Friedrich Hayek as Ideologue

The highly intelligent Peter Boettke protests that Austrian economists like Friedrich Hayek were not dogmatic ideologues:

The Austrian Economists: Economics and Ideology : Perhaps no charge has been leveled against Austrian economists more than any other to dismiss their scientific contribution as the claim that they are dogmatic ideologues. This is, of course, ironic because the Austrians from Menger on insisted on their "value-freedom" in a Weberian sense of means-ends analysis. In fact, Gunnar Myrdal in his analysis of the political influences on economic theory points out that the Austrians are the least guilty. But the debates with both Keynesianism and market socialism, and the staunch stance that both Mises and Hayek held, led to the impression that dogmatic ideologue was the best label for these two and their followers...

But what, then, is one to make of Friedrich Hayek's statement in 1956 that Clement Attlee's social democratic government had destroyed the "rule of law" in Britain?

More on Hayek...: Archive Entry From Brad DeLong's Webjournal: Of course, six years of socialist government in England have not produced anything resembling a totalitarian state. But those who argue that this has disproved the thesis of The Road to Serfdom have really missed one of its main points: that "the most important change which extensive government control produces is a psychological change, an alteration in the character of the people." This is necessarily a slow affair... attitude[s] toward authority are as much the effect as the cause of... political institutions under which it lives.... [T]he change undergone... not merely under its Labour government but in the course of the much longer period during which it has been enjoying the blessings of a paternalistic welfare state, can hardly be mistaken.... Certainly German Social Democrats... never approached as closely to totalitarian planning as the British Labour government has done.... The most serious development is the growth of a measure of arbitrary administrative coercion and the progressive destruction of the cherished foundation of British liberty, the Rule of Law.... [E]conomic planning under the Labour government [has] carried it to a point which makes it doubtful whether it can be said that the Rule of Law still prevails in Britain...

Private property rights were much narrower than Hayek would have wished, and government ownership of the commanding heights of the economy was much greater than he (or I) would have wished. But destruction of the rule of law? Nonsense.

This is important. For if right-wing ideologues claim that Clement Attlee has destroyed the rule of law through nationalizations, unemployment insurance, public health programs, and zoning, then right-wing ideologues can take one step further to justify the crimes of a Franco or a Pinochet.

Comments

[John Emerson]

People still cite "The Road to Serfdom" as gospel: they are sure that creeping socialism, democratic at first, eventually leads to totalitarian socialism and Communism.

Sweden has been socialist for 70+ years. The way they deal with this is to claim that Sweden is totalitarian and Communist. They really believe that, too.

So dialogue becomes difficult at times.

[Buce]

Funny about economists: Hayek's long-term predictions have proven crashingly wrong. So also Marx. So also Schumpeter. Nice to be in a field wheere being wrong doesn't matter all thaat much.

[Northern Observer]

Peter Boettke has produced a lemon.
Austrian economics may be non ideological in theory and in its own texts, however it is ruthlessly ideological in practice.

At the heart of their argumentation lies nothing more than blind faith in the inherent good of the free market and private property system above all other forms of social organization, all the time, everytime. They know the "TRUTH" and if only everyone would obey then the World would be a better place.

Unfortunately for the Austrians, our historical experience contradicts this. And so for the poor Austrian thinker, experience and fact must be ignored, denied and attacked so that their radical economic faith can remain unquestioned, untainted.

If that is not ideology I don't know what is. The Austrians are dedicated economic determinists. They would make Marx proud. Indeed they are Marx's antithesis but in a way that absorbs so many qualities of their ennemy.

In the political sphere the same could be said of the modern American conservatives and Marx.

Faith is the most dangerous temptation for any academic discipline and the conservative economists have been paralysed by it. Let's not ignore their malady in order to create dialogue.

[Rich]

I tried my honest best to read Road to Serfdom, but failed.

However, didn't Hayek condemn right wing totalitarianism as well as that on the left? For sure, most examples came from the left, but deep down inside he was merely anti-totalitarian.

I was left with two feelings when I stopped reading Road to Serfdom: 1) More people say they've read the book than people who actually have; 2) It's much like 1984, where one's political outlook is projected onto the author's political perspective (i.e., many "free market" theocrats who say they've read Hayek would be excoriated by the man).

[Charles]

Everyone is against totalitarianism, Rich. Especially while the rubble from the last incarnation of it is still smoldering.

I never read Hayek because I met his supporters. As much as they managed to turn me off, I suspect there's a redeeming value in the ideology.

Sort of like the occasional Joe Conason article in Hustler.

A good argument can be made that governments ought to be doing far more than they are, even in so-called nanny states. One example: the European Big Three have failed to help their immigrant populations integrate into society. So one sees horrific poverty as with the British cocklers or angry alienation of the kind that swept France. This has now created space in which Al Qaida can operate and endangered the whole society. In the US, cost-benefit says we should be spending far more than we do on social services. Far, far more.

And yet.

And yet, there is value in having a society that begins from the premise that each individual is responsible to get things going, that help may be available but that it's not guaranteed.

A friend who does evaluations for disability reports that a woman, still in her teens, walked into his office and demanded to be placed on disability. She was behaved and dressed in a manner to suggest that even at her young age, she was engaged in a profession.

This young woman was almost certainly the produce of an abusive home and may well have been addicted to substance abuse. It's possible that in a broader sense of the word, she actually is disabled... but of course, she doesn't qualify for benefits. My friend told her to leave and not come back.

Where on earth did she get the attitude that help was guaranteed?

[P O'Neill]

And Atlee was elected. Did anyone voting for post-war Labour have any doubt about what their platform for government was?

[Buce]

It's perhaps useful to look at Hayek through the lens of his longtime friend Michael Oakshott:

"How deeply the rationalist disposition of mind has invaded our political thought and practice is illustrated by the extent to which traditions of behavior have given place to ideologies, the extent to which the politics of destruction and creation have been substituted for the politics of repair, the consciously planned and deliberately executed being considered (for that reason) better than what has grown up and established itself unselfconsciously over a period of time. . . . This is, perhaps, the main signifiance of Hayek's /Road to Serfdom/ --not the cogency of its doctrine, but the fact tht it is a doctrine. A plan to resist all planning may be better than its opposite, but it belongs to the same style of politics."

--Oakeshott, Rationalism in Politics 26 (LibertyPress 1991)

Mrs. Thatcher called Oakeshott her favorite political thinker. So far as I know, Oakeshott did not return the compliment.

[anne]

"This is, perhaps, the main signifiance of Hayek's 'Road to Serfdom' -- not the cogency of its doctrine, but the fact tht it is a doctrine. A plan to resist all planning may be better than its opposite, but it belongs to the same style of politics."

Perfect; there is the caution, and then we can move on. Reading Austrians however is for me an exercise in wondering whether I have learned how to think :)

[liberal]

Rich wrote, "However, didn't Hayek condemn right wing totalitarianism as well as that on the left? For sure, most examples came from the left, but deep down inside he was merely anti-totalitarian."

AFAICT Hayek supported Pinochet.

[liberal]

One big problem with Austrian economics is that it appears to be unscientific, because it assumes certain axioms are unfalsifiable.

[liberal]

Anyway, Austrian economics is incoherent on the question of freedom. From URL
http://geolib.pair.com/essays/sullivan.dan/royallib.html

-------------------------------------

Von Mises misses
Ludwig von Mises acknowledged in several places wholly unique distinctions between land and capital, but in his zeal to denounce land value tax, stated that,
"Classical economy erred when it assigned land a distinct place in its theoretical scheme. Land is, in its economic sense, a factor of production, and the laws determining the formation of the prices of land are the same that determine the formation of other forms of production."

Or, paraphrasing of Jay Leno, go ahead and buy up the land. We'll make more. The difference between land and capital is huge, and explains why the cost of silicon chips goes down as demand goes up, while the cost of Silicon Valley goes up as demand goes up. There is no natural monopolization of capital, but, with state sanction, there is monopolization of land. But von Mises would sooner obscure these distinctions in socialist fashion than to embrace a proposal he mistakenly thought to be socialist.

In his first edition of Human Action, von Mises attacked land value tax as based on the socialist principle that legitimate property flows only from labor. But that is also a libertarian principle, a classical liberal principle, an Austrian principle, and even the von Misean principle behind private property! So, by the third edition, von Mises changed his text to read that land taxers claim legitimate property flows only from manual labor.

This is much more logically consistent, but factually incorrect. It is a correct assessment of what many socialists believe, but it is not a correct assessment of what land taxers believe. Henry George, the most prominent land taxer of all, wrote in his magnum opus, Progress and Poverty,

"Thus the term labor includes all human exertion in the production of wealth, and wages, being that part of the produce which goes to labor, includes all reward for such exertion. There is, therefore, in the political-economic sense of the term, no distinction as to the kind of labor, or as to whether its reward is received through an employer or not...."

George also defended the ownership of property that flows from the employment of capital.

Perhaps von Mises was biased by his location in Europe, where classical liberalism had not fared as well as in America. He might also have first seen land value tax in the Communist Manifesto, and not realized that it was there as a socialist ploy to co-opt support from classical liberalism. (Marx expressed contempt for land value tax as a reform in its own right, and openly stated that his support of it was only to draw people to what he really wanted, which was to control capital.) If this is where von Mises got his first exposure to the idea, it would not be surprising to see him close his mind to it.

[liberal]

Austrian Murray Rothbard also seems to misunderstand freedom; he even appears to be incapable of understanding quite simple, elementary economics:
http://members.aol.com/_ht_a/tma68/geo-faq.htm#rothbard

[Ellen1910]

Brad chastises Hayek for charging Atlee with, in Brad's words, "the destruction of the rule of law." Brad says that charge goes too far and is ideologically based.

But of course, Hayek said no such thing.

He charged Atlee with the destruction of the Rule of Law (see, The Constitution of Liberty and Law, Legislation, and Liberty), a completely different matter, isn't that so class?

[Dale]

"Where on earth did she get the attitude that help was guaranteed?"

Charles, it seems to me that any decent society should feel obliged to offer a young person, as you suggest, seemingly engaged in prostitution, a drug user, having suffered parental abuse (you paint a dark picture of her likely background)some significant moral and material assistance.

You ask "Where on earth did she get the attitude that help was guaranteed?"

I would reply she may have gotten this attitude from her basic moral intuitions. She may have heard or read something about love, care and compassion from a religious tradition. She may have been reaching out, the best she was able, for a hand in her personal salvation.

That seems very reasonable to me. The sorrow is that she may not get the support she needs.

[Ari]

Dale, I had no idea what was being referred to other than it is fine to be impolite and routinely unsympathetic to someone you are unwilling to take the trouble to try to understand. But, again, whether anyone was ever sympathetic to Hayek has never been clear to me.

[Peter]

You are correct to state that exaggerated rhetoric is but a short step away for right-wing idealogues to supporting a Franco and or a Pinochet.

When Pinochet was placed under house arrest for a year in Britain, pending consideration of a deportation request by a magistrate in Spain (a request which the Blair Labour Government ultimately refused), one of his strongest public supporters in Britain was Norman Lamont, John Major's first Chancellor of the Exchequer. Lamont did not only defend Pinochet against being deported, but argued in favour of his regime and his policies in Chile.

It still strikes me as shocking and reprehensible that a democratically-elected Member of a British Parliament could so defend a violent military usurper of democracy. Did Lamont have similarly no respect for his own constituents' rights, or did he believe that Chileans deserve fewer rights than Britons?

[jon livesey]

Actually, the Atlee admininstration was in some sense a watershed in recent British history. It took the necessary regulation of the wartime economy and extended that regulation into peacetime. The socialist planning and regulation represented a sea change from the free markets and sanctity of private property that had previously been the ideal.

I'm not sure if I would characterise this as the destruction of the rule of law - with or without capitalization - but it certainly changed the psychology of the British citizen. Pre-Atlee, to be British meant that anything not explicitly forbidden was allowed. Post-Atlee we have gradually descended to a kind of dependency on the state that has half the households in the country receiving some form of government handout, along with the risk of being prosecuted for "offenses" as serious as mocking someone's religion.

Calling this the road to serfdom is hyperbole, but it's definitely the road to something less than full citizenship.

[Buce]

But, again, whether anyone was ever sympathetic to Hayek has never been clear to me.

Uh, that would exclude the Nobel Committee, the University of Chicago and the publishers of his collected works?

[Ari]

Precisely the attitude that explains why Britain keeps voting for Labor and against Conservatives. Even with the issue of the war, Britain understood what the meanness of Conservatives was about.

[Walt Pohl]

Buce: What Hayek, Marx, and Schumpeter all have in common is that they have no meaningful influence on modern academic economics.

[anne]

But, there you have it, the problem with Hayek is that there is no sympathy in his work, so why would we expect sympathy for it by more than those for whom community is of no account provided they are comfortable. To me this is definitively arch conservatism.

[Kate]

I've read with pleasure. Maybe it's offtopic, but i just wanted to say, that it's really interesting to read everything this with the comments... You discuss here a lot of interesting things on different useful themes. Thanks for that =)

[Abhijit]

"Pre-Atlee, to be British meant that anything not explicitly forbidden was allowed. Post-Atlee we have gradually descended to a kind of dependency on the state that has half the households in the country receiving some form of government handout, along with the risk of being prosecuted for "offenses" as serious as mocking someone's religion."

Jon -- sorry, but thats total nonsense. Pre-Atlee, for the large majority of people that were a part of Britain or its colonies, life was living under an oppressive government. This was not as bad as Hitler's Germany or Stalinist Russia, but for practically all of Britain's colonies (whose population far outweighed Britain proper), it was still an effective dictatorship. That great defender of freedom and fan of using poison gas on "natives", Winston Churchill was perfectly willing to continue this system ad-infinitum, just as he was perfectly willing to let 10s of millions of Indians starve during the war. When one talks of any reduction of freedom during the Atlee era, one has to balance it against the great increase in freedom for British colonies.

And what did freedom mean for supposedly British areas such as Ireland before ? The notion that just about everything was allowed in Britain pre-Atlee would doubtless strike the Irish as ludicruous. [ To be clear, I'm not suggesting that Atlee had anything to do with Irish home rule]

Even in England, there were the various restrictions on voting, there were the rotten boroughs, there was the lack of women's suffrage till the early 20th century and so on. There were vast institutionalized class differences. There was plenty of mercantilism as well (which is emphatically not the same as the free market).

[liberal]

Charles wrote, "This young woman was almost certainly the produce of an abusive home and may well have been addicted to substance abuse. It's possible that in a broader sense of the word, she actually is disabled... but of course, she doesn't qualify for benefits. My friend told her to leave and not come back.

"Where on earth did she get the attitude that help was guaranteed?"

Yes, there are not a few folks like that.

OTOH, the amount of "help" such people collect from government transfers is dwarfed by orders of magnitude by government transfers to the wealthy, primarily land rent (but also other economic rents).

[jon livesey]

"Precisely the attitude that explains why Britain keeps voting for Labor and against Conservatives."

If politics were an issue of "attitude" I would be forced to agree with you, but in reality Labour's policies have a habit of driving the country into bankruptcy. The most famous occasion was in 1975, but there were disguised bankruptcies - I think seven - even before that, when the economy "survived" with the aid of handouts from the US and/or West Germany.

In sense, you are stating the basic fallacy of socialism. It's the notion that if your heart is in the right place and you want to do good by the poor, then a Labour policy must be the right way to do it. The trouble is that Labour policies have a way of undermining the productive economy, no matter how grand and noble their motives are.

Right now, for example, we are probably in Labour's last "good" quarter. As we go into 2006, you will likely see slower and slower growth in the UK economy. Partly this is due to a large increase in regulation of business under Labour, partly it is due to Labour disguising unemployment by hiring something like half to three quarters of a million new civil servants, who produce nothing salable, and partly it is due to Gordon Brown's tax, borrow and spend policies.

Labour is a little like the new compassionate lord of the manor, who buys popularity by blowing the savings of his old tightwad father on making everyone's life better, and who then wonders why he runs out of cash.

[jon livesey]

"This was not as bad as Hitler's Germany or Stalinist Russia..."

Gosh, that's a relief.

[liberal]

jon livesey wrote, "The socialist planning and regulation represented a sea change from the free markets and sanctity of private property that had previously been the ideal."

First, one of the greatest violations of "free markets" are those **government-granted** licenses to steal called "land titles":

"We call ourselves the 'party of principle,' and we base property rights on the principle that everyone is entitled to the fruits of his labor. Land, however, is not the fruit of anyone's labor, and our system of land tenure is based not on labor, but on decrees of privilege issued from the state, called titles. In fact, the term 'real estate' is Middle English (originally French) for 'royal state.' The 'title' to land is the essence of the title of nobility, and the root of noble privilege." --- Introductory paragraph to "Are you a Real Libertarian, or a ROYAL Libertarian?", at URL
http://geolib.pair.com/essays/sullivan.dan/royallib.html

And the "sanctity of private property" was never held by the classical liberals, if "property" is deemed to include not only capital but also land:

"Landlords grow richer in their sleep, without working, risking, or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title." --John Stuart Mill

"As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed." -- Adam Smith, _The Wealth of Nations_

[liberal]

jon livesey wrote, "In sense, you are stating the basic fallacy of socialism. It's the notion that if your heart is in the right place and you want to do good by the poor, then a Labour policy must be the right way to do it."

True. But "conservative" policies won't work either.

"The trouble is that Labour policies have a way of undermining the productive economy, no matter how grand and noble their motives are."

Except that the current Labour party doesn't appear to be all that socialist, where "socialism" is given its correct definition: "government ownership of the means of production."

[Ari]

Well responded to Jon Livesey. You have a sense of humor, or humour. I disagree quite a bit though, for the Tories are no rational alternative in economic policy, and I expect voters will continue to disagree. But, your response is well argued.

[jon livesey]

"A good argument can be made that governments ought to be doing far more than they are, even in so-called nanny states. One example: the European Big Three have failed to help their immigrant populations integrate into society."

Ironically, that may be because they *are* nanny states. Here in the US, immigrants with some enterprise typically make some form of success for themselves. It wasn't very long after the end of the VietNam war, for example, that VietNamese restaurants began to open up and create livelihoods for their owners and staff.

In Europe, on the other hand, what we see may be the end result of welfarism. One of the striking thing about the recent riots in France is that often the rioters were second or third generation immigrants who had had access to whatever welfare the state had to offer.

Oh, and for what it's worth, the "British" cocklers were actually chinese illegal immigrants who were victims of human trafficing. They were living in conditions of effective slavery, which is not what most people call "poverty". It's not actually Government policy to drown the poor, at least not yet.

[Buce]

"What Hayek, Marx, and Schumpeter all have in common is that they have no meaningful influence on modern academic economics."

It's a fair point, although probably not quite the unvarnished truth. It seems that the people who did have an influence--Jevons, Marshall, or if you prefer, Arrow and Debrue--did not fritter away much energy on grand predictions.

[jon livesey]

"True. But "conservative" policies won't work either."

But that's the point, isn't it. No party has a "policy" which can change economics. The only way for people to raise themselves out of poverty is to find a productive activity.

What we see in the UK is an endless see-saw, where at one period of history - roughly 1945-79 - Conservatives notice that Labour policies get Labour elected - which is one definition of "work" but not the one we want - and so Tories adopt welfare policies, and we have what's called the period of "socialist concensus". It consists of one economic crisis after another, no matter which party happens to be in power.

Eventually the voters have had enough, and throw Labour out for a couple of decades, and when they finally creep back into power, it is as Tories-lite. So now we have a kind of right-of-centre concensus which is now gradually slipping back into a new system of government handouts, persistent deficits, and rising national debt.

This ring-around-the-policies exchanges power back and forth between the major parties, but does it do much for the poor? Not much. Social mobility is still significantly behind the US, no matter how much "compassionate" Europeans gripe about the hard hearted US system.

[Alan]

Attlee's Labour Party won the 1945 election because most Britons at the time recognised that the high degree of planning undertaken under the Coalition Govt which had saved Britain was going to be equally necessary to avoid a catastrophic situation once peace returned, as had happened after the end of the First World War.

Britons recognised that the attitude of many in the Conservative Party was still wedded to classical economic nostrums that had failed them very badly in the interwar years.

I'll go with Brad,whether you say rule of law or Rule of Law, what Hayek wrote about Britain in 1956 was arrant nonsense.

[jon livesey]

"Attlee's Labour Party won the 1945 election because most Britons at the time recognised that the high degree of planning undertaken under the Coalition Govt which had saved Britain was going to be equally necessary to avoid a catastrophic situation once peace returned, as had happened after the end of the First World War."

Then shall we assume that the same voters had lost their minds when they threw Labour out in 1951? Five years isn't a very long mandate in British politics.

For Americans who may not be very familiar with the minutiae of British politics, in 1951 Britain still had food rationing. Clothes rationing had only ended fairly recently, in 1949. In 1947 there was an interesting crisis in the coal industry - unemployment and a coal shortage at the same time, as a result of which parts of manufacturing industry had to be shut down, which aborted the export drive. In 1947 the convertibliity of Pound was restored and almost immediately - one month later - suspended, amid a run on the Pound, due to what many people consider to be Treasury incompetence. This led to a sterling devaluation in 1949. It wasn't too hard for the Tories to win against a record like that. Some Tory candidates simply carried the weekly cheese ration from door to door and showed it to the voters.

There is a general point here. It's one thing to say "X voters recognized that Y policy was necessary". It's entirely another say that Y policy actually worked.

[John Emerson]

Southeast Asian immigrants to the US got a lot of government help when they first arrived, and many (one source says half) are still dependent. American conservatives complain about this.

[Alan]

Then shall we assume that the same voters had lost their minds when they threw Labour out in 1951? Five years isn't a very long mandate in British politics.

No, we could note the fact that the absolute number of votes for the Labour Party in 1951 is still the highest total for any party in any general election in Great Britain,and was in excess of the number of votes for the Conservative Party,which gained a slim majority due to the vagaries of the first-past-the-post system and not as a wholesale repudiation of the policies of the
Labour Govt.

The coal crisis was mainly due to what is still regarded in Great Britain as the severest winter in living memory. Britain doesn't do snow very well, as this week's headlines show!

Also, it should be noted that the convertability of the pound was a condition
of the loan made by the American Govt in 1945 when lend-lease ended, not a policy that the Labour Govt embarked on voluntarily. The Treasury, its professional civil servants and political members alike, were fully aware of the dangers when they agreed to the loan, but had absolutely no choice to agreement to the terms ofthe loan, insisted on by a Republican Congress.

I am prepared to debate the govt's record honestly, but you are either ignoring the historical reality or are ignorant of it.

[Barkley Rosser]

jon livesey,

When you first came on you acted like an aggrieved Brit. Later you talked about what goes on "here in the US." So, are you an aggrieved Brit who moved to the US? If so, you should stop whining about deficit spending by Labour. Here In The US it is the conservative Republicans who are going off the deep end with deficit spending, while the Democrats under Clinton actually ran surpluses.

Regarding Hayek and the Road to Serfdom I note that the latest issue of the European Journal of Political Economy has a symposium on the work with people like me, David Levy, Peter Boettke, and Bruce Caldwell participating. I will note just a few points I make, plus some others.

First, I have to agree that this preface by Hayek to the second edition of RTS is pretty silly, especially the remarks about Rule of Law or rule of law. However, I note that such nonsense is not repeated that I am aware of in Constitution of Liberty, which was his sequel to RTS, published in 1960 or so. Indeed, in COL, Hayek admitted that nationalization and central planning had fallen out of favor and that the movement of socialism in the West was more towards a welfare state. RTS is mostly about the evils of planning (which he only saw as taking a command form) and nationalization.

In RTS, Hayek in several places supported elements of a welfare state, albeit somewhat limited. However some go well beyond what one finds in the US even now, most notably national health insurance. Hayek was for it.

Hayek was certainly against right wing totalitarian regimes, especially that of Hitler. His ultimate gibe at socialism was that it historically led in Germany to Hitler. The major basis of this claim is that several important German social democrats from before WW I turned into German nationalists during WW I and later became Nazis or supporters of Naziism, with a common theme being the heroism of German culture against the commercialism of Britain, the liberal democratic enemy.

Regarding the whole Chile business, I have never been able to get a straight or definitive answer about that. I know people who knew Hayek and claim he did not support Pinochet. However, it is also clear that he never publicly denounced Pinochet. I would say that it is not entirely accurate to identify the economists who went to advise Pinochet as being Hayek's associates. My understanding is that they were "Chicago boys" who were closer to Friedman, although I would not be surprised if they admired Hayek. Although Hayek and Friedman were both generally pro-laissez faire, they also had quite a few differences. They were far from being peas in a pod.

[piotr]

"half of the British public receives some kind of government handout".

How is it counted? National Health Service? That would be more than half. Can one call these "handouts" "collectively purchased services"?

On the other hand, Gordon Brown is a financial genius, which ordinarily means a serious and serial abuse of sound accounting principles (both on public and in private sectors). However, is it possible that if British economy eventually slows down it can be caused by the cyclic nature of house market and its impact on consumption spending (more than by any ommissions and commissions of Blair and Brown)?

[John Quiggin]

"Social mobility is still significantly behind the US, no matter how much "compassionate" Europeans gripe about the hard hearted US system."

Not true. Depending on how you define it, social mobility in the US is either lower than in Europe (as measured by movement between income quantiles) or about the same (as measured by occupation or other measures of social status). The era of high social mobility in the US ended around 1900
http://www.aeaweb.org/jep/contents/#11

[No von Mises]

Anne said: "But, there you have it, the problem with Hayek is that there is no sympathy in his work, so why would we expect sympathy for it by more than those for whom community is of no account provided they are comfortable. To me this is definitively arch conservatism."

Yes, and I add this exquisite line by John Kenneth Galbraith:

"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."

[Tired of the Hayek Cult]

John Quiggin should have posted a link to his own blog post on Hayek and Pinochet:

http://johnquiggin.com/index.php/archives/2005/02/25/hayek-and-pinochet-one-more-time/

John discusses Hayek's 1981 interview with the (pro-Pinochet Chilean) newspaper El Mercurio where Hayek says, "Personally I prefer a liberal dictator to democratic government lacking liberalism."

A translation of the entire interview is here: (scroll down a bit for the English version):

http://www.fahayek.org/index.php?option=com_content&task=view&id=121

In that same interview Hayek also says,

"However, when I refer to this dictatorial power, I am talking of a transitional period, solely. As a means of establishing a stable democracy and liberty, clean of impurities"

I guess all of those people murdered and tortured in Chile were just impurities to be cleansed.

[Barkley Rosser]

Tired of the Hayek Cult,

OK, buster, you had better come up with something better than this crap. I just went to the website you posted, and the only thing I could find by Hayek there was his quite admirable "Why I am not a Conservative." The site is "Institut Hayek, Liberalisme et Atlantisme," a French site with a bunch of stuff by recent French people. For all the scrolling, poking, and so forth that I did, I could not find this reputed El Mercurio interview that you "quoted." Now, maybe it happened and it exists, but you had better come up with a better source than this one for it.

For all the numerous people dissing Hayek rather ignorantly and declaring that nothing he said was of any worth and that clearly he was/has been "proven wrong," well, I hate to tell you, there are a lot of people that would say that he and von Mises were proven right when the Soviet Union fell. This is somewhat of an oversimplification, but there is much truth to it.

Hayek in particular analyzed the planning problem in a very sophisticated manner via the problem of information. I am under the impression that Brad's colleague George Akerlof discovered the concept of asymmetric information on his own (for one thing I think he neologized the term), but he himself has since recognized that Hayek preceded him. This was central for Hayek, although in the end the fall of command socialism may have had more to do with the incentive problems for technological change in the system arising from its property arrangements as analyzed by von Mises originally in 1920.

Hayek may well be guilty of having defended Pinochet, although that so far remains to be proven. But then, Marx defended democracy very eloquently in numerous writings, while denouncing it in some written in the heat and disappointment of the collapse of the Paris Commune in which his daughter and son-in-law died, shot down at le Mur des Communards in the Pere Lachaise cemetary. Lenin would use these writings as Marxist justification for his doctrine of centralized control and shutting down of the Duma in December, 1917,
when his opponents, the SRs, won the elections.

[andres]

"What Hayek, Marx, and Schumpeter all have in common is that they have no meaningful influence on modern academic economics."

Walt: you could just as equally reverse that statement and say that modern academic economics has no influence on political economic analysis in the style of Hayek, Marx, and Schumpeter. I know which tradition I prefer.

Warning: a necessarily abbreviated rant from an ex-economist follows. By "modern academic economics" I mean mainstream theories which not only rely heavily on mathematical models, but more importantly, rely on models founded on methodological individualism and on rational actor decisions where inconvenient social details such as future uncertainty, class politics, and the influence of non-economic social institutions such as religion are swept under the carpet. If this description doesn't fit the reader who is an economist, then please don't take what follows personally.

Modern academic economics is certainly relevant in studying macroeconomic business cycle fluctuations or questions of finance or industrial organization, for example. In that sense it is a highly useful, though rather technical and historically uninteresting discipline.

On more _historical_ questions, such as the sources of long-term economic growth, how to get countries on the periphery of the world economy out of poverty, or how to reduce inequality in industrialized countries, mainstream academic economics is pretty much useless. Or at least, having been force-fed any number of papers on new growth theory, AK models, endogenous TFP growth, and Ramsey saving mechanisms as a graduate student, that is the opinion I have settled on. Way too much of what is published in academic journals today deals with those questions in this manner and is, in that sense, a complete waste of wood pulp and/or bandwidth.

If one wishes to write any decent analysis on economic development or economic history, one _has_ to address discourses in the style of Marx, Schumpeter, and Hayek, not to mention Smith, Ricardo, Malthus, Polanyi and the pre-1980's economic development literature, regardless of whether one agrees with them or not. To take one prominent example relevant to Brad's original post, Marxist and Austrian theorists may be totally opposed to each other on political grounds based on their starting premises, but they are methodologically sympathetic to each other in that they both reject mechanistic social determinisms in favor of what Marx would call dialectical and Hayek would call subjective analysis. Even Marshall, who was completely neoclassical in his policy conclusions, diverged substantially from the method that modern mainstream economics considers acceptable.

By contrast, the thinkers who are normally cited as the ancestors of modern mainstream economics, e.g. Jevons, Walras, Pareto, von Neumann, and Ramsey (the last two weren't even economists), are almost totally irrelevant to any contemporary work in economic development, economic history, or income distribution/social policy. While I totally dislike Hayek's overall outlook and ideology, he has proven much more influential in modern discourse than writers like Walras, and this should be clue as to the overall effectiveness of their analysis. _The Road to Serfdom_ is still cited over and over again by people who may or may not have read it, but only terminally specialized zombies or unwilling graduate students read Walras, von Neumann, or even more recent thinkers like Lucas, Barro, or Akerlof, or pre-1990's Stiglitz in the original. That, I think, says it all.

[liberal]

jon livesey wrote, "But that's the point, isn't it."

No, it's not the point.

"No party has a 'policy' which can change economics."

Of course. So what?

"The only way for people to raise themselves out of poverty is to find a productive activity."

Wrong. The other way is to stop forcing them to pay twice, once through regressive taxes, the other time to a landowner who (in his role of landowner) has contributed nothing to the economy.

Henry George understood this over 100 years ago. Sadly, most neoclassical still don't get it.

[liberal]

Barkley Rosser wrote, "The major basis of this claim is that several important German social democrats from before WW I turned into German nationalists during WW I and later became Nazis or supporters of Naziism, with a common theme being the heroism of German culture against the commercialism of Britain, the liberal democratic enemy."

If so, that's a vacuous claim, given that there were plenty of non-Social Democrats who turned into Nazis too.

[liberal]

andres wrote, "On more _historical_ questions, such as the sources of long-term economic growth, how to get countries on the periphery of the world economy out of poverty, or how to reduce inequality in industrialized countries, mainstream academic economics is pretty much useless."

Primarily because they don't understand the role of land rent in an economy.

[liberal]

Barkley Rosser wrote, "OK, buster, you had better come up with something better than this crap. I just went to the website you posted, and the only thing I could find by Hayek there was his quite admirable 'Why I am not a Conservative.' The site is 'Institut Hayek, Liberalisme et Atlantisme,' a French site with a bunch of stuff by recent French people. For all the scrolling, poking, and so forth that I did, I could not find this reputed El Mercurio interview that you 'quoted.' Now, maybe it happened and it exists, but you had better come up with a better source than this one for it."

You're kidding, right? It's right there at the given link.

Of course, it's reasonable to question the providence of the article and translation.

[Tired of the Hayek Cult]

Barkley Rosser wrote, "OK, buster, you had better come up with something better than this crap"

I swear the link works on my computer. The link to hayekcenter.org in John Quiggin's post is broken and so that's why I posted a new link to the French site. But the English translation is there.

Try going to:

http://www.fahayek.org

At the top left hand side of the page it says "Rechercher . . ." In to that box type "pinochet" and click the magnifying class. The second result from the search is "L'Institut Hayek publie deux interviews inédites en anglais de F.A. Hayek." If you click on the link it will take you to the interview. The first part is in French, but then scroll down to the englsh part. It starts as follows:

"Friedrich von Hayek, Leader and Master of Liberalism"
By Renée Sallas
El Mercurio" (p. D8-D9), 12 April 1981, Santiago de Chile

"The sole concession he has made to his 82 years, which he will be celebrating on May 8 next, is to finally give up his pipe. Today he merely sniffs from time a time a pinch of good English tobacco that he takes from an old silver snuff-box which he keeps in his waistcoat pocket.

Otherwise, Friedrich von Hayek retains his alertness, his explosive sentences, his pugnacity, his brilliance and his passion for liberty that have characterized the best years of his life.

He is an indefatigable workers and traveller. Once, when told off by someone for his intense activity at such an advanced age, von Hayek replied: "I had a spell of bad health when I reached 70. For 5 years I was practically out of circulation. Of course, no doctor correctly guessed what I was suffering from. Until one day, unexpectedly, I got up... forgot that I was now 75 and began working as actively as ever. The joke that I always make nowadays is that I challenged old age. I don't like it, so I have decided to give it back."
. . .

The part I quoted was this:

Interviewer: Apart from Chile, can you mention other cases of transitional dictatorial governments?

Answer: Well, in England, Cromwell played a transitional role between absolute royal power and the limited powers of the constitutional monarchies. In Portugal, the dictator Oliveira Salazar also started on the right path here, but he failed. He tried, but did not succeed. Then after the war, Konrad Adenauer and Ludwig Erhardt held initially almost dictatorial powers, using them to establish a liberal government in the shortest possible space of time. The situation called for the presence of two very strong men to achieve this task. And the two of them very successfully accomplished this stage towards the establishment of a democratic government. If you permit I would like to make a brief comment in this sense on Argentina.

Interviewer: Why not?

Answer: I felt very disenchanted right from my first visit there, shortly after Peron's fall. At that time I talked with many officers from the Military School. They were highly intelligent persons. Politically brilliant, I would say among the most brilliant politicians in their country. For me it was a pity they did not make better use of this intelligence. I would have hoped they could have laid the foundations for a stable democratic government. And yet they did not. I do not know why they failed, in fact, but my impression is that they had the political ability and the intelligence to do so.

Interviewer: Which means that you would propose stronger, dictatorial governments, during transitional periods...

Answer: When a government is in a situation of rupture, and there are no recognized rules, rules have to be created in order to say what can be done and what cannot. In such circumstances it is practically inevitable for someone to have almost absolute powers. Absolute powers that need to be used precisely in order to avoid and limit any absolute power in the future. It may seem a contradiction that it is I of all people who am saying this, I who plead for limiting government's powers in people's lives and maintain that many of our problems are due, precisely, to too much government. However, when I refer to this dictatorial power, I am talking of a transitional period, solely. As a means of establishing a stable democracy and liberty, clean of impurities. This is the only way I can justify it - and recommend it.

**************

Barkley Rosser wrote, "For all the numerous people dissing Hayek rather ignorantly and declaring that nothing he said was of any worth and that clearly he was/has been "proven wrong," well, I hate to tell you, there are a lot of people that would say that he and von Mises were proven right when the Soviet Union fell. "

I don't think most of the people who are dissing Hayek believe that he contributed nothing to economics or philosophy. I'm just tired of conservatives and libertarians trotting out Hayek's critique of central planning as an argument against having any sort of welfare system (or in the extreme case having any sort of government at all) . I know that Hayek didn't argue this, but his followers routinely use his arguments for this purpose.

[Randall]

Tired of the Hayek Cult:

I'm just tired of conservatives and libertarians trotting out Hayek's critique of central planning as an argument against having any sort of welfare system (or in the extreme case having any sort of government at all). I know that Hayek didn't argue this, but his followers routinely use his arguments for this purpose.

[Randall]

No von Mises:

Yes, and I add this exquisite line by John Kenneth Galbraith:

"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."

[John Emerson]

Andres: I still remember the moment in about 1967 when I was chatting with an acquaintance who was a PhD candidate in economic at the University of Minnesota. I had an interest in economic history and mentioned Polanyi. He did this little flinch pause and then, as politely as he could but still a little condesendingly, explained to me that economics wasn't interested in political economy any more, and that mathematical modeling was where it was at.

This is my type case of the arbitrary limitation of the paradigm, by a combination of groupthink and bureaucratic ruling, but since then I've found as many cases of this in various academic fields, as I could ever possibly want.

[Craig Tindale]

I love you guys (and girls) all with your neat theories on what someone did or might of meant, or what does it mean now. There is no recognition that its the structure of the intellectual inquiry that is at the core of the problem. People seem to have difficulty holding lots of contradictory information in their mind at the same time.

I suspect this is a factor of information overload and psychological comfort than reasoned and considered thought.

Like? , what is the point of this discussion if not one person can agree what the Hayek mean’s in the first place?

America is a land of economic bio polarity, butterflies might be flappin their wings in the Amazon but according to modern America academia, everything’s either totally wrong or totally right.? Let give everything a big label and argue about the label its much simpler.

Hayek preferred liberal dictators in preference to democratic Necons (my artistic license)?, doesn’t it kind of depend on the Dictator and the NeoCons in question and what stage the society has reached. Anyone would think that Western civilization and democracy sat high on a 1000 year foundation of peace and stability. Folks we just got here it might take other cultures a while to achieve SUV’s, McMansions and Flat screen TV’s in every room.

Its all castles in the air, breast beating about who’s theories right and wrong, when depending on the assumptions you make they could all be wrong (or right) .

What if Putin and Hu turn out to be Austrian’s with a monterist twist, how does that play up against Western Inflationist Monetarists during a period of Shumpterarian creative destruction.. What if Hu decides to try a bit of Bernanke inflation targeting of his own ?,
What if they bid up gold to $2000 an oz and start buying Euro’s. Did you know Putin went to a gold show last week ?

Don’t get caught up on any of these questions, think of some of your own !, that’s the real point I am trying to make . Many of you folk seem to be bumping around in your own intellectual bubble and if you don’t pop out of it many generations to come will suffer

Its time for all the sacred cows to go to the abattoir .

.
Here is the comic book version of the book for those who haven’t read it;-

http://www.mises.org/TRTS.htm

It illustrates the ideas without the landscape of Europe or America and as you read through them reflect on where America is heading, in a world of exponentially growing complexity both right and left lurch toward centralized control.

Narajuna the great Buddhist logician made many observations about concepts. For, "when all things are empty, why [speculate on] the finite, the infinite, when in reality both the finite and the infinite and neither the finite nor the infinite, can really be conceptualized or understood. Why speculate on the identical, the different, the eternal, the non-eternal, both, or neither?" Freedom is a similar concept, America is niether free nor is it not free, freedom as defined by Straussian myth makers in Washington or will you Americans acutally allow the thought of democracy evolving in another direction , a democracy for the world, without US military and dollar hegonomy.

What Narajuna meant is was that concept s are just that , they are tranistory, you cant make castles out of the dusty books and fuzzy memories of yesteryear, they are both meaningless and useful. Everything is different and everything is the same, nor is it not different nor is not the same.

[boettke admirer]

Barkey Rosser suggests that RTS was only an attack on command planning which leads to serfdom, etc. In the 76 preface to RTS H argues that the welfare state (eg - Sweden) leads to serfdom also, but that the process occurs "more slowly, indirectly, and
imperfectly" (p. xxiii).

[anne]

Boettke Admirer:

Barkey Rosser suggests that Road To Serfdom was only an attack on command planning which leads to serfdom, etc. In the 76 preface to RTS Hayek argues that the welfare state (eg - Sweden) leads to serfdom also, but that the process occurs "more slowly, indirectly, and
imperfectly" (p. xxiii).

Precisely.

[boettke admirer]

Hayek's claim in the 76 preface is just silly - & that is why our beloved pete boettke sometimes even makes his grad students cringe

[John Emerson]

76 was 29 years ago. Is an update on swedish serfdom coming out soon?

I came from a conservative family, and I frist heard about Sweden's imminent bankruptcy about 1955. the Swedes are a very slow people.

[Walt Pohl]

andres: But what have they acheived? Marx' central historical prediction went wrong. Hayek's central historical prediction went wrong. (Schumpeter I'm less familiar with. Didn't he predict we would slide into decadence, causing capitalism to fail?) I don't see how your preferred tradition has gotten anything more right than academic economics has.

[Charles]

Dale, as I heard the tale of the young woman, she was not expecting help out of a belief in compassion. Her attitude was, rather, contemptuous and demanding. She believed, for some reason, that she would get disability payments automatically.

I do agree that it's a shame she won't get any help. She is, we have to keep in mind, just a teen. That is much too young to abandon hope. If she does, we will end up paying.

____________

Liberal, I agree that the amount of assistance to the poor nowadays is negligible. It's the mark of a society gone insane that we will spend more time denying aid to a poor person than we will in checking in on how paymasters in Iraq are delivering shrink-wrapped 100 dollar bills.

My question is how does a nation teach the young to take initiative? The social Darwinists (and I think I would include Hayek, or at least his followers among them), say that we can only do this by creating intolerably oppressive conditions, to either physically or socially eradicate the less fit. There has to be a better way, and I suspect the answer lies in understanding why this young woman believed that she was not responsible for taking initiative.

[Barkley Rosser]

First let me note that I am visiting a daughter. Her computer connections are flakey, and I do not have access to my books either by or about Hayek. Given that:

Tired of Hayek Cult,

I was stalled out in getting at the interview you report is there. Let us say that it is there and that you have quoted it accurately. I note a couple of points.

1) In what you quote there is nothing directly about Pinochet or Chile. Perhaps he said something about them, but it is not there. (For the record, I think Hayek should have denounced Pinochet's methods, whether he was there or not, and his failure to do so is a blot on his record.)

2) Hayek makes it clear that his support for a strong leader is "of a transitonal period, solely." Although someone above suggested that the following sentence about "As a means of establishing a stable democracy and liberty, clean of impurities" referred to killing dissidents as Pinochet did, I do not see that as a reasonable interpretation of it at all. That is pushing the envelope for purely ideological purposes, although I realize that to a large extent that is what this particular thread is about.

3) The cases that Hayek is quoted as being concerned with focus particular on the west German case in the late 40s. In RTS and elsewhere it is clear that Germany was a huge focus of interest for Hayek all along. He was in fact personally an enormous influence on Erhard through the Freiburg-based Ordo-liberals led by Muller-Armack. These were also the people who invented the term "social market economy" (sozialmarktwirtschaft), which became the ruling ideology of West Germany. It included avoidance of nationalization or central planning, but an extensive welfare state. The social democracy of Sweden is basically a more extended version of this model. While Hayek notes that Adenauer and Erhard had near dictatorial powers, they clearly did not do the sorts of things that Pinochet did in Chile, killing dissidents, although there was a Nazi resistance movement in the countryside that took some time to finally suppress.

4) I did manage to get to John Quiggen's site. He is one who has been cited as a source of this more direct quote that a liberal dictatorship is preferable to an illiberal democracy (I am not getting it quite right here). I think that what you quote in effect implies this. However, Quiggen himself noted that he could not fully verify this quote and had spent a lot of time trying to do so. I read that before I posted my earlier reply to you.

anne,

Well, you have found what is practically the only reference one can find to Sweden in all of Hayek's writings. It certainly is vague, and that sentence is followed by this:
"It has frequently been alleged that I have contended that any movement in the direction of socialism is bound to lead to totalitarianism. Even though the danger exists, this is not what the book says."

I would also note the following from p. 259 of The Constitution of Liberty, in which he clearly states that the danger of going to nationalization and central planning had largely receded in Western Europe:
"The aims of the welfare state can be realized without detriment to individual liberty."

One of the weird aspects of Hayek is how little he says about the Nordic or Scandinavian economies. In the first edition of RTS he mentions Sweden only once, and then as a kind of extension of German social democracy. He never mentions it all in the Constitution of Liberty, although he talks about Germany a lot.

What was Hayek's view then on the welfare state? He is hard to pin down, but in my paper ("The Road to Serfdom and the World Economy: 60 Years Later," European Journal of Political Economy, Dec. 2005, 21(4), 1012-1025, also available on my website at http://cob.jmu.edu/rosserjb), I argue, with good support I think, that Hayek supported a state-guaranteed minimum of welfare support that included national health insurance. What he did not support was what he viewed as arbitrary redistributions of income. In this regard he criticized the progressive taxation of the day that included in many countries, including both the UK and US, top marginal income tax rates exceeding 90%. He also specifically opposed redistributions towards specific groups.

One may disagree with this, but it is not the image of him that is put forth by both many of his opponents as well as many of his supporters. BTW, both Boettke and Caldwell (editor of the Hayek papers) criticized some of my arguments, especially when I in fact said that Hayek should have been more of a social democrat, given the performance of the Nordic economies and societies.

Like Adam Smith, Marx, Keynes, and Schumpeter, Hayek has a long oeuvre, longer than most given the length of his life. Like some of them his views evolved over time. One can find him in contradiction with himself or apparently muddled or vague about things. To the extent he went to Chile and even indirectly supported Pinochet, this is a blot on his career and person.

However, one should not simply dismiss all of his ideas or arguments because of this. Virtually all of these famous economists can be found to have apparently supported something nasty or questionable at some point or other (or to have said something nasty or unacceptable to modern tastes). This does not lead us to therefore refuse to read them or to dismiss all of their ideas en masse.

Regarding Brad's beef over the 1956 RTS preface, based on COL, there is good reason to believe that Hayek modified his views between 1956 and 1960. A key event again seems to have had to do with Germany, in particular the specific abjuration by the German Social Democratic Party of Marxism that occurred in 1959.

4)

[andres]

The achievement is that even if the main historical prediction of Marx, Hayek, Schumpeter and others doesn't come true, the detailed analysis that is needed to make the prediction true and credible always sheds significant light on issues that are at first seemingly unrelated but later turn out to be of essential importance. Examples:

Marx. Central historical prediction: capitalism would collapse, though he didn't say when. On the way to that prediction, Marx shed light on the importance of class on political conflicts, the role of class conflict in the search for more automated, labor-saving means of production, the resulting need for capitalist entrepreneurs to bypass a falling rate of profit by increasing product differentiation, and the continual takeover of previously democratic governing systems by what amounts to a corporate oligarchy. Though all of these issues were a means to an end as far as Marx was concerned, they became his main contribution.

Hayek. Central prediction: free, unregulated markets are the most dynamically efficient means of allocating resources as well as ensuring human liberty, and by contrast socialism is bunk because central planning cannot deal with the information overload problem. Historically, the need for continual government regulation of key industries (eg finance in order to prevent moral hazard and crisis, various heavy industries to prevent environmental pollution, etc) has proven Hayek wrong in that respect. But the numerous pathologies of Soviet and Maoist central planning have shown over and over that if socialism is to succeed, it cannot rely on centrally- administered production and pricing.

Schumpeter. Central prediction: the increasingly large scale of capitalist production and the continual bureaucratization of major corporations would lead to capitalism evolving into what was essentially socialism in all but name. This proved wrong because numerous industries have shown that smaller and more flexible firms have a significant advantage in coming up with new products that fill market niches. _But_ it is true that it is the larger corporations, which operate internally as command economies, which have the resources and large scale to popularize such innovations. As such, it is inconceivable that capitalism can exist today without large corporate bureacracies, but most maintream economists ignore that issue and still preach to their undergraduates the efficiency virtues of perfect competition.

What all three had in common, in addition to others such as Smith and Polanyi, is that they conceive of human interaction as being riddled with contradictions, conflict, and uncertainty, and therefore incapable of being accurately modeled by mathematical optimization exercises. Mainstream economics could do well to learn from them.

[Alan]

Regarding Brad's beef over the 1956 RTS preface, based on COL, there is good reason to believe that Hayek modified his views between 1956 and 1960. A key event again seems to have had to do with Germany, in particular the specific abjuration by the German Social Democratic Party of Marxism that occurred in 1959.

It's a puzzle then why he would say that Britain's Labour Party had destroyed the rule of law, even though it had always abjured Marxism, if he was so impressed by the SPD's action in 1959.

[Barkley Rosser]

Alan,
I am not sure that the UK Labour Party ever formally "abjured Marxism" in the way the German SPD did. I think it is a matter of its never having formally followed it, whereas the German SPD had done so from the 1800s. Its 1959 abjuration was a big deal.

Probably the most important theorists of the UK Labour Party were the Webbs with their Fabian socialism. Now, this was always to be gradualistic and within a parliamentary democratic framework. But in fact the goal was to be something like a Soviet-style model, a point emphasized by Hayek in RTS, originally written in 1944 and anticipating a Labour takeover after the war, which happened. Indeed, the Webbs look pretty silly or naive in visiting the USSR in the late 1930s and openly praising the place while mass murder was actively going on. At worst, Hayek can be accused of saying nothing about widespread murder in a place after it had ceased.

In that regard, the British model in the late 40s was more officially socialistic, certainly in regard to lots of nationalizations and in its slowness in ending the more or less command economy of the war period. In one of his few comments on Sweden, Hayek noted that it was less socialist in the sense of nationalization or planning than either Britain or Austria during the postwar period.

[Tired of the Hayek Cult]

Barkley Rosser wrote, " . . . Hayek has a long oeuvre, longer than most given the length of his life. Like some of them his views evolved over time. One can find him in contradiction with himself or apparently muddled or vague about things. To the extent he went to Chile and even indirectly supported Pinochet, this is a blot on his career and person."

The reason I think it's important to publicize Hayek's connection to Pinochet is because it sullies his reputation. Conservatives and libertarians use ideas like spontaneous order and the information problem to argue that all (or almost all) governmental attempts to solve societal problems will either be futile or have perverse consequences. [see Albert Hirschman's "The Rhetoric of Reaction: Perversity, Futility, Jeopardy" for a description of the three common types of arguments conservatives make against government action. http://www.amazon.com/exec/obidos/ASIN/067476868X ] Hayek is always presented as defender of liberty but exposing Hayek's hypocrisy (i.e., his condoning of a coup against a liberal, democratic government) can be used to undermine his credibility in arguments with conservative/libertarian people.

Several times on this blog (April 07, 2003 and September 25, 2004) Brad Delong has written about how when he teaches Robert Nozick's "Anarchy, State, and Utopia" he has his students read a piece from the New Republic called "Anarchy, State, and Rent Control" which describes Nozick's lawsuit against Eric Segal for supposedly violating a rent control law. Brad says that this causes his students to not take what Nozick writes very seriously. I think publicizing the Hayek-Pinochet connection serves a similar rhetorical purpose.

[John Emerson]

Walt Pohl: predictivity is not a standard for social thinking, because of reflexivity. For example, people warned about overpopulation 30 years ago, but now the problem doesn't look so bad. Were they bad predictors, or good prophets? Their message then was listened to, and partly for that reason, the problem isn't as bad as it would have been. Hayek, Marx, and Schumpeter made predictions, but they were intended as warnings and worked that way.

Are you comparing their predictions to some other predictions made at the same time? Or just to people who didn't bother with predictions?

[John Emerson]

Hayek, along with Popper and Whitehead, was a big opponent of predictive determinism as a scientific model, and some of his writings are early statements of principles of self-organization.

[Bruce Wilder]

Hayek is a good example of the principle that it is easier to be a critic than an architect. The effective critic has the all-important tool of omission to work with, and by clever omissions, can persuade people, whose welfare, values and aspirations are inimical to his own aims. For the architect, omissions form the core of a potentially fatal flaw in the overall design.

The architect is motivated to learn to do better. The good critic can help the architect to identify omissions; the bad critic will use omissions of his own to oppose the architect and befuddle those, whose cooperation are needed by the architect and the builders.

Hayek, on his good days, was a good critic of well-intentioned post-war, post-depression socialism. He actually helped people understand what went wrong with socialism, and to build a better society, by correction. On his bad days, he was an evil prick.

Hayek, and even more Von Mises, favor the concentration of wealth and power in the hands of smallish "private" elite. They would allow -- indeed would encourage -- the wealthy few to oppress and exploit the poorer majority, and would prefer that democratic majorities not use government to defend themselves or to undertake projects for the public good.

Pinochet exemplified what Hayek wanted and admired, and Hayek's support of him revealed that. There were many leftists in the 1930's, who shamefully blinded themselves to what Stalin was doing, but its was an imaginary Stalin that they admired. It was the real Pinochet, that Hayek liked.

[Alan]

I think the Labour Party-Webb-Stalin connection pulled out as a convenient strawman to damn the 1945-51 Govt by association is very weak.

The main architects of the welfare reforms of the 1945 Govt were Beveridge, a Liberal politically, and as far as I know not a Stalin-hugger, Herbert Morrison, a centrist and Ernest Bevin, whose antipathy to the Russian model and the likes of the Webbs and Laski was legendary. His mantra was "voluntaryism" and the achievement of cooperation between owners and workers, because he believed it served the interests of the British working class. The nationalisation of coal, the railways and the Bank of England owed more to a pragmatic
reaction to the parlous situation the war had left the British economy in than to ideology.

I still don't see where the justification for Hayek to say the rule of law had collapsed in the UK in 1956. You're arguing that the reforms of the 1945 would eventually have led to a Soviet model (which
I think is absurd), but Hayek appears to have been describing 1956, not the dim and distant future.

I'm not an economist, I'm more focused on the history of the period, and so far those defending Hayek seem to be intent on playing
fast and loose with historical fact, rather
than offering a rational defence of Hayek's
statement.

[Ari]

Beyond economics, do philsophers pay much attention to Hayek? I never found him on a reading list in philosophy, and that was more than a decade ago.

[Ari]

John Rawls was everywhere however in political philosophy.

[Ari]

Cornell West? I loved him as a teacher.

[Walt]

John, it's you who convinced me that predictions must always count for something. You argued roughly that since anti-war people made correct predictions of the outcome of the war, while pro-war people made incorrect predictions, and that this must weigh heavily in deciding who was credible (you were arguing about who the media treated as credible, but I don't see why the principle doesn't apply more widely).

I suppose that you could argue that Marx and Hayek's predictions prevented their predictions from occurring, but we need to hold that to an awfully high standard of proof, otherwise it's too easy of an argument to make. I'm sure there are Y2K "experts" who now claim their claims of civilizational collapse are the only thing that stood betweek us and civilizational collapse.

[Arun Khanna]

“Hayek, Marx, and Schumpeter all have in common is that they have no meaningful influence on modern academic economics.”

The collapse of communism shows Hayek has (and had) a meaningful influence on world economies.

[John Emerson]

Damn, I don't remember that.

Near term prediction (next two years) is less dodgy than long term (next 50-100). Even so, I had a pretty good idea what was going on in Iraq and what would happen after the war, but that mostly consisted of being unable to believe that a democracy would spring up and greet us with flowers.

[Jonathan Goldberg]

Krugman on Hayek:

[I]f one asks what substantive contributions [F. A. Hayek] made to our understanding of how the world works, one is left at something of a loss. Were it not for his politics, he would be virtually forgotten.

Originally in Slate. A quick google produced an indirect reference and howls of protest from sundry right-leaning types.

I read The Road to Serfdom at 16. Fortunately, by 18 I had recovered.

[Henry Engel]

Collapse of communism means Hayek had an impact? First off, communism didn't collapse. It wasn't practiced in any form even resembling what Marx had in mind. What the press called communism was nothing of the sort.

Second, centrally planned totalitarianism would've collapsed regardless of what Hayek said.

[Steve Horwitz]

After dozens and dozens of comments, no one other than Barkley Rosser has deigned to try to deal with Hayek's actual analytic contributions to economics (or a few other fields, I might note). We can bash him all we want for the Pinochet connection - and Barkley's take on that is precisely right - or try to avoid argument by calling him a "neo-con," which he certainly was NOT, but none of that gets to the point of explaining exactly what his contribution to economics was (or tried to be) and why it was wrong.

Have any of you folks other than Barkley ACTUALLY READ Hayek's technical work in economics? Have you read anything other than The Road to Serfdom? If not, you are totally missing the point of Boettke's original post and almost all of these comments are, in the language of the lawyer, "non-responsive."

I could also go on about the horrific misreadings and misrepresentations of Hayek's views that are strewn about these comments, but I just don't have the heart. If you all want to use this as a chance to go on an anti-libertarian bender, that's fine, but don't pretend to actually be addressing Hayek's scholarly work.

It's too bad, because serious dialogue between libertarians and their critics over Hayek's analytic contributions would be a welcome development in my view. But it's not going to happen until folks get past their ideological blinders. It's interesting to note that people in theoretical psychology and neuroscience seem to have no problem dealing with his analytic contributions to those fields, whatever their politics might be. What's wrong with folks in the social sciences on the left that they aren't willing to engage in the same way?

[Alan]

But it's not going to happen until folks get past their ideological blinders. It's interesting to note that people in theoretical psychology and neuroscience seem to have no problem dealing with his analytic contributions to those fields

That maybe so, I am not a psychologist/neuroscientist. What I am familiar with is postwar British history, and I think everybody with any knowledge of this history would say his statement about the collapse of rule of law in 1956 Britain that
Brad noted would be regarded as nonsense by
anyone familiar with that history regardless
of ideology.

This would give me pause. I might then ask to
any economist/psychologist/neuroscientist of my acquaintance if Hayek had ever let his clear ideological position get in the way of
fact enough to state a nonsensical position in their own fields.

[Walt]

Steve: I addressed them. I just dismissed them altogether.

[Arun Khanna]

Henry Engel said: "Collapse of communism means Hayek had an impact? First off, communism didn't collapse. It wasn't practiced in any form even resembling what Marx had in mind. What the press called communism was nothing of the sort. Second, centrally planned totalitarianism would've collapsed regardless of what Hayek said."

The Nobel Prize committee in 1974 seems to think Hayek had an impact. You don't have to agree with Hayek but I think most people would concede he had an impact. The link gives the Nobel Prize press release for 1974.

http://nobelprize.org/economics/laureates/1974/press.html

[alan]

ok steve horwitz - lets have a serious debate - what do you make of hayek's silly arguments that the welfare state will lead to serfdom?

no answer i figure?

[Steve Horwitz]

Well Alan, if he actually SAID that, it would be silly. Unfortunately, I'm not in the office where my copy of RTS is (as well as Bruce Caldwell's recent *Hayek's Challenge*, which debunks the myth of that being Hayek's argument) to provide the textual evidence to the contrary, but I'll be happy to do so next week.

This is the whole problem: people have a potted view of Hayek (much like the Right's potted view of Marx or Keynes) that bears little resemblance to the real deal.

Bottom line: Hayek NEVER said that the welfare state WOULD or WILL lead to serfdom. His point was simply that the same erroneous intellectual beliefs about the operation of the social world were at the base of the view that the West could and should be democratically "planned" as were the foundation for the serfdom of Nazi Germany and the Soviet Union. He argued that if we continued to push for a larger role for democratic planning (including elements of the welfare state), we would have to make a choice between becoming progressively (or regressively?) more controlling of people's non-economic values, and thus restrict their freedom in a variety of ways, and more tolerant of the "worst getting on top" or we would have to abandon the attempt to plan. Hence, such attempts to plan could put us on "the road to serfdom," but actually taking the road was NOT inevitable. It was an Orwellian warning, not a determinist argument.

As Barkley has noted, Hayek gave the state some significant scope to provide for the well-being of those who couldn't fend for themselves in the market, so it would be silly for him to make the argument you say he did. Moreover, RTS was written as a popularization of other arguments he'd made. If we want to talk about Hayek's analytic contributions, why aren't we talking about Constitution of Liberty, or his articles on knowledge from the 30s and 40s, or his work on monetary theory or capital theory? Again, they might be *wrong* but they are analysis not ideology.

The reasons he believed attempts to plan (which were very popular in the West when he was writing RTS) would be unable to deliver the economic goods and would lead to restrictions on freedoms of various sorts were not some ideological commitment to private property or some such thing, but an analysis about the nature of human knowledge and the ways in which market and political processes enable us to use such knowledge. His analysis may well have been wrong, and he never, as Schumpeter said of him, attributed to his opponents anything more than intellectual error himself (far more than many of you have been willing to grant him!), but it was socio-economic analysis based on his earlier work, not ideological shoe-pounding.

Grab your copy of RTS Alan (I assume you have one, otherwise you wouldn't trying to tell me what the book is about, right?) and let's look at the text next week and see, shall we?

Ball's in your court now.

[alan]

how very strange that hayek never said that:

“At the time I wrote [1944] socialism meant unambiguously the nationalization of the means of production and … central planning … [Thus] Sweden [circa 1976] … is very much less socialistically organized than Great Britain or Austria, though Sweden is commonly regarded as much more socialistic. This is due to the fact that socialism has come to mean chiefly the extensive redistribution of incomes through taxation and the institutions of the welfare state. In the latter the effects I discuss in this book [RTS] are brought about more slowly, indirectly, and imperfectly … the ultimate outcome tends to be very much the same, although the process by which it is brought about is not quite the same as that described in this book” (viii).

[alan]

"As Barkley has noted, Hayek gave the state some significant scope to provide for the well-being of those who couldn't fend for themselves in the market, so it would be silly for him to make the argument you say he did"

how significant a scope? Clearly less than modern sweden (or sweden circa 76), & less than UK circa 45 (or now).

[alan fan]

SH writes: "so it would be silly for him to make the argument you say he did"

so given al's evidence, will Hayek worshipper (aka Stephen Horwit) admit that Hayek made a silly argument. That would be an austrian first.

You "we love mises, hayek, george bush' right wingers are kooks

[alan]

To SH - yes, I do own a copy of RTS, as the wag who just entered my office suggested, perhaps I ought to ask you which of the various editions I should pull off my shelf?

BTW - were you aware that there are some very very minor differences in the wording of the US & UK editions.

To Alan fan - libertarians are not Bush worshippers - they just play into the his hands

[Steven Horwitz]

Right. If you try to plan, you'll face a choice between slowly restricting non-economic freedoms and giving up on planning. If you go with a welfare state, you will face the same choice (restricting freedoms or scaling back your welfare state), only much more gradually. It can be reasonably argued that most of the West began to feel that trade-off in both cases and stopped short of "serfdom." The "ultimate outcome" he refers to is not "guaranteed serfdom" but the the claim that states will have to put increasing restrictions on freedom in order to continue planning or grow the welfare state.

You seem to think Hayek's analysis is flawed because you are interpreting him deterministically, but that was not his argument. His argument, like that of Mises before him I might note, was that the "costs" of planning/welfare state in terms of various forms of freedom would continually rise. That is, you couldn't have both planning (or an extensive welfare state) and freedom (and a well-functioning economy), even in a democracy. Democracy does not take the problems out of severely restricting the market process.

By analogy, if I say "if you smoke enough cigarettes, you'll get lung cancer" and you decide to limit your smoking to a few cigarettes a day after your two pack-a-day habit started making you unhealthy and as a result you never get lung cancer, was there something wrong with my argument? Not necessarily.

You want Hayek to be saying the equivalent of "if you smoke one cigarette, you're guaranteed to get lung cancer." Unfortunately, that's not what he's saying.

The very facts that countries like Great Britian de-nationalized various industries and that the Scandanavian welfare states have, in the last few years, seemed to bump into the upper limits of their willingness to tolerate the economic and social costs of a large welfare state suggest some truth to Hayek's analysis.

Definitive proof against Hayek's actual argument would have been if western democracies had continued to push toward ever more planning and ever larger welfare states without either restricting the non-economic freedoms of the citizenry or seeing their economies suffer in comparison to the west.

It is a debatable proposition that de-nationalization occurred because of economic stagnation and the increasing state apparatus needed to even attempt to run such industries. It is also a debatable proposition that the levelling off of Scanadavian welfare states has been the result of their not being willing to tolerate the burden it placed on other parts of their economy and hence their well-being. Either or both arguments might be wrong, but they aren't silly and they are consistent with the warning Hayek provided in RTS.

To be continued, if you so desire, after the holiday.

[Steven Horwitz]

Please do tell how us libertarians play into Bush's hands. I'm fascinated by that claim, being that I'm opposed to the war, opposed to Bush's fiscal and monetary policies, opposed to his social policies, have been an activist against the Patriot Act and for same-sex marriage, and have never voted Republican in my life. Please, tell me why I'm guilty of playing into the hands of Emperor W.

[Steven Horwitz]

One more thing... obviously "Alan fan" has not read a word of Austrian economics if he thinks it's all hagiographic of Mises and Hayek. Both of them have made a number of silly arguments. For example, Hayek's currency proposal in the Denationalization of Money is very silly, as is just about all of volume 3 of Law, Legislation, and Liberty, and he gave some bad policy advice during the Great Depression, and he shouldn't have ever gone near Pinochet.

There. There's 4 "Austrian firsts" for you. So glad to see "Alan fan" is interested in real dialogue.

[alan]

I don't read Hayek deterministically, I just read it as an unpersuasive mechanism - how does Sweden circa 76 lead to the worst of chapter 10 (death camps & all that)?
How do we get from public libraries to concentration camps?

You might do well to read the anti hayek's RTS contributions to the symposium Barkey Rosser mentioned in an earlier post (or perhaps - like Hayek? - you think that free electronic journal subscriptions at state universities lead to concentration camps?

Provide an RTS-type mechanism which is vaguely persausive & those of us who are soft-left (Brad? Certainly me) might pay attention.

Why would you oppose single-sex marriage BTW?

[alan]

"You want Hayek to be saying the equivalent of "if you smoke one cigarette, you're guaranteed to get lung cancer." Unfortunately, that's not what he's saying."

I don't read hayek as saying that, I just read him as not persuasively showing how starting with a puff will lead to 10,000 packs per day.

Public libraries to concentration camps (which is what worst give us in chapter 10 of RTS) mechanism please?

[alan]

"Democracy does not take the problems out of severely restricting the market process"

how severe before RTS kicks-in?

Same as "significant scope" for state in welfare - how significant for RTS to kick-in?

Give us a mechanism of some sort - not this Mises Institute type free market ra ra ra blather.

[Steven Horwitz]

Your last set of questions are good ones, and precisely the kinds of questions I think Hayekians haven't tried to answer but should have. I'll gladly confess to not having any answers of my own, mostly because those kinds of questions are not in my own area of research. My point was just to clarify what Hayek was saying. Perhaps, as there seem to be more young folks interested in Hayek, we might get some good dissertations and other research that try to answer those questions.

And don't pin the Mises Institute on me. I'm persona non grata with them and damn proud of it. I find them to be, in general, an embarassment to Austrian economics and libertarianism, and I'm convinced that Mises himself would agree were he alive. Over ten years ago I called them "a fascist fist in a libertarian glove" and the ensuing years have done nothing to convince me otherwise.

You misread me on same-sex marraige. I'm in favor of legalizing it, not opposed. And I could make a nice Hayekian case for it if you'd like. ;)

And that's enough for me. Happy new year all.

[Lawrence H. Whtie]

Going back to Brad DeLong's original post, I think he simply misundertands what Hayek was saying. What, for Hayek as a classical liberal, does the "Rule of Law" stand in opposition to? The arbitrary Rule of Men. Or, in Hayek's words, quoted by Brad, "arbitrary administrative coercion".
Hayek doesn't say that Attlee *destroyed* the Rule of Law (reduced it to zero), but that he seriously eroded it. Was that an outlandish claim?

[Alan]

I don't believe I made any reference to RTS at
all. I'm not in any way a student of Hayek. My
point was he actually says in his 1956 preface;

The most serious development is the growth of a measure of arbitrary administrative coercion and the progressive destruction of the cherished foundation of British liberty, the Rule of Law... [E]conomic planning under the Labour government [has] carried it to a point which makes it doubtful whether it can be said that the Rule of Law still prevails in Britain...

Any historian of postwar Britain would tend to regard anybody espousing these views as having an ideological slant that precluded
an honest assessment of the truth.

It seems that Hayek is pushing the evidence for his thesis,as far as I understand it from the debate in these comments, in RTS a lot further than the situation in 1956, that the vast majority of other observers would recognise, merits.

I'm not really interested in Hayek's thesis as such, more in the confused or dishonest depiction of the history of the period. Again, if a thinker can put forward a view as ridiculous as this, why should I not be suspicious of the rest of his oeuvre.

[Alan (only the history, ma'am)]

Er, there seem to be two Alans on the thread.

My last two comments were the one above, and the last one that referred to the psychologists/neuroscientists.

[Alan (only the history, ma'am)]

Hayek doesn't say that Attlee *destroyed* the Rule of Law (reduced it to zero), but that he seriously eroded it. Was that an outlandish claim?

He said he doubted it still existed in Great Britain, that's seems to go a bit further than
"serious erosion".

And, yes, it's an outlandish claim. If the "rule of law" and the "Rule of Law" are two distinct and confusable concepts Hayek could easily have clarified that. I assume a halfway competent editor would have checked this was exactly the way Hayek wished to represent his views.

[anne]

Interesting discussion or argument, much that I might not have otherwise considered :) In historical context, "Road to Serfdom" becomes more of a sympathetic read, but I prefer Isaiah Berlin as a more adroit or flexible thinker from whom more nuanced similar positions can be gained.

[Alan (only the history, ma'am)]

In historical context, "Road to Serfdom" becomes more of a sympathetic read, but I prefer Isaiah Berlin as a more adroit or flexible thinker from whom more nuanced similar positions can be gained.

I do think you are correct about the historical context. If Hayek seems to me to be making a rather tenuous slippery-slope argument about the dangers of all government involvement, the current example of the Soviet bloc and the recently-defeated examples of Nazi Germany and fascist Italy
would perhaps be some justification for a rather paranoid thesis.

[anne]

Ah, you have helped me. The problem with Hayek really becomes rigidity, the rigidity of the model is a social studies problem for societies are not static even when most meant to be. experiences change us each and collectively. Isaiah Berlin allowed for more flexible understanding of social structures, as did Reinhold Niebuhr, both of whom abhored dictatorial thinking and institutions. So, what do we have, Hayek as a hedgehog rather than a fox :)

[anne]

http://www.nytimes.com/books/97/07/13/reviews/970713.gray.html

July 13, 1997

An Idea Whose Time Won't Come
By JOHN GRAY

THE SENSE OF REALITY
Studies in Ideas and Their History.
By Isaiah Berlin.

This century is littered with utopias. Sir Isaiah Berlin, the distinguished Oxford philosopher, historian of ideas and man of letters, has always held that the search for a perfect society is the pursuit of an illusion. This is not because he thinks human beings are incurably imperfect. He questions the very idea of perfection. Throughout his writings he insists that the great goods of human life are diverse and conflicting. Ultimate values are not harmonious. They are often rivals. The utopian fantasy that we can have them all is not just overoptimistic. It aspires to something we cannot imagine -- a society in which incompatible ideals are no longer in conflict. Values like self-realization and social cohesion, economic progress and settled communities cannot always be made compatible. Sometimes we must choose between them. In the nine seminal essays collected in ''The Sense of Reality,'' ranging over such diverse subjects as the Romantic movement, Marxism, Kant's influence on nationalism and the thought of Rabindranath Tagore, Berlin argues with rare wisdom and passion that every such choice entails a loss.

In the book's title essay, he rejects the common belief that utopians are rebels against inescapable laws of social or historical development. They are, he tells us, people who imagine they have discovered such laws when in human affairs there are none. Nineteenth-century thinkers, he writes, ''believed that human society grew in a discoverable direction, governed by laws; that the borderline which divided science from utopia . . . was discoverable by reason and observation and could be plotted less or more precisely; that, in short, there was a clock, its movement followed discoverable rules and it could not be put back.'' ...