When F.A. Hayek published The Road to Serfdom in the spring of 1944, the West had all but moved on from free markets. Some element of centralization—a planned economy at the very least—was considered the moderate "middle way" between the capitalism that had allegedly caused the Great Depression and the authoritarian economies of Russia and Germany. The enormous success of The Road to Serfdom, particularly in the United States, was a complete surprise.
A seminal treatise for the American Right, Serfdom has aged pretty well: in June 2010 it reached #1 in sales on Amazon.com, and the University of Chicago Press sold out of all copies of its new "definitive edition," edited by Bruce Caldwell, director of Duke University's Center for the History of Political Economy. The rush to become reacquainted with the most influential free-market economist of the 20th century is no doubt inspired by the Great Recession and our unsuccessful dalliance with the policies of Hayek's nemesis, John Maynard Keynes.
However, though Hayek's diagnosis of our economic ailment is as excellent now as it was then, it is by no means clear that his fully developed political philosophy, outlined in later books such as The Constitution of Liberty, offers the appropriate cure. Last year's anti-austerity protests in Europe and Occupy Wall Street demonstrations at home reveal that the greatest threat to our liberty is not simply economic, but a citizenry addicted to government largesse.
An outline of the proper structure and arrangement of free institutions alone does not suffice to make citizens rule themselves any more than knowledge of the principles of nutrition will make an overweight person thin. The fundamental virtues necessary for self-government are not intellectual, but moral. As Edmund Burke wrote in A Letter to a Member of the National Assembly,
society cannot exist unless a controlling power upon will and appetite be placed somewhere, and the less of it there is within, the more there must be without. It is ordained in the eternal constitution of things, that men of intemperate minds cannot be free. Their passions forge their fetters.
Libertarian intellectuals from the Cato Institute and Reason magazine are at the forefront of the discussions surrounding Hayek's resurgence and are hopeful that some of their political philosophy will be picked up along with his. Neither Hayek nor the libertarians, however, offer a political philosophy that can cure the intemperate mind.
The Planned Economy
Hayek's thesis in The Road to Serfdom challenged the conventional wisdom at a time when many politicians and economists were confident that some combination of scientific discovery, American ingenuity, and government centralization could produce an earthly Utopia. He argues that the knowledge necessary for centralization does not exist in collective form, but is distributed among all the individuals in society. Each person pursues his own end using knowledge that is some mixture of intuition and personal experience. Man, writes Hayek, "is often served better by custom than by understanding." He often does "the right thing without comprehending why" it is right. Because essential knowledge is scattered and localized, Hayek concludes—contra Keynes—that even the greatest minds couldn't successfully direct a planned economy. The information needed to do so is simply inaccessible. The first and most important problem for political society is not scarcity but human ignorance.
Knowledge exists only as the knowledge of individuals. It is not much better than a metaphor to speak of the knowledge of society as a whole. The sum of the knowledge of all the individuals exists nowhere as an integrated whole. The great problem is how we can all profit from this knowledge, which exists only dispersed as the separate, partial, and sometimes conflicting beliefs of all men.
Hayek's solution to this problem is the free market. Centralized control of the means of production will never bring prosperity, because planners have no device with which to accurately anticipate the needs of the citizens. Only the free market, through the free price system, can effectively coordinate the scattered individual knowledge and values of producers and consumers.
Despite the strength of Hayek's arguments, America went with Keynes instead. We are learning the hard way that Hayek was right. Faced with this, the Left changed its focus from prosperity to fairness, insisting that the federal government ought to arrange everything such that the poor, the altruistic, and the environment don't get run over by the careless, speeding locomotive of prosperity that is the free market economy. They grant that centralization will decrease GDP. Their reply is that America could use a kick or two in the shins, anyway.
By the time Jimmy Carter and his cardigan sweater appeared on national television to demonstrate just how cozy our new decreased standard of living could be, Hayek had translated Serfdom's central premise into multiple statements on law, politics, epistemology, and the division of the sciences. The most important of these later works is The Constitution of Liberty, published in 1960.
In The Constitution, he posits that the real purpose of political institutions is to facilitate spontaneous order. The free market economy converts dispersed and partial knowledge into an ordered system spontaneously, or without human design. Like Adam Smith's "invisible hand," spontaneous order is the result of individual human action but not human design.
For Hayek, there is no pre-political state of nature, and political institutions are not founded in response to scarcity or violence. Common law, morality, religion—all long-standing social institutions—are the result of centuries of trial and error. Indeed, modern civilization itself is a spontaneous order. A system analogous to the biological process of natural selection, Hayek's "social survival of the fittest" occurs as primitive tribes stumble upon practices more conducive to survival. The tribes that adopt the practices survive, and those who do not, die out. Thus Hayek's advocacy for the preservation of traditional mores and social institutions: they contain the wisdom of the ages.
Hayek believed the purpose of society is progress or "growth for growth's sake." The goal is not simply to change, but to increase the totality and coordination of human knowledge. Individual liberty is an essential political good only because it serves the higher, collective purpose of social and intellectual evolution. Society does not exist for the protection of liberty, but rather liberty is protected because it is essential for the growth of knowledge and the evolution of man.
When it first appeared, The Constitution of Liberty received only an echo of the praise garnered by Hayek's earlier work. The Road to Serfdom was a primer on everything the Right should oppose. The Constitution of Liberty attempted to outline everything that the Right should support. It was almost universally panned.
Reviews from the Left were predictably sour, but the most negative review belongs to anarcho-capitalist and father of the libertarian movement Murray Rothbard, who pronounced it "an extremely bad, and, I would even say, evil book." Rothbard attacked Hayek for severing reason from liberty:
[R]eason can discover the natural law of man, and from this can discover the natural rights of liberty. Since Hayek dismisses this...he is left with only two choices for the formation of a political ethic: either blind adherence to custom...or the coercive force of government edict."
Hayek's definition of political society borrows from evolutionary theory, as well as the Scottish Enlightenment, in particular the epistemology of David Hume. By contrast, the American Right largely speaks the Lockean social contract language employed by the founders, which posits a static human nature and a political system created to preserve natural rights. Although Hayek denied that political institutions should be rooted in natural rights, most libertarian and conservative critics of The Constitution of Liberty don't believe freedom stands a chance without them.
Falters and Slips
The University of Chicago has recently published a "definitive edition" of The Constitution of Liberty, edited by Cato Institute fellow and University of Alberta emeritus professor of history Ronald Hamowy. The shouting matches inspired by the original release of The Constitution have quieted down, though disagreements remain. In his introductory essay Hamowy, a former Hayek student and editor of The Encyclopedia of Libertarianism, tries to preserve Hayek's luminous reputation while simultaneously exposing the multiple sins that The Constitution of Liberty commits against libertarianism.
Hamowy gently allows that Hayek "falters and slips" in his endeavor to illustrate the political institutions necessary to preserve liberty, but blames these missteps on the enormity of the task. Hamowy's original review, published in 1961, was much more confrontational: he concluded that Hayek's political system would fail to preserve liberty. Hayek responded in The New Individualist Review, arguing that no political institution could provide the fail-safe preservation of liberty that Hamowy desires.
The Constitution of Liberty is marvelous in its scope and design. But it offers little instruction for a society that increasingly subverts basic freedoms. Hayek is not a Hegelian when it comes to human progress. He believes that societal devolution, defined as a loss in individual liberty, is just as likely to occur as evolution. When liberty is suppressed, individuals no longer inform the market with their particular knowledge, because their minds are otherwise employed in the service of others. As a result, the spontaneous order and human progress slow to a halt.
Hayek does not offer a way back to progress once liberty is compromised, other than to increase individual liberty. But what if a majority of the citizenry no longer value freedom? Once lost freedom is difficult to regain.
"V" is for Virtue
The Constitution of Liberty serves as a reminder of why sound economic policy must be subordinate to sound political principles. Ultimately, conservatives are suspicious of Hayek's political theory because they disagree with his understanding of human nature. Most supporters of limited government do not believe that man is simply the product of evolution, or that we stumbled upon our most cherished institutions by accident, but that our system of government is the product of the American Founders' painstaking design, and our institutions created to protect our God-given natural rights.
Surprisingly, Rothbard—no friend to conservatives—was right when he argued that Hayek's rejection of natural law and natural right ultimately undermines his defense of freedom. Limitations on the power and scope of government must begin with the recognition of the pre-political nature of rights. Government can be both a threat and a support to liberty. To keep government in check requires more than knowledge of those institutions conducive to limited government; it requires a citizenry virtuous enough to defend freedom.
"Statesmen," wrote John Adams in 1776,
may plan and speculate for liberty, but it is religion and morality alone, which can establish the principles upon which freedom can securely stand. The only foundation of a free Constitution is pure virtue, and if this cannot be inspired into our People in a greater Measure than they have it now, they may change their rulers and the forms of government, but they will not obtain a lasting liberty.
Hamowy argues in The Encyclopedia of Libertarianism that a political system founded on individual rights and limited government will ward off encroachments by the state. But what is to be done when the citizenry decides that it wants more government?
An unbridled free market cannot generate enough wealth to satiate all appetites. The real demonstration provided by Occupy Wall Street is that a certain percentage of society will always look to the government to even the score between those who are willing to work longer and harder and those who would prefer not to.
Under the "V" section in Hamowy's Encyclopedia of Libertarianism, one finds this gem on the role of virtue in a free society:
Are all or the most important virtues sustained by the market order? Are the dispositions engendered by such practices and institutions truly virtues in any recognizable classical sense, that is, are they goods pursued for their own sake and not because they contribute to some other end, such as successful generation of wealth? Libertarians have not written a great deal about either of those questions perhaps because they do not apparently need to be answered for free societies to exist.
We shall see.