Friedrich August von Hayek (1899-1992)
- Hayek was an Austrian (later British citizen) known for his arguments about economic liberalization and free market capitalism.
- He is widely regarded as the most influential economist of the 20th century.
- Hayek fought for Austria in World War I, during which he wasb decorated for bravery.
- He left Austria in 1938, after Nazi Germany took control of the country.
- He won the Nobel Prize in 1974 and the U.S. Presidential Medal of Freedom in 1991.
- Hayek was an enormous influence on modern conservative thinking in the United States and Great Britain, though he was a critic of modern conservatism. In an essay entitled Why I Am Not a Conservative, he critiqued contemporary conservatism for its tendency to “stand still.” Hayek identified himself as a classical liberal.
- Hayek’s central work was The Road to Serfdom (1944). He also wrote Individualism and Economic Order (1948) among other works.
The Road to Serfdom
“The principle that the end justifies the means is in individualist ethics regarded as the denial of all morals. In collectivist ethics it becomes necessarily the supreme rule.”
- Hayek argues that Western democracies, including the United Kingdom and the United States, have “progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past.” Society has mistakenly tried to ensure continuing prosperity by centralized planning, which inevitably leads to totalitarianism. “We have in effect undertaken to dispense with the forces which produced unforeseen results and to replace the impersonal and anonymous mechanism of the market by collective and ‘conscious’ direction of all social forces to deliberately chosen goals.” Socialism, while presented as a means of assuring equality, does so through “restraint and servitude”, while “democracy seeks equality in liberty”
- Hayek’s central argument is that that all forms of collectivism will inevitably lead to tyranny.
- collectivism: An economic system in which the means of production and distribution are owned and controlled by the people collectively
- Hayek used the examples of Nazi Germany and the Soviet Union as proof for his thesis.
- Even the very poor have more personal freedom in an open society than a centrally planned one. “[W]hile the last resort of a competitive economy is the bailiff, the ultimate sanction of a planned economy is the hangman.” Socialism is a hypocritical system, because its professed humanitarian goals can only be put into practice by brutal methods “of which most socialists disapprove”
- Hayek argued that in a collectivist government, the rulers would lack the ability to understand and assess all of the information necessary for the distribution of resources. Only a free market, with rational competing actors, could do so.
- Faced with the failure of their economic system, Hayek argues, the collectivist government would rely on coercion, eventually culminating in the emergence of a strong man or dictator, empowered by the people because of his perceived ability to “get things done.”
- Eventually, the people would become little better than serfs, as they were in Nazi Germany and the Soviet Union.
- Hayek disapproved strongly of the notion of ‘social justice‘. He compared the market to a game in which ‘there is no point in calling the outcome just or unjust’and argued that ‘social justice is an empty phrase with no determinable content’; likewise ‘the results of the individual’s efforts are necessarily unpredictable, and the question as to whether the resulting distribution of incomes is just has no meaning.
- Trying to level the playing field and helping those who failed creates a moral hazard–a situation in which a party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party insulated from risk behaves differently from how it would if it were fully exposed to the risk.
- Hayek does concede that the government does have an important role to play in the economy:regulation of monetary policy, workplace regulations, and free flow of information. For this reason, some critics argue that Hayek does not go far enough to defend laissez-faire capitalism.
- Hayek also wrote that the state has a role to play in the economy, and specifically, in creating a “safety net.” He wrote: “There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health.”
- Laissez-faire: An economic principle advocated by economic liberals of minimal government intervention into the forces of the free market
- A claim for equality of material position can be met only by a government with totalitarian powers.
- Freedom granted only when it is known beforehand that its effects will be beneficial is not freedom.
- If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion.