HAYEK'S GENERAL ARGUMENT
In the 1930's and 1940's, when Hayek first became famous, belief in the
benevolence of the market was
rapidly being replaced by a belief in the benevolence of state
intervention. Hayek disagreed.
Hayek's two general themes are that the managed society does not work and
that it is incompatible with
freedom.
He argues that there are two types of order:
CONSTRUCTED ORDER (example: government planning)
SPONTANEOUS ORDER (prime example: the market)
Hayek, believes that whilst the role of the state's constructed order is
important, it has to be
limited. This is a position very like Adam Smith's and you will find it
useful to compare Hayek and
Smith.
Hayek says that constructed order generally goes wrong if it does any more
than provide favourable
conditions for spontaneous order. The most important favourable condition
to spontaneous order is the
rule of law.
Hayek argues that separate epistemological traditions focus on constructed
order and spontaneous order as their model of society. He calls these
constructive rationalism [which corresponds to what is usually known as
rationalism]
and evolutionary rationalism [which corresponds to what is usually known as
empiricism]
***
Hayek agrees with Adam Smith that self-interest and the market meet human
need more effectively than
benevolence or planning:
And he also believes that planning threatens political liberties.
Government planning, he argues, puts
governments in a position where "to support themselves they are obliged to
be oppressive and
tyrannical".
In a market decisions are de-centralized. They are located in billions of
consumer demands. With
planning they are concentrated in the state. This is economically
in-efficient, but it also has
political consequences, because the power is concentrated.
***
In his recent works Hayek argues that spontaneous order has been discovered
in the course of evolution
and that it's great merit is that it works despite our ignorance. Hayek
says that we can never have
the data necessary to plan society. Spontaneous order works without a
plan.
The Road to Serfdom
In The Road to Serfdom Hayek argued that planning threatens
political liberties and that any
amount of state intervention is the slippery slope to "totalitarianism".
Marxists, he said, had blamed
Fascism on capitalism, but the true culprit is state intervention.
Free market prices of goods and services give us instructions about what
society wants.
If government intervenes to stop the market operating, government
instructions replace free-market
information. This means that instead of individuals deciding what they
want, the government decides
what they should have.
The extreme case of this is the totally planned economy : As there is no
market billions of decisions
previously made when individuals decided to buy or sell something now have
to be centrally planned.
This is economically inefficient, but it also has political consequences.
All that power is taken away
from individuals and concentrated in the planning authorities. Under such
a system, Hayek argues, there
cannot be any freedom.
Freedom depends on the market
Hayek argues that the mixed economy gives the worst of all possible worlds.
Planning and the market do not mix. Given that his book was a criticism of
what was happening in
Britain, this is a crucial argument. But the argument itself is difficult
to find in his book, and even
more difficult to follow.
Law
Most, if not all, liberal theorists include law in their idea of freedom.
They contrast law with arbitrary will:
Arbitrary will: If, as in
Hobbesian
society, I must obey every whim of the ruler, I am not free. [Hobbes
argument that liberty of the
subject is consistent with the unlimited power of the sovereign
is not accepted by liberals]
Law: If, as in
Lockean
society, the will of the sovereign is made known
as general rules (law) that apply equally to everyone, then I am free
because I can do anything within the law without any fear of
the sovereign. This applies whether the sovereign power is one person or
the whole people.
Hayek restates the liberal position on law so as to exclude the kind of
laws that socialists might want
to pass! Let us see how he does this.
The law according to Hayek must only maintain negative freedoms and not try
to establish positive
freedoms . [The distinction between positive and negative freedoms was made
by Isaiah Berlin. (1958
Two Concepts of Liberty)]:
negative freedom is the freedom to do anything not prohibited
positive freedom is giving people the power to do things
If, for example, a poor person is hungry he or she is still free to eat in
the sense that there is no
law prohibiting it. That is a negative freedom. Positive freedom would be
the power to eat that comes
through having food.
Berlin (and Hayek) argue that the idea of positive freedom is a confusion
of language. Freedom and power
should not be confused. "Everything", Berlin says "is what it is: liberty
is liberty, not equality or
fairness or justice or human happiness or a quiet conscience."
Freedom, according to Hayek, is the absence of coercion. It is a situation
in which the individual is
not dependent on the arbitrary will of another. So called "positive
freedoms", Hayek claims, mean
that people cease to be equal before the law and are subject to the
arbitrary will of the government.
Let us say, for example, that in the interests of social justice we decide
to tax rich people in order
to pay for the education of poor children. That means that the state is
deciding that one class of
people should pay tax and another class should receive benefits from the
tax. There is nothing just or
impartial about this, Hayek argues. It is analogous to the arbitrary will
of the sovereign that law was
intended to curb.
HAYEK AND THE FREE-MARKET THINK TANKS
Since 1957 the Institute of Economic Affairs has promoted the ideas
of Hayek in Britain. It has
also promoted the monetarist ideas of Milton Friedman. For many years
Friedman and Hayek were academic
colleagues at the University of Chicago. Their ideas, though compatible,
are not identical.
The Centre for Policy Studies was set up by Sir Keith Joseph and
Margaret Thatcher in
1974. It is a free-market conservative think-tank separate from official
Conservative Party research
organs.
The Adam Smith Institute started in America in 1978. The British
institute started in 1981. It
promotes the privatization of public services. Hayek is chair of its
academic board. One of its
projects was The Omega File in 1984 which drew a picture of an
almost completely privatized
society.