Entrepreneurship, Money and Coordination

Entrepreneurship, Money and Coordination

Hayek’s Theory of Cultural Evolution

New Horizons in Institutional and Evolutionary Economics series

Edited by Jürgen G. Backhaus

Hayek’s theory of cultural evolution has always generated controversy. Interest in Hayek’s theory, and others’ analysis and criticism of it, has been rising of late. This volume urges a reconsideration of Hayeks’ theory of evolution and aims to explore the relevance of Hayek’s theory for its own sake and for evolutionary economics more generally.

Chapter 7: Money and Reciprocity in the Extended Order – An Essay on the Evolution and Cultural Function of Money

Walter W. Heering

Subjects: economics and finance, austrian economics, evolutionary economics

Extract

Walter W. Heering* Money is indispensable for extending reciprocal cooperation beyond the limits of human awareness – and therefore also beyond the limits of what was explicable and could readily recognised as expanding opportunities. Friedrich August von Hayek (1988, p. 104) Money, according to Friedrich A. von Hayek, is an eminent cultural achievement, which has developed spontaneously along with evolution of what he termed the ‘extended order’. Three aspects of this view on money are of special interest here. First, money was and is mostly misunderstood and is still badly understood even by specialists in the field (Hayek 1988, pp. 101– 102). Second, money cannot be managed or handled deliberately; attempts to do so in the past have produced devastating effects. Indeed, Hayek saw money as one of those regrettable examples, where intervention by the state prevented more efficient arrangements (Hayek 1988, pp. 103–104). Third, money is a necessary prerequisite (in the same sense as is law, morality, etc.) for a modern liberal society (Hayek 1988, p. 104). In their contribution to this volume, Martin Bohl and Jens Hölscher have focused on the second of these three points: On Hayek’s deep distrust in the ability and honesty of state agencies to manage money properly, which culminated during the mid-1970s period of high inflation in his radical proposal, ‘almost a bitter joke’, as he himself put it (Hayek 1984, p. 29), to ‘denationalise’ money, i.e. to abandon the state monopoly for issuing money in favour of a system...

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