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Posts Tagged ‘F.A. Hayek’

Don Boudreaux drops Hayek on the Wall Street Journal

Here’s the bulk of Prof. Boudreaux’s (George Mason University) letter to the WSJ:

Contrary to much misunderstanding, Hayek never argued that the slightest deviation from laissez-faire capitalism launches a society on an unstoppable march toward tyranny.  Instead, he reasoned that tyranny is the inevitable result of government policies aimed at preventing market competition from ever threatening anyone’s economic prospects.  As long as voters demand that government protect them from all downsides of economic change, governments can oblige them only by shutting down, one after another, all avenues for economic change.  Competition; entrepreneurship; innovation; consumer sovereignty; workers’ freedom to change or to quit their jobs; even changes in demographics.  Government must obliterate these and all other sources of change if no one is to be exposed to the risk of losing a job or of having her wages or benefits cut.

Obviously, in reality governments cannot produce such a petrified paradise.  But in the course of trying they will create hell on earth unless people come to accept the fact that widespread material prosperity is impossible without genuine change – and that change is impossible without some people suffering economic disappointment.

Boudreaux is notorious for his witty, poignant letters. My personal favorite is still his August 2011 retort to Peter Morici’s CNBC blog-post claiming the destruction caused by hurricane Irene would spark a “process of economic renewal [that] can leave communities better off than before.” With Morici parroting the broken window fallacy, Boudreaux felt it appropriate to cause more destruction:

I hereby offer my services to you, at a modest wage, to destroy your house and your car.  Act now, and I’ll throw in at no extra charge destruction of all of your clothing, furniture, computer hardware and software, and large and small household appliances.

Because, I’m sure, almost all of these things that I’ll destroy for you are more than a few days old (and, hence, are hampered by wear and tear), you’ll be obliged to replace them with newer versions that are “more economically useful and productive.”  You will, by your own logic, be made richer.

Just send me a note with some times that are good for you for me to come by with sledge hammers and blowtorches.  Given the short distance between Fairfax and College Park, I can be at your place pronto.

Oh, as an extra bonus, I promise not to clean up the mess!  That way, there’ll be more jobs created for clean-up crews in your neighborhood.

Image via Cafe Hayek

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Classic Rock for Classical Liberals: Shades of Grey

Taking a break from the Rush tunes for a minute. It takes a lot of will power, but I got there!

Here is a great Billy Joel song titled “Shades of Grey” from his River of Dreams album. My favorite lyrical moment(s) beg the question – Did Billy write this tune after reading F.A. Hayek’s essay The Use of Knowledge in Society?

Now with the wisdom of years I try to reason things out
And the only people I fear are those who never have doubts
Save us all from arrogant men, and all the causes they’re for
I won’t be righteous again, I’m not that sure anymore

Shades of grey wherever I go
The more I find out the less that I know
There ain’t no rainbows shining on me
Shades of grey are the colors I see

Billy performing “Shades of Grey” at the Boston Garden in 1993:


Image via Google Images

Classic Rock for Classical Liberals archive

Remembering Hayek

Over at Bleeding Heart Libertarians, Steve Horwitz takes a moment to remember F.A. Hayek and the significance of his ideas:

Today we pause to note the 20th anniversary of the death of F. A. Hayek, perhaps the most important social thinker of the 20th century and a man whose ideas still remain ahead of their time and distorted and misunderstood by the supposed intellectual elite.  There are so many great Hayek quotes one could deploy on this occasion, but I think I will go with this one from “Why I’m Not a Conservative”:

“[Classical liberalism] has never been a backward-looking doctrine.  There has never been a time when liberal ideals were fully realized and when liberalism did not look forward to further improvement of institutions.  Liberalism is not averse to evolution and change;  and where spontaneous change has been smothered by government control, it wants a great deal of change of policy.  So far as much of current governmental action is concerned, there is in the present world very little reason for the liberal to wish to preserve things as they are.”

More Spatial Orientation blogposts about Hayek are available here. Brad and I co-authored this post titled Hayek 101 back in August:

Attempts to reinforce the certainty of John Maynard Keynes’ economic theories and characterize his critics as illiterate shows a disheartening lack of knowledge while besmirching his greatest intellectual rival and critic: the lesser-known Austrian economist Friedrich A. Hayek.  Hardly an illiterate, Hayek won the 1974 Nobel Prize in Economic Sciences and authored the best-selling book, The Road to Serfdom, in addition to other influential works on economics, law, and political philosophy.  While we encourage Keynesians to read up on Hayek, we know they wont, so here’s a free lesson…

His differences with Keynes stem from the inevitable knowledge problem suffered by those tapped to centrally plan the economy.  No matter the brilliance of technocratic planners, vital knowledge is dispersed throughout millions of market actors, which cannot possibly be attained through central planning committees.  Hayek asserted, “The knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”

The two further disagreed about the state in which markets exist.  Keynes believed market economies were entities to be managed and controlled.  However, Hayek argued markets exist in an organic state, where individuals come together spontaneously, acting on “the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess,” as reflected in a freely moving price system.  Prices then serve as the proper indicator of supply and demand signaling to consumers the true costs of goods and services.  Market competition serves as the mechanism for accurate coordination of such a pricing system.

Hayek’s counter to Keynesian stimulus further damages the conventional wisdom of economic thought.  Claiming that if natural occurrences like adjustments in partiality or technological change alter prices, market actors would in turn be forced to reestablish the mechanisms in which they organize with others in the marketplace.  As the price of goods change, re-organization will occur spontaneously rather than artificially.  On the other hand, monetary disturbances (i.e. Keynesian stimulus and the flooding of markets with money by central banks) distort signals by creating unsustainable inflation.  As a result, central banks cannot continually ‘ease’ markets with printed money, which in turn perpetuates the boom-bust business cycle.  These artificial interventions expanding the money supply are a major driver of America’s financial predicament.

As it currently stands, world economic policies continue to move in Hayek’s direction.  Since the fall of the Soviet Union, the vast majority of its former satellite states moved from centrally planned economies to free-market systems – creating prosperity previously unseen.  Even China, one of the last stalwarts of socialist-style economic planning, significantly opened its markets and realized massive increases in economic growth and wealth as a result.  As societies progress, Keynesian economics continually prove ineffective when compared to the spontaneous order of free markets.

Image via Google Images

Jobs and Bad Ideas

Last night’s jobs speech from the President was laced with bad ideas.  Chris Edwards at Cato points out some of the lowlights:

  • A temporary payroll tax cut. This is not a tax cut at all because the president would “pay for it” with tax hikes later on. And if it’s temporary, it won’t encourage businesses to hire additional workers anyway.
  • More federal infrastructure.  When the federal government spends on infrastructure, it often misallocates the funds. The list of federal infrastructure boondoggles and cost overruns is endless — in public housing, dam-building, Corps of Engineers projects, bridges to nowhere, high-speed rail, etc. Instead, what we need is higher-quality infrastructure spending financed and built by the private sector. We need private airports, private air-traffic control, and private toll highways.
  • A federal infrastructure bank. Such a financial scheme would reduce transparency in federal spending, which would go directly against a key Obama promise of increased budget transparency.
  • Federal jobs training programs. Since the 1960s, federal jobs-training programs simply haven’t worked.
  • New business tax credits. New tax credits for hiring will distort business decision making and, by making the tax code more complicated, such credits would encourage more tax cheating. They would be the exact sort of tax loophole that Obama claims to hate.
  • Crony capitalism. When Obama talks about “government and business working side-by-side,” it sounds to me like an invitation to corruption.
  • Extending unemployment insurance. Such subsidies would help keep the unemployment rate high.

Essentially, this new jobs bill is just another form of stimulus.  I can’t fathom the degree of hubris it takes to live through the past two decades and still maintain that the federal government can effectively manage the economy.  F.A. Hayek said it best in The Fatal Conceit:

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

Like Hayek, I prefer markets the way I prefer food: Organic!

Smearing Hayek and Mises

Another day, another anti-libertarian screed.  This time it’s over at Salon, where Michael Lind tries to smear all libertarians as a bunch of democracy hating, autocracy apologizing fascists.  The invocation of Ludwig von Mises and Friedrich A. Hayek as the leading cheerleaders for fascism is especially odd since, you know, they actually wrote stuff quite to the contrary.  Will Wilkinson does a superb job of refuting Lind’s ridiculous claims while pointing out what Mises and Hayek actually wrote:

…Mr Lind apparently was not content to settle for anything less than a sweeping condemnation of the entire libertarian tradition. So he plunges in after the big Austrian fish, Ludwig von Mises and F.A. Hayek, attempting to establish their antagonism to democracy by way of establishing a sympathy for fascism. The problem is that Mises and Hayek were among the 20th century’s most principled and pugnacious opponents of fascism, as well as articulate advocates of liberal democracy. This presents Mr Lind with a very large problem that he attempts to solve by noting that both men at various times believed communism to be a form of anti-liberal collectivism even more virulent and deadly than fascism. But despising communism more than fascism does not in any sense amount to a rejection of democracy, so it’s not clear what Mr Lind thinks he is doing, especially since Mises and Hayek were not circumspect about their opinions on fascism or democracy.

…The third volume of Hayek’s monumental “Law, Legislation, and Liberty”, is an extended defence of constitutionally-limited liberal democracy. In this passage, Hayek defends Mises’ not-exactly romantic brief for democracy as the best means for keeping government roughly aligned with the sentiments of the governed:

“[E]ven a wholly sober and unsentimental consideration which regards democracy as a mere convention making possible a peaceful change of the holders of power should make us understand that it is an ideal worth fighting for to the utmost, because it is our only protection (even if in its present form not a certain one) against tyranny. Though democracy itself is not freedom (except for that indefinite collective, the majority of ‘the people’) it is one of the most important safeguards of freedom. As the only method of peaceful change of government yet discovered, it is one of those paramount though negative values, comparable to sanitary precautions against the plague, of which we are hardly aware while they are effective, but the absence of which may be deadly.”

Got that? Democracy is “an ideal worth fighting for the utmost”, “our only protection…against tyranny”, “one of the most important safeguards of freedom”. That is not a bad review! Comparing democracy to “sanitary precautions against the plague” lacks a certain romance, but you’ve got to admit that its hard to think of an endorsement stronger than “multitudes may die without it”.

Here’s Mises on fascism, by the way.

“The fundamental idea of these movements—which, from the name of the most grandiose and tightly disciplined among them, the Italian, may, in general, be designated as Fascist—consists in the proposal to make use of the same unscrupulous methods in the struggle against the Third International as the latter employs against its opponents. The Third International seeks to exterminate its adversaries and their ideas in the same way that the hygienist strives to exterminate a pestilential bacillus; it considers itself in no way bound by the terms of any compact that it may conclude with opponents, and it deems any crime, any lie, and any calumny permissible in carrying on its struggle. The Fascists, at least in principle, profess the same intentions.”

Almost as bad as communists! This was first published in 1927, by the way, well before Hitler’s wholehearted embrace of exterminationist tactics. Mises’ prescience is remarkable. Anyway, some fascist.

Lind also fails to grasp the difference between the classical liberalism of Mises and Hayek and the modern day libertarianism of Murray Rothbard.  Wilkinson concludes:

But when it comes to the classical liberalism of Mises and Hayek, Mr Lind either doesn’t know what he’s talking about, or he’s willing to shamelessly misrepresent their views about democracy, to practically invert them, in order to grind his anti-libertarian ax. He completely botches his piece by failing to see the large substantive philosophical disagreement between Mises and Hayek’s brand of classical-liberalism and Hans Herman Hoppe and Patri Friedman’s brand of libertarianism. I would argue that the differences are so great that Mises and Hayek don’t really count as “libertarian” at all, as that label is usually applied today. A competent, useful article on this topic might seek to explain why so many of today’s libertarians seem to reject Mises and Hayek’s argument that democracy is a life-or-death matter and an utter necessity for a liberal social order of peaceful cooperation, even if there are serious problems inherent in democratic politics.

Plenty more push-back from Jason Kuznicki, Walter Olson, Damon W. Root, and Roderick Long.

Hayek 101

*co-authored with Craig D. Schlesinger

Attempts to reinforce the certainty of John Maynard Keynes’ economic theories and characterize his critics as illiterate shows a disheartening lack of knowledge while besmirching his greatest intellectual rival and critic: the lesser-known Austrian economist Friedrich A. Hayek.  Hardly an illiterate, Hayek won the 1974 Nobel Prize in Economic Sciences and authored the best-selling book, The Road to Serfdom, in addition to other influential works on economics, law, and political philosophy.  While we encourage Keynesians to read up on Hayek, we know they wont, so here’s a free lesson…   

His differences with Keynes stem from the inevitable knowledge problem suffered by those tapped to centrally plan the economy.  No matter the brilliance of technocratic planners, vital knowledge is dispersed throughout millions of market actors, which cannot possibly be attained through central planning committees.  Hayek asserted, “The knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”  

The two further disagreed about the state in which markets exist.  Keynes believed market economies were entities to be managed and controlled.  However, Hayek argued markets exist in an organic state, where individuals come together spontaneously, acting on “the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess,” as reflected in a freely moving price system.  Prices then serve as the proper indicator of supply and demand signaling to consumers the true costs of goods and services.  Market competition serves as the mechanism for accurate coordination of such a pricing system.  

Hayek’s counter to Keynesian stimulus further damages the conventional wisdom of economic thought.  Claiming that if natural occurrences like adjustments in partiality or technological change alter prices, market actors would in turn be forced to reestablish the mechanisms in which they organize with others in the marketplace.  As the price of goods change, re-organization will occur spontaneously rather than artificially.  On the other hand, monetary disturbances (i.e. Keynesian stimulus and the flooding of markets with money by central banks) distort signals by creating unsustainable inflation.  As a result, central banks cannot continually ‘ease’ markets with printed money, which in turn perpetuates the boom-bust business cycle.  These artificial interventions expanding the money supply are a major driver of America’s financial predicament.

As it currently stands, world economic policies continue to move in Hayek’s direction.  Since the fall of the Soviet Union, the vast majority of its former satellite states moved from centrally planned economies to free-market systems – creating prosperity previously unseen.  Even China, one of the last stalwarts of socialist-style economic planning, significantly opened its markets and realized massive increases in economic growth and wealth as a result.  As societies progress, Keynesian economics continually prove ineffective when compared to the spontaneous order of free markets.

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