The Beast G, back Ahead

Some excerpts from a review article by Francis Fukuyama on new edition of F A Hayek's 1960s book The Constitution of Liberty. The current President of Mont Pelerin Society is Prof.Kenneth Minogue. He said to me (during the February's MPS Asia Regional Meeting which I attended) that this book is Prof.Minogue's favourate and the best among Hayek's books!! 

• In an age when many on the right are worried that the Obama administration’s reform of health care is leading us toward socialism, Hayek’s warnings from the mid-20th century about society’s slide toward despotism, and his principled defense of a minimal state, have found strong political resonance. 

• Unlike Beck, Hayek was a very serious thinker, and it would be too bad if the current association between the two led us to dismiss his thought. Hayek always had problems getting the respect he deserved; even when he was awarded the Nobel in economic science in 1974, the awards committee paired him with the left-leaning economist Gunnar Myrdal. With the passage of time, however, many of the ideas expressed in “The Constitution of Liberty” have become broadly accepted by economists — e.g., that labor unions create a privileged labor sector at the expense of the nonunionized; that rent control reduces the supply of housing; or that agricultural subsidies lower the general welfare and create a bonanza for politicians. His view that ambitious ­government-sponsored programs often produce unintended consequences served as an intellectual underpinning of the Reagan-Thatcher revolution of the 1980s and ’90s. Now that the aspirations of that revolution are being revived by Tea Partiers and other conservatives, it is useful to review some of the intellectual foundations on which it rested.

• Hayek’s skepticism about the effects of “big government” are rooted in an epistemological observation summarized in a 1945 article called “The Uses of Knowledge in Society.” There he argued that most of the knowledge in a modern economy was local in nature, and hence unavailable to central planners. The brilliance of a market economy was that it allocated resources through the decentralized decisions of a myriad of buyers and sellers who interacted on the basis of their own particular knowledge. The market was a form of “spontaneous order,” which was far superior to planned societies based on the hubris of Cartesian rationalism. He and his fellow Austrian Ludwig von Mises used this argument against Joseph Schumpeter in a famous debate in the 1930s and ’40s over whether socialism or capitalism offered a more efficient economic system. In hindsight, Hayek clearly emerged the winner.