Rescuing Hayek from the Hayekians (and himself)

Friedrich-August-Hayek

We (belatedly) finish Conservative Week with a look at Margaret Thatcher’s favourite economist and philosopher: Friedrich Hayek.

The Austrian economist FA Hayek has long been a staple of free market thinking. Margaret Thatcher read him as an undergraduate and cited him as a major influence on her premiership. And in 2010, professional right-wing scaremonger Glenn Beck devoted a whole episode of his TV show to Hayek’s book the ‘the Road to Serfdom’ and in the process launched it to the top of the US bestseller charts.

Given Beck’s use of Hayek as a tool for creating hysteria, it’s worth reflecting on what kind of free market thinker Hayek really was.

In order to argue that the (purported) expansion of the state under Obama threatens American democracy, Beck focuses exclusively on a single work of Hayek’s: ‘the Road to Serfdom.’ It’s a polemic about how economic planning leads to tyranny and it’s an excellent book. Hayek shows with chilling precision that there is no clean division between the economy and the rest of life, hence the state cannot takeover one and not the other.

Hayek and Beck both argue that combining liberal democracy and socialism is impossible. But they are talking about different socialisms. Beck’s scarcely deserves the name; at one point it extends to the government hiring people to conduct the census. By the contrast Hayek was writing Serfdom in the 1940s as Stalin’s Soviet Union was devouring Eastern Europe and many people in Britain were advocating keeping wartime planning in place even after hostilities had ceased. Hayek had more sinister things on his mind than Obamacare.

In fact it seems quite possible that Hayek would have been ok with a welfare state. In Serfdom Hayek wrote that:

Nor is there any reason why the state should not assist individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance, where, in short, we deal with genuinely insurable risks, the case for the state helping to organise a comprehensive system of social insurance is very strong. There are many points of detail where those wishing to preserve the competitive system and those wishing to supersede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective. But there is no incompatibility in principle between the state providing greater security in this way and the preservation of individual freedom.

It is a pity that Beck does not go beyond Serfdom and look at the rest of Hayek’s work. His macroeconomics are mostly junk but his political theory is enlightening. Of particular benefit to Beck might be The Constitution of Liberty. It’s an argument that prosperity rests on the rule of law, and it might teach Beck that it’s not just the size of the state that matters. Whether it is accountable to the public and courts matters too. This is why despite Sweden and Venezuela both have economically interventionist governments, life in these two countries couldn’t be more different.

Progressives too often forget that freedom includes free markets. People who call themselves Hayekians need to remember that there is more to freedom than free markets.

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3 thoughts on “Rescuing Hayek from the Hayekians (and himself)

  1. Pingback: Why Government Doesn’t—and Can’t—Manage Resources Like a Private Business | pundit from another planet
  2. “In fact it seems quite possible that Hayek would have been ok with a welfare state” — is wishful thinking and historical manipulation of the most absurd kind. But is standard operating procedure on the institutional left. I can almost hear Hayek laughing from the beyond.

  3. Pingback: Uncertainty the Destroyer | pundit from another planet

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