"There is little doubt that the growth of health insurance is a desirable development. And perhaps there is also a case for making it compulsory since many who could thus provide for themselves might otherwise become a public charge. But there are strong arguments against a single scheme for state insurance; there seems to be an overwhelming case against a free health service for all." -- F. A. Hayek.
Hayek wrote this on page
298 of his magnum opus, The Constitution of Liberty (1960). We could put
this another way.
This isn't about putting government in charge of
your health insurance; it's about putting you in charge of your health
insurance. Under the reforms we seek, if you like your doctor, you can keep
your doctor. If you like your health care plan, you can keep your health care
plan.
These words may sound
familiar. They are from President
Obama's 2009 speech calling on Congress to pass ObamaCare.
But if Hayek was willing
to surrender the moral case against ObamaCare, what about the welfare state in
general? Hayek favored this surrender.
In the Western world some provision for those
threatened by the extremes of indigence or starvation due to circumstances
beyond their control has long been accepted as a duty of the community. . . .
The necessity of some such arrangement in an industrial society is unquestioned
-- be it only in the interest of those who require protection against acts of
desperation on the part of the needy.
These are the opening
words of chapter 19, "Social Security." He spelled out the
implications of this position on the next page.
Once it becomes the
recognized duty of the public to provide for the extreme means of old age,
unemployment, sickness, etc., irrespective of whether the individuals could and
ought to have made provision for themselves, and particularly once help is assured
to such an extent that it is apt to reduce individual's efforts, it seems an
obvious corollary to compel them to ensure (or otherwise provide) against those
common hazards of life. . . .
Finally, once the state
requires everybody to make provisions of a kind which only some had made
before, it seems reasonable enough that the state should also assist in the
development of appropriate institutions. Since it is the action of the state
which makes necessary the speeding up of developments that would otherwise have
proceeded more slowly, the cost of experimenting with and developing new types
of institutions may be regarded as no less the responsibility of the public
than the cost of research for the dissemination of knowledge in other fields
that concern the public interest. . . .
Up to this point the
justification for the whole apparatus of "social security" can
probably be accepted by the most consistent defenders of liberty. Though many
may think it unwise to go so far, it cannot be said that this would be in
conflict with the principles we have stated. Such a program as has been
described would involve state coercion, but only coercion intended to forestall
greater coercion of the individual in the interest of others; and the argument
for it rests as much on the desire of individuals to protect themselves against
the consequences of the extreme misery of their fellows as on any wish to force
individuals to provide more effectively for their own needs.
He wrote: "The
necessity of some such arrangement in an industrial society is unquestioned --
be it only in the interest of those who require protection against acts of
desperation on the part of the needy." Let me summarize his position:
"Voters should surrender to violence-prone blackmailers. This surrender is
both moral and institutional. This policy of surrender is consistent with
liberty." Let me identify where this road is headed: to something worse
than serfdom.
Sixteen years after the
publication of The Road to Serfdom, Hayek pulled the moral rug out from
under the fledgling libertarian movement that his earlier book had helped to
launch. The Road to Serfdom became a best-seller for the University of
Chicago Press. It was summarized in 1945 in Reader's
Digest. This book, along with Hazlitt's Economics in One Lesson
(1946), probably contributed more to an understanding of the dangers of central
planning than any other book that was widely read, and has remained widely
read, ever since the mid-1940s.
Nevertheless, Hayek's
work has always been a liability in the areas of morality and epistemology. He
was never as committed to the free market as his mentor was: Ludwig von Mises.
Mises was hard-core in his defense of free market principles. Hayek never was.
THE TINKERER
There is something else
that most people do not understand. There are two basic approaches to academic
topics, and Hayek understood this clearly. He said that some people are
system-builders. He said that others are tinkerers. He always called himself a
tinkerer.
Ludwig von Mises was a
system-builder. Even more of a system-builder was Murray Rothbard. But Hayek
never had that ability or inclination. He would take a small topic and
investigate it. He would generally keep in the back of his mind this principle:
voluntary decisions in the marketplace are more efficient than decisions by
central planning boards. He understood enough of Mises to be opposed to central
planning. But he was never committed in the way that Mises was to the
fundamental principle that the state should be restricted from entry into
affairs that are governed by price competition, open entry, and voluntary
contracts. In this sense, Hayek was always soft-core.
He wrote some very
important articles. His article on "The Use of Knowledge in Society,"
published in 1945, remains a classic. Every student who takes an upper-division
course in economics ought to read that article. Of course, the professors need
to read the article even more than they do. It appears as Chapter 4 of his
collection of essays, Individualism and Economic Order (1948). This book
is online here.
From 1944 until 1960, he
labored long and hard on his book, The Constitution of Liberty. I bought
it in 1960. I had not read The Road to Serfdom. I was put off by chapter
19: a defense of the welfare state as an aspect of the free society. Hayek
believed in the basic right of the civil government to take money away from
people in order to create safety nets for the general population. In other words,
Hayek was not a libertarian. He was generally opposed to market interference,
but on the fundamental issue of the welfare state, he was in the other camp. He
was as schizophrenic as any scholar I have ever seen. He was a tinkerer. He was
not bothered by broad contradictions.
I bought my copy of The
Constitution of Liberty a few months after its publication. I was 18 years
old. I immediately recognized the extent of his intellectual schizophrenia.
Reading Chapter 19 inoculated me against Hayek early in my career.
The first libertarian to
publish a warning on this book was Hayek's graduate student, Ronald Hamowy. In
the first issue of the student publication, New Individualist Review,
which was published in April 1961, Hamowy wrote a critique of the book from the
libertarian standpoint. Hayek was one of the general editors of the journal.
Hayek replied to his critique in the second issue three months later. You can
read this exchange on-line: Hamowy,
Hayek.
(It is fascinating that Hamowy was chosen to be the editor of the corrected,
posthumous edition of The Constitution of Liberty in Hayek's collected
works.)
Hayek was a confirmed
evolutionist, so he did not believe in fixed law of any kind, including social
law. Over a period of four decades, he repeated his position again and again.
He believed that all social institutions evolve, and that new conditions create
new responses. He denied categorically that there is any fixed principle of law
governing this evolutionary process. Thus, he had no philosophical or moral
answer to this criticism, namely, that it is at least conceivable that new
economic and social conditions would create a situation in which the free
market's response would be a form of suicide. The free market's response might
be to develop state institutions that would overcome many aspects of the free
market. In fact, Hayek expressly said this with respect to the development of
the welfare state.
So, Hayek was always an
unreliable defender of the free market system. From a philosophical standpoint,
he offered no defense, other than this one: the inability of men to specify
permanent principles. He offered pragmatic defenses, all based on social
evolution. He never accepted Mises' principle of deductive reasoning as
governing economic theory.
HAYEK WAS A
CONSERVATIVE, NOT A LIBERTARIAN
Hayek was much closer to
conservatives than to libertarians. He was much closer to Russell Kirk than he
was to Murray Rothbard. Neither Kirk nor Hayek believed in economic law. They
both rejected the idea on the same basis, namely, their commitment to some form
of social evolution. Each of them would come down on the side of free-market
institutions, for they did not trust the operations of state bureaucracies, but
always on the basis of a pragmatic argument that society had chosen these free
market institutions voluntarily. Then the question arises: "How can we
stop the state from invading and capturing the institutions of society?"
Or this: "How can we stop the politicizing of social institutions by the
state?" Hayek had no philosophical answer, and neither did Kirk.
Hayek wrote this in 1949
in "The Intellectuals and Socialism."
Orthodoxy of any kind, any pretense that a
system of ideas is final and most the unquestionably accepted as a whole, is
the one view which of necessity antagonizes all intellectuals, whatever their
particular views on particular issues. Any system which judges man by the
completeness of their conformity to a fixed set of opinions, by their soundness
or the extent to which they can be relied upon to hold approved views on all
points, deprives itself of a support without which no set of ideas can maintain
its influence in modern society.
This permanent and
comprehensive dismissal of permanent and comprehensive systems of thought
included Mises's theory of a priori reasoning as the proper
epistemological foundation for economic theory. This is why libertarians in the
Mises camp have never been comfortable with Hayek.
In the debate between
Keynes and Hayek, there was no debate. That debate is mythological. The music
videos on Hayek vs. Keynes are very clever, but they are misleading. Hayek's
sporadic negative comments on Keynes came decades after Keynes and his
disciples had completely swept both the academic and government worlds. There
was Hazlitt vs. Keynes, but that came only in 1959 -- too late to have any
effect: Hazlitt's book, The Failure of
the "New Economics" . Hayek and Mises did not respond to
Keynes in a comprehensive way. This was a strategic error. By the time Hazlitt
wrote his book, 23 years had gone by, and the universities had been completely
taken over by Keynesians. Hazlitt had never gone to college. Academia chose to
ignore his book. The book is devastating.
Hayek's strategic error
in 1936 and thereafter still exists. No Austrian school economist has responded
to Keynes in a comprehensive way: books, articles, and videos. That is why I
proposed the Keynes
project in 2009. There have been no takers.
So, with no academic
Austrian school defenders challenging Keynes in the 1960s, economics students
went to Friedman and the Chicago school. But these economists were statists to
the core with respect to monetary theory and monetary policy. They
categorically rejected the idea that the free market, meaning free banking,
meaning banking completely unprotected by civil governments, should govern
monetary policy. They had their own plans for central banking, which no one
with any influence in politics or government considered for five seconds. It
was enough that the Chicago school baptized central banking. "Thanks,
guys; now please go away. Don't call us. We'll call you."
This is why Rockwell.com
and the Mises Institute have fundamentally changed the alignments: statism vs.
the free market. The World Wide Web has brought readers to Lew Rockwell.com and
Mises.org. Because of copyright restrictions, Web readers do not read much that
was written by Hayek. Price competition rules (free to download). Digits rule
(on-line now).
Mises.org promotes
economists who believe in systems. Mises was a systems man, and so was
Rothbard. Neither of them was a tinkerer. Therefore, it is far easier for a
student to learn basic economics from Mises or Rothbard that it is from Hayek.
He never wrote a comprehensive treatise defending economic theory or the free
market social order. For that matter, neither did Friedman. (The only
systematic Chicago school textbook was written by Allen and Alchian, who were
at UCLA: University Economics. Its last edition was in 1972.)
CONCLUSIONYou do not win a war by tinkering.
There is a story from the Cold War era about a young Russian diplomat who gets his first chance to leave the USSR: an assignment in Paris. His equivalent is a young French diplomat who gets assigned to Moscow. The trains each way stop at Warsaw. The Russian thinks: "This must be Paris." The Frenchman thinks: "This must be Moscow."
On the road between Keynes and Rothbard, Hayek was Warsaw.
Source: Tea Party Economist, Gary North, - July 12, 2013
http://teapartyeconomist.com/2013/07/12/f-a-hayek-obamacares-defender
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