Understanding Hayek

In an earlier post, I deployed the following statement by Michael Oakeshott:

How deeply the rationalist disposition of mind has invaded our political thought and practice is illustrated by the extent to which traditions of behaviour 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 significance of Hayek’s Road to Serfdom — not the cogency of his doctrine, but the fact that 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. And only in a society already deeply infected with Rationalism will the conversion of the traditional resources of resistance to the tyranny of Rationalism into a self-conscious ideology be considered a strengthening of those resources. (From “Rationalism in Politics,” in Rationalism in Politics and Other Essays, new and expanded edition, pp. 26-7.)

I hereby retract my implied endorsement of Oakeshott’s view of Hayek as a rationalist. Hayek’s “doctrine” consisted of a reasoned, well-founded warning against central planning. That is no more a doctrine than a highway sign that warns of sharp curves ahead.

Hayek was very much an anti-rationalist. (The use of reason, in itself, is not rationalism, which values only reason and the ordering of socio-economic relationships by the use of reason.) For example, Peter G. Klein writes that

…Hayek’s later emphasis on group selection and spontaneous order is not shared by Mises…. A clue to this difference is in Hayek’s … statement that “Mises himself was still much more a child of the rationalist tradition of the Enlightenment and of continental, rather than of English, liberalism . . . than I am myself.” This is a reference to the “two types of liberalism” to which Hayek frequently refers: the continental rationalist or utilitarian tradition, which emphasizes reason and man’s ability to shape his surroundings, and the English common-law tradition, which stresses the limits to reason and the “spontaneous” forces of evolution. (“Biography of F.A. Hayek,” at Ludwig von Mises Institute)

As for The Road to Serfdom, Peter Boettke explains that it

was conceived of as part of Hayek’s Abuse of Reason project. It was a political tract for its time, but it was also much more than that. A careful reader can see in the book both where Hayek attempts to move beyond the political issues of his day to address more timeless issues of social cooperation….

Hayek’s basic thesis in The Road to Serfdom is that the lure of socialist ideology has the unintended and undesirable consequence of economic depravation and political tyranny when countries follow its policy agenda. The reason for this is that the task of socialist planning requires economic planners to assume a level of responsibility for economic life in a country which is both cumbersome to the point of impossible, and powerful beyond any reasonable limit that could be safely trusted to any one individual or group of individuals….

Hayek’s book was not a deterministic one, but rather a warning to those countries of the West who were enamored with socialist ideology, that the implementation of socialism would tend to undermine the beliefs that were at the core of Western civilization….

…[S]ixty years on, we are still celebrating Hayek’s achievement with The Road to Serfdom.

Most of this celebration of Hayek, admittedly, is ideological in nature and confirms Hayek’s status as an iconic figure for the world-wide conservative and libertarian movement. I do not deny the importance of this in explaining the popularity of Hayek’s work, but I also think those who rely on this explanation exclusively relegate Hayek’s work to the status of a “coffee-table book” — a work to be seen as in one’s possession among the intelligentsia but not read. Rather, I want to stress the analytical contribution that Hayek makes in his work….

Hayek sought to demonstrate in a manner persuasive to the public and the intellectual elite that the consequences of the policy choice of socialism would lead them down a path that they themselves would never want to go if they made their choices in full knowledge of the consequences of their choice. It is a tragic tale he is telling in The Road to Serfdom, not one of determinism or even opportunism. “Is there a greater tragedy imaginable,” Hayek asks, “than that, in our endeavor consciously to shape our future in accordance with our highest ideals, we should in fact unwittingly produce the very opposite of what we have been striving for?” (“On reading Hayek: choice, consequences, and The Road to Serfdom“)

Hayek was out to slay the rationalistic dragon of market socialism:

economic systems where the means of production are publicly owned, managed and operated for a profit in a market economy…. Theoretically, the fundamental difference between a traditional socialist economy and a market socialist economy is the existence of a market for the means of production and capital goods under market socialism.

On that point, Boettke writes:

[Hayek] never impugns the character of those he is arguing with, instead he points out how their intellectual error leads to results that would make these individuals shudder with fear. To reiterate …, the market socialists thought their model of socialist planning could be reconciled with consumer sovereignty, but their position was untenable due to the organizational problems of socialism in terms of aligning incentives, utilizing information, and discovering knowledge. Neither Lerner nor Durbin [two leading market socialists] ever admitted that Hayek had refuted their claim to have squared the circle. Of course, they believe in individualism and not authoritarian government. But their theory if put into practice would have resulted in a march toward serfdom as special interest forces would be unleashed to agitate for greater and greater government control over resources and the allocation of labor. Either consumer sovereignty would be suppressed, or planning would have to be abandoned — but the two could not be reconciled. (Id.)

Boettke concludes:

Hayek wrote The Road to Serfdom at a crucial stage in the 20^th century. The Nazi threat to western civilization had just been defeated, but the Communist system had grown in legitimacy in the process. Communism had avoided the Great Depression, and whatever problems might exist, Stalin did mobilize the resources in the Soviet Union to transform a peasant society into an industrial power in a generation and effectively enough to help the allies defeat Hitler. Hayek’s argument was that our fascination with the Communist ideal will prove to be our undoing unless we recognize the warning signs. He stood there and could do no other, but to pen this warning.

The Road to Serfdom made Hayek a famous man, but it also partially discredited him among his fellow academics and the intellectual elites in the west. But he was not deterred and his career post-1944 focused increasingly on the issues of social philosophy and political economy….

…Hayek’s emphasis [was] on how alternative institutional arrangements, through their properties to align incentives and utilize dispersed information, impact the choices people make…. (Id.)

(For more by Boettke, see “Hayek’s the Road to Serfdom Revisited: Government Failure in the Argument Against Socialism,” and “Hayek and Market Socialism: Science, Ideology, and Public Policy.”)

Hayek, in short, was prescriptive only to the extent that his understanding of human nature and social relationships enabled him to issue well-founded warnings about the unintended and undesirable consequences of rationalistic schemes — like socialism.

As for Hayek’s Abuse of Reason project, here is Bruce Caldwell’s outline:

In late August 1939 Hayek sent a letter to his friend Fritz Machlup saying that … he would begin work on a new project, tracing the decline of reason from Saint-Simon to Hitler. The plan of the work was contained in an outline prepared in the summer of 1940, titled “The Abuse and Decline of Reason: The Reflections of an Economist on the Self- Destructive Tendencies of Our Scientific Civilization.” The introduction was to be titled “The Humility of Individualism.” Part 1, called “The Collectivist Hybris,” would trace the topic through French, German, English, and American phases. Part 2 was to be called “The Totalitarian Nemesis.” In a slightly later outline, the first chapter of part 1 was to be “Scientism.”

The Abuse of Reason project would tell a very different story from that of the steady side-by-side progress of socialism and democracy that Webb and others espoused. In Hayek’s alternative tale, the steady growth of scientism and of the planning mentality engendered the (in Hayek’s view, false) hope that scientific advances would allow the creation of a new planned socialist society. Scientism and socialism grew up together. Hayek would trace out the pedigree and history of the ideas that he felt had led the western world to totalitarianism. (“Hayek on Mill”)

In sum, Hayek’s work is anti-doctrinal. Its implications for policy are negative ones. As Francis Fukuyama writes,

Hayek’s skepticism about the effects of “big government” are rooted in an epistemological observation summarized in a 1945 article called “The Uses of Knowledge in Society.” There he argued that most of the knowledge in a modern economy was local in nature, and hence unavailable to central planners. The brilliance of a market economy was that it allocated resources through the decentralized decisions of a myriad of buyers and sellers who interacted on the basis of their own particular knowledge. The market was a form of “spontaneous order,” which was far superior to planned societies based on the hubris of Cartesian rationalism. (“Friedrich A. Hayek, Big Government Skeptic,” The New York Times, May 6, 2011)

So far, so good. But Fukuyama later discusses “two major critiques of Hayek’s arguments”:

The first comes from the left. Hayek provides a very minimalist definition of freedom as freedom from coercion, and particularly coercion by a central government. But as the economist Amartya Sen has argued, the ability to actually take advantage of freedom depends on other things like resources, health and education that many people in a typical society do not possess. (Id.)

Sen is talking about “positive liberty,” which I have addressed here (among other places):

In other words, it is not enough to have “peaceful, willing coexistence and its concomitant: beneficially cooperative behavior.” That kind of liberty — liberty in the fullest sense — encompasses the acts of love, affection, friendship, neighborliness, and voluntary obligation that help individuals acquire the “power and resources” with which they may strive to attain the fruits of liberty, insofar as they are willing and able to do so.

That should be enough to satisfy the proponents of positive liberty … but I suspect otherwise. I would be more sanguine were they proponents of a proper definition of liberty, but they are not. Thus, armed with an inchoate definition of liberty, they are prepared to do battle for positive liberty and, I fear, the positive rights that are easily claimed as necessary to it; to wit:

A lack of “power” entitles certain groups to be represented, as groups, in the councils of government (a right that is not extended to other groups).

A lack of “resources” becomes the welfare entitlements of various kinds — for personal characteristics ranging from low intelligence to old age — which threaten to suck ever more resources out the productive, growth-producing sectors of the economy.

The exercise of “free will” becomes the attainment of certain “willed” outcomes, regardless of one’s ability or effort, which then justifies such things as an affirmative-action job, admission to a university, a tax-subsidized house, etc.

“Classism,” “sexism,” “racism,” and now “beauty-ism” become excuses for discriminating against vast swaths of the populace who practice none of those things.

With respect to the final point, a certain degree of unpleasantness inevitably accompanies liberty. Legal attempts to stifle that unpleasantness simply spread injustice by fomenting resentment and covert resistance, while creating new, innocent victims who are deemed guilty until they can prove their innocence.

In sum, the line between positive liberty and positive rights is so fine that the advocacy of positive liberty, however well meant, easily becomes the basis for preserving and extending the burden of positive rights that Americans now carry. (“Positive Liberty vs. Liberty”)

Positive liberty and positive rights are aspects of social justice, a concept that Hayek rightly rejected. If some are granted positive rights in the name of positive liberty or social justice, others must perforce be denied liberty — at the whim of the state. Those who presume to decide who is deserving and who is not are arrogant accountants of the soul.

Fukuyama, ends by echoing (unwittingly, I suspect) Oakeshott’s critique:

In the end, there is a deep contradiction in Hayek’s thought. His great insight is that individual human beings muddle along, making progress by planning, experimenting, trying, failing and trying again. They never have as much clarity about the future as they think they do. But Hayek somehow knows with great certainty that when governments, as opposed to individuals, engage in a similar process of innovation and discovery, they will fail. He insists that the dividing line between state and society must be drawn according to a strict abstract principle rather than through empirical adaptation. In so doing, he proves himself to be far more of a hubristic Cartesian than a true Hayekian. (Fukuyama, op. cit.)

William Easterly responds:

To say Hayek’s skepticism about government was based on “great certainty” is not just wrong, it is so much the opposite of Hayek, it’s like accusing Michele Bachmann of excessive belief in the Koran.

Hayek’s view of knowledge was that it was partial and dispersed among many. The market gave individuals the incentives to apply this knowledge, and coordinated the uses of this local knowledge in a way that rewards each of us who knows best about any particular narrow area…. Government usually lacks both the incentives and the coordination mechanism. In government we don’t know who knows best, so which knowledge wins the argument could often be wrong. (“Saving Private Hayek”)

A good summation is found in a blog post by Peter Boettke:

Hayek [in The Road to Serfdom] was not diagnosing the situation in Russia and Germany, but offering a warningto the countries of the West that they could in fact go down the same path as Russia and Germany if they didn’t resist the lure of socialist ideology. And critical to his argument was that democratic institutions were not a robust bulwark against the excesses that logically result from socialist planning. In short, even a civilized attempt at democratic socialism will have unintended and undesirable consequences.

Another way to think about this is that Hayek begins his work with full knowledge (and acceptance) of Mises’s critique of socialism, but he is examining a world where political leaders and intellectuals do not accept that critique and so they will pursue the socialist plans anyway. They think the problem with Soviet Russia or Nazi Germany is the non-democratic nature of the political systems, and not the economic planning being pursued. So planning advocates in the West, wanted to pursue economic planning within the context of a democratic political system. Hayek is just pursuing the logic of what results given the nature of economic planning….

Critical to the current discussion on Hayek, Keynes and Planning is not the liberal credentials of the two thinkers, nor their intentions, but the logical tracing out of the intended and unintended consequences of economic planning. As Keynes’s letter to Hayek about The Road to Serfdom reveals, he believed that he and Hayek were in essential agreement about the horrors of Soviet and Nazi planning, but in disagreement about the question of whether planning is the problem. Instead, Keynes argues we want more, not less, planning provided that the planning was being done by men of high character. In essence, Keynes didn’t get the point about the Mises-Hayek critique of socialism. (“What Was the Argument in The Road to Serfdom?“)

And so it goes. In the 67 years since the first publication of The Road to Serfdom, Americans have been herded (often willingly) down that road. Why? Because of economic illiteracy (a widespread belief in the “free lunch,” for example), the interest-group paradox (the belief that I can have my “free lunch” but I will not have to pay for the “free lunches” of others), and the kind of “soft despotism” (fascism’s friendly face) that was foreseen by Alexis de Tocqueville.

Hayek was not a rationalist. He was a profound realist and, unfortunately, a prescient one.

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