Opinion from a Libertarian ViewPoint

TGIF: Where Socialists Go Wrong | The Libertarian Institute

Posted by M. C. on January 17, 2023

Here Hayek extended Ludwig von Mises’s fatal critique of socialism; namely, that

  1. without tradeable private property in the means of production, markets for resources and producers’ goods don’t exist;
  2. without such markets, true prices can’t exist; and
  3. without prices, rational economic calculation is impossible;
  4. therefore, socialism is impossible; it’s “planned chaos.”

by Sheldon Richman 



Since socialism is “in” today — even though many people who say they favor it have no idea what it is — F. A. Hayek’s last book, The Fatal Conceit: The Errors of Socialism (1988), is worth checking out. Hayek, the late great Nobel-laureate economist of the Austrian school, begins this way:

This book argues that our civilisation depends, not only for its origin but also for its preservation, on what can be precisely described only as the extended order of human cooperation, an order more commonly, if somewhat misleadingly, known as capitalism. To understand our civilisation, one must appreciate that the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices, many of which men tend to dislike, whose significance they usually fail to understand, whose validity they cannot prove, and which have nonetheless fairly rapidly spread by means of an evolutionary selection — the comparative increase of population and wealth — of those groups that happened to follow them. The unwitting, reluctant, even painful adoption of these practices kept these groups together, increased their access to valuable information of all sorts, and enabled them to be ‘fruitful, and multiply…’ This process is perhaps the least appreciated facet of human evolution.

Socialists take a different view of these matters.

Well, that last sentence is quite an understatement. By socialism Hayek didn’t mean the welfare state or continuing government efforts to manipulate market outcomes according to some notion of equity. That would be interventionism or the mixed economy. No, socialism is the abolition of the market order and its necessary condition, private property: the replacement of free private enterprise with centralized bureaucracy. Let’s cut to the chase:

The main point of my argument is, then, that the conflict between, on one hand, advocates of the spontaneous extended human order created by a competitive market, and on the other hand those who demand a deliberate arrangement of human interaction by central authority based on collective command over available resources is due to a factual error by the latter about how knowledge of these resources is and can be generated and utilised. As a question of fact, this conflict must be settled by scientific study. Such study shows that, by following the spontaneously generated moral traditions underlying the competitive market order (traditions which do not satisfy the canons or norms of rationality embraced by most socialists), we generate and garner greater knowledge and wealth than could ever be obtained or utilised in a centrally-directed economy whose adherents claim to proceed strictly in accordance with ‘reason’. Thus socialist aims and programmes are factually impossible to achieve or execute; and they also happen, into the bargain as it were, to be logically impossible.

Hayek is saying that once we understand how information about resources is produced and transmitted, we realize that central planners can’t deliver the goods. Socialism can’t keep its (earlier) promises of plenty. (Nor of justice, but that’s for another time.)

Here Hayek extended Ludwig von Mises’s fatal critique of socialism; namely, that

See the rest here

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