I’ve met a fair few libertarians in my travels. Many have cited FA Hayek, the Nobel Prizewinning economist, in support of their ideas. Curious, I read The Road to Serfdom (1944), popular amongst those who advocate market forces. Hayek’s arguments are impressive, but I wasn’t convinced. It was Karl Popper citing with approval a passage in Hayek’s The Constitution of Liberty (1960) that prompted me to read more.
Hayek and Popper
Friedrich August von Hayek was born in 1899 into an academic Viennese family. He was related to Ludwig Wittgenstein and strongly influenced by his ideas. Hayek served in the Austro-Hungarian army in WW1, an experience that prompted him to choose an academic career. He joined the London School of Economics in 1931, remaining in the UK after the outbreak of WW2.
Hayek soon gained a formidable reputation as an economist, and The Road to Serfdom was highly influential. But he found himself at odds with John Maynard Keynes and JK Galbraith amongst others, and in 1950 moved to the USA, settling at the University of Chicago. He, Milton Friedman, Frank Knight, Karl Popper, Ludwig von Mises and George Stigler founded the neoliberal Mont Pelerin Society in 1947.
Contemporaries, both Hayek and Popper were born in Vienna and studied at the University there. Both emigrated from Austria before WW2 and worked at the London School of Economics. They were founder members of the Mont Pelerin Society, and for both, freedom was vitally important – Popper published the two-volume The Open Society and Its Enemies in 1945, a year after Hayek’s The Road to Serfdom. But their thinking is very different.
Hayek’s starting point is individualism and the principles of 18th & 19th century liberalism; in the postscript to The Constitution of Liberty entitled “Why I am not a Conservative” he describes himself as an ‘Old Whig’.
For Hayek, individual freedom (the absence of arbitrary coercion) is a paramount principle. Not only because people don’t like arbitrary coercion, but because maximising individual freedom affords the greatest opportunity for innovation – new technologies, foods, medicines, techniques, trading relationships etc.
The best safeguard against arbitrary coercion is the rule of law; not specific legislation, but rather underlying principles that everyone, including government, is aware of and equally subject to. For Hayek individualism is fundamental, so not surprisingly he considered socialism – for which collectivism is fundamental – to be the arch-enemy of freedom.
The section of The Constitution of Liberty entitled ‘Freedom and the Law’ is stunning in its scope and argumentation. And if you want to explore the downside of socialism, Hayek is your go-to source. It’s when he comes into contact with the real world in ‘The Value of Freedom’ and ‘Freedom in the Welfare State’ – that I feel his reasoning becomes distinctly wobbly.
freedom vs coercion Hayek admits that complete freedom and a total absence of coercion aren’t possible within a social group. For society to function, some behaviours will be prohibited and others required. But these constraints are similar to those we encounter in the natural world.
safety net vs welfare state He also recognises the need for a safety net to prevent destitution – that might require public funding. Hayek has two main concerns; that a safety net will introduce the expectation that all should be the same, and that it will become a lever for coercion on the part of government.
equality vs equalisation Hayek wants everyone to have equal access to the safety net, not for the safety net to evolve into a welfare system that equalises everyone. He doesn’t support the redistribution of wealth, or spending significantly more resources on one group of people rather than others.
market forces vs centralised planning The assumption that we’re all entitled to the same quality of life results in central planning. But the real world is too complex for central planning to work. People and their circumstances are all different, so fairness in a centrally planned system requires discretionary decisions on the part of administrators, and those can be used to arbitrarily limit the freedom of individuals. His solution to the complexity problem is the market, an impartial function that can respond to any situation. He advocates competition (for goods, housing, jobs) mediated by price.
impartiality Hayek argues; “And if one way of achieving our ends proves too expensive for us, we are free to try other ways” (Serfdom, p.97). That, I’d suggest, is where his argument collides with reality. Hayek doesn’t appear to have ever met anyone who has run out of ‘other ways’ to try – whose poverty, poor health or complex adverse circumstances mean that they simply can’t bootstrap themselves out of the situation.
Hayek is aware that his model will be tough for some, but doesn’t see market forces as any different to natural ones; “Man has come to hate, and to revolt against, the impersonal forces to which in the past he submitted even though they often frustrated his individual efforts” (Serfdom p.209). What he conveniently overlooks is that throughout history people have revolted against impersonal forces (climate, geography, famine, sickness) and that revolt has been the driver for a great deal of innovation.
socialism and conservatism
For Hayek, socialism with its centralised planning is the antithesis of the kind of world he’d like to see. He points out it led to the totalitarianism of Stalinism, and that Hitler’s rise to power was facilitated by the socialist policies already in place in Germany. Understandably, he’s worried that what he sees as socialist thinking across the political spectrum in the UK will end up with the same outcomes.
Of course that’s not what happened. Not yet anyway. Hayek was right that the post-war worldview would result in successive governments, of the right and the left, centralising power and limiting individual freedom. But I’d argue that those actions are the result, not of socialism, but of a human tendency to want to increase control over our environment and to reduce the amount of information we have to deal with. And any model of society is prone to that tendency.
Hayek touches on this in the chapter ‘Why the Worst Get on Top’ in The Road to Serfdom. Those who are highly motivated to seek power and oversimplify have an advantage over those who aren’t bothered about power and who know complex issues can’t be reduced to a soundbite.
The fact that control-seeking and over-simplification are human tendencies rather than outcomes of a particular political worldview, is important because of those who subscribe to Hayek’s view risk seeing socialism as the enemy of liberty, when in fact the enemy is human behaviour to which they are equally prone. Margaret Thatcher was heavily influenced by Hayek, but centralised and simplified like there was no tomorrow – including over-simplifying Hayek.
Popper is also committed to freedom and opposed to arbitrary coercion. But his starting point is reasoning. In Conjectures and Refutations (1963) he systematically compares and contrasts empiricism and intellectualism, and shows how the latter, unfettered by evidence, leads to essentialism, utopianism, then totalitarianism.
Hayek is in his element with abstract principles. But when he comes up against the real world he begins to falter. He acknowledges that the real world and his market model, are complex, messy and sometimes harsh, but believes people will put up with that in order to hang on to an abstract principle of ‘freedom’. This is where Hayek and Popper part company.
For Hayek, freedom is of paramount importance. For Popper, any single paramount abstract principle is problematic. Via a painstaking critique of Plato, Hegel and Marx in The Open Society and Its Enemies, Popper shows how making abstract principles paramount results in essentialism, utopianism, then totalitarianism.
The world Hayek envisages isn’t a utopia in the way most people would use the word, but it is in the sense Popper uses it – in Hayek’s case an ‘ideal’ world in which individual freedom is prized above everything and impartial market forces (eventually) result in significant benefits for all.
Ironically, Hayek’s model means that despite the impersonal forces of nature and the market applying equally to all, some people through an accident of birth or adverse circumstances are likely to have to be more submissive to those forces than others who happen to be in the right place at the right time with the right opportunities.
Submitting to the impersonal forces, as Thomas Hobbes pointed out, can result in life being ‘solitary, poor, nasty, brutish and short’. In Hayek’s model that fate is averted by the minimal safety net, but he doesn’t go into detail. Ironically, his model implies that it’s OK for some people never to escape the safety net because they still have their individual freedom and there are benefits for others collectively from economic advances. Hayek’s approach has been tried in the West for the last three decades. We’re still waiting for the economic benefits to trickle down. His model has resulted in a few becoming richer, many becoming poorer, and postponing action on pre-existing crises involving raw materials, pollution and ecological catastrophe.
the real world
Popper points out that theoretically possible abstract concepts considered by philosophers and logicians are often impossible in the real world – because the real world is constrained by complex factors that philosophy and logic don’t have to take into account. That doesn’t mean you can’t base a socio-politico-economic system on abstract principles such as individual freedom and the rule of law, but it does mean making an abstract principle paramount will be problematic.
The economist Paul Krugman reportedly observed that Hayek’s ideas were more about politics than economics. A friend commented; “He must be an economist if he uses equations”. I said I hadn’t seen a single equation in either book. The response was “But equations tell you there are variables”. The challenge for most economists tackling the real world is getting all the relevant variables into their equations. But Hayek doesn’t have that problem because he’s dealing with abstract principles and can include or exclude whatever variables he wishes.
Popper is happy to embrace abstract principles, but is well aware of what happens when they collide with the real world. At the end of The Open Society and its Enemies: the Spell of Plato, Popper points out that if piecemeal improvements to institutions go wrong, the damage is limited, but if things go wrong with the wholesale changes advocated by utopians, it’s catastrophic (p.172). Abstract principles make great servants but dangerous masters. As we’re discovering with Brexit.
Hayek, FA (1944). The Road to Serfdom, Routledge.
Hayek FA (1960). The Constitution of Liberty, Routledge.
Popper, K (1945). The Open Society and its Enemies Vol 1: The Spell of Plato, Routledge.
Popper, K (1945). The Open Society and its Enemies Vol 2: Hegel and Marx, Routledge.
Popper K (1963). Conjectures and Refutations, Routledge.