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Is Hayek Still Relevant?

Jesse Larner has an interesting and much talked-about article on F.A. Hayek in the left-liberal journal Dissent (for links to other commentary on Larner's piece, see here). Larner gives Hayek credit for his pathbreaking critique of socialist central planning. But he argues that Hayek's thought is largely irrelevant today.

To very briefly summarize Hayek's two most important ideas, he argued that socialism can't work as an effective system for producing and distributing goods because it has no way of aggregating the necessary information about people's wants and needs. By contrast, the price system of the market is a very effective method for collecting and using information about people's preferences and the relative value of different goods. Hayek's 1945 article "The Use of Knowledge in Society" is the best short statement of this argument. Hayek also argued that government control of the economy under socialism necessarily leads to the destruction of democracy and personal freedom. The central planners' control of the economy enables them to crush potential opposition and strangle civil society. This, of course, was the main argument of Hayek's most famous book, The Road to Serfdom (1944).

Larner concedes the validity of both of these Hayekian claims. But he suggests that they are largely irrelevant today because the modern left has mostly abandoned central planning and because Hayek failed to recognize that "collectivism" could be a "spontaneous, nongovernmental, egalitarian phenomenon," not just a totalitarian order imposed by the state. He also suggests that "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)."

Larner makes some defensible points. For example, he is right to imply that Hayek's arguments are more compelling as a critique of full-blown central planning than of more modest forms of government intervention. It is also true that full-blown economic central planning has a lot less support among left-wing intellectuals today than fifty or sixty years ago. Nonetheless, Hayek's ideas are far more relevant to our time than Larner thinks.

I. The Persistence of Central Planning in Left-Wing Thought.

Although the modern mainstream left no longer favors central planning of the entire economy, many left-wingers do favor government control of large parts of the economic system. Most European leftists and a good many American ones favor government control of the health care industry, which constitutes some 10-15% of the economy in advanced industrialized society. Some forms of government planning are favored not only by left-wingers but also by many moderates and conservatives. For example, government owns and operates some 90% of the schools in Western Europe and the United States. However much we take public education for granted, it still represents the socialization of a vast swathe of the economy.

In addition, many mainstream liberals such as Cass Sunstein and Supreme Court Justice Stephen Breyer (as well as some conservatives and moderates) favor giving broad regulatory authority to "expert" government bureaucrats. This is not quite the same thing as government ownership of large enterprises. But it has important ideological affinities with it, to the extent that both policies rely on central planning by expert government bureaucrats. Hayek's arguments in "The Use of Knowledge in Society" are certainly relevant as potential critiques of these various forms of planning - both those that involve government ownership of large enterprises in health care and education and those that rely on regulations administered by expert bureaucrats. If Hayek is right, all these planners and experts don't know as much as they think they do, and certainly can't aggregate knowledge as effectively as the free market can.

Finally, it's worth noting that even full-blown socialism isn't as completely dead as Larner assumes. For details, see my September 2007 post on "Why the Debate Over Socialism Isn't Over."

Fundamentally, most liberals and leftists still look to the state to plan large portions of the economy and other aspects of our lives. So too do many conservatives and moderates, as witness the rise of "big government conservatism" under George W. Bush. Today's advocates of government planning are more modest in their ambitions than the mid-twentieth century socialists whom Hayek criticized. But they are not modest enough to make his arguments irrelevant.

II. Hayek and "Voluntary" Collectivism.

Larner also criticizes Hayek for ignoring the possibility that "collectivism" could be voluntary rather than imposed by the state. He suggests that Hayek was wrong to ignore the thought of socialist anarchists such as Proudhon and Kropotkin, who favored communal enterprise without state control.

Much depends on what is meant here by "collectivism." To the extent that it simply means voluntary cooperation between individuals and groups in civil society, Hayek not only didn't ignore it, he was a great advocate of it. Throughout nearly all his major works, Hayek stressed the importance of voluntary social cooperation and repeatedly emphasized that individuals can't progress or even survive for long without civil society institutions and traditions that are the product of cooperation. Hayek's famous theory of "spontaneous order" was of course based on the idea that society progresses through the development of social norms and customs produced by voluntary cooperation in civil society. Hayek favored free markets and strict limits on government power in large part because he thought that they fostered such voluntary cooperation better than government planning does. Far from denying 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," Hayek wrote that:

[T]rue individualism affirms the value of the family and all the common efforts of the small community and group . . . [and] believes in local autonomy and voluntary associations . . [I]ndeed, its case rest largely on the contention that much for which the coercive action of the state is usually invoked can be done better by voluntary collaboration.

Hayek, "Individualism: True and False," in Individualism and Economic Order (1948), pg. 23

Larner is right to point out that Hayek ignored the socialist anarchists in his writings on socialism. But he would not have objected to them in so far as they advocated the formation of purely voluntary communities based on socialist or egalitarian principles, such as the Israeli kibbutzim. Indeed, Hayek, like John Stuart Mill, emphasized the importance of social experimentation in voluntary civil society. In his essay "Why I am not a Conservative," Hayek criticized conservatives for their excessive suspicion of change and new ideas. Few other libertarians would disagree.

Conflict between Hayekian libertarians and advocates of voluntary collectivism arises when one asks what we should do if it turns out that most people don't want to live in a collectivist commune, but would prefer a "capitalist" lifestyle instead. This is exactly what happened in the case of Israel's kibbutzim, the most successful modern experiment in voluntary collectivism. If voluntary collectivists are willing to accept this result, then there is no major disagreement between them and most libertarians, Hayek included. If, however, they prefer to use state or private violence to force dissenters into the communes against their will, then this form of socialism is no longer voluntary. Unfortunately, real-world socialist anarchists often chose the path of violence when faced with this contradiction between their commitment to collectivism and their opposition to state coercion. This is exactly what happened when socialist anarchists achieved a high degree of influence in 1930s Spain, arguably the movement's greatest period of success.

Perhaps more importantly, advocates of socialist anarchism and other forms of voluntary collectivism have never been more than a minor part of the political left as a whole. The vast majority of left-wing intellectuals (to say nothing of left-wing political leaders) favor a high degree of government control of the economy and society. If they have even heard of voluntary collectivism, they don't have much sympathy for it. Indeed, they probably have a lot less sympathy for it than Hayek would have.

I don't claim that Hayek was right about everything or that he perfectly foresaw our situation today. To the contrary, he made his share of mistakes. But his most important arguments haven't lost their relevance.

vassil petrov (mail):
To very briefly summarize and oversimplify Hayek's two key ideas, he argued that socialism can't work as an effective system for producing and distributing goods because it has NO way of aggregating the necessary information about people's wants and needs.
7.26.2008 4:58am
Originalism Is Useful (mail):
This post, and its attendant links, was wonderful. I do wish, however, there had been links to precisely who is "much-talk"-ing about Larner's article.
7.26.2008 7:56am
Bemused Observer (mail):
Hayek also argued that government control of the economy under socialism necessarily leads to the destruction of democracy and personal freedom.

In fact, Hayek was all in favor of "the destruction of democracy" when it suited his economic precepts. To wit:


Friedrich von Hayek, the Austrian émigré and University of Chicago professor whose 1944 Road to Serfdom dared to suggest that state planning would produce not "freedom and prosperity" but "bondage and misery," visited Pinochet's Chile a number of times. He was so impressed that he held a meeting of his famed Société Mont Pélérin there. He even recommended Chile to Thatcher as a model to complete her free-market revolution. The Prime Minister, at the nadir of Chile's 1982 financial collapse, agreed that Chile represented a "remarkable success" but believed that Britain's "democratic institutions and the need for a high degree of consent" make "some of the measures" taken by Pinochet "quite unacceptable."

Like Friedman, Hayek glimpsed in Pinochet the avatar of true freedom, who would rule as a dictator only for a "transitional period," only as long as needed to reverse decades of state regulation. "My personal preference," he told a Chilean interviewer, "leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism." In a letter to the London Times he defended the junta, reporting that he had "not been able to find a single person even in much maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende." Of course, the thousands executed and tens of thousands tortured by Pinochet's regime weren't talking.

Indeed.
7.26.2008 9:20am
American Psikhushka (mail) (www):
Bemused Observer-

In fact, Hayek was all in favor of "the destruction of democracy" when it suited his economic precepts.

Lots of libertarians and others favor or favored controls on democracy so fundamental individual rights can be carved out, namely some of the Founding Fathers. That's why we have a republic and not a direct democracy. A direct democracy can too easily slip into collectivism which as Rothbard said certainly is slavery.

Note that I'm not defending Pinochet's actions and the events that took place during that period.
7.26.2008 10:17am
p. rich (mail) (www):
The myth of a wise and benevolent government controlled by enlightened liberals/socialists is the foundation of the Democratic Party. They surreptitiously pursue their agenda through the schools, media, legislation and the courts. The shortage of intellect behind their vision is clearly evident in the notion that a huge, all powerful bureaucratic entity is capable of being wise or efficient. Every country that has, usually through violent revolution, implemented such a scheme has eventually collapsed under the weight of its own centralized ineptitude and fundamental delusions. Never one to be put off by facts, the left will continue its efforts irrespective of "unintended consequences", even if those be the collapse of the United States.
7.26.2008 10:22am
vassil petrov (mail):
Friedrich August von Hayek is one of the best social scientists of the 20th century.
7.26.2008 10:28am
Sasha Volokh (mail) (www):
More generally, the idea that a libertarian dictator is the ideal state -- if you could find one -- is fairly common (either implicitly or explicitly) among libertarians. If you could guarantee a libertarian dictator, democracy would still have some second-order benefits, like giving one possible outlet for certain grievances to emerge or for experimentation in certain ways of solving problems, but overall those benefits would probably be way swamped by the negatives of democracy, that is, the ability of the majority to violate individual rights.

I agree with the above myself. Of course, "if you could find one" is the key part. There's no such thing as a libertarian dictatorship that can reliably stay libertarian -- even in the unlikely case that you could find one that started out being libertarian -- either because the original dictator would be corrupted, or because he would die eventually, and bad people tend to get on top in dictatorships. Once you allow for the degeneration of even initially libertarian dictatorships (to say nothing of the unlikelihood of finding a dictatorship that even starts out libertarian), it's pretty clear that some form of democracy is better, and some form of constitutional democracy is probably the best form of democracy.

So Hayek was wrong on Chile. But the general idea that democracy is the worst system except for all the others, and more specifically that democracy is only valuable as an instrumental goal to the extent that it serves individual rights, is quite commonplace among libertarians, and correct.
7.26.2008 10:33am
American Psikhushka (mail) (www):
From the third paragraph of the main post:

...Hayek failed to recognize that "collectivism" could be a "spontaneous, nongovernmental, egalitarian phenomenon," not just a totalitarian order imposed by the state.

All the definitions of collectivism I've seen state that it's collective ownership of the means of production and distribution. That means control of the economy by the politicians who represent the collective. That's totalitarianism, it just seems like the author thinks it will be made less problematic by being broken down into smaller units. Count me as extremely skeptical of that notion, I can see that being just as bad, if not worse.

Now if he's referring to some kind of collective effort sort of like an Amish barn raising where people freely give their materials and labor that's fine, but that isn't collectivism. And that scenario is fully compatible with libertarianism as long as property and time are freely given with absolutely no coercion involved.

Sheesh, the lefties love, love, love the group activities. From a developmental perspective maybe their childhoods were just a few dodgeball and tag football games away from "evolving" them into good libertarians.(I don't like the "evolving" metaphor normally, I'm using their terminology.)
7.26.2008 10:50am
Mitchell Freedman (mail) (www):
Ilya,

Bolloten is not as reliable guide to the Spanish Civil War of the 1930s as you may think. Not that Herb Matthews by himself is, either, but Bolloten and Matthews need to be read against each other. The situation in Spain was such that it is easy to see, when reading enough, that the anarchists were responding to the violence already endemic and specifically to the military wing's coup against the Spanish Republic in 1936. There had violent fermenting before the coup for at least a decade and the language and support for violence was already quite strong there. To blame anarchists in a way that besmirches social anarchists elsewhere is therefore wrong.

Also, as another commenter or two pointed out, Hayek seemed to support the violence inherent in the Pinochet regime in Chile. Not very becoming for a guy who wants to argue that Social Security is just a step or two away from the Gulag. Hayek was destroyed in a debate with Karl Polanyi decades ago. Why anyone really takes Hayek seriously is something that can be studied the way people continue to take seriously a "manifesto" pamphlet written by two guys in 1848 (and I will be clear and say that many of Marx's other lengthier works are far more relevant and reasonable in our time).
7.26.2008 10:55am
American Psikhushka (mail) (www):
Sasha-

...it's pretty clear that some form of democracy is better, and some form of constitutional democracy is probably the best form of democracy.

The main feature would have to be the carving out of fundamental individual rights - self-ownership, self-defense, property, autonomy, speech, association, travel, etc. I assume that is what you are implying by "consitutional". If those rights are truly secured most of the potential risks of democracy are greatly reduced.
7.26.2008 11:29am
Sasha Volokh (mail) (www):
I meant to be vague on what the content of the constitution should be, since my comment wasn't primarily about that, but you're not saying anything I hugely disagree with. I just don't want to commit myself because I think it's actually a difficult question how much of a role constitutions really play in constraining governments; and I don't want to say (as your comment could be read to endorse) that having a constitution that "says all the right things" will "greatly reduce[]" "most of the potential risks of democracy."

For instance, Great Britain has never had a written constitution, but it's hardly totalitarian. On the other hand, various totalitarian and otherwise illiberal countries have had some constitutions that, on paper, seem good. (Great Britain even looks good relative to other European countries with good-looking constitutions.) We've got some good stuff in our constitution, but ultimately the constitution gets interpreted by politically appointed judges, so in the long run it's hard for the judiciary to deviate too far from popular opinion on too many issues.

So I'm more inclined to see good and functioning constitutions as symptoms of a political equilibrium in a country that would tend to make that country good even in the absence of a constitution. It's still true that constitutions have an effect, but it's hard to say exactly how much.
7.26.2008 11:40am
donaldk2 (mail):
Chile: 'thousands killed and tens of thousand tortured'

The sources, please.

And whatever the numbers are, it is arguable whether or not the number of victims would have been greater if Allende had succeeded in co-opting the methods and personnel of the Cuban autocrat.
7.26.2008 12:08pm
Mitchell Freedman (mail) (www):
Donaldk2, Allende was not killing people and was on the verge of becoming a dictator. If anything, Allende was too naive to see what was being planned against him, especially after the murder of a leading general who was loyal to the Chilean government (Schneider, was his name, I believe). You are daft if you think that Allende can be remotely compared to Pinochet.

You also demand a source to support the other commenter's statement about thousands killed and tens of thousand tortured..." Let's just start with this quote from Wikipedia:

The Rettig Report concluded that 2,279 persons who disappeared during the military government were killed for political reasons, and approximately 30,000 tortured according to the later Valech Report, while several thousand were exiled. The latter were chased all over the world in the frame of Operation Condor, a cooperation plan between the various intelligence agencies of South American countries, assisted by a US communication base in Panama. Pinochet believed these operations were necessary in order to "save the country from communism".

You, Donald, are a right wing whore who is no different than a Stalinist wanting evidence to show why Stalin was a monster.
7.26.2008 12:21pm
Mitchell Freedman (mail) (www):
And of course my first sentence left out the word "not" in the second section of that sentence, so it should read "Allende...was not on the verge of becoming a dictator."

That's what happens when we flame, as I did against Donald...
7.26.2008 12:24pm
Mark Nazimova (mail):
Bemused Observer quoted Hayek (via an article by Greg Grandin at Counterpunch) as saying "My personal preference leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism." It might be helpful to know the context.

It was taken from an April 1981 interview of Hayek by Renée Sallas that appeared in Santiago, Chile's El Mercurio, translated to English here. This is the relevant part of the interview (with the original statement italicized):

What opinion, in your view, should we have of dictatorships?

Well, I would say that, as long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally I prefer a liberal dictator to democratic government lacking liberalism. My personal impression — and this is valid for South America - is that in Chile, for example, we will witness a transition from a dictatorial government to a liberal government. And during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.

Apart from Chile, can you mention other cases of transitional dictatorial governments?

Well, in England, Cromwell played a transitional role between absolute royal power and the limited powers of the constitutional monarchies. In Portugal, the dictator Oliveira Salazar also started on the right path here, but he failed. He tried, but did not succeed. Then after the war, Konrad Adenauer and Ludwig Erhardt held initially almost dictatorial powers, using them to establish a liberal government in the shortest possible space of time. The situation called for the presence of two very strong men to achieve this task. And the two of them very successfully accomplished this stage towards the establishment of a democratic government. If you permit I would like to make a brief comment in this sense on Argentina.

Why not?

I felt very disenchanted right from my first visit there, shortly after Peron's fall. At that time I talked with many officers from the Military School. They were highly intelligent persons. Politically brilliant, I would say among the most brilliant politicians in their country. For me it was a pity they did not make better use of this intelligence. I would have hoped they could have laid the foundations for a stable democratic government. And yet they did not. I do not know why they failed, in fact, but my impression is that they had the political ability and the intelligence to do so.

Which means that you would propose stronger, dictatorial governments, during transitional periods...

When a government is in a situation of rupture, and there are no recognized rules, rules have to be created in order to say what can be done and what cannot. In such circumstances it is practically inevitable for someone to have almost absolute powers. Absolute powers that need to be used precisely in order to avoid and limit any absolute power in the future. It may seem a contradiction that it is I of all people who am saying this, I who plead for limiting government's powers in people's lives and maintain that many of our problems are due, precisely, to too much government. However, when I refer to this dictatorial power, I am talking of a transitional period, solely. As a means of establishing a stable democracy and liberty, clean of impurities. This is the only way I can justify it - and recommend it.

7.26.2008 12:40pm
The Mojo Bison (mail) (www):
Maybe my reading of Hayek (and Polanyi, too) is incomplete, but I was always more worried about the innate tendency of any large collective to become more interested in its own survival/aggrandizement than in its self-proclaimed goals. (Neither one of them, IIRC, talks about that.) That includes the government/bureaucracy/ruling class of said collectives. Therein lies the true danger of any large system.

(Times like these, I really wish I had kept all my old public administration books. It may have been L. Peter who made that argument, in addition to his more famous principles --but this has been, what twenty years ago, and those books are long-since gone...)
7.26.2008 12:55pm
Fub:
Sasha Volokh wrote at 7.26.2008 10:40am:
We've got some good stuff in our constitution, but ultimately the constitution gets interpreted by politically appointed judges, so in the long run it's hard for the judiciary to deviate too far from popular opinion on too many issues.
Or, as FP Dunne's Mr. Dooley observed,
"No matter whether the country follows the flag or not, the Supreme Court follows the election returns."
7.26.2008 1:03pm
J. F. Thomas (mail):
It was taken from an April 1981 interview of Hayek by Renée Sallas that appeared in Santiago, Chile's El Mercurio, translated to English here.

And in this Hayek is different than every other utopian (be it Communist, fascist or whatever) in what way? The dictatorship is always going to be a "transitional" step to a more perfect and just society. Just one more purge or emergency measure will eliminate the incorrect elements (the socialists, jews, aborigines, whoever) in society and make them see how wrong they are. Then society can be turned over to a stable, liberal democracy where everyone agrees on the rules.
7.26.2008 1:06pm
Flash Gordon (mail):
Leftists like Larner are not in favor of voluntary anything. If something is voluntary we might not do what leftists want us to do. They favor only a system that gives them the power to make other people do as they are told, by leftists.
7.26.2008 1:26pm
Eric Muller (www):
Is Hayek still relevant?

You mean after the pregnancy? And the break-up?

I think she is.
7.26.2008 1:54pm
vassil petrov (mail):
Is Hayek still relevant?

You mean after the pregnancy? And the break-up?

I think she is.


I coudn't agree more.
7.26.2008 2:20pm
trad and anon:
In addition, many mainstream liberals such as Cass Sunstein and Supreme Court Justice Stephen Breyer (as well as some conservatives and moderates) favor giving broad regulatory authority to "expert" government bureaucrats. This is not quite the same thing as government ownership of large enterprises. But it has important ideological affinities with it, to the extent that both policies rely on central planning by expert government bureaucrats. Hayek's arguments in "The Use of Knowledge in Society" are certainly relevant as potential critiques of these various forms of planning - both those that involve government ownership of large enterprises in health care and education and those that rely on regulations administered by expert bureaucrats. If Hayek is right, all these planners and experts don't know as much as they think they do, and certainly can't aggregate knowledge as effectively as the free market can.
I don't think this is a terribly relevant argument. The argument about expert control of the regulatory system is by contrast to control of the system by rent-seeking political donors and lobbyistselected officials who represent the true will of the people. In any case, it is a ludicrous misrepresentation to conflate CAFE standards, disclosure requirements for publicly traded companies, or restrictions on how many rat droppings can go into food sold to people with "central planning." You are within your rights to oppose such things, but regulation of private business and taking over control of operations are very different things.

I'll grant you that the national health services of Europe would constitute central planning vis-a-vis the health care industry. But hey, we already have healthcare for all. No doubt the price system would aggregate information even better without the "central planning" that lets poor people use the emergency room.
7.26.2008 2:23pm
trad and anon:
And in this Hayek is different than every other utopian (be it Communist, fascist or whatever) in what way? The dictatorship is always going to be a "transitional" step to a more perfect and just society. Just one more purge or emergency measure will eliminate the incorrect elements (the socialists, jews, aborigines, whoever) in society and make them see how wrong they are. Then society can be turned over to a stable, liberal democracy where everyone agrees on the rules.
Exactly. This sounds nearly as plausible as the withering away of the state after the proletarian revolution.
7.26.2008 2:26pm
Glenn W. Bowen (mail):

But he suggests that they are largely irrelevant today


...a mere sixty-four years later, "largely irrelevant".

Another case of, "it'll work this time".


He also suggests that "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


Human beings do exist as both, without Larner's parameters; and, perhaps it isn't necessary to subordinate, but it is inevitable that it will subordinate.
7.26.2008 3:10pm
Ilya Somin:
Like Friedman, Hayek glimpsed in Pinochet the avatar of true freedom, who would rule as a dictator only for a "transitional period," only as long as needed to reverse decades of state regulation.

Friedman did not approve of Pinochet's dictatorship, and in fact specifically criticized it's suppression of political freedoms. See here. Approving of one aspect of Pinochet's economic policies is not the same thing as approving of the regime as a whole. The same point can be made about Hayek, who (as noted above), apparently approved of the regime's economic policies without approving of all its other activities. Hayek did believe that Pinochet was the lesser of the available evils in 1970s Chile, given Allende's efforts to set up a socialist dictatorship (on which, see for example, Mark Falcoff's book, Modern Chile, 1970-89). Whether or not Hayek was right to conclude this, believing that in some historical circumstances a dictatorship may be a lesser evil doesn't invalidate the rest of his thought. Indeed, it's hard to argue that every nation can be democratic at all times. In some situations, democracy might not be a realistic alternative, and the only available options different types of dictatorship.
7.26.2008 3:10pm
Ilya Somin:
The argument about expert control of the regulatory system is by contrast to control of the system by rent-seeking political donors and lobbyistselected officials who represent the true will of the people. In any case, it is a ludicrous misrepresentation to conflate CAFE standards, disclosure requirements for publicly traded companies, or restrictions on how many rat droppings can go into food sold to people with "central planning."

I didn't say that the two are exactly the same. Indeed, I said they are different. However, they do have important commonalities in so far as both rely on the knowledge of expert government planners overriding the market. As such, both are vulnerable to Hayek's criticism from "The Use of Knowledge in Society" that government experts are not as effective in aggregating and using knowledge as the market price system is.
7.26.2008 3:13pm
Ilya Somin:
Bolloten is not as reliable guide to the Spanish Civil War of the 1930s as you may think. Not that Herb Matthews by himself is, either, but Bolloten and Matthews need to be read against each other. The situation in Spain was such that it is easy to see, when reading enough, that the anarchists were responding to the violence already endemic and specifically to the military wing's coup against the Spanish Republic in 1936.


The article by Bryan Caplan I linked to cites a large number of sources, not just Bolloten. I agree that the fascists, communists and others also engaged in violence during the SPanish Civil War. Caplan emphasizes this too. HOwever, as he also points out, many of those targeted by the Spanish anarchists were not fascists or communists engaged in their own violence, but simply people who disagreed with the anarchists politically, or refused to enter their communes.
7.26.2008 3:28pm
David Matthews (mail):
"Today's advocates of government planning are more modest in their ambitions than the mid-twentieth century socialists whom Hayek criticized. But they are not modest enough to make his arguments irrelevant."

I think that's the key. "Central planning" can take many and varied forms, but the notion that a pool of bureaucratic experts can outperform the democratic forces of the market is still pervasive, and still, probably, false.
7.27.2008 12:58am
Sasha Volokh (mail) (www):
I would also note that there's a distinction between Hayek's general ideas and his specific arguments. He was arguing at a time when the main enemy was the advocates of central planning, so most of the time he focuses on central planning. That doesn't mean that his ideas are limited to the central planning context.

Now I don't remember right now whether he talked specifically about forms of communism other than central planning. But his ideas are applicable to those other forms too. Von Mises, for instance, devotes a bit of time in several places to arguing against syndicalism, which was also commonly advocated in non-Bolshevik circles as an alternative to central planning. Von Mises is clear that syndicalism is something very different from central planning, and argues against syndicalism separately. Hayek may do this too, though I'm not 100% sure.

Regardless, the idea of the knowledge problem and suchlike -- ideas found in Hayek, von Mises, and Austrians generally -- is applicable to a whole range of policies, from central planning to syndicalism to market socialism of different stripes.
7.27.2008 1:10am
Michael F. Martin (mail) (www):
The best defense of the Sunstein/Thaler choice architecture program is that we really don't have an alternative in many cases -- somebody has to decide what the defaults are going to be; they're not advocating for a more dirigiste form of government; they're advocating for a form of government that is more respectful of idiosyncrasies of psychology when some dirigiste form of intervention is inevitable (because of market failures or whatever).
7.27.2008 4:30am
Michael F. Martin (mail) (www):
Thanks for this great post. In response to this point:


Unfortunately, real-world socialist anarchists often chose the path of violence when faced with this contradiction between their commitment to collectivism and their opposition to state coercion.


Isn't this because collectivists naturally tend to rely on us-them distinctions in founding their organizations? Everythings' fine so long as the distinction is broad enough to encompass everyone who happens to be standing around... but that's not long.

On the other hand, occasionally even capitalist institutions can denigrate into "us-them" modes of activity. Isn't this why we need some government checks (such as antitrust law)?
7.27.2008 4:36am
Hayek sympathiser (mail):
Some commenter referred to a debate in which Polanyi allegedly destroyed Hayek. Which debate? How was Hayek supposedly destroyed?
7.27.2008 12:05pm
A.R Jones/TmjUtah (mail) (www):
Well, the United States Government has defacto taken control of the credit market in the country over the last thirty years, and driven them straight into the pavement. Simultaneously, the government also controls domestic energy production through onerous and illogical embargo / regulatory schemes that pander to Greens on one side, farmers on the other, and keep domestic energy corporations waiting for the knock on the door in the night.

As of yesterday, 26 July, the House has passed legislation making the Government formally responsible for covering the losses in Freddie and Fannie.

The act is cowardice; coercion by checkbook, armed with fiat money and fueled by stink fear.

I believe Hayek's principles as relevant today as they were sixty years ago. In the case of broken countries, sometimes the best transition you can hope for is a benevolent dictator. Our own (US) experience is showing the folly of democracy devoid of liberalism - liberalism of the old, continental definition.

Bumpy ride ahead, and we've only ourselves to blame.
7.27.2008 12:52pm
G Joubert (mail):
Central planning took one form in 1944. It takes a different form today. One only needs to spend a little time in Portland, Oregon to see it.
7.27.2008 1:48pm
thomass (mail):
The left consistently denies the central tenants of its ideology. It even often refuses to admit to having an ideology. Its member even believe these things but it is doublethink. Once they have power they always will move to bring more sectors of the economy to be state run and for the goal of forced equality. In the US the next push is for the healthcare system.
7.27.2008 3:10pm
GatoRat:
"But he suggests that they are largely irrelevant today because the modern left has mostly abandoned central planning..."

And this in the context of CAFE standards, the home loan bailout fiasco and the proposals for increasing regulation of the oil markets. If those aren't attempts at central planning, what is.

(Even if you agree with all three of those items, at least have the courage and intelligence to admit that it's central planning.)
7.27.2008 5:12pm
Sasha Volokh (mail) (www):
GatoRat: Hayek, von Mises, and the Austrians not only sharply distinguish between socialism (i.e., central planning) and syndicalism, as I pointed out in a comment above; they also distinguish between central planning and interventionism. They have all sorts of arguments against interventionism, many of which come down to the argument that the intervention won't accomplish its intended goal and will create new problems that will engender further intervention, etc., so that ultimately, in their view, intervention, if not curtailed, will lead to central planning. But that doesn't mean that interventionism is socialism.

More specifically, suppose that some neoclassical economist believes strongly in Pigouvian taxation and other measures to remedy market failures, but otherwise believes in letting the market work. Now such a guy -- depending how extensive he believes market failures are -- can endorse a ton of different taxes, regulations, etc. But all that's just interventionism, and subject to the Austrians' critiques of interventionism -- not socialism or central planning.
7.27.2008 5:23pm
mockmook:
I believe Hayek's criticism implicitly extends (and is relevant) to the "middle way" of socialism-lite.

One aspect of the dangers of not using price signals not mentioned here, bureaucracy.

The "middle way" gives us huge inefficient bureacracies dedicated to expansion of their fiefdoms. They create legions of people within their ranks who advance without regard for producing real goods (and who lose their regard for real producers).
7.27.2008 5:45pm
A.R Jones/TmjUtah (mail) (www):
The "middle way" gives us huge inefficient bureacracies dedicated to expansion of their fiefdoms. They create legions of people within their ranks who advance without regard for producing real goods (and who lose their regard for real producers).


Totalitarianism without having stood up first and claimed the ground for the state/proletariat/common good.

Or in another way, neck reining instead of using the Spanish bit.

But the outcome remains the same. We have no marketplace today - just a house of cards in the process of finding the floor.

Yeah. I think Hayek applies today. In spades.
7.27.2008 6:45pm
Lee A. Arnold (mail) (www):
The real problem is a little different. Prices no longer cover all the necessary kinds of information.

A major condition of our time is the growing symbiosis of two separate and inexorable tendencies: (a) the increasing network effects of environmental externalities and social transaction costs, due to the crowding and growing complexity of the world; combined with (b) the increasing narrowness of personal knowledge due to advancing specialization and the division of labor, --with this individual narrowness leading to a simplified, and rather incompetent, common culture.

Markets alone won't fix this growing symbiotic combination, because (a) prices can't transmit all that kind of information sure enough and fast enough, and even if they could, (b) YOU don't have enough knowledge to evaluate it for proper market demand.

So the solution for some problems is going to be a return to targeted institutions, administered democratically, that use expert knowledge to adjust some prices or regulate some markets. We see the questions already in the crises of subprime finance and the atmospheric carbon sink. The simplistic application of Hayek's notions of knowledge will not do.
7.27.2008 6:52pm
David Warner:
"YOU don't have enough knowledge"

If I don't have it, why would it be rational to assume the experts do? Isn't their specialization even more advanced than my own?
7.27.2008 8:22pm
Anonymous #823:
So the solution for some problems is going to be a return to targeted institutions, administered democratically, that use expert knowledge to adjust some prices or regulate some markets.
That is a leap. If we assume, as you implicitly do, that experts are needed to reduce market frictions caused by market complexity and customer simplicity, then the experts' knowledge is in demand and worth the customers' effort to pay for it to smooth over said frictions. The internet today serves that functionality for most people I know; where faculties are paid for by enthusiasts' own energies, ads, or subscription fees. Isn't this patently obvious?
7.27.2008 10:14pm
Bruce Hayden (mail) (www):
Markets alone won't fix this growing symbiotic combination, because (a) prices can't transmit all that kind of information sure enough and fast enough, and even if they could, (b) YOU don't have enough knowledge to evaluate it for proper market demand.

So the solution for some problems is going to be a return to targeted institutions, administered democratically, that use expert knowledge to adjust some prices or regulate some markets. We see the questions already in the crises of subprime finance and the atmospheric carbon sink. The simplistic application of Hayek's notions of knowledge will not do.
I think that you miss the concept of markets providing information. Indeed, I would suggest that markets are, overall, more perfect than ever before. And they are getting faster. In many markets, information is now integrated into prices within minutes.

The concept of "targeted institutions, administered democratically, that use expert knowledge to adjust some prices or regulate some markets" is just another way of saying centralized control and planning. And one of Hayek's points was that this ultimately leads to totalitarian control.

Since you bring up the subprime problem, let us look at the "bailout", which is filled with just the sort of rent seeking that is a natural and invariable result of the top down planning and resource allocation that you are pushing. The same institutions that made so much money with the subprime lending are now being bailed out.

And the carbon problem you are referencing? Obviously you are in favor of spending trillions of dollars through top down planning solving what is increasingly evidently a non-problem the least cost effective way possible.
7.27.2008 10:19pm
Bruce Hayden (mail) (www):
"YOU don't have enough knowledge"

If I don't have it, why would it be rational to assume the experts do? Isn't their specialization even more advanced than my own?
One nice thing about markets is that you don't need to have enough knowledge. Rather, the market has it. The more perfect the market, the more perfect the information that it contains.

Individuals on the other hand are limited to the amount of information that they can comprehend and utilize. What makes this worse is the rent seeking and capture that is a natural result of trying to have the "experts" run things.
7.27.2008 10:24pm
Lee A. Arnold (mail) (www):
David,
Whatever your specialty is, I will bet that you know more about it than I do (unless you are a systems theorist, or a residential plumber!) This is the sense of "expert."

It is not rational to assume that you know everything there is to know in the world.

Is your question about the processes of gathering the criteria for judging an expertise? Those can be market-based, such as in the case of successful baseball scouts or stock brokers, or institutionally-based, e.g. educational or professional certification such as for heart surgeons or wildlife biologists.

In this sense that I was using it, no one is more specialized than another. The whole system is progressively differentiating.

Increasing specialization does not reduce a person's capacity for knowledge -- it narrows the focus of the subject matter which fills that capacity. We must know our subjects to remain competitive in our fields. And there are only so many hours in the day to learn things. So we each know "more and more about less and less."

The big question is one which Hayek's studies partly centered upon: how does this get integrated? We want freedom, and we want efficiency. But if our brain-pans have limitations, those two alone won't prevent the world from flying apart.
7.27.2008 10:57pm
Lee A. Arnold (mail) (www):
Anonymous # 823,
You may want to explain how market agents would have prevented the subprime fiasco. Weren't they sort of front and center? Shall we crash the whole economic system so they learn not to do it again? And how long do you think that lesson would last?

Wouldn't it be better to regulate a little more transparency?

But I agree with you about the internet, for some things. "Targeted institutions" does not mean only government institutions, it is meant in the Coasian sense. Internet-organized boycotts (for example) of goods and services may become highly effective institutions to change environmental practices or third-world human rights issues.
7.27.2008 10:57pm
Lee A. Arnold (mail) (www):
Bruce Hayden,
Market prices provide information about allocation: resource availability and substitution, technological efficiency, and preference in demand. Hayek wrote about markets over socialism in that sense.

Prices do not provide information about whether the can of tuna at the grocery store helped to destroy a population of dolphins, much less what that means for the wider marine ecosystem.

This is quite aside from the fact that there are few "perfect" markets, aside from agricultural commodities and financial instruments (in better times,) and so the allocative information is not complete because market failure is normal and endemic.

There is also the big issue of liberty, and the effects of any kind of centralization (including monopolistic competition) upon it. There are all sorts of institutions in effect right now which have not led to totalitarianism.

If you are looking for somebody to defend the Wall Street bailout or who insists it will cost trillions to get off the carbon economy, I am not the person.
7.27.2008 10:58pm
David Warner:
Lee A. Arnold,

Much thanks for the generous response. There is actually a link in my original response to to you (click the "I"). I'd be curious as to your thoughts on those arguments.

And if the answer involves residential plumbing, I promise to defer to your expertise...
7.28.2008 1:26am
Bob Goodman (mail) (www):
A quarter century ago "libertarian socialism" was hot shit. Its advocates tended to interpret a regime that allowed for free enterprise as constituting a barrier to people's ability to "voluntarily get together" and do the things they presume people would really want to.
7.28.2008 1:46am
Lee A. Arnold (mail) (www):
David Warner, Sorry, I went right by your link. I haven't read Surowiecki's book, but from the Wikipedia rundown it appears reasonable to maintain that the "wisdom of crowds" won't automatically avoid all knowledge problems. The article observes that there are different kinds of crowds, different subject categories of information, and different mechanisms of group decision.

Prediction markets ought to work for things which are similar in form to mass decision-making: political elections, for example. (Although they didn't favor Webb in Virginia until nearly the last minute, although it was obvious to me a couple of months out. But I'm not a gambler.) But what is the theory behind the assertion that they can predict terrorist attacks? That someone is squealing, and the word gets around?
7.28.2008 2:56am
Steven Maloney (mail) (www):
Certainly Hayek cannot be too irrelevant if so many interesting comments can be offered on this page! If I may make the observation that Hayek is useful not only because of what Hayek is for, but as a serious thinker about the social sciences and as someone who had very broad, deep insights into human beings, the world and the way we study them well beyond the scope of what has been discussed in the comments. Hayek is no more "just" a libertarian legal formalist than Adam Smith is "just" a free-market capitalist. Both characterizations shrink the depth of insight for both men as well as the genius of their curiosity.
7.28.2008 3:09am
Anonymous #823:
Lee A. Arnold,
Wouldn't it be better to regulate a little more transparency?
To the extent that it undercuts fraud, absolutely.

The rest of the subprime stuff seems to have stemmed from individuals speculating on the value of their homes. The failure was their intuition, and they should have felt the effect of that; but instead, today they're rewarded by the rest of us (via the government). In fact, that is one more action in a long, old list that impugns the government's capability to make any financial decisions for third parties.
7.28.2008 10:59am
Lee A. Arnold (mail) (www):
So how do you prevent them from crashing the whole system, without bailing them out? For me, this comes under the rubric "network effects from increasing social transaction costs." I'm guessing we need new laws and regulations -- after the free-market ideologues pushed deregulation.
7.28.2008 1:33pm
Anonymous #823:
Why not bail them out? Allow other banks and high-rollering institutions to do that. They know the risks involved and how to price them, ignoring regulatory restrictions that allow such parts of the corporate brain to atrophy. It seems to me that if the government were not currently in the business of compulsory lifetime insurance, then such simple answers might be more evident.

Though I admit, I've reached the limit of my knowledge about this particular fiasco. I have a hard time caring about the back-and-forth between illiterates or fraudsters who, on one side, leverage for toys the biggest assets in their estates and, on the other, a bunch of politicos who abuse and invent economic events to redistribute wealth. The foreign investors who bought up all these mortgage derivatives? Let their own government screw them over, we have enough philips heads as it is.
7.28.2008 4:11pm
Bruce Hayden (mail) (www):
Prices do not provide information about whether the can of tuna at the grocery store helped to destroy a population of dolphins, much less what that means for the wider marine ecosystem.
Agreed. But so what? If your goal is to provide this information, then provide it.

Of course, the problem with the government providing it, is that the government agency involved is invariably captured by some group or another, and we will be getting their view on things.
This is quite aside from the fact that there are few "perfect" markets, aside from agricultural commodities and financial instruments (in better times,) and so the allocative information is not complete because market failure is normal and endemic.
Ok, a lot of markets aren't perfect. But the level of perfection or efficiency continues to increase for many, if not most, markets, as barriers to information flow decrease and mechanisms for arbitrage and the like increase.
There is also the big issue of liberty, and the effects of any kind of centralization (including monopolistic competition) upon it. There are all sorts of institutions in effect right now which have not led to totalitarianism.
Maybe, but I doubt that you can show many government run organizations that do not lead in that direction. You really have not shown any instances where government institutions increase, and don't ultimately decrease, liberty.
If you are looking for somebody to defend the Wall Street bailout or who insists it will cost trillions to get off the carbon economy, I am not the person.
Not here either. Obviously.
7.28.2008 7:03pm
Bruce Hayden (mail) (www):
So how do you prevent them from crashing the whole system, without bailing them out? For me, this comes under the rubric "network effects from increasing social transaction costs." I'm guessing we need new laws and regulations -- after the free-market ideologues pushed deregulation.
Do you have any idea how many laws and regulations we now have on the books?

Let me also suggest that one of the big problems with writing new laws and regulations is that there is invariably much more money and many more brains on the side of getting around or exploiting them, than on the side of writing them.

Another problem is that since there are so many rules and regulations on the books now, that they are by necessity arbitrarily enforced. That leaves the discretion of whether to enforce up to elected politicians and unelected bureaucrats. I have a hard time seeing how that leads to increased liberty.
7.28.2008 7:09pm
Lee A. Arnold (mail) (www):
So Bruce Hayden, present the solution to the financial crisis.
7.29.2008 1:40am
Pashley (mail):
I think some bloggers neglect to notice that for much of the left, there are no "legitimate" market transactions. Classical economics assumes that there is a free-acting buyer and free-acting seller transacting in their own best interests, that brings us a price.

The left has no free-acting participants. One is bigger and exploiter, dictating terms to the smaller and exploited. This is straight from Marx, a matter of faith. So, no price derived from the market is legitimate.

So, the default actor, and decision maker, is the government. Not because the government is the best argument, its just that the private actors are not.
7.29.2008 3:38am
Anonymous #101:
Pashley, if that's true, that's very scary. I wish I knew how to respond that letter of faith.
7.30.2008 5:25pm