The communicative character of capitalistic competition: a Hayekian response to the Habermasian challenge.

• Author: Wohlgemuth, Michael

Politics steps in to fill the functional gaps opened when other mechanisms of social integration are overburdened.... In filling in for social processes whose problem-solving capacities are overtaxed, the political process solves the same kind of problems as the process it replaces.

--Jurgen Habermas, Between Facts and Norms

We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based--a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed.

--Friedrich A. Hayek, "The Pretence of Knowledge"

"Ideal speech situations," "domination-free discourse," and "deliberative communities" describe political ideals that many sociologists cherish proudly. Their sometimes explicit, sometimes implicit motivation is to mobilize political discourse as a means of taming or transforming the capitalist "system" according to alleged needs of "society." (1) Most economists and defenders of capitalistic competition, however, express no concern about communicative communities. We assume that the individual market actor chooses among given alternatives that satisfy given preferences subject to given constraints. Why, then, should Homo oeconomicus argue (Aaken 2004)? Not "communicative action" but "commutative action" takes place among the individuals who populate economic textbooks. Only a few economists, most of them "Austrian," have recognized that the exchange of goods and services within the spontaneous order of the "catallaxy" involves an exchange of knowledge, ideas, opinions, expectations, and arguments--that markets are indeed communicative networks (see, for example, Hayek [1946] 1948; Lavoie 1991; Horwitz 1992; Davis 1998). In fact--and this claim constitutes my thesis in this article--market competition is more "deliberative" than politics in the sense that the market process generates more information about available social problem solutions and their comparative performance and about people's preferences, ideas, and expectations when that information is spontaneously created, disseminated, and tested.

This idea is anathema to followers of Habermasian discourse ethics. The intellectual thrust and political clout of their vindication of deliberative democracy depends critically on a mostly tacit assumption that markets fail to meet social needs and to regulate social conflicts. Political discourse therefore "steps in to fill the functional gaps when other mechanisms of social integration are overburdened" (Habermas 1996, 318). I claim that the argument should be the other way around: politics and public deliberations are overburdened mechanisms, unable to deal with an increasingly complex and dynamic society. Moreover, the requisites of ideal speech communities are so enormous that functional gaps are inevitable. Some gaps can be closed if market competition occurs. In other cases, reorganizations of the political system are needed. Hence, I am not arguing that Habermas is wrong when he stresses the virtues of open discourse in order to reach informed agreement among citizens who seek to realize mutual gains from joint commitment by contributing to common (public) goods and by submitting to common rules of conduct (Vanberg 2004). I am challenging his neglect of capitalistic competition as a communicative device and his disdain for the classical-liberal conception of bounded democracy under the law (Habermas 1975, 1998).

I would be bold to try to convince discourse philosophers that capitalism is an arena of pure "communicative action" as characterized by Habermas himself in two thick volumes (Habermas 1984, 1985), but I make no such claim. (2) As with his separation of "system" and "lifeworld," his distinction between ideal-type concepts of action suggests seemingly obvious but misconceived assignments to real-type social environments. This article is not the place to analyze more than one thousand pages of Habermasian philosophy and speech-act sociology. Simply put, Habermas distinguishes three concepts of action: (1) "Instrumental action," which is nonsocial and oriented solely toward success (the economist's textbook example of a utility-maximizing Robinson Crusoe may be an example); (2) "strategic action," which is oriented toward success in social interaction (think about the economist's players in noncooperative game-theoretic models) and in which acts of communication are often among the players' stratagems; and (3) "communicative action," which in its pure ideal-type form represents social interaction aimed at reaching an understanding about the recognition of "validity claims" irrespective of personal interests in individual success (1984, 285; 1990, 58). Obviously, according to Habermas, instrumental and strategic action drive the "system" (state and market), whereas "communicative action" takes place out there somewhere in the "lifeworld" or among the "public" (1996, 429).

This last form of social action is certainly the most idealistic. I cannot claim that markets are a preserve of "communicative action" in this very demanding form, but I wonder whether any other arenas for social exchange can ever come close to the ideal of a disinterested interest in achieving understanding about claims to truth or rightness? Neither TX politics nor TX markets qualify; and even TX science may be dominated by strategic interests and instrumental communication. The "wild" complex of public-opinion formation is, as I show later, plagued even more by (preference) falsification, radicalization, and inconsistency with no empirical claim to truth or rightness.

Mainstream economists and most sociologists may easily form an understanding that human action in competitive markets is overwhelmingly instrumental and strategic. Economists may claim that this condition does not preclude social outcomes that are welfare enhancing (given an "invisible hand" model), whereas sociologists (and Habermasians) may claim that bad motives produce bad results and that strategic action using power and money leads to social oppression. In this article, I take sides with the sociologists and argue that communication is important (something that economists find difficult to incorporate in their models), but at the same time I show the sociologists (and mainstream economists) that markets serve as forums of communication that generate valuable knowledge about human valuations of alternative problem solutions.

My basic assumption rules out any angelic actors engaged in disinterested discourse, earnestly seeking a truth even if it be an uncomfortable one. Still, different rules and procedures shape the action and communication in the realms of politics, public opinion, and markets, and hence lead to different results even if we keep our model of human behavior constant (instead of insinuating "communicative action" in its idealistic sense to be absent in some arenas and present in others). From this point of departure, I proceed to show that capitalistic competition may be even more communicative than politics with respect to results and procedures. First, I present some of the most prevalent ideal types of deliberative democracy or ideal speech situations. The procedural postulates of ideal-type political communication serve as a foil for bringing out the functional characteristics of market exchange and competition that to a remarkable degree live up to discursive demands. Discourse-theoretical ideal types also serve to highlight limits and predicaments of real-type political discourse. Next, I draw policy conclusions with the intention of allowing political systems to cope with these predicaments better. Finally, I briefly summarize comparative strengths and weaknesses and preferable application areas of political and economic "discourse."

Deliberative Democracy as a Political Ideal

Reading Habermas can be both overwhelming and confusing. At the same time, however, it can be challenging and even stimulating for someone who learned most of his political economy from reading Hayek and similar-minded scholars (see Pennington 2003 or Prychitko 2000 for a similar Hayekian approach to Habermasian issues). Especially in Between Facts and Norms (1996), Habermas's late endorsement of the rule of law activates interpretative frames that have formed over years of reading classical-liberal texts. The only "economist" that Habermas seems to know and take seriously, however, is Karl Marx. Hence, his old-fashioned, if still popular, misapprehension of capitalistic competition. Hence, too, perhaps, his insistence on sheltering his romantic ideal of a spontaneously self-organized "public" from a coercive "system" of colonizing market forces (Habermas 1985, 196). And hence my impression that Habermas's ideal of a deliberating public has more in common with real market processes than meets Habermas's own eyes.

According to Habermas, the public sphere cannot be conceived as a hierarchical, purpose-driven organization; it "is not even a framework of norms and competences and roles, membership regulations, and so on.... The public sphere can best be described as a network for communicating information and points of view (i.e. opinions expressing affirmative or negative attitudes)" (1996, 360). The same is true for the market process. Similarities appear not only on the level of coordination and communication, but also on the level of rules of conduct that shape this "spontaneous order." Discourse theory is a procedural theory that lays the stress on general rules that allow an open-ended discourse and that promotes the legitimacy of binding decisions that result from such discourse. The general attributes of the rules of a fair "discourse" game resemble those of a fair market game of "catallaxy" (Hayek 1976, 115ff.): abstract rules of conduct that apply equally to every...