The rule of law
Hayek undertakes to show that the operation of the market leads not only to the creation of an order, but also to a great increase of the return which men receive from their efforts.
‘The game of catallaxy’ is ‘a wealth-creating game (and not what game theory calls a zero-sum game), that is, one that leads to an increase of the stream of goods and of the prospects of all participants to satisfy their needs’ (Hayek, 1976, p. 115). However, the tendency of the market to promote welfare is subject to some qualifications. Hayek accepts that the state should provide a safety net of social security provision for the very poor, that it should finance the supply of certain public goods, and that it should impose regulations to control negative externalities. Since, on Hayek’s argument, the monopoly on coercion is to be centralized in the hands of government, that is, essentially a monocentric organization, it is crucial that this immense power should not be misused. Government must therefore itself be constrained by general rules, or by what Hayek calls the ‘Rule of Law’.Hayek’s doctrine of the Rule of Law is a meta-legal doctrine - a political ideal - a set of standards against which we can judge any laws, regardless of their particular content. The guiding idea is that interventions should, as far as possible, take the form of laying down general rules, which apply equally to everyone and which must be known and certain. In The Constitution of Liberty (Hayek, 1960), Hayek traces the history of the Rule of Law tradition. Moreover, he sets himself the task of answering the question of what liberalism means ‘when applied to the concrete problems of our time’ (ibid., p. 3). He examines the problems, among others, of welfare statism, labour unions, taxation and transfer payments, money, housing and town planning, agriculture and natural resources, education and research, and ‘neighbourhood effects’. This book, in which Hayek developed the ethical, anthropological, legal and economic bases of a liberal economic and social order, is by some considered his magnum opus.
In conclusion, it should be clearly understood that through the theory of polycentric or spontaneous orders Hayek grounds the political ideal of the Rule of Law ‘positively’, that is, on an empirical-scientific basis and not on arbitrary metaphysics.