May 8, 2011


Friedrich A. Hayek, Big-Government Skeptic: THE CONSTITUTION OF LIBERTY: The Definitive Edition. (The Collected Works of F. A. Hayek, Volume XVII.) By F. A. Hayek, Edited by Ronald Hamowy (FRANCIS FUKUYAMA, 5/07/11, NY Times Book Review)

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. He and his fellow Austrian Ludwig von Mises used this argument against Joseph Schumpeter in a famous debate in the 1930s and ’40s over whether socialism or capitalism offered a more efficient economic system. In hindsight, Hayek clearly emerged the winner.

“The Constitution of Liberty” builds on this view of the limits of human cognition to make the case that no government can know enough about a society to plan effectively. The government’s true role is more modest: to create laws that are general and equally applied; these laws constitute the matrix in which the spontaneous interactions of individuals can occur. (It may, however, surprise some of Hayek’s new followers to learn that “The Constitution of Liberty” argues that the government may need to provide health insurance and even make it ­compulsory.) [....]

In the end, what drove people on the left crazy about Hayek back in the 1950s is the same thing that makes him appealing to a Glenn Beck today. Hayek made the slipperiest of slippery slope arguments: the smallest move toward the expansion of government would lead to a cascade of bad consequences that would result in full-blown authoritarian socialism. If anything, however, the history of the past 50 years shows us that the slippery slope has all sorts of ledges and handholds by which we can brake our descent into serfdom and indeed climb back up. Voters in the United States and Europe took seriously the arguments about the dangers of big government and reversed course after the 1980s. Indeed, the pendulum swung so far backward that financial markets were left dangerously unregulated prior to the financial crisis. President Obama’s return to “big government” didn’t last more than a year before it was met with fierce ­resistance.

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.

Considered only in terms of economics, the most successful nations tend to have less than 40 million citizens (America being a glaring exception). And small island nations (within the Anglosphere) do exceptionally well. This would seem to argue in favor of the idea that good government is a product of localness.

On the other hand, these smaller homogenous states tend towards "bigger" government, precisely because the recipients of taxpayer largesse are perceived as neighbors.

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Posted by Orrin Judd at May 8, 2011 7:12 AM
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