billions of interactions between thinking human beings all over the globe and those interactions are based on the interactions yesterday and those are based on the interactions on the day before that, etc. No one controls this. This does not mean that large institutions can’t influence the society and market. But there is no control here. Even with President-elect Obama’s economic “stimulus” plan, no one is really sure how the market is going to react to it. How did it react to the original issuing of money to free up loans? Well, Donald Trump put it this way the other day: “No matter what your credit rating or your track record, you still can’t get a loan.”

The implications are clear. Those who say that they can fix this, that, or the other thing, in society or the market are blowing smoke. Even if they can influence things, this influence might not be for the better, because of the Law of Unintended Consequences, which is founded on the fact that people will act in their own perceived best interest, regardless of what a government program will try to accomplish. This is why it is better to let the economy deal with circumstances than try to tweak it. It was that constant meddling with the economy which caused the problems in the first place. More meddling can’t remedy the results of the original meddling—at least if we are not in some kind of dream world.

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