Looks at the truths and fallacies in the work of F.A. Hayek
Larner, Jesse
RIGHT-WINGERS love Friedrich Hayek. The Austrian-British economist is revered by true believers at the American Enterprise Institute, the Cato Institute, the National Review, and the...
...In fact, various episodes of Labour government in Britain— and the British Labour party of the 1920s and 1940s was no watered-down "third way" Blairite party—did not destroy British democracy...
...he does not exist for the State, nor for that abstraction called 'society,' or the 'nation.' . . . Man, the individual, has always been and, necessarily is the sole source and motive power of evolution and progress," wrote Goldman in a 1934 pamphlet, "The Individual, Society and the State...
...One of the unexpected things in Road is that he writes with passion against class privilege...
...Experience should have taught us by now that human societies are jerry-built structures, rickety towers of ad hoc solutions to unforeseen problems...
...He lays out the complex ramifications of a relatively simple set of ideas, always with their impact on individual agency at the center of his analysis...
...It has a broad and complicated pedigree...
...BECAUSE THEY understand so little about the thoughtful left (and former association doesn't translate into knowledge...
...Their development is evolutionary, and as in biological evolution, they do not have natural endstates...
...But whose goal...
...TODAY, THESE observations are merely obvious...
...What about the original ethos of the kibbutz, explicitly socialist, collectivist, voluntarist, democratic (in both the political and the personal sense), and engaged with a free market...
...Horowitz and his cohort, like the earlier generation of converts led by Irving Kristol, still think of the modern left as a crypto-Castroite conspiracy), it is hard for many on the right to acknowledge that as a critique of socialism, Hayek's ideas are limited rather than devastating...
...He is a romantic, a serious deficit in a social theorist...
...In titling his individualist manifesto The Road To Serfdom, Hayek clearly was equating collectivism with a tendency to slavery...
...I did begin this essay by remarking that Hayek is a romantic...
...He points out that any economic master plan would necessarily have to delegate so many important issues of policy to nonelected technocrats as to be inherently antidemocratic, and that a society in which the value of goods and labor were defined according to their utility to the plan would necessarily allow no room for individual choice and subjective valuation...
...Hayek was a surprise, in several ways...
...In many ways, the warnings in Road prefigure those in 1984 and have the same intimate feel for the totalitarian state...
...It is curious that Hayek, although he argues for spontaneity and innovation in economic relations and against the arbitrary direction of social or economic life, seems very uncomfortable with this democratic ramshackleness, with the truth of that old adage about legislation and sausages...
...When Hayek wrote Road and this is a measure of how much the world has changed in a short time—he felt he had to defend the idea of a relationship between political liberty and the economic system in which it exists (or doesn't exist...
...The only kind of socialism he considers in Road is state-managed, perfect-society utopianism, in which the direction of the economy and all of its inputs and outputs are planned, with the accompanying political and moral degradation that Hayek demonstrates quite convincingly...
...The practice would devastate civil society, and with it democracy...
...And, to a great extent, it avoids the subtle, ambient humiliations of other models of the market...
...This is a socialism that is not incompatible with democracy, markets, or liberty...
...Economic planning assumes a social goal at which the plan aims...
...Indeed, now that polls show that a plurality of Americans support such a plan above any other proposal, it may well be in the domain of public consensus that Hayek acknowledges to be a legitimate focus of policy...
...Influential, whether I like it or not...
...Hayek is susceptible to this mistake precisely because he is distrustful of all human attempts to define authority and so prefers a mystical, holistic origin for it...
...Admittedly, Kropotkin's ideas had little impact on the world of 1944, Stalin's a great deal...
...THE EDITORS 90 n DISSENT / Winter 2008...
...A complex economy is something no person or institution can understand...
...If there's a delay, it's because a few editors are reading your article...
...These endorsements may be less solid than they appear...
...Hayek's solution is to deny the legitimacy of any movement to impose restraint on competition...
...Positive fulfillment beyond the most basic needs is a matter of individual striving...
...The concept of a legislature that can express an abstraction such as the "will of the people" in its everyday actions is the perfectionist fallacy writ large...
...We will not consider manuscripts submitted simultaneously to several publications...
...The articulation of the nomos by judges is merely "[the correction] of disturbances of an order that has not been made by anyone and does not rest on the individuals having been told what they must do . . . the judge is in this sense an institution of a spontaneous order...
...He proposes the strict separation of the power to make rules from the power to dispose of resources, since otherwise conditions are created for bargaining between competing factions in the interest only of maintaining a power share, thus diluting some reified "will of the people...
...Perhaps the best that we can hope for is some reasonable restraints on outright collective gangsterism of the left or the right, monitored, assessed, and readjusted as necessary...
...With more than sixty years between us and the first edition, we are able to put his ideas to some empirical tests...
...Many of his arguments rest on a reductionist idea of socialism, and his conception of the sources of law can only be called mystical...
...Hayek's political philosophy recognizes only negative rights...
...In a rebuttal of the government spending part of Hayek's thesis, economic historian Rick Tilman points out that civil liberties in the United States expanded dramatically from the New Deal through the Great Society...
...5) We're usually quick in giving editorial decisions...
...Yet it is worth pointing out that Hayek understood at least one very big thing: that the vision of a perfectible society leads inevitably to the gulag...
...to provide security...
...It is the Borg Hive, the submersion of individual will and agency to the greater good...
...to tolerate no privileged access to the law...
...George Orwell wrote, "In the negative part of Professor Hayek's thesis there is a great deal of truth . . . collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamt of...
...And please remember that we can't consider articles unless they're accompanied by a cover letter and stamped, self-addressed envelope...
...Yes, it is true that unions and chambers of commerce and gun enthusiasts and environmentalists and industrial sectors and doctors and lawyers and Indian casinos will band together and attempt to capture the machinery of government to further their own particular interests, often—usually—at the expense of rivals who are locked out of participation (and of the social and economic choices of individual citizens...
...JESSE LARNER is the author of Mount Rushmore: An Icon Reconsidered (Nation Books, 2002) and Forgive Us Our Spins: Michael Moore and the Future of the Left (Wiley and Sons, 2006...
...He rejects the very concept of social justice, for much the same reasons that he rejects the arbitrary valuation of labor: in Hayek's view there is no way to put an objective value on a grievance or to weigh it against other claims...
...and not only in agreement with it, but in deeply moved agreement...
...But it is possible to imagine market forces at work under a social insurance plan, and the market distortions could not be greater than those produced by the health maintenance organizations we have now...
...For serfdom in Russia came about through the loss of collective solidarity, as free peasant communes, starting in the mid-fifteenth century, first lost their community right to negotiate terms with estate holders throughout the year, except on St...
...Democracy is a ramshackle structure...
...If you are submitting to Dissent electronically, our e-mail address is submissions@dissentmagazine.org...
...But this does not mean that public disbursements in the social interest necessarily start us down a slippery slope to the totalitarian state, and Hayek, in suggestively conflating government spending with government planning, pulls a bit of a sleight of hand in Road...
...Because the benefits of socialized medicine have been so apparent in Western Europe and in Canada, without any erosion of political freedoms, to deny them would be to put a free-market ideology above empirical evidence...
...The omission of these other viewpoints is important nowadays, because Hayek's ideological descendants often assume, either sincerely or disingenuously, that in a world very different from that of 1944, socialism by definition still means state control of the economy in the interest of perfecting social relations...
...Hayek disapproved of prebendal institutions that increase the wealth and power of an elite—whether that elite be composed of union members, holders of exclusive concessions, or hereditary lords—at the expense of other members of the class in whose interests the elite is supposedly working, and of society at large...
...WHEN HAYEK strays from discussing the evils of the planned economy he becomes markedly less convincing, and the political strength of for-profit medicine rather ironically suggests something that Hayek misses about spontaneous collectivist tendencies...
...He admits that there are a few rare economic circumstances in which market forces cannot deliver the optimum result, and that when these occur, the state may legitimately intervene...
...In Law, Legislation, and Liberty, he sees a great evil in allowing legislative bodies to address specific measures rather than abstract, general rules— and sees in majority rule the creation of a government of unlimited powers, which can override any general rule for a specific purpose...
...And the modern right has enlisted Hayek as a political weapon: Why can't those loony lefties acknowledge the simple and obvious truths that he understood...
...Or the Argentine workers who are buying out—or taking over—their factories...
...2) Please don't write to ask whether we're interested in such and such an article—it makes for useless correspondence...
...Politically, Hayek is not the cynic I had braced for...
...The ineptitude of Hayek's title suggests the shallowness with which he has considered patterns of collective life in human societies...
...Nor did the New Deal in the United States...
...But it can generate a sustainable order, with a rational allocation of resources, as individuals respond to their own circumstances and make choices as consumers and entrepreneurs, signaling the subjective value that they place on goods and capital stock through the price mechanism: One of Hayek's most original contributions to economic theory is the insight that economic systems are based primarily on information rather than resources...
...Even a brief survey will show that there are all kinds of imaginative ways in which libertarian collectivism can coexist with capitalism and markets...
...It is surprising that he apparently did no research on the historical roots of serfdom...
...Ronald Reagan and Margaret Thatcher cited his ideas as central to the social revolutions they hoped to spark...
...To what exDISSENT / Winter 2008 n 87 RECONSIDERATIONS tent can Bakunin's unbalanced idealism or Emma Goldman's exasperating individualist anti-authoritarianism still speak to us today...
...Yet he finds the foundation of law in emergent common rules of conduct that predate human society and make it possible (Hayek calls this nomos, after the Greek, as opposed to thesis, the body of positive law...
...his most famous book, The Road to Serfdom, has sold more than 350,000 copies in the United States alone...
...The Austrian-British economist is revered by true believers at the American Enterprise Institute, the Cato Institute, the National Review, and the Weekly Standard...
...then saw this exception suspended, and finally terminated by decree...
...They are what they are continuously becoming...
...Consider those "fair trade" coffee collectives, from Guatemala to Ghana, that negotiate a common interest within a market environment...
...Please include a postal address and phone number...
...This kind of socialism does exist, and can certainly fit comfortably within the structures of market capitalism...
...Isn't the barbaric (I use the word with no relativistic embarrassment) practice of female genital mutilation derived from this sort of nomos...
...There may be consensus in government, or on a delegated planning board, but this only reflects the consensus of immediately interested parties...
...Check all your figures, dates, names, etc.—they're the author's responsibility...
...The rest of us, I hope, have learned to be wary of prophets...
...The core of Road is an exploration of why a planned, state-managed economy must tend toward totalitarianism...
...To them, Hayek is the author of universal truths, and he has taken on the status of a prophet...
...This focus on stateled socialism should not be particularly surprising in 1944, and perhaps Hayek (like Arthur Koestler, in a different but not unrelated way) deserves some credit for warning European idealists about the true meaning of the major romantic movement of the postwar period...
...George's Day...
...In a society of competing interests—a condition that would describe every human society— any goal, any plan, inevitably favors some interests against others...
...Hayek's principle might be sound, if applied universally, which it could never be...
...In philosophy, if not in economics, she and Hayek had more in common than either might wish to acknowledge: "The individual is the true reality in life...
...But how relevant is the RCP to the ongoing American political debate...
...As we're not an academic journal, we prefer that they, wherever possible, be dropped altogether or worked into the text...
...Hayek doesn't seem to grasp that human beings can exist both as individuals and as members of a society, without necessarily subordinating them to the needs of an imposed social plan (although he acknowledges that the state can legitimately serve social needs, he contradictorily views collective benefits as incompatible with individual freedom...
...He recognized that institutions that interfere with the price mechanism encourage relations of patronage...
...Please use inclusive language so that we don't have to make adjustments during editing...
...But credit Hayek with this: In Road, he thoroughly, eloquently, and convincingly demolishes an idea that virtually no one holds nowadays...
...If this seems odd, recall that Keynes wrote of Road, that "it is a grand book...
...4) Notes and footnotes should also be typed double-spaced, on a separate page...
...The only question is whether the parochial interest associations in the world of for-profit medicine will be able to defeat it...
...One can come away from Road still convinced, for example, that there is no reason for democratic, market-respecting socialists to reject the benefits of a national health care system, which could be handled as social insurance without involving government in services...
...To plan an outcome and to direct economic inputs and outputs toward this outcome is to stifle the emergence of a spontaneous, democratic response to the needs of the individuals who make up the community— a response that will necessarily have winners and losers, but that will not privilege the vision or depend on the limited information of a governing elite, and that will encourage further experimentation...
...Antigovernment ideologues admire him as one of those few who kept Adam Smith's fires burning during the dark reign of John Maynard Keynes in the West...
...But Hayek is not merely an eccentric mystic...
...The responsibility of a government that fosters individual freedom is to set up transparent and impartial rules so that the legal reaction to personal choices can be predicted for all, regardless of social station...
...By way of partial illustration of what happens when special interests are imposed on spontaneous order, he observes that the socialists and the traditional conservatives of his day had to a great extent collaborated with one another in carving out spheres of influence, mutually reinforcing monopolies in labor and in markets, and that both of these new models of class privilege had damaging social results...
...To Our Contributors A few suggestions: (1) Be sure to keep a copy of your manuscript...
...Yes, when they feel like it, rightwingers can dig up someone like "Maoist economist" Raymond Latta of the Revolutionary Communist Party, who will argue that a completely planned economy is more efficient and more just than the market...
...It is a comment on the narrowness of Hayek's terms...
...There's the example of fishing cooperatives, in which investors and crew are paid in shares of the catch—a form of economic organization that is found wherever fishing is pursued as a way of life, and which has ancient origins...
...And Hayek is very convincing, and most interesting, when discussing the romantic roots of German antiliberalism and of the illiberal statism of the left and right...
...Democracy turned out to be a lot stronger than Hayek expected...
...I try to keep abreast of right-wing thought, so I'd been aware of Hayek for a long time, and aware of his status in certain circles...
...Perhaps it is because of this outlook that Hayek does not, in Road, address collectivism as a spontaneous, nongovernmental, egalitarian phenomenon...
...This is not what those who honor Hayek as the valiant individualist who destroyed the intellectual foundations of the left would like to believe...
...Of course, a classical liberal would argue that single-payer health care funding would amount to controlling inputs and outputs by other means...
...To Hayek, this is what socialism, communism, and collectivism—he makes little distinction between them—mean: the dangerous illusion of perfectibility...
...Even, to come down a notch, think of corporate stock ownership plans or the limited employee ownership of companies like Avis or United Airlines...
...No doubt this statement would shock his many disciples, for Hayek produced mountains of paper on a great many aspects of social life, writing not only on economics and law but in the fields of cognition, philosophy, social psychology, and biography...
...The absence of any consideration of more libertarian, less top-down approaches (the socialisms of Luxembourg, Kropotkin, Proudhon, many others...
...In Road, first published in 1944, he makes a powerful and farranging critique of state control of economic life...
...Or take a chance and send us your article...
...Perhaps he never quite escaped his Austrian roots...
...Hayek is by no means as rational and irrefutable as the right would have it...
...Recently I decided I should study his work, much as, in my twenties, I decided I really ought to read the Bible...
...Former leftist turned left-basher David Horowitz, for example, loves to do this kind of thing, in the same way that Dinesh D'Souza, with equal intellectual seriousness, recently blamed the attacks of September 11, 2001, on cultural liberalism...
...or of the possibility of nontotalitarian models of social democracy, like those that emerged in Europe after the war) should alert the reader to Hayek's limitations...
...For thoughtful democratic socialists, this line of attack is surely an amusing or infuriating distraction...
...In any case, no one argues that a government monopoly in a specific sector vital to the national interest—the military, say—must lead to totalitarianism...
...Comprehensive models of how society should work reject the wisdom of solutions that work and deny the legitimacy (indeed, from Lenin to Mussolini to Mao to Ho to Castro to Qutb, deny the very right to exist) of individuals who demonstrate anti-orthodox wisdom...
...It is not subject to the perfectionist fallacy...
...If this is one's concept DISSENT / Winter 2008 n 8r7 RECONSIDERATIONS of socialism, it could hardly survive a fairminded encounter with Hayek...
...In The Constitution of Liberty, Hayek directs a great many words against laws designed with a specific purpose or remedy in mind— what modern conservatives call "outcomebased" legislation...
...What, then, are constitutions for...
...Plainly, transparently—and in stark contrast to many modern conservative intellectuals—he is a man concerned with human freedom...
...Keynes followed up his seven famous lines of praise with eighty-four littleknown lines in favor of expanded economic planning, and Orwell was, after all, a libertarian democratic socialist...
...At least as far as he takes the argument in this book, there isn't much that thoughtful modern liberals or even democratic socialists who understand the power of markets would necessarily object to—although they might feel that there is more to the story than Hayek acknowledges...
...What happens when free people, living under a limited government that respects their right to make choices, band together to form an egalitarian corporation in which all are entitled to the full value of their labor—including the right to make decisions about how to reinvest or otherwise dispose of the fruits of that labor— and who then stand or fall together, on their ability to provide products or services whose value is assessed by the market...
...Waddington, Sir Richard Acland, H.J...
...In most of this work he shows a tendency to an abstract idealism that it is hard to imagine as compatible with actual human social life, and with the exception of his powerful critique of the planned economy, his ideas have not been resoundingly vindicated by historical experience...
...In a sense law is related to custom in this manner, but there is no guarantee that honoring this concept of the nomos leads to an enlightened condition of liberty...
...Isn't it a bit odd to assume that such a thing can exist in measurable form—or that it would take concrete expression in some way other than the vulgar partisan horse trading that Hayek decries...
...He's nowhere near as extreme as his ideological descendants...
...Look at our last few issues to see if your idea fits in...
...DISSENT / Winter 2008 n 89 RECONSIDERATIONS Hayek's concept of the sources of legal legitimacy is even more problematic...
...The RCP quite explicitly despises liberal democracy...
...Laski—who, when Hayek wrote, were calling complacently for what can only be read as an enlightened totalitarianism, even in the shadow of Hitler...
...3) Type your ms double-spaced, with wide margins...
...IT IS A BIT chilling to read the words of the British socialists quoted by Hayek—E.H...
...Suffice it to say that he's much more convincing on planning than on spending...
...Defenders of these models are 86 n DISSENT / Winter 2008 RECONSIDERATIONS required by their own rigidity to invent the category of the counterrevolutionary...
...The paradox is that forming spontaneous associations for the collective good of insiders seems to be a universal human activity...
...Indeed, he is often eccentric...
...He wisely rejects "natural law," which amounts in practice to the idea that the universe inherently supports one's own view of justice...
...In a more cautious age, perhaps some of the ideas of the zealots of libertarian collectivism can be salvaged through modern synthesists like David Ellerman, who understands the theory of surplus value as well as the power of markets...
...Carr, C.H...
...And in the real world, most of Hayek's admirers have been content to thunder against unions while indulging industrial lobbies...
...Although he frequently acknowledges that culture and institutions matter at least as much as economic policies, he never seems to notice that the countries he studied in which totalitarianism flourished were all countries in which there had never been a culture of liberal democracy...
...When individuals are free to make choices, this is invariably what they choose to do...
...He recognizes such a thing as the social interest and will even endorse some limited redistributionalism—he goes so far as to suggest that the state ensure a minimum standard of living, an idea that surely embarrasses the good folks at Cato...
...His argument takes a familiar classical liberal stance...
...The right-wingers have never quite known what to do with the kibbutzim...
...Tilman notes that Hayek does not say what particular level of government spending must lead to totalitarianism, and because Hayek does not reject government involvement in the 88 n DISSENT / Winter 2008 RECONSIDERATIONS economy in principle, it's hard to pin him down here...
...Does it represent any school of democratic socialism...
...But other visions of socialism, and other socialistic traditions, were certainly available to Hayek when he wrote...
...Morally and philosophically I find myself in agreement with virtually the whole of it...
...To present this model is not to express any opinion on the practicality of libertarian collectivism...
...And because he locates all responsibility and agency only at the level of the individual, he sees no way in which any claim can be generalized to society...
...and to protect contracts and private property, so long as doing so does not conflict with the very small set of social assumptions on which there truly is broad consensus (arguably, Hayek's suggestion that government should be responsible for a minimum standard of living would have fit into this consensus when Road was published...
...Who is to say whether the favored interests are "better" for society as a whole...
...This is the unfortunate but inevitable tension between institutional rent-seeking and civil society...
...To Hayek, as to such diverse right-wingers as Ayn Rand, Margaret Thatcher, William F. Buckley, Thomas Sowell, or Phil Gramm, collectivism is defined as something imposed and policed by the state...
...With no bargaining power, and with the state on the side of its aristocratic vassals in underpopulated rural Russia, the peasants became the property of the estate and later of the manorial lord...
...So to Hayek, the common law is a spontaneous phenomenon, without obvious human direction...
Vol. 55 • January 2008 • No. 1
