(Liberty) - 'A market .. a discovery process which continuously gathers knowledge..'

Posted by ProjectC 
<blockquote>'A market, [Hayek] went on to show, is a discovery process which continuously gathers knowledge, updates it and relays it to participants.'</blockquote>

'The life and times of F.A. Hayek, who explained why political liberty is impossible without economic liberty

Socialism appealed to the idealism of intellectuals, yet it brought the most hideous tyrannies. Just from the standpoint of human liberty, socialism was a catastrophe everywhere.

More than anyone else, Friedrich Hayek explained why central planning undermines human liberty and, if pursued far enough, will lead to tyranny. He told why thugs end up dominating socialist regimes. He told how the essential institutions of a free society develop without central planning.


Hayek realized that decisive critiques of central planning, which had been published in German, were virtually unknown among English-speaking readers.


.., Hayek found himself "differing very strongly in the interpretation of the political events in Germany from the view then generally current in England and particularly held by the majority of my socialistically inclined colleagues in the other departments of the London School of Economics. They all tended to interpret the National Socialist regime of Hitler as a sort of capitalist reaction to the socialist tendencies of the immediate postwar period, while I saw it rather as the victory of a sort of lower-middle-class socialism, certainly thoroughly anti-capitalistic and anti-liberal but taking over all the methods of socialism."

The May 1940 issue of Economica published Hayek's article "Socialist Calculation: The Competitive 'Solution,'" in which he addressed the political consequences of government control over the economy. He wrote, "This is of course precisely the authoritarian doctrine preached by Nazis and Fascists...in a planned system all economic questions become political questions, because it is no longer a question of reconciling as far as possible individual views and desires, but one of imposing a single scale of values, the 'social goal' of which socialists ever since the time of Saint-Simon have been dreaming." He added: "an examination in greater detail would clearly exceed the scope of an article...an adequate treatment would require another book..."

Hayek began his most famous attack on central planning in September 1940. It was a book that took almost four years to write. After the Germans started bombing London, the London School of Economics moved from their quarters on Houghton Street to Peterhouse College, Cambridge, and Keynes found rooms for Hayek at King's College, Cambridge. He lived there about a year. "Hayek's son," reported biographer Ebenstein, "remembers that the rooms...were very comfortable but cold...Ultimately, he succeeded in finding a semi-converted barn in Cambridge, in which he and his family lived until 1945. This former barn where Hayek did his work was approximately two stories high and was subsequently used as an auditorium for amateur dramatics." Hayek remarked that he worked midst "the continuous disruptions of falling bombs."

English intellectuals -- promoters of central planning -- claimed socialism was the opposite of Nazism, but Hayek insisted that socialism, communism and Nazism were part of the same collectivist trend which had gathered momentum during the 20th century. Hayek predicted that if the trend went far enough in England, the breeding ground of liberty in the modern world, it would bring totalitarianism.

He noted there is general agreement about a few functions of government -- such as punishing violent criminals. But as government takes on more functions, it necessarily goes beyond the realm of general agreement and infringes ever more on personal liberty. Central economic planning, Hayek explained, inevitably means massive assaults on liberty by giving bureaucrats the power to decide which kinds of cars, pens, apples and everything else should be produced -- and who should get them. He observed that power tends to be corrupted because it naturally attracts people who enjoy taxing, imprisoning and even executing others. Hence, "the worst get on top." Hayek warned that central planning is on a collision course with liberty and democracy.

Called The Road to Serfdom -- after Alexis de Tocqueville's phrase "the road to servitude" -- the book was published in England on March 10, 1944. Only about 2,000 copies were printed initially, but the book provoked controversy, and the press run sold out. Newspaper commentators and Members of Parliament began talking about the book.

..Then came libertarian journalist Henry Hazlitt's 1,500-word review on the front page of the Sunday New York Times Book Review, September 24, 1944. He declared that "Friedrich Hayek has written one of the most important books of our generation...It is a strange stroke of irony that the great British liberal tradition, the tradition of Locke and Milton, of Adam Smith and Hume, of Macaulay and Mill and Morley, of Acton and Dicey, should find in England its ablest contemporary defender -- not in a native Englishman but in an Austrian exile."..'


Keynes, of all people, wrote Hayek this enthusiastic letter: "In my opinion it is a grand book. We all have the greatest reason to be grateful to you for saying so well what needs so much to be said. You will not expect me to accept quite all the economic dicta in it. But morally and philosophically, I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement."

Socialist author George Orwell: "In the negative part of Professor Hayek's thesis there is a great deal of truth. It cannot be said too often -- at any rate it is not being said nearly often enough -- that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitor never dreamed of."


Hayek remembered meeting Churchill at a dinner: "I could see him swilling brandy in great quantities; and by the time I was introduced to him, he could hardly speak but at once identified me as the author of The Road to Serfdom. He was stock drunk. He just said one sentence: " 'You are completely right; but it will never happen in Britain.' Half an hour later he made one of the most brilliant speeches I ever heard."

The Labour Party won the election, Atlee became the next Prime Minister, and he attacked the right of individuals to choose their work. "Ask yourself," Atlee declared in a March 1947 radio broadcast, "whether you are doing the kind of work which the nation needs in view of the shortage of labor. Your job may bring you in more money but be quite useless to the community. You may complain of the shortage of coal or houses...towels and underclothing...but have you any right to complain if you are content to do some better-paid but quite useless work?" By the fall of 1947, the Labor-dominated Parliament enacted peacetime forced labor. As economist John Jewkes explained, "no man between the ages of 18 and 50 years and no woman between the ages of 18 and 40 years could change his or her occupation at will. Every such change had to be registered at the Employment Exchange, and the Minister of Labour had the power to direct workers changing their jobs to the employment he considered best in the national interest.

"It is extremely significant, and indeed sinister," Jewkes continued, "to watch how, by the logic of events, the ardent planner, still retaining his respect for individual freedom acquired from his upbringing in another type of society, was driven to hedge, to temporize, to qualify and finally to capitulate before the inexorable demands of the Plan." This was exactly what Hayek warned about. Fortunately, there was a public outcry against forced labor, and this contributed to the Labor Party's defeat in the 1950 elections.


Hayek further developed the case against socialism by gathering a dozen of his essays into Individualism and Economic Order (1948). "The peculiar character of the problem of a rational economic order," he wrote, "is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate 'given' resources -- if 'given' is taken to mean given to a single mind which deliberately solves the problem set by these 'data.' It is rather a problem of how to secure the best use of resources, known to any of the members of society, on ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilitization of knowledge which is not given to anyone in its totality." A market, he went on to show, is a discovery process which continuously gathers knowledge, updates it and relays it to participants.

Meanwhile, in 1947 Hayek called a meeting of scholars concerned about liberty. "After the publication of The Road to Serfdom," Hayek recalled, "I was invited to give many lectures. During my travels in Europe as well as in the United States, nearly everywhere I went I met someone who told me that he fully agreed with me, but that at the same time he felt totally isolated in his views and had nobody with whom he could even talk about them. This gave me the idea of bringing these people, each of whom was living in great solitude, together in one place. And by a stroke of luck I was able to raise the money to accomplish this."


Hayek recognized that views about history were a major factor shaping views about current policies. In particular, escalating regulatory burdens on free markets were due, in part, to the view that untrammelled capitalism generated tremendous wealth while it impoverishing millions. In 1954, Hayek gathered work of economic historians T.S. Ashton and Louis Hacker, economists W.H. Hutt and Bertrand de Jouvenal into a book, Capitalism and the Historians. Far from grinding down the poor, Hayek explained, the 19th century Industrial Revolution enabled millions to survive.


He completed his long-dormant trilogy Law, Legislation and Liberty, consisting of Rules and Order (1973), The Mirage of Social Justice (1976) and The Political Order of a Free People (1979). He attributed much of the decline of liberty to the mistaken belief "that democratic control of government made unnecessary any other safeguards against the arbitrary use of power." He attacked "social justice" as a wholly arbitrary, meaningless idea aimed to justify the endless expansion of government power during the 20th century. The most disastrous consequences occurred in countries which adopted parliamentary government -- but lacked a constitutional tradition limiting, at least to some degree, what legislators might do. "It turned out," Hayek wrote, "that the Americans two hundred years ago were right, and an almighty Parliament means the death of the freedom of the individual...Personal freedom requires that all authority is restrained by long-run principles which the opinion of the people approves."

He observed that the U.S. Constitution didn't prevent a highly centralized government from developing. He thought this was because Congress had the power both enact what he called "rules of just conduct" and to direct the federal government. He recommended that these functions be separated: a "Legislative Assembly" to enact "rules of just conduct" and a "Government Assembly" to direct the federal government. He thought the Legislative Assembly should be incapable of giving out favors; candidates should be between 45 and 60, and they should be elected to 15 year terms, giving them something like the independence of judges. The Government Assembly should deal with topical issues subject to interest group lobbying; the whole body should be elected periodically, like the U.S. House of Representatives, and membership in the Government Assembly should render a person ineligible for the Legislative Assembly. Hayek hoped that assigning separate functions to two assemblies would reduce the overall level of coercion and in particular reduce the amount of discriminatory legislation. For example, budgets which authorize spending to benefit some interest groups, financed by taxes on other interest groups.

Hayek added that "I certainly do not wish to suggest that any country with a firmly established constitutional tradition should replace its constitution by a new one drawn up on the lines suggested...[but] very few countries in the world are in the fortunate position of possessing a strong constitutional tradition."

In 1976, Hayek produced The Denationalization of Money, a report for the Institute of Economic Affairs (London), which challenged what he called "the source and root of all monetary evil, the government monopoly of the issue and control of money." He referred to the scourge of inflation and deflation, the consequence of volatile central bank policies. He made a case that private institutions would do a better job than government at maintaining stable money. He cited historic precedents and explained why competition, the scrutiny of currency exchanges and the financial press would provide more discipline than there is in central banks subject to political pressures.


Hayek had lived just long enough to see the Union of Soviet Socialist Republics disappear from the map. He had insisted, as Mises did before him, that socialism would never deliver decent living standards -- and he was vindicated. He warned that socialism means tyranny, and after World War II dozens of countries embraced socialism and suffered through savage tyranny. He did perhaps more than anyone else to show that free people, not government planners, are the key to a flourishing civilization.

As John Cassidy wrote in the February 7, 2000 New Yorker: "If there are two things most people can agree on these days, they are that free-market capitalism is the only practical way to organize a modern society and that the key to economic growth is knowledge. So prevalent are these beliefs that their origins are rarely examined, which is somewhat surprising, since both statements can be traced back, in large part, to one man, Friedrich August von Hayek." His moral courage and dazzling insights made clear that ideas shape our destiny.'

- Great thinkers on liberty</blockquote>