George Soros Misrepresents F.A. Hayek

Billionaire and philanthropist George Soros attempts to pander to followers of the great F. A. Hayek, he writes,

Human beings act on the basis of their imperfect understanding — and their decisions have unintended consequences. That makes human affairs less predictable than natural phenomenon. So Hayek was right in originally opposing scientism.

At the time of the Economica articles, Popper was between Hayek and the socialist planners. He was just as opposed as Hayek to communism’s threat to individual liberty, but he advocated what he called piecemeal social engineering rather than laissez-faire.

Here I sided with Popper. But Popper and Hayek were not that far apart. I was influenced by both — and I also found fault with both.

By identifying Hayek’s inconsistency and political bias, I do not mean to demean him — but to improve our understanding of financial markets and other social phenomena.

When F. A. Hayek posited of a society that emerges from spontaneous order, what he meant was that there is no specific social or economic outcome set by anyone most especially by central planners, but of a system that emerges from interactions done by individuals.

To quote Hayek, (bold emphasis mine)

A spontaneous order is a system which has developed not through the central direction or patronage of one or a few individuals but through the unintended consequences of the decisions of myriad individuals each pursuing their own interests through voluntary exchange, cooperation, and trial and error.

Thus, it is plain nuts to say that Hayek has been plagued by political bias.

Political bias represents ideology which sees political and economic order as having specific socio-economic outcomes designed by various schools of thought on central planning, which is the opposite of what Hayek or his followers stand for.

Moreover, Soros says he is influenced by Hayek. But as Greg Ransom aptly points out,

Soros calls for a middle ground between Popper and Hayek, between the far left and Hayek. What Soros doesn’t explain is why there is no middle ground in his political activities — or why he funds so many fundamentally dishonest and hard left “Think Tanks”, people who have no problem mischaracterizing or even smearing the ideas of Hayek — and those who teach them — at the drop of a hat.

In short, what Soros says and what he does conflicts. It is Mr. Soros who seems to be plagued by inconsistencies and not Hayek.

Moreover, like typical believers in central planning, the common argument begins with a cart before the horse “strawman” argument; Soros favorite is to use “market fundamentalism” to typify Hayek’s supposed ideology.

Bob Wenzel exposes this fallacy,

The fact of the matter is that free market advocates understand that the free market system is about profits and losses, and that losses are just as important in directing an economy in a better direction as are profits. There is no belief that there are no errors in a market system.

In addition, to pin the blame on “inherent market instability” as the work of “market fundamentalism” or free market forces is totally misguided.

For instance, bubble cycles won’t occur without interventionism (inflationism), most especially from Central Banks. Since policies and regulations affect people's behavior and actions, the stimulus response mechanism constituting Soros' reflexivity theory comes to play.

In short, people respond to incentives which policies or regulations shape.

I would partly agree with Soros for his view on human action via the reflexivity theory (which I also use in analyzing the markets), but I think he has either misunderstood or misrepresented Hayek.