Rather than imagine what you know happens at a roller rink, imagine that you have never seen or heard of a roller rink (or an ice-skating rink for that matter). Knowing nothing of skating, you would probably expect catastrophe. You exclaim:
“How are 100 people supposed to skate around the arena without guidance or direction? Each skater traces out a pattern, and the patterns must mesh so skaters avoid injury. That’s a complex problem. It would require smart leadership. But it won’t get solved! The arena will be a scene of collision, injury, and little fun. Who will pay for that?!”
Intuition leads us to think that complex problems require complex, deliberate solutions. In a roller rink, the social good depends on getting the patterns to mesh. But no one is minding that good. Not even the owner intends to look after it. How can the social good be achieved if no one is looking after it?
Yet, we have all witnessed roller skating, and we know that somehow it does work out. There are occasional accidents, but mostly people come away unscathed and have fun, enough that they pay good money to participate. The spectacle is counter-intuitive. How does it happen?
Suppose you and I step into roller-skates and join the other skaters on the floor of the rink. In skating, I do not aim to solve the big problem of coordinating all the skaters. I do not try to get all 100 patterns to mesh. I show common courtesy, but basically I am out for myself. I want to have fun, and so certainly don’t want to get hurt. Looking out for myself, I promote my interest in avoiding collision with you.
An important quality of collision is mutuality. If I collide with you, then you collide with me. And if I don’t collide with you, you don’t collide with me. In promoting my interest in avoiding collision with you, I also promote your interest in avoiding collision with me.
The key to social order at the rink is this coincidence of interest. I do not intend to promote your interest. Most likely I don’t even acknowledge it. Still, by looking out for myself I am to that extent also looking out for you. My actions promote your interest
Roller skating is an example of what economist and philosopher F.A. Hayek called spontaneous order. The process is beneficial and orderly, but also spontaneous. No one plans or directs the overall order. Decision making is left to the individual skater. It is decentralized.
The contrast is centralized decision making. Again, intuition tells us that the only way the complex social good can be achieved is by central planning. Yet Hayek tells us that often, decentral planning is the only way it can work.
Suppose the social good on the floor of the roller rink were entrusted to central planning. The rink owner appoints a really smart, really nice guy to look out for the social good.
He stands on the edge of the rink, holds a bullhorn up to his mouth, and calls out directions: “You in the blue jacket, speed up and veer to the left.” “You in the black hat, I want you to slow down and move toward the inside.” And so on.
The results would be terrible. The PhD could not come close to achieving the brisk dynamic order that spontaneous skating achieves. The main reason he could not is that he lacks knowledge of individual conditions. The planner’s college knowledge is useless in informing him of the particular conditions of your situation.
Your local conditions-your opportunities, constraints, and aspirations-are best known by you. No one else comes close. The only person who can truly be in your head is you.
Being smart, the planner would recognize his limitations and just slow things down. To prevent collisions he would have to impose regimentation. Skating would be slow and simple. Skaters would be bored. On top of that, they would not find the joy and dignity that come from making one’s own course.
On the floor of the roller rink, the social good can only be achieved by spontaneous order. As Hayek explained, the case for leaving action spontaneous is stronger the more complex social affairs are, because greater complexity only exacerbates the planner’s knowledge problems. When the situation is simple, central planning can succeed. If there were just four skaters, central planning might not be so bad. But with 100 skaters, it is preposterous.
The principles find direct application in economics. Just as we want to discourage collisions, we want to encourage voluntary exchange. In both cases, the key is mutuality. Gains from trade are mutual, giving rise to coincidence of interest: In promoting my interest in gaining in a voluntary exchange with you, I also promote your interest in gaining in a voluntary exchange with me. You would not enter into the exchange if you did not stand to profit.
People buzz about spontaneously to advance their own interest, but in the process advancing the social good. As merchants, we earn the honest dollar by serving our customers-that is, by serving society. As consumers, we obtain stuff by rewarding suppliers for services rendered.
Again, if someone were to presume to plan the economy, the result would be disaster. The social patterns in an economy are fabulously complex, making decentral planning all the more necessary.
In economics, the substance of “spontaneity” is liberty. Liberty means freedom from others messing with your stuff, including yourself, your person. When the government tells you that you can’t enter certain contracts, can’t use your property in certain ways, and can’t keep 35 percent of your earnings, it treads on your liberty. It is making life less spontaneous and more centrally directed or controlled.
It sounds self-centered-freedom from others messing with your stuff. But the principle would go for everyone, so it also requires you not to mess with others’ stuff. Liberty implies not only security and freedom in ownership, but duties to respect ownership by others. Societies built on liberty are consequentially of the highest moral standing.
But more importantly, we live in a world of mutuality. I want others not to mess with my stuff so that I can use my stuff to best participate in mutual relationships. The ties of mutual relationships form the vast network of society, and when its members are individually empowered and motivated to advance those connections, we have a society that is well cared for.
The principles of local knowledge, coincidence of interest, and spontaneous adaptation have much more power than is generally recognized. People have a hard time understanding how spontaneous order works, or even that it exists. At a roller rink, spontaneous order happens before our very eyes. But in society, each of us is immersed deep within the spontaneous order, focused on our own particular situation. Although economics cannot make the whole actually visible to us, it can help us see the principles at work.