We Are Not All Hayekians Now

Forbes , March 19, 2000

LAST YEAR THE GERMAN NEWSWEEKLY DIE ZEIT asked Berkeley philosopher John Searle to single out a "book of the century." He chose Friedrich Hayek's The Road to Serfdom. With its argument that socialist planning would inevitably collapse into stagnation and oppression, it was a prophetic work--remarkable for 1944.

"When I was an undergraduate at Oxford in the 1950s," Searle said in a recent Reason interview, "the conventional wisdom was that capitalism, because it is so inefficient and so stupid, because there's not a controlling intelligence behind it, cannot in the long run compete with an intelligently planned economy."

Searle's professors mocked Hayek, who argued just the opposite, for clinging to long-refuted theories. "Because everybody spoke so badly of him," Searle says regretfully, "I never took Hayek seriously until after he was dead."

Searle wasn't the only one ill-served by an elite education that scorned Hayek's work, nor is he alone in his new admiration. John Cassidy, economics correspondent for The New Yorker and another Oxford grad, published a paean to Hayek in that magazine's Feb. 7 issue. Hayek, writes Cassidy, "was vindicated to such an extent that it is hardly an exaggeration to refer to the 20th century as the Hayek century."

The scholarly work of Hayek, who won the Nobel Prize in economics in 1974 and died in 1992, spanned not only economics but political and social theory, psychology and cognitive science. He also worked diligently, as a polemicist and an organizer, to preserve and extend classical liberal principles of economic and personal freedom. Milton Friedman once called Hayek "the most influential person" in spreading libertarian ideas.

Cassidy focuses on what he calls "Hayek's most lasting contribution to economics: The notion that free markets and free prices are a means of conveying and exploiting information." We are all Hayekians now, he proclaims. Everyone "from Bill Gates to Jiang Zemin" agrees that competition is good when you can have it.

But Cassidy tries hard to rescue Hayek from his libertarian followers, whom he terms "the far right." He wants to save government intervention in education, health care, retirement planning and finance from Hayekian criticism. To accomplish this trick, he combines a truth--that Hayek did not oppose on principle all forms of government action, including minimal social programs--with significant distortions and omissions.

The thesis of The Road to Serfdom, for instance, is not simply that central planning is inefficient because it blocks the flow of information. Rather, Hayek argues that substituting government plans for individual plans requires imposing a single hierarchy of values and overriding the diverse tradeoffs individuals would prefer. "One best way"--even for education, retirement saving or health care--is a prescription for tyranny or vicious political conflict.

Hayek preferred competition to collective decision making, and diversity to forced uniformity. He worried about the desire of "specialists," or special interests, to impose their preferences on everyone. He insisted on the rule of law: that "government in all its actions is bound by rules fixed and announced beforehand--rules that make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one's individual affairs on the basis of this knowledge." That formula is incompatible with the regulatory state as we know it.

So it may be, as Cassidy writes, "quite possible to be a Hayekian and still believe in active government." School choice requires activist government; so does mandatory retirement saving in personally controlled accounts; so do disclosure requirements for selling securities. And these programs arguably meet Hayek's requirements.

But most contemporary law honors neither competition nor diversity. It is not possible to be a Hayekian and believe in government prescriptions for uniform entertainment ratings, or in complex tax codes that favor some family structures or income uses while punishing others, or in static, bureaucratically determined allocation of the broadcast spectrum. Nothing in the current political debates suggests that we are all Hayekians now.