Hayek might be too much of a liberal for the Republicans

by pdxblake

The FT Alphaville blog, a great resource on financial subjects, had a great post about the (ahem) disagreement between Ayn Rand and Friedrich Hayek, both of whom are influential in libertarian thinking (including the big government libertarian Paul Ryan).  To the quotes.  First from a book on libertarian history:

When Hayek talks of the “very defined limits” in which individualism “allows” people to follow their “own values and preferences rather than somebody else’s,” Rand thunders, “Oh God damn the total, complete, vicious bastard! This means that man does exist for others, but since he doesn’t know how to do it, the master will give him some ‘defined limits’ for himself”.

They also found a recollection by Hayek of an in person interaction with Rand:

Afterward, [Hayek] took questions, which were mostly about Ayn Rand and “Atlas Shrugged.” The leading questions were “What was Rand really like?” and “What is your evaluation of ‘Atlas Shrugged’?”

Hayek’s responses took on the style of a confession. “Although I tried seriously to read the book, I failed, because there was no romance in it,” he said. “I tried even more diligently to read that fellow John Galt’s hundred-page declaration of independence, and I knew I’d be questioned on all that, but I just couldn’t get through it.”

As for Rand, he said he had met her only once, quite recently, at a party given in their honor — “and you should never have two lions at the same party.” The host eagerly brought the two together for the introduction. Here are the results, to the best of my memory: “We had a very brief exchange. She swelled in anger and spun away, remaining only long enough to say, ‘You are a compromiser.’ ”

I have (unfortunately) suffered through the entirety of Atlas Shrugged and I also (suprisingly) enjoyed Hayek’s Road to Serfdom.  I say surprisingly because I view government’s role in the economy as more than nothing, which is the current interpretation of Hayek’s thinking.  The FT Alphaville team describe:

Hayek’s view was that the market process is mysterious and unpredictable; there are too many variables whose interactions are too complex to grasp. And yet the outcomes yielded by a setting of free competition and undistorted price signals are superior to those of central planning. Government encroachment is to be resisted precisely because it would distort the price mechanisms that govern this process.

Let me highlight the key point in this summary: “the outcomes yielded by a setting of free competition and undistorted price signals are superior to those of central planning”.  That is, I think, not as controversial idea as most of the people who push the Austrian (or Austerian as it is called today) think it is when they take Hayek to be a tract opposing any and all government involvement in the economy and it is also one of the big reasons why I enjoyed Hayek’s book.

I don’t think that Hayek’s idea that free competition and undistorted price signals are superior to central planning necessarily supports the anti-government ideas that are often linked with Hayek’s (to wit, Paul Ryan).  Hayek is often condemned by some more doctrinaire libertarians as being much too compromising.  One libertarian critic, Walter Block (who himself is extreme enough to support voluntary slavery) singled out (pdf, but a fork in the eye is about as pleasant) Hayek’s insistence that “The attitude of the liberal toward society is like that of the gardener who tends a plant and, in order to create the  conditions most favorable to its growth, must know as much as possible about its structure and the way it functions”.  Liberal in this context of course is the European sense of liberalism meaning liberalizing economic policies.

Of course that is anathema to the current Republican party’s libertarianism that views only fewer regulations and fewer taxes (especially for the wealthy) as the solution.  It probably also explains Ayn Rand’s disdain for Hayek’s thinking.  Hayek’s writing was much more focused on anti-central plannning (i.e. anti-Soviet economics).  And that is where I think his points were most valuable.  There is a vast difference between discussions in the US about the Affordable Care Act to provide private sector insurance coverage that pays for private sector-provided medical care and discussions about imposing central planning of the majority of the economy (not that you’d know that from listening to Republicans).

The specific quote that so irks the radical Block is indeed a fantastic argument for the Affordable Care Act (even though I would prefer single-payer to get more efficencies by widening the pool of insured people).  The reason?  Healthcare is a market that doesn’t operate well as an unregulated market, which is why the US (with the most free-market of health insurance and care markets) has the highest costs and poor outcomes.  And so greater government involvement in health insurance and healthcare can act as water and fertilizer from the gardner that helps the economy grow by limiting the rise in health care costs that burden businesses and keep money wage growth low (because increasing benefit costs absorb the money spent on employees).

There are many things that Hayek and I disagree on, for sure, but the Randian tack that the Republicans have taken recently should highlight the areas where Hayak is now probably too far left for the current Republican party (kindof like Eisenhower, Nixon and Reagan).  And that should be an intuitive conclusion since the Democratic party is pro-capitalist (perhaps too much in some cases, Glass-Steagall repeal, ahem) but believes there is a role for government to act as the gardener of the economy, which for today’s Republican party is SOCIALISM!

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