♪ Music ♪ Reality – captured in user friendly symbols and processed for understanding. ♪ Music ♪ The Idea Channel. Dr. Hayek, you were trained as a lawyer, I understand. Where were you trained? In Vienna. My earlier background was biological, but during World War I, I got intensely interested in political subjects. At that time, you could study economics in Vienna only as part of the law degree: so I did a regular law degree, although only the first part in the normal way. I have a very good education in the history of law. But then I discovered that I could claim veterans’ privileges, and so I did the second part in modern law in a rush and forgot most of modern Austrian law. I was later again interested. In fact, in 1939, or rather in 1940, I was just negotiating with the Inner Temple people to read for a barrister there when I had to move to Cambridge; so the thing was abandoned. But I got so fascinated with the differences of the two legal systems, and my interests had turned to these problems, that I thought it might be useful to have systematic training, but it never came off. So my knowledge of common law is still very limited. Were you thinking of practicing actually? Oh, no. Oh, no. It was just that I became so interested in the evolution of the law and the similarity between the evolution of Roman law and the later evolution of common law that I wanted just to know a little more about judge-made law. You went to the law school because you wanted to study economics, and your lifework, of course, as everybody knows, has been in economics. When did you first begin to think about the relationship between legal philosophy and the problem of maintaining a free society? Well, that’s difficult to remember. I began to think about this problem in the late 30s in a general way, and I think it began with the general problem of the genesis of institutions as not designed but evolving. Then I found, of course, that law was paradigmatic for this idea. So it must have been about the same time when I wrote the counterrevolution of science thing, when I was interested in this evolution of institutions, that my old interest in law was revived, as I said, as a paradigmatic for grown institutions as distinct from designed institutions. Your interest in grown institutions, or evolving institutions, came out of your work in biology? I understand you had some background… Well, I come from a completely biological family; so my knowledge of biology derives from my boyhood. The grandson of a zoologist, son of a botanist, and the funny thing is that although my own family grew up separated from my Austrian family in England, they both have become biologists again. That’s a genetic trait. My brother was an anatomist, incidentally; so the tradition is wholly biological. But I’ve never studied biology, but I think by the time I became a student of law, I knew more biology than any other subject. But your approach to these matters have been largely affected by the fact that you were familiar with Darwin and the evolutionary hypothesis from an early age? Yes. I think it was mainly revived when I returned to my psychological interests. I did not mention that while I was studying law, I really divided my time fairly equally between economics and psychology, with the law on the side. I did conceive at that time, when I was twenty-one, twenty-two, ideas on physiological psychology which I had to give up; I had to choose between the two interests, which were economics and psychology, and for practical reasons I chose economics. But after I published The Road to Serfdom in 1944, I wanted to take leave from this sort of subject. So I had discredited myself with my professional colleagues by writing that book that I thought I would do something quite different and return to my psychological ideas. So between ’45 and ’50, I wrote this book The Sensory Order, and that is based entirely on psychological ideas, on biological ideas. And that was, I think, the revival of my interest in the field of biological evolution. You mentioned that your interest was divided between economics and psychology, and for practical reasons you took up economics. What were the practical reasons? There was no chance of a job in psychology. I see. You mean, the universities just didn’t have an opening? No. In fact, there were hardly any psychologists teaching there, and certainly nobody had any sympathy with the kind of my interests. And anyhow, at that time you couldn’t make an academic career your career. I mean, nearly everybody in Austria, except in the experimental subjects, who was aiming at a professorship had to have a second occupation during the period in which he prepared for it. And there was then, in the early 20s, still no chance for psychologists getting an outside job. But as a lawyer with an interest in economics, it was quite easy. And what was your outside job? Oh, at first I became a civil servant in one of these temporary governmental offices for carrying out the provisions of the peace treaty of 1918. Clearly the pre-war days. In that capacity, it so happened that my official chief was Ludwig von Mises, whom I had not known at the university, had not known then, and I had never attended his lectures at the university. I rather like telling the story of how I came to him with a letter of introduction by von Wieser, who was my real teacher, who described me as a promising economist. Mises looked at me, promising economist? I’ve never seen you at my lectures. But we became very great friends afterwards, and for the next ten years, I was working in Austria, he was for the first five my official head in the government office; then he helped me to create the Institute of Economic Research and became vice-president while I was director. For the whole ten-year period while I was still in Austria, I was very closely connected with him. Is it possible for you to identify now the major intellectual influences on the development of your thought? I mean, I gather some of them come out of a Darwinian brand of thought, and there must have been others in law and in economics. Oh, I think the main influence was the influence of Karl Menger’s original book, a book which founded the Austrian school and which convinced me that there were real intellectual problems in economics. I never got away from this. I was taught by his immediate pupil, von Wieser, and that is my original background. I was later very much influenced by Mises; the first theoretical problems I took up were problems arising out of his theory of money and trade cycle, which I elaborated. So until the middle thirties or late thirties, in my own age, I was a pure economist concerned with money, bank, capital, industrial fluctuations. Then came one event in my life which really changed my outlook. I became suddenly, it’s a very funny circumstance which started it. One of my colleagues at the London School of Economics used to make fun of the use of data by economists, who were so anxious to assure themselves that there were data that they were speaking about given data. And this talk about data made me aware that they are, of course, purely factious; that we are assuming these facts are given, but never say to whom they are given. Which made it clear to me that the whole economic problem is a problem of utilizing widely dispersed knowledge which nobody possesses as a whole, and that determined my outlook on economics and proved extremely fertile. And my whole interpretation of the market prices as the signals telling people what they ought to do all sprang from this one thing which I first outlined in a lecture to the London Economic Club in 1937. I think, while up to this point my work was conventional in the sense of just carrying on what existed. That was a new outlook I brought into economics. Which now I like to put it into the form of interpreting prices as signal leading us, on the one hand, to serve needs of which we have no direct knowledge, and on the other hand, to utilize means of which we have no direct knowledge. But it’s all through the price signals, which enable us to fit ourselves in an order which we do not, on the whole, comprehend. Well that idea that information and facts are spread widely throughout the society, and that no one person has even an appreciable fraction of the exact facts, also forms a large part of the basis of your philosophy of law. Oh, yes; oh yes. I want to come back to that in a moment, but before I do, I thought I’d ask you specifically in your work on law, if you can identify the writers or the persons who influenced you. Well, I don’t think there was an original influence when I began to search for people sympathetic to me. It was very largely the late nineteenth-century English lawyers, people like Dicey and Vinogradoff and Maitland, in whom I found a treatment which was sympathetic to me and which I could use. But the initial interest came really from economics, which led me back to law. And then I was trying to comprehend the basics of the English system…In fact I found that the basic philosophy of liberalism was probably more clearly expressed by some of the English lawyers of the period than by any of the economists. The positivists, the legal positivists, come in for what one might, with understatement, call considerable criticism in your latest book, and I wondered, when did you first come across legal positivism? Kelsen was my teacher. Oh, was he? You went to his lectures? And then you went to his lectures, did you then.. I was greatly impressed by him at first. The logic of it has a certain beauty, and he was a very effective expositor. But I think what disturbed me first was his claim to be the only one who was not ideologically affected. He pretended that he was a critique of all ideology, and he was pure science. I saw too clearly that he was as much affected by a certain kind of ideology as anybody else. When did you first come to have the now-critical view of Kelsen that you hold? Oh, certainly only when I was working on these problems ten years after my study in England. It was probably when I was working on these things on the history of ideas, particularly Comte and the Saint-Simonians, when I learned to see what I now call the constructivistic approach. It was in Comte and the early sociology that I found it most clearly expressed, that I began to trace the development from Cartesian rationalism to positivism. Well, it was a very slow and gradual process which made me see it clearly; so that’s why I can’t say exactly when it began. But by the time I did this book on the counterrevolution of science, I had a fairly clear conception of it. Well, in your latest book, Law, Legislation and Liberty, you’re starting from a premise, I take it, that liberty is really declining throughout Western democracies, and in fact is in considerable danger of extinction within the foreseeable future. I wonder if you’d care to talk a little bit about the evidence you see for the proposition that liberty is, in fact, declining and is in danger. Well, of course, the original occasion was my analysis of the causes of the intellectual appeal of the Nazi theories, which were very clearly, I mean, take a man like Carl Schmitt, one of the most intelligent of the German lawyers, who saw all the problems, then always came down on what to me was intellectually and morally the wrong side. But he did really see these problems almost more clearly than anybody else at the time, that an omnipotent democracy, just because it is omnipotent, must buy its support by granting privileges to a number of different groups. Even, in a sense, the rise of Hitler was due to an appeal to the great numbers. You can have a situation where the support, the searching for support, from a majority may lead to the ultimate destruction of a democracy. Perhaps I should explain this, you see, the reason why I ever wrote The Road to Serfdom. In the late thirties, even before war broke out, the general opinion in England was that the Nazis were a reaction, a capitalist reaction, against socialism. This view was particularly strongly held by the then-director of the London School of Economics, Lord Beveridge, Sir William Beveridge, as he was then. I was so irritated by this, I’d seen the thing develop, that I started writing a memorandum for him, trying to explain that this was just a peculiar form of socialism, a sort of middle-class socialism, not a proletarian socialism. And that led first to turning it into an article and then turning it into that book, for which I was able to use material I had already accumulated for what I had planned about the abuse and decline of reason, of which the counterrevolution of science thing was to be the first, introductory, part. I thought I would trace the development of this extreme rationalism, or as I now call it, constructivism, from Descartes through Comte and positivism; and then in the second volume, called the decline of reason, showing the effects, leading to totalitarianism and so on. I had all these ready when I had the practical purpose of explaining to the English intellectuals that they were completely mistaken in their interpretation of what the Nazi system meant, and that it was just another form of socialism. So I wrote up an advance sketch of what was then meant to be volume two of the large work on the abuse and decline of reason, which I never completed in that form, very largely because the next historical chapter would have had to deal with Hegel and Marx, and I couldn’t stand then once more diving into that dreadful stuff. [laughter] So I gave it up, and it’s only now, almost forty years after I started on the thing, that in Law, Legislation and Liberty I’ve finally written out the basic ideas as they have gradually shaped themselves. Well, I wonder if you see, for example, in the United States, evidence of the decline of freedom. Well, I think in a way the necessity for an American government, in order to capture the support of all kinds of splinter groups, to grant them all kinds of special privileges is more visible than in almost any other country. It hasn’t gone as far yet, because your development is not a steady one, unlike the British one, which has been continuously in the same direction. You make experiments like the New Deal and then undo it again. Well, we never really undid a lot of the New Deal, I’m afraid, did we? No, it’s quite true. But at the time I formed these ideas, because it was during the New Deal, the New Deal was very largely evidence for me that America was going the same way in which Europe, at least England, had gone ahead. Well I think it must be, I suppose a lot of people would say that, in fact, in some sense freedom was increasing in America, because we certainly now have much more freedom for racial minorities. Yes. There is much more freedom in the area of sexual permissiveness. There is much more freedom, if you want to call these things freedom, in the area of things that may be said or written or shown in the film or shown on the stage. Now, I suppose the latter could be evidences of depravity rather than freedom, but I take it you think.. Well, I think America is in a very early stage of the process. You see, it comes with a restriction of economic freedom, which only then has effects on the mental or intellectual freedom. In a way, American development is probably a generation behind the one which gave me the illustrations, the German development. The American degree of restrictions of freedom is perhaps comparable to what it was in Germany in the 1880s or 1890s under Bismarck, when he began to interfere with the economic affairs. Only ultimately, under Hitler, gave the government the power which American government very nearly has. It doesn’t use it yet to interfere with intellectual freedom. In fact, perhaps the danger to intellectual freedom in the United States comes not from government so much as from the trade unions. Well, I think what you’re saying, then, is that although in some ways society is becoming more permissive, that the basic freedom upon which all others ultimately depend is economic freedom. Yes. And, you know, even the permissiveness, I have certain doubts whether this sort of permissiveness, in which the, I’m not now speaking about the governmental activities, the change in morals due to permissiveness is in a sense anti-liberal, because we owe our freedom to certain restraints on freedom. The belief that you can make yourself your own boss, and that’s what it comes to, is probably destroying some of the foundations of a free society, because a free society rests on people voluntarily accepting certain restraints, and these restraints are very largely being destroyed. I blame, that respect, the psychologists, the psychoanalysts, as much as anybody else. They are really the source of this conception of a permissive education, of a contempt for traditional rules, and, it is traditional rules which secure our freedom. I think somebody said that the reason John Stuart Mill and others could talk about the requirements of now almost absolute freedom in some areas was that they were really relying upon an understood set of morals, which people would not transgress. Once the moral capital of that era has been dissipated, that kind of permissiveness or freedom is no longer restorable. John Stuart Mill’s attitude toward this was very ambiguous. In a sense, his argument is directed against the tyranny of the prevailing morals, and he is very largely responsible for the shift from protest against government interference to what he calls the tyranny of opinion. And he encouraged a disregard for certain moral traditions. Permissiveness almost begins with John Stuart Mill’s On Liberty. So that there’s a direct line between John Stuart Mill and Times Square in New York City, which is a rather overly permissive area? Yes, yes, I think he is the beginning. You know, I sometime said, I don’t want really to exaggerate, that the decline of liberalism begins with John Stuart Mill’s On Liberty. That’s an interesting thought. Do you agree with the suggestion that Mill was really a much more sensible writer when he was not under the influence of Harriet Taylor? Yes, but I think that influence can be overrated. He always needed a moral, he was not a very strong character fundamentally, and he was always relying on the influence of somebody who supported him. First his father, then Comte, then Harriet Taylor. Harriet Taylor led him more deeply into socialism for a time, then he stayed. Well I’ll tell you, the next article I’m going to write is to be call, “Mill’s Muddle and the Muddle of the Middle.” It’s a great title. But returning to your book and the relationship between law and liberty, as you just mentioned, I think really central to your argument is the distinction between constructivist rationalism and evolutionary rationalism, and I wonder if you would elaborate for us on that distinction. Well, I have tried to do that at length in that postscript to Law, Legislation and Liberty, which I first gave as a Hobhouse Lecture under the title “The Three Sources of Human Values.” Which essentially amounts to that our rules of conduct are neither innate, the majority of our rules of conduct, nor intellectually designed, but is a result of cultural evolution, which operates very similarly to Darwinian evolution, but of course is much faster, because it allows inheritance of inherited characteristics, as it were. And that the whole of our system of rules of conduct, legal as well as moral, evolved without our understanding their function. I put it even as strong as that it’s culture which has made us intelligent, not intelligence which has made culture. And that we are living all the time thanks to the system of rules of conduct, which we have not invented, which we haven’t designed, and which we largely do not understand. Which we are now forced to learn to understand them in order to defend it against the attempt to impose upon them a rationally designed system of rules, which we can’t do because we don’t even understand how our present system works, and still less how any designed rules would work. But it is in this context that I am now trying to develop and finally state my upshot of all my ideas. But I take it, and correct me; I may be quite wrong, that you think a body of rules or laws which evolve because it serves the group in ways the group doesn’t even understand is likely to leave more room for freedom of the individual than is a rationally designed body of law. Yes, very definitely; but of course it takes a long time really to explain this. A system of rules which has developed is a purely abstract system of rules which merely secures coordination without enforcing upon us common goals or common aims. We are only happy emotionally if we are aware that we are working with our environment for common purposes. But we are actually living in a system where we profit from a method of coordination which is not dependent on common purposes of which we are aware, but it rests entirely on our obeying abstract rules which are end-independent, as it were, and that is partly the cause of our discomfort in this system, because it does not satisfy our emotional desire for knowing that we’re working for common purposes. On the other hand, has created these conditions in which we constantly are self serve purposes of which we have no information, serve needs of other people whom we don’t know, and profit from the doings of other people who don’t intend to benefit us but who, just by obeying these abstract rules, produce an order from which we can profit. It is a system which creates a maximum opportunity for people to achieve their own purposes without their being constrained to serve common purposes with the group into which they were born. Of course, they are still free to join voluntarily any group for pursuing common purposes. But this freeing from the need to pursue the same common purposes with the environment in which you are born is, in one hand, the basis of the worldwide economic order; on the other hand, the thing which disagrees with our emotions. It has in fact occurred, particularly in countries with the Anglo-Saxon legal tradition, that the evolved order has allowed a great deal of freedom. On the other hand, other orders have evolved elsewhere in the world which are quite unfree; so that there’s no necessary connection between an evolutionary body of law, is there, and freedom? In a sense, yes. But it works both ways. Real evolution you have only under freedom. Wherever you have a community completely commanded by an authoritarian system, there is no evolution, in a sense, because better systems cannot prevail so long as the old system is maintained by force. So it’s rather that evolution is made possible by freedom, and what you get in unfree systems is due to the fact that the emergence of the better has been prevented. You mean there’s no competition between rules within the system when it’s.. No competition, or no competition at least between groups pursuing different rules. You can’t start in a little circle acting different rules from those which are the official ones. I’m not sure that you would say that a system which is allowed to evolve freely will necessarily prevail over a system which operates on command and tyranny. That is, to the degree that the issue between the United States and the Soviet Union is still in doubt, a free system of law may not have, may not be conducive to the will and the military determination necessary… Oh, no! You had, of course, a historical instance when the military organizations of feudal state destroyed what was essentially already a commercial organization which in antiquity had already existed. It was largely the invading military bands which came from the east which destroyed what was a sort of commercial civilization in a wider sense, and which throughout the whole Middle Ages imposed authoritarian order and which was only gradually destroyed by some little commercial centers which escaped the feudal system. The Italian commercial cities and later the Dutch commercial cities developing because they allowed new rules to spring up and to prevail. These little communities, which acted on different principles, really developed modern civilization. So the survival of the fittest is really a survival of the fittest rules within a society where there are allowed to compete. … which comes to the same thing as the fittest groups. Rules are always things practiced by some little group. I mean, take the trading towns of the Mediterranean in Phoenician and Greek times. It was certainly a breaking of the tribal rules when these little centers began to trade with distant places, taking from their neighbors what they could have used very well, to sell it elsewhere against traditional morals. And it was this breaking of traditional morals that made the rise of commerce possible, which ultimately benefitted all the people in these towns. They all undoubtedly greatly resented it, for things they could have better used were taken elsewhere. But if I understand you correctly, the superior system of law within a society which allows law to evolve is not necessarily correlated to the military strength of that society or the military interpretation of that society. Oh, no. You see, I think the most beautiful phrase which confirms this occurs in a recent study by a youngish French economic historian that capitalism grows everywhere due to political anarchy. I think that’s true. Is that right? I thought perhaps it created it. Oh, no; oh, no. I think it was the weakness of government which prevented government from suppressing these new developments, which they otherwise would have done. You mention, you make a distinction between mankind evolving originally in small tribal groups, which were end-oriented, and now having moved into the greater society, which is not end-oriented but is more abstract and more general. And I wonder if part of your argument is that that part of our evolutionary heritage in the tribal society makes us long for an end-oriented society and makes us long for a kind of a tribal cohesion, which will destroy the open society and its freedom. Forgive me if I first correct the thing. Tribal is not the right expression, because a tribe is always the beginning of a political order. It’s a small band of forty and fifty, in which mankind lived for a million years before even the first tribes have arisen, in which we’ve acquired our innate instincts. So innate instincts are really based on a face-to-face society where you knew every other member had to serve, and every outsider was an enemy. That’s where our instincts come from. The tribe was the first attempt, of a sort of large order, where some rules as distinct from common purpose already began. That’s why I don’t like the expression tribal element in this sense. It’s really–we have no word for this–morals which existed in the small face-to-face band but they determined our biologically inherited instincts, which are still very strong in us. And I think all civilization has grown up by these natural instincts being restrained. We can use even the phrase that man was civilized very much against his wishes. He hated it. An individual profited from it, but the general abandoning of these natural instincts, and adapting himself to obeying formal rules which he did not understand, was an extremely painful process. And man still doesn’t like them. Well, I wonder if you thought that the growth of intrusive government, which announces moral aims and regulates in the name of moral aims, is in fact due to that evolutionary heritage–an attempt to get back to that kind of a society. Partly that, and partly, at least, to stop further development. People have always accepted a certain number of rules and resent new ones. The whole process is a process of introducing new rules adopted by a small minority which a majority rejects, and the function of government very frequently, as a rule, is to prevent further evolution. Well, it would seem to follow from your view of a good law and a just law and a free society, that legislation ought to be held to a minimum. That is, deliberately planned law ought to be used only when it is quite clear that something has gone wrong with the evolving law. Yes. But even more important, the legislation, in a strict sense, ought to be confined to general rules, where what we now call legislation largely orders or commands issued to particular groups–granting privileges to some and imposing special duties on others–which is incompatible to the general idea that law, the general law should be based on abstract rules only. We call now law a great many things which are not law in my sense. Well, yes. If I understand it, as an evolutionary body of law grows up, based upon the unarticulated assumptions of the group and what makes it work well, those assumptions then have to be articulated as disputes arise and courts decide them. That articulation is necessarily abstract and general. And in order to preserve the benefits of a system like that, you would like the legislator to follow the model of legislating abstract, general rules rather than.. Exactly, exactly. As I recall, you think a large part of our present difficulty arises from the fact that we have placed in one legislature two quite different kinds of duties: one is that of announcing just rules of conduct, which are abstract and general and whose consequences are in many cases unforeseeable; and also the function of running the government and making rules of organization. Perfectly correct. That is exactly what I am trying to expound in that last volume of Law, Legislation and Liberty, which I have yesterday completed reading the proof. Well, I wanted to understand the relationship between that, because– Is it your thought that because we have a legislature which makes rules of organization for the government, that the frame of mind, the command frame of mind that that inculcates, infects its general lawmaking function? … so that it does that–it legislates generally, in that fashion, when it shouldn’t? Well, the legislature no longer knows what laws are. It constantly mixes up general rules and orders for specific purposes. In fact, most of our legislatures don’t understand any law. All right, I won’t disagree with that. But democracy, you say, results rather naturally in groups demanding privileges and in legislatures becoming end-oriented and passing specific rules to advance specific groups. And there’s a whole theory of democracy that this interest-group struggle is what it’s all about. Why do you think that necessarily leads away from freedom? Because all this legislation is a discriminating legislation which deprives some people of rights which others have. Every license given to anybody means that somebody else is not allowed to do it, and ultimately it leads to a sort of cooperative state. You mean the sheer proliferation of regulations leads to the point where everything is regulated, because if any one group gets privileges, others will demand them, and finally the entire society may be permeated by rules. It is that feature that leads to the lack of freedom. You refer in the first two books to the need for institutional invention, to bring law back to its proper function, and I wonder if you would describe to us just the nature of the institutional innovation you have in mind. What I have in mind is very largely the role of corporations, where we have very blindly applied the rules of law which have been developed to guide the individual to legal persons. Now, I have no doubt that the problem of delimitation of a protected sphere which we have learned for the individual cannot in the same, unchanged, form to very big organizations. They have physical powers which the individual does not have, and in consequence, we probably shall gradually have to invent new restrictions on what an organized group can do, which are distinct from the restrictions for the individual. I wouldn’t normally like to call it invention, because I am now sure you can’t at once design such a system, but I think that’s the direction in which we ought to aim, to guide evolution. These are the problems which we ought to face much more consciously and to experiment in this direction. It’s not a problem we can solve overnight. No, I was thinking of your suggestion which I have heard about that we have two houses of a legislature. I was going to ask you about that. Oh, I see, yes. I very much am convinced that if democracy is not to destroy itself, it must find a method of limiting its power without setting above the representatives of the people some higher power. And then, I think, can only be done by distinguishing between two different representative assemblies: one confined to legislation in the classical sense of laying down general rules of conduct; and the other directing government under the rules laid down by the first. Thus, we get a limitation which results in certain things not being, nobody having the power to do certain things at all. You see, one assembly has only the power of laying general rules and the other can only, within these general rules, organize the means entrusted to government for its own purpose. There will be no authority who can lay down discriminating rules of any kind. Well, that’s what I wanted to ask you about, because the idea is new to me, and it’s interesting, provocative. But, for example, if we had a legislature laying down general rules, would, for example, our current labor legislation qualify as general rule? Legislation authorizing the organization of unions, collective bargaining, strikes, and so forth. I think you have very sharply to distinguish. I think the law should prevent all uses of coercion, which would include the prevention of poster picketing, the prevention of union firms, exclusive rights for a union to allow employment in the thing. It would really come to the exclusion of what I call the privileges granted to unions in the present sense–the authorization of the use of force, which only the unions have and which, of course, in the case of England is particularly flagrant, because there it was introduced by a single law in 1906, when the unions were exempt from the ordinary law. But the same thing has resulted largely by jurisdiction in this country and, to some extent, on the Continent. Such legislation I think would be impossible if you had, on the one hand, only general rules equally applicable to all, and on the other hand, governmental powers which did not extend to granting to anyone special privileges. There would still be a problem of services, government services being unequal, but that, I think, would be a very minor problem. Welfare programs? Certain welfare programs, yes. Your question of welfare states is an exceedingly difficult thing to discuss briefly, because it is such a mixture of completely different things. I mean, there are certain services which certain governments can render without discrimination; there are others which it could render, but only by very different methods from which it is now employing. But I’m sure there is one group which could not be achieved in such a system, and that is deliberate redistribution of incomes. What you could do is to provide a uniform floor for people who cannot earn a certain minimum in the market, for whom you can provide in this form; but anything beyond this, any deliberate attempt to correct the distribution according to supposed principles of social justice, is ultimately irreconcilable with a free society. I think that must be related to your point, in your book, that any attempt for the society to produce real equality is ultimately inconsistent with the direction of a free society. Material equality, yes. And that is because equality does not occur–I’m guessing– naturally, and therefore requires pervasive regulations to be produced? Well, let me put it, the same thing, but in a slightly different form. You can allow people to choose their occupations only if the price offered to them represents their usefulness to the other people. Now, usefulness to your fellows is not distributed according to any principles of justice. Now, if you rely on prices and incomes to direct people to what they ought to do, you must necessarily be very unequal. But any free society has many elements of coercion in it, and to have a progressive income tax for the purpose of redistribution of wealth is inconsistent with the principle of a free society only in that it is a principle which, if extended.. Well, the point is, it’s no principle. If you could have progressive income tax according to some general rule which was really a general rule, it would be all right; but the essence is that progression is no rule, and the thing becomes purely arbitrary. Let me say, incidentally, I have no objection to progression to the extent that it is needed to make the whole tax burden equal in compensation, the progression of the income tax compensating for the regressive effect of indirect taxes. But I think the aim of taxation, if it is based on general rules, should be to make the net burden of taxation proportional and not progressive, because once you have progressive, the thing becomes purely arbitrary. It becomes ultimately an aiming at burdening particular people along these lines. You have identified the constructivist-rationalist fallacy, i.e., that a single mind can know enough to direct a society rationally. Is there a connection between that and what appears to be a growing egalitarianism in this society? The modern passion is for increasing equality. Yes. I’m sure there is, although so far as I can see– Oh, in fact, that agrees with what you just suggested. Egalitarianism is very definitely not a feeling but an intellectual construction. I don’t think the people at large really believe in egalitarianism; egalitarianism seems to be entirely a product of intellectuals. Well, that’s what I wondered: if you agree with the argument of Schumpeter, carried on by Kristol and others, that in fact a large part of our social movement is due to the class struggles between intellectuals and the business classes, and that intellectuals tend to be constructivist-rationalists. Very much so. Very much so. I don’t think I am as skeptical about the possibilities as either Schumpeter or Kristol. I believe, in fact, this is my present attempt to make the intellectuals fell intellectually superior if they see through socialism. You’re an apostle to the intellectuals, and you’re going to– Well, that’s quite a task. But I guess Schumpeter’s point–and Kristol’s point–is that it’s a class struggle, and intellectuals, in order to achieve power, use the weapon of equality, which politicizes and which extends the powers of government. Yes, but they’re not quite as sinister as they make them appear. I think the intellectuals really believe that egalitarianism is a good thing but do not understand the function of inequalities in guiding our system. I think you can persuade them that for the people at large, egalitarianism would not have beneficial effects. They believe it would. Well, it’s curious, if it’s mere intellectual error rather than intellectual error caused by group interest, that so many economists are egalitarians, and economists who seem to understand the workings of the market system. I’m afraid they don’t. No, quite seriously, within economics a whole branch has grown up which is closely connected, though perhaps not necessarily, with the mathematical approach. Which, for the reason I gave initially, because they assume the data are really given, they overlook the problem of utilization of knowledge. They start out from the assumption, which is no need for in a system where everything is known anyhow, and therefore they really do not understand how the market operates. In all these ideas of using the equations of Pareto to direct socialist systems, things which Lange, that group suggested, they are really based on the idea that there is no problem of utilizing dispersed knowledge. They imagine that because they have this fictitious data, which for them, they assume to be given to them, this is a fact, and it isn’t.

Author Since: Mar 11, 2019

  1. Bork was bright but he suffers in comparison to the  incandescent brilliance of Hayek. Like comparing a Ferrari and a Corvette. Hayek was a truly great thinker. Courageous. Bold.

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