New Work for the Invisible Hands of Business
Introduction
Perhaps the abiding theme of Richard Cornuelle’s thought was libertarian skepticism about the efficacy of government in addressing social problems. But what is the best nongovernmental means to address these problems? Cornuelle was far from the sort of libertarian who glorified the individual and saw appeals to community and society as creeping socialism. And it was in this quest for community that he saw the independent sector as the best hope for “reclaiming the American dream” (1965). It was a vision of the independent sector more as community-based little platoons and Tocquevillean associations than as large, bureaucratized nonprofits vying for government grants to “implement social programs.”
It is safe to say that Cornuelle’s vision of the independent sector has not been realized. What part of his vision needs to be rethought? Cornuelle’s 1991 “New Work for Invisible Hands” shows at least one direction for that rethinking. My goal here is to indicate one way in which the rethinking initiated in that article could be carried further.
Cornuelle’s Critique of Libertarian-Austrian Thought
A striking feature of “New Work” is how Cornuelle forcefully raises issues that have been rather neglected in libertarian thought and Austrian economics, which, “lacking any analytical device but market theory” (1993, 186), has trouble giving a satisfactory account of social associative action (e.g., the independent sector) or an account of what goes on
inside firms. These lacunae are shared with the new institutional economics of neoclassical economics, as Herbert Simon notes: “A fundamental feature of the new institutional economics is that it retains the centrality of markets and exchanges. All phenomena are to be explained translating them into (or deriving them from) market transactions based upon negotiated contracts, for example, in which employers become ‘principals’ and employees become ‘agents’” (1991, 26-7).
Cornuelle was writing about this shortcoming of libertarian thinking when the socialist experiments of the twentieth century were collapsing. The decline of communism was widely seen as a historical verification of the Austrian critiques of a socialist economy in favor of a market economy, and, more broadly, the critiques of planned organizations (taxis) in favor of spontaneous orders (cosmos). This leaves a big problem, however: accounting for the “visible hand” (Chandler 1993) of organizations that are so important, if not characteristic, of the modern, industrialized market economy, as Cornuelle noted: “As the dust settles on the ruins of the socialist epoch, a second crippling deficiency of libertarian thought is becoming more visible and embarrassing. The economic methodology that the Russians have lately found unworkable still governs the internal affairs of firms in capitalist and socialist countries alike. An economy presumably works best if it is not administered from the top; a factory presumably works best if it is (1991, 3).
Herbert Simon made a similar point at the time: “The economies of modern industrialized society can more appropriately be labeled organizational economies than market economies. Thus, even market-driven capitalist economies need a theory of organizations as much as they need a theory of markets (1991, 42).
These deficiencies in both Austrian and neoclassical economics are relevant to Cornuelle’s abiding concern for empowering nongovernmental social action to address social problems. Essential to the thriving of a democracy and a republic is a citizenry that is not only capable of taking initiative and thinking independently but also is accustomed to exercising those virtues in the institutions of daily life. To have social efficacy, these virtues have to be exercised in association with other people in organizations that will amplify individual efforts.
