Hayek’s role for the state

A fascinating defense of Hayek, in response to Sach’s column (posted here the other day). According to Tim Duy, Hayek was more reasonable than we give him credit for being (thanks to Economist’s View for this one):

In Defense of Hayek, by Tim Duy: I feel a need to at least quickly defend Hayek against Jeffery Sachs attacks. Sachs leaves the impression that Hayek is a right wing ideologue who argues against any state provision of social services. From the Road to Serfdom:

There is no reason why in a society which has reached the general level of wealth which ours has attained the first kind of security should not be guaranteed to all without endangering general freedom…there can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody…Nor is there any reason why the state should not assist the 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 the assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong….To the same category belongs also the increase of security through the state’s rendering assistance to the victims of such “acts of God” as earthquakes and floods. Whenever communal action can mitigate disasters against which the individual can neither attempt to guard himself or make provision for the consequences, such communal action should undoubtedly be taken….There is, finally, the supremely important problem of combating general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them…

The type of planning that Hayek was vociferously opposed to is that meant to offset not insurable risk, but the fundamental shifts that accompany structural change:

The planning for security which has such an insidious effect on liberty is that for security of a different kind. It is planning designed to protect individuals or groups against diminutions of their income, which although in no way deserved yet in competitive society occur daily, against losses imposing severe hardships having no moral justification yet inseparable from the competitive system.

In other words, it is appropriate for society to guarantee a proscribed level of health care accessibility, but not to guarantee you against loss because technological change eliminates your job. Note that  Hayek’s list of accessible social services is actually quite broad. And in other parts of the Road to Serfdom, he recognizes the need for government to address externalities, monopolies, etc.

I dislike efforts to color Hayek as a one-dimensional personality as much as I am irritated by efforts from the right to discredit Keynes as a socialist. Of course, some blame for the attack on Hayek should be directed to the right; so called supporters of Hayek have damaged his reputation with such simplistic expositions as this cartoon.

Speaking of Keynes, Robert Skidelsky’s masterful biography includes Keynes’s thoughts on Hayek:

Keynes’s response was unexpected. Hayek’s was a “grand book,” he wrote, and “we all have the greatest reason to be grateful to you for saying so well what needs so much to be said….Morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement, but in deeply moved agreement.”

Keynes did note, however, that Hayek, by admitting to the need for government to serve a social function, recognized that there was in fact need for a middle ground, but could not determine where to draw it.

Finally, it is important to recognize that Hayek was writing in reaction to the rise of Fascism in Germany and Stalinism in the Soviet Union. There is an important lesson there, and God help us if we ignore it in an eagerness to discredit Hayek.

2 comments

  • It is not simply a matter that “Hayek was writing in reaction to the rise of fascism in Germany and Stalinism in the Soviet Union.” We did not need Hayek to advise us on such ills. What Hayek did in the Road to Serfdom was to equivocate all forms of planning with Stalinism and Fascism.

    That like a good classical liberal he throws a bone to public goods in a hurried litany is hardly evidence of his subtlety, but, rather, evidence of the degree to which he was following a template well laid out. Smith and Ricardo too drew up such lists.
    True, Hayek is two inches deeper than Bastiat. But so what?

  • I am fascinated by the philosophical sophistication and historicity of Hayek’s thought–in contradistinction to that of Milton Friedman, for example. Brian Lee Crowley’s “you can’t beat the market, so you might as well join it” conversion to Hayekian economics is a powerful and distinctive current in contemporary Canadian neo-liberalism, and I feel a need to read all of Hayek’s works before I can completely come to terms with AIMS and what it stands for. For now, I’ll make two observations:

    1. The world of ‘our” childhoods–the stagflation of the 1970s and the high interest rates and tight money policies that were probably instrumental in wringing inflation out of the economy–certainly contained lessons that lent credence to some aspects of Thatcherism and Reaganism. Nevertheless, the fact remains that even that politically bastardized version of Keynesianism helped to create a quality of life, an improved equality of opportunity, and a realization of human potential that our parents and grand-parents could only have dreamed of.

    2. As George Orwell once observed of Hayek’s work–an observation that Brian Crowley himself cited in his essay “The Vindication of Doubt” which appeared on IDEAS in the early 1990s–it is in the negative part of Hayek’s argument(i.e. the case for caution and skepticism about all human institution) that we find the greater truth. The distance between Hayek’s “evolutionism” and a commonsense application of Pigovian and Paretian analysis such as Joseph Heath’s “The Efficient Society” (i.e. that we may have arrived at a good division of labour between government and market in Canada through trial and error) may not be all that great after all.

    –Mark Crawford
    “B.C. Policy Perspectives”

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