CPAC: The Road to Serfdom

[guerilla]

http://www.freedomworks.org/informed...?issue_id=2933

Nobel Prize winner Friedrich Hayek's "Road to Serfdom" has influenced countless people on the subjects of collectivism and totalitarian rule.

Hayek was a world class Austrian Economist, debating and debunking early Keynesian theory. FA Hayek was a champion for liberty, classic liberalism, free market economics and limited government.

Hayek's Road to Serfdom: A Timely Reminder
Dr. Brough addresses the Conservative Political Action Conference (CPAC)

In 1944 Friedrich Hayek’s Road to Serfdom was published, first in England and six months later in the United States. The following year, Reader’s Digest published an abridged addition that was perhaps the most widely read economic tract of the time, reaching more than half a million readers in one format or another. World War II, the harsh realities of Nazi Germany, and the emerging communist state in the Soviet Union provided Hayek with an especially powerful insight into the horrors of collectivism and the rise of the totalitarian state.

Yet, in both academic and literary circles, Hayek was a voice in the wilderness. The collectivist left was on the rise, enamored with the visions of a Soviet, communist-style utopia, while most academic economists were emboldened with a new set of policy tools they claimed would allow governments to allocate resources far more efficaciously than a market ever could. Hayek was one of the few to advocate the principles of limited government in a world increasingly characterized by an encroaching state.

Hayek’s ideas emerged from simple, but powerful, economic insights. The most basic economic issue is the allocation of resources. There are far more demands for resources than possibly can be met—scarcity haunts every decision. Every society, then, must determine how these resources will be allocated, and there are only two choices: voluntary exchange or coercion. Either the government controls and allocates resources by force, or individuals, exchanging freely in the marketplace, determine how resources are used.

Hayek argued that voluntary exchange was preferable and superior to a government allocation of resources and that no government could replicate the efficiencies of the market. For Hayek, the market was a discovery process that not only allocated resources, but also coordinated the plans of millions of individuals living in a post-industrial society. Hayek described a “spontaneous order” that allowed individuals to prosper and nations to develop in the absence of government coercion.

Key to Hayek’s vision was the price mechanism. Prices carry far-flung bits of information about the relative scarcity of specific goods and services that allow both consumers and producers to adjust their use of scarce resources. Markets are voluntary, dynamic, and evolving, which allow individuals to adapt to a constantly changing world.

The government, on the other hand, is unable to capture the information flowing through the economy and is too large and rigid to adjust easily to new circumstances. When a government allocates resources by fiat, there is no price signal reflecting the degree of scarcity. The struggle between visions first appeared in the Socialist Calculation debate of the 1930s, with economists such as Ludwig von Mises and Hayek arguing against the collectivists that governments would fail in their attempts to improve upon the market. Government price controls—direct and indirect—distort the information conveyed by prices. Coordination breaks down, and economic activity becomes less efficient. This is often followed by even more government intervention, which seeks to undo the damage of the first intervention. As a result, government expands at the price of economic liberty. Little by little, more power is ceded to government, and each loss of liberty is another step on the road to serfdom.

That is the basic message Hayek outlined in his seminal work. Government is coercive by nature. Resources can only be allocated by taking from one group to give to another. Taxes are collected from all, and then spent by the government on particular programs that benefit particular people. Politics, rather than markets, is used to make important decisions about the allocation of resources. Progress suffers as innovation in the marketplace yields fewer rewards, while political power and control of the encroaching state become more important.

Political markets are zero-sum games at best; when the cost of government is included in the transaction, they may even be negative sum games. That is, political actors engage primarily in redistribution, which means when one person gains, someone else loses. Add in what it costs the government to shuffle resources, and the economy may be shrinking.

Hayek’s work examined the critical nexus between markets and governments, between individual freedom and government authority. The Road to Serfdom presented a compelling case that the central government cannot replace the market’s ability to communicate vast amounts of complex information. Hayek demonstrated that the state-led economic model is far inferior to the market’s ability to generate economic growth and prosperity. Even worse, the loss of liberty that occurs under command-and-control regimes can eventually lead to totalitarianism and holocaust. Communism, socialism, fascism, and other forms of centrally planned economies have been in vogue at various times with the intellectual elite, and Hayek’s work was a direct challenge to those endorsing such ideas.

The Road to Serfdom was both a warning and a plea to understand the inevitable link between collectivism and totalitarianism. The 20th century is marked by costly experiments in alternative forms of government that took a horrific toll in terms of human life. Despite the prosperity and liberty created by market economies, the push for a larger state persists. Government continues to grow and the coming election may see renewed efforts to expand its scope. Hayek’s message is just as valid today as it was more than half a century ago when The Road to Serfdom was first released.

[gauharjk]

The theory of Free Market Economics is absolutely clear. Central planing is almost always inefficient. Decentralization is the way to go. Dynamic Markets rewards entrepreneurs, and is a great motivator for innovation.

But after reading the essay, I had a few questions about this economic theory...

1. Markets are composed of local societies, just like the local government. Can you trust the local government to allocate resources optimally?

2. Can you trust markets to be fair and society to be corruption-free? Societies are almost always biased against minority groups.

3. What really is a free market? There has to be government oversight and regulation for the smooth functioning of any market, isn't it?

4. Do Free Markets have the power to prevail over Mafia groups? You must have read how the Mafia gets most of the contracts, coz no one dares to oppose them, or even to bid lower than them. I have seen Mafia in action.

I am sure Free Market economies are more superior than controlled economies, because in controlled economies, the losses are distributed amongst the tax-payers, and there is a huge chance of waste coz of inefficiency. BUT, you can't trust human beings, can you?

What does Mr. F. A. Hayek say about regulation? Self-regulation? Government regulation?

[AGS]

Thanks for this buddy, makes for some very interesting reading.

[gauharjk]

Originally Posted by AGS

Thanks for this buddy, makes for some very interesting reading.

It is a great theory... I believe someone (in the government) should run a simulation on a Super-computer to find out if it actually feasible.

[guerilla]

Originally Posted by gauharjk

It is a great theory... I believe someone (in the government) should run a simulation on a Super-computer to find out if it actually feasible.

This is for you. Some more reading. I really, really like Robert Higgs. He's a very intelligent man.

http://mises.org/story/2749

Whatever promotes the growth of the state also weakens the capacity of individuals in civil society to fend off the state's depredations and therefore augments the public's multifaceted victimization at the hands of state functionaries. Nothing promotes the growth of the state as much as national emergency — war and other crises comparable to war in the seriousness of the threats they pose.

States, by their very nature, are perpetually at war — not always against foreign foes, of course, but always against their own subjects.....

Originally Posted by gauharjk

The theory of Free Market Economics is absolutely clear. Central planing is almost always inefficient. Decentralization is the way to go. Dynamic Markets rewards entrepreneurs, and is a great motivator for innovation.

But after reading the essay, I had a few questions about this economic theory...

1. Markets are composed of local societies, just like the local government. Can you trust the local government to allocate resources optimally?

2. Can you trust markets to be fair and society to be corruption-free? Societies are almost always biased against minority groups.

3. What really is a free market? There has to be government oversight and regulation for the smooth functioning of any market, isn't it?

4. Do Free Markets have the power to prevail over Mafia groups? You must have read how the Mafia gets most of the contracts, coz no one dares to oppose them, or even to bid lower than them. I have seen Mafia in action.

I am sure Free Market economies are more superior than controlled economies, because in controlled economies, the losses are distributed amongst the tax-payers, and there is a huge chance of waste coz of inefficiency. BUT, you can't trust human beings, can you?

What does Mr. F. A. Hayek say about regulation? Self-regulation? Government regulation?

Sorry, I wanted to reply back to this sooner, but got busy, and this needs a long response (which I can't even give right now).

But to keep the discussion going...

1. It's a lot easier to change a local government than a federal one. You can certainly trust a local government to allocate better than a federal one, when it is locally staffed by the very people who their policies will effect. Nothing worse, than someone in Washington telling everyone how to live from Wyoming to Florida.

2. This is a complicated question, because it needs a thorough answer. There is no fair. There is no such thing as crime free, corruption free. What the market does, is it gives you choices. Good choice and bad choices, but always choices. As far as minority rights, they have the same basic human rights as everyone else. Everyone faces bias. Even beautiful white people.

The difference is, when you have equal legal rights, equal opportunities (not mandated opportunities, but private property rights and entrepreneurial opportunities).

So as long as you don't screw with anyone else, they can't screw with you.

3. What oversight? You can provide oversight. You vote with your dollars anyway. You don't like a company or product, you switch to the competitor. This is what people do in politics when they feel a party has let them down, they change to the competitor. But in a free market, you have more than 1 competitor. You might have hundreds to choose from.

More often than not, government regulation is the problem, not the solution.

4. A lot of people confuse free market capitalism with anarchy or lawlessness. This is not true. In a free market society, private property rights are paramount. So no one can extort, steal etc. This would be against the law. Fraud would also be against the law. Violence, against the law.

What's different, is that the government doesn't try to steer the economy by attempting to predict what people want and possibly misdirecting resources. Or forcing people to produce something no one wants, and then forcing people to consume it.

When you ask, "can one trust human beings?", the question should be,

Who do you trust more? Yourself, or the government?

The government is made up of people, sometimes acting in your benefit, sometimes in the benefit of others, sometimes in the benefit of itself (the growth of the institution).

I'm a poor spokesman for this because I'm still learning every single day. I don't have the answers, but I do know a bunch of the questions.

[gauharjk]

Originally Posted by guerilla

This is for you. Some more reading. I really, really like Robert Higgs. He's a very intelligent man.

http://mises.org/story/2749

Thanks for the link. I'll read it now...

Originally Posted by guerilla

Who do you trust more? Yourself, or the government?

I'd certainly like to make my own decisions, rather than depending on the government. It all makes sense. Thank you for helping me broaden my viewpoint.

[guerilla]

Originally Posted by gauharjk

I'd certainly like to make my own decisions, rather than depending on the government. It all makes sense. Thank you for helping me broaden my viewpoint.

Well shucks....

I have this simple idea in my head.

Here is you. --------------- Here is the government -------------- Here is liberty.

We want to cut out the middle man.

Here is you. --------------- Here is liberty.

So much nicer.