The Revivalism of Friedrich Hayek's Ideas

Great stuff by Professor Russ Roberts at the Wall Street Journal on "Why Friedrich Hayek Is Making a Comeback"

(all bold highlights mine)

He championed four important ideas worth thinking about in these troubled times.

First, he and fellow Austrian School economists such as Ludwig Von Mises argued that the economy is more complicated than the simple Keynesian story. Boosting aggregate demand by keeping school teachers employed will do little to help the construction workers and manufacturing workers who have borne the brunt of the current downturn. If those school teachers aren't buying more houses, construction workers are still going to take a while to find work. Keynesians like to claim that even digging holes and filling them is better than doing nothing because it gets money into the economy. But the main effect can be to raise the wages of ditch-diggers with limited effects outside that sector.

Second, Hayek highlighted the Fed's role in the business cycle. Former Fed Chairman Alan Greenspan's artificially low rates of 2002-2004 played a crucial role in inflating the housing bubble and distorting other investment decisions. Current monetary policy postpones the adjustments needed to heal the housing market.

Third, as Hayek contended in "The Road to Serfdom," political freedom and economic freedom are inextricably intertwined. In a centrally planned economy, the state inevitably infringes on what we do, what we enjoy, and where we live. When the state has the final say on the economy, the political opposition needs the permission of the state to act, speak and write. Economic control becomes political control.

Even when the state tries to steer only part of the economy in the name of the "public good," the power of the state corrupts those who wield that power. Hayek pointed out that powerful bureaucracies don't attract angels—they attract people who enjoy running the lives of others. They tend to take care of their friends before taking care of others. And they find increasing that power attractive. Crony capitalism shouldn't be confused with the real thing.

The fourth timely idea of Hayek's is that order can emerge not just from the top down but from the bottom up. The American people are suffering from top-down fatigue. President Obama has expanded federal control of health care. He'd like to do the same with the energy market. Through Fannie and Freddie, the government is running the mortgage market. It now also owns shares in flagship American companies. The president flouts the rule of law by extracting promises from BP rather than letting the courts do their job. By increasing the size of government, he has left fewer resources for the rest of us to direct through our own decisions.

Hayek understood that the opposite of top-down collectivism was not selfishness and egotism. A free modern society is all about cooperation. We join with others to produce the goods and services we enjoy, all without top-down direction. The same is true in every sphere of activity that makes life meaningful—when we sing and when we dance, when we play and when we pray. Leaving us free to join with others as we see fit—in our work and in our play—is the road to true and lasting prosperity. Hayek gave us that map.

Despite the caricatures of his critics, Hayek never said that totalitarianism was the inevitable result of expanding government's role in the economy. He simply warned us of the possibility and the costs of heading in that direction. We should heed his warning. I don't know if we're on the road to serfdom, but wherever we're headed, Hayek would certainly counsel us to turn around.

More On "Are People Inherently Nihilistic?"

I stumbled upon this interesting interview with Yale Professor James C. Scott who teaches political science and anthropology.

Here is an interesting piece... (bold highlights mine)

``The state, or centralized political organization, has been with us for the last 4000 years. Even when this state was not all-pervasive or all-powerful everywhere, it was always there. So even if certain spaces or people were ‘outside’ the state—in the so-called state of nature—they always coexisted with the state and interacted with it dialectically. So saying that there are people living inside and with the state, and others outside and without it, and that supposedly they will behave completely different, is a difficult hypothetical.

``I have, for instance, the idea that life was not ‘brutish, nasty and short’ outside of the state as Hobbes argued, partly because the population levels were so low that the way of dealing with conflict was simply moving out of the way. A lot of the things people struggled and died over, were essentially commodities. So if by the state of nature we mean people living outside the state in a world in which states already exist so they are at the periphery of states, then this is a completely different thing.

``We know, for instance, that pastoralism is in fact always organized in order to trade with agrarian states; it is not some previous form of subsistence that is superseded by agriculture. Another example: in the 9th century the people in Borneo were considered to be very backward and they were a typical example of a hunting and gathering society. What were they gathering? Certain kinds of feathers and resins and the gall bladders of monkeys, all stuff hugely valuable in China at the time! So they were gathering these things for international trade with an already existing state; their hunting and gathering is a hunting and gathering performed in the shadow of states. So which ‘state of nature’ are we referring to? When Rousseau speaks of the savages he has met, he sees people that strategically respond to representatives of an organized state, pursuing their interests and behaving politically. So the concept, perhaps, hides more than it reveals."

read the rest of the interview here

my comment:

Professor Scott, who ironically is a "'Marxist' inclined towards anarchism by convictions", suggests that people operate in the same manner in and out of the state, aside from the groups at the periphery ("living outside the state") interacting with the state.

In other words, people instinctively operate on the basis of trade under a spontaneous political order, similar to what we pointed out in our earlier post, Are People Inherently Nihilistic.

Again, arguments that assert that people are endemically atavistic and self destructive beings that require government is simply not proven by facts.