1Dan Klein has written an interesting book in which he ruminates on the meaning and justification of the free society, and on our (we human beings) ruminations, research, and discussions about the free society. Clearly, Klein aspires to be an original thinker, a tweaker of ideas. He is inspired by his subject and in awe of it. He is cognizant that it can never be completely mastered or adequately described in words. He is thus poetic and innovative in his use of language as he strains against its limitations. He wants to challenge the reader to share his awe and inspiration and to think outside of the box, like he does. All this is entertaining and sometimes informative, but it is possible to feel that it is a bit of a stretch, not always convincing. In addition, some of the apparent “innovations” are not really new.
2Klein is at his best when discussing concrete cases, to wit, the spontaneous coordination of skaters on an ice rink, observations on urban transit systems, issues in the economics of reputation, and various illustrations of how complexity implies unknowns and what to do about it. In these analyses he is eloquent and knowledgeable and, recalling and building on some of his previous work, provides the reader with information and analysis that furthers his mission to construct a cogent and defensible account of how to advance freedom in our messy world. Some of this would prove useful in the classroom.
3But his aim is much more ambitious than this. He wants to push the envelope on two particular sets of ideas—on coordination (three chapters) and on knowledge (four chapters). On the former he offers a “new” interpretation that distinguishes between two kinds of coordination—mutual coordination and concatenate coordination. The clarity of the distinction appears to be inversely related to the number of words offered by way of definition and explanation—not surprisingly—and fosters the impression that “he doth protest too much.” Mutual coordination refers to the idea, familiar to us now in this modern/post-modern world, of bottom-up, spontaneous mutual orientation by individuals to each other’s actions (as on the ice rink). Concatenate coordination appears to be something else (not altogether clear to me)—apparently a top-down view of social outcomes on the basis of whether they are coordinated or not. Klein makes the claim that it is this latter view that is exclusively the one used by the classical economists, Smith included, and all others until rather recently.
4The validity of this claim aside, what about the cogency or value of this distinction? Perhaps I have missed the point, but it seems to echo aspects of Hayek’s (and other’s) analysis of organizations and orders. Organizations, like firms, achieve crucial aspects of their coherence through conscious direction and allocation, whereas orders, likes social institutions (language, common law, markets) achieve that coherence spontaneously, which means by individuals taking actions in their own self-interest, not (consciously) promoting the cause of coordination (see Horwitz, 2010). The idea of concatenate coordination appears to me to imply a kind of top down judgment of outcomes—by some spectator or analyst. Indeed, the very concept of coordination necessitates a judgment, always, someone’s judgment. For example, as Richard Wagner has argued (Wagner 2010), a military parade is coordinated in a way that a market is not. The sergeant-major may see the parade as fully coordinated. But the economist, thinking about the disappointed plans of the draftee-soldiers may see it as hopelessly discoordinated. All social situations are the resolved outcomes of human actions. Whether they are seen to be coordinated or not depends on the posited criteria of coordination. The notion of coordination is a teleological one. We privilege mutual coordination in that it elevates the plans of the individuals being coordinated by each other’s actions. A dictator or an outside observer may give more or less weight to this. What more is there that one can say, and how does it matter?
5Klein’s second big topic relates to knowledge. His extended discussion includes the usual suspects—information, dispersion, interpretation and cognition; but not much about expectations (though implied by interpretation). On cognition he offers an analysis of the “deepself” along the lines of the work of Marvin Minsky on artificial intelligence (extensively quoted). It’s all about multi-layered consciousness, analogous to different orders of society, in a very complex sensory order. Where have we heard that before? Klein’s account of cognition may be intriguing to some (it contains rather fanciful metaphors) and informative of Minsky’s work, but it is not clear it is either path-breaking or especially helpful.
6Perhaps more interesting is his analysis of the connections between knowledge, information and interpretation. Klein chooses the umbrella “asymmetric interpretation” to cover this line of inquiry. This is in order to tap into the well-known stories of asymmetric information, pioneered by George Akerlof (1970) and others, who puzzled over the question of how markets could function when different people possess different relevant information. As Klein points out, there is a crucial difference between information and knowledge. Information has to be interpreted. Interpretation is subjective, idiosyncratic. Two people with the same information may have very different interpretations of its meaning—they may learn different things from the same information. They have different “knowledge.” And, clearly, it is different knowledge, in part a consequence of different interpretations, that is more important than different information. Asymmetries or differences in knowledge are what drive entrepreneurship and the market process. When knowledge is flattened to information, and everyone has (or can have) the same information, we have a world of common knowledge, in which there can be no entrepreneur.
7Klein has some interesting stories to illustrate this, and his treatment is powerfully persuasive especially to those for whom these ideas are new. But they are not new. The distinction between information and knowledge, and the dangerous tendency to flatten the latter into the former, is something that has been known for a long time and is the subject of much discussion in certain circles like management studies, entrepreneurship, studies in cognition, not to mention, most notably, in Austrian Economics for the last half century. How Klein can talk about this subject without a single reference to the work of Ludwig Lachmann on the matter of disparate expectations, is something that will greatly perplex his readers versed in the Austrian literature—something which the numerous references to Hayek and Polanyi do little to remedy.
8From the 1940’s onwards, Lachmann explored the implications of the difference between information and knowledge and how different interpretations gave rise to different expectations even on the basis of the same information, and the “same” experiences. The phenomenon of different expectations concerning the same future events implies that at most one of them can turn out to be correct, error is inevitable. The basis for error, and its implications for the ability to discern equilibrating forces in the market process, is a matter concerning which a protracted debate between Lachmann and Israel Kirzner later ensued. And although Kirzner’s work on entrepreneurship and the discovery of entrepreneurial opportunities is a primary motif in this book, there is no mention of this debate.
9A subtext of the book is, indeed, Kirzner’s work on entrepreneurship. It runs throughout the book and reflects the change in attitude that Klein went through about it. Kirzner is clearly a significant influence on his thinking and its development. Yet, as he recounts in an autobiographical discourse, he has reason to have changed his attitude on some aspects of it. He is no longer so enthusiastic about it and he provides some thoughtful criticisms. What is, once again, missing from this is exegetical context? In the course of the Lachmann-Kirzner debate and beyond, numerous criticisms emerged of Kirzner’s framework, including of the assertion of equilibration, the assertion that entrepreneurship is costless, what it means to say that opportunities are “discovered”, the very meaning of the notion of “opportunity”. But there is hardly any recognition of this in Klein’s story (he has a passing reference to the criticisms of Loasby, Ricketts and “others”). To a large extent he has provided old wine in a new bottle. And he does so in a manner that leaves a bit of a sour taste, as his attitudinal journey progresses from warm admiration to hostility. Though Kirzner’s work has been the subject of much critical analysis over many years, without exception (as far as I know) this has been cordial and even friendly. That Klein has perceived his criticism to have provoked a reaction justifying his hostility is unfortunate and may well have been better left out of the book. (For more on the Kirzner-Klein debate see the Spring 2010 issue of the Journal of Private Enterprise containing full length contributions by interested authors. For a subsequent rejoinder to Kirzner and the commentators see Klein 2011 and the online appendix referenced therein).
10This applies as well to the other subtext that runs through the book, namely the autobiographical narratives inserted at various points. Klein is understandably passionate about his subject and wishes to recount his personal journey, but in a book as jam-packed with intricately related ideas as this one, it is possible to feel that these narratives simply intrude. It is not clear that he has reached the level of celebrity to justify the level of interest in this that he seems to presume.
11Klein has some things to say about policy and methodology and the relationship between the two. He points out that policy always takes place in a dynamic world, in which neat comparisons between alternative situations are impossible. Not only are the precise efficiency comparisons of neoclassical-welfare economics irrelevant; but even higher level systemic-institutional comparisons tend to flounder. In the end, one has to settle for judgments that are of necessity much “looser” in character. If it is the cause of liberty in which we are interested, we shall have to judge a policy by whether or not it “by and large” contributes to or detracts from this cause. And the criteria to be marshaled in support of liberty are also, of necessity, loose. Klein suggests that the striving for value-neutrality in economics (and social science in general) may be futile.
12There is a sense in which one may readily agree. There is probably a general awareness that judgments involving many real-world alternatives are difficult to make even on the basis of solid agreement on fundamental values, because of uncertainties involved in policy-implementation and the counterfactuals they imply; and because all policy actions have diverse effects—some that appear conducive to liberty and coordination and some that do not, so that some kind of utilitarian calculus is called for, is unavoidable. All this is true and has been pointed out clearly by scholars like Hazlitt ( 1972) and Yeager (2001) (not mentioned in the book). Ethics and social science are inevitably connected and the one informs the other; though they are categorically different things. There is also another connection that Klein mentions but perhaps does not get quite right. That is the crucial role of the burden of proof, and how this forces values into research. In any investigation one has to decide how to set up the research framework. What hypothesis are you going to test? What is the null hypothesis you are going to try to refute, failing which you will maintain an alternative hypothesis, which may be the basis of some policy. There is no value-neutral way to decide where to put the burden of proof. In this respect, a research strategy in the service of economic policy is necessarily informed by the values of the researcher. But saying this does not negate the difference between facts and values or the need to strive for neutrality in the conduct of the research itself (Lewin, 2007).
13In sum, Klein’s book is both entertaining and frustrating. It is well written, it is provocatively full of ideas and it is informative on some interesting subjects. It suffers from overreaching and failure to connect with the ideas of others who also have had interesting things to say.