Results for “road to serfdom”
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On the merits of Hayek’s *Road to Serfdom*

I’ve seen this work bashed a number of times in the blogosphere over the last few years.  It didn’t get everything right, but it remains an important and seminal work and at the time of its publication it was a revelatory work.  Let’s turn the microphone over to Albert Hirschman, hardly a right-wing ideologue.  This is from Jeremy Adelman’s very useful biography of Hirschman:

…when he [Hirschman] found a copy of Friedrich von Hayek’s recently published…The Road to Serfdom in a Rome bookstore, a nerve was struck: “Reading this book is very useful for someone like me who grew up in a ‘collectivist’ climate — it makes you rethink many things and has shown me in how many important points I have moved away from the beliefs I had when I was 18 years old. The experience of the army has also confirmed or rather demonstrated forcefully the advantages of a monetary society, anonymous, and where one preserves at least a sector of private initiative.”

…Even more than a reminder of his skepticism of statist planners, Hayek got at something Hirschman felt strongly: the need to acknowledge the basic limits to the “intelligibility” of our complex world.  Leaders were wont to claim complete knowledge when they did not have it and thus to squash the individual’s ability to make adjustments “to changes who cause and nature he cannot understand.”

Hirschman was never convinced by Hayek’s desire to rely so heavily on the market, but in this appreciation of the book you will find more wisdom than in the recent attempted take downs.  In essence, the critics are not grasping how backward was the intellectual climate when Hayek’s book came out and what a useful corrective it was.

By the way, here is a new and good Cass Sunstein review of the Adelman bio of Hirschman.

Addendum: From the comments, Ricardo points us to Sen’s nice words about the book.

Rereading *The Road to Serfdom*

Given all the recent fuss, I picked it up again and found:

1. It was more boring and less analytic on matters of public choice than I had been expecting.

2. Although some of Hayek's major predictions have been proven wrong, they are more defensible than I had been expecting.

3. The most important sentence in the book is "This book, written in my spare time from 1940 to 1943…"  In those years, how many decent democracies were in the world?  How clear was it that the Western powers, even if they won the war, would dismantle wartime economic planning?  How many other peoples' predictions from those years have panned out?  At that time, Hayek's worries were perfectly justified.

4. If current trends do turn out very badly, this is not the best guide for understanding exactly why.

It's fine to downgrade the book, relative to some of the claims made on its behalf, but the book doesn't give us reason to downgrade Hayek.

The Road to Medicare, not The Road to Serfdom

Here is my latest NYT column, which they titled "The Pendulum Swings Back to Austerity."  Excerpt:

The unfolding of the financial crisis has also changed the public’s sense of where change is needed, both in the United States and Europe. The tragedies of 2008 were represented by Bear Stearns and Lehman Brothers – both private-sector institutions. In 2010, the financial crisis has spread to sovereign debt, with Greece as the most obvious example.

All of these developments are part of one broader story of overreach and complacency. Yet the 2008 crises were attached more directly to market institutions, while the 2010 crises are more closely linked to governments. Because politicians and voters are more influenced by the latest developments than by news from two or three years earlier, a cautious attitude toward public-sector spending has been further cemented.

And this:

Democracies, like markets, have some self-correcting mechanisms, and we are now seeing those at work in the United States and many European countries. (Spain and Britain, for example, are pursuing fiscal austerity aggressively.)

The lessons are straightforward. First, to paraphrase the French moralist La Rochefoucauld, things are never as good, or as bad, as they seem. Second, the Obama reforms, like the Reagan revolution, are turning out to be radically incomplete, which should come as no surprise.

Finally, effective political ideas are those that can still do good in half-baked form. We have neglected this insight in designing financial reform, and it remains to be seen if we can apply it successfully to climate change.

Overall, I believe we are headed toward slower growth and a larger public sector, but I do not believe we are headed down the road to serfdom.  At the same time, I am aiming at a different target.  Critics of incrementalism are usually too focused on the single issue at hand — where they are sure they know best — and not sufficiently aware of the efficiency properties of the broader system, which introduces self-correction mechanisms to counter or limit most major changes.

If I had to stress one sentence from the piece, it would be this one:

Finally, effective political ideas are those that can still do good in half-baked form.

Road to Serfdom, 60th anniversay

BBC informs us that this is the 60th anniversary of the publication of Hayek’s Road to Serfdom. In memoriam, here is a fact sheet about the book.

I have always seen huge pluses and minuses in the work. On the down side, mixed economies did not lead to fascism, communism, or totalitarianism, as Hayek had feared. On the plus side, Hayek offers his strongest and clearest case for liberty. Only rarely is political decision-making about trying to do the right thing. His analysis of the dynamics of political power remains a “public choice” classic to this day.

Thanks to Ray Squitieri for the pointer.

The long-run consequences of Russian serfdom

They are not good, as evidenced by a new paper by Buggle and Nafziger (pdf):

This paper examines the long-run consequences of serfdom in the countries of the former Russian Empire. We combine novel data measuring the intensity of labor coercion on the district level in 1861 with several intermediate and present-day outcomes. Our results show that past serfdom goes along with lower economic well-being today. We apply an instrumental variable strategy that exploits the transfer of serfs on monastic lands in 1764 to establish a causal link between past serfdom and current economic development. Tracking the evolution of city populations throughout Soviet times corroborates the finding of persistent economic differences. Furthermore, our results suggest a political economy mechanisms linking higher historical economic inequality with worse public goods provision (roads and education), as well as lower urbanization and structural change towards factory production, as explanation for this persistence. We do not find differences in contemporaneous cultural attitudes and preferences.

The pointer is from Pseudoerasmus.

Wednesday assorted links

Monday assorted links

*Passing on the Right*

The authors are Jon A. Shields and Joshua M. Dunn Sr. and the subtitle is Conservative Professors in the Progressive University.  I found this book subtle and thought-provoking throughout.  Here is one good bit:

In fact, many conservative academics feel more at home in the progressive academy than in the Republican Party.  This alienation is not because most conservative academics we interviewed are Rockefeller Republicans. In some respects, they are more conservative than self-identified Republicans in the general population.  Instead, the Republican Party tends to trouble even the most conservative professors because they share with the American founders a small-c conservatism that is sensitized to the dangers of democratic movements.  This political orientation inclines conservative professors to look askance at the populism that has shaken up the Republican Party in recent years…

What also comes through in this book is the remarkable diversity of thought among the so-called “intellectual right.”  And I enjoyed this anecdote:

A professor of history at an elite university, meanwhile, turned right after taking a course with the Marxist historian Arno Mayer.  This admiring historian recalled Mayer announcing to his class, “I’m going to assign the book I most disagree with in the twentieth century, and I’m going to ask you not to critique it, but to recreate its arguments with intellectual empathy.”  The book was Hayek’s Road to Serfdom.

If only the blogosphere was always so tolerant.  I feared I would be bored by this book, but I found it a work of quality scholarship, yet highly readable too.  Here is a Jonathan Marks WSJ review.  And here is a relevant column by Virginia Postrel.

Hayek on Gibraltar

In 1944, the celebrated economist Friedrich Hayek was commissioned by the British Colonial Office to undertake a report on the economy of Gibraltar. His conclusion was that the government of Gibraltar should use market forces to relocate working class Gibraltarians into neighbouring Spain. Yet despite the libertarian credentials Hayek had established via his work of the same year, The Road to Serfdom, such a policy would have moved Gibraltarians into the dictatorship of General Franco.

In a study presented to the Economic History Society’s 2015 annual conference, Chris Grocott argues that Hayek’s proposal to relocate Gibraltarians into Spain shows an alarming lack of political astuteness on the part of the winner of the 1974 Nobel Prize for Economics.

In the first instance, the British Colonial Office conveniently lost Hayek’s report. When it re-surfaced in early 1945, the Colonial Office then sent the report to the Admiralty who, unimpressed with Hayek’s condemnation of educational facilities in Gibraltar’s dockyard, moved to delay its publication. Meanwhile, Hayek himself was on a lecture tour of the United States, promoting The Road to Serfdom, and oblivious to the dismay that his report has caused.

There is more here, via the excellent but under-followed Mark Koyama.

John Roemer changes his mind on a bunch of things, including socialism

He has a new published paper, in Analyse & Kritik, entitled “Thoughts on Arrangements of Property Rights in Productive Assets,” here is the abstract:

State ownership, worker ownership, and household ownership are the three main forms in which productive assets (firms) can be held.  I argue that worker ownership is not wise in economies with high capital-labor rations, for it forces the worker to concentrate all her assets in one firm.  I review the coupon economy that I proposed in 1994, and express reservations that it could work: greedy people would be able to circumvent its purpose of preventing the concentration of corporate wealth.  Although extremely high corporate salaries are the norm today, I argue these are competitive and market determined, a consequence of the gargantuan size of firms.  It would, however, be possible to tax such salaries at high rates, because the labor-supply response would be small.  The social-democratic model remains the best one, to date, for producing a relatively egalitarian outcome, and it relies on solidarity, redistribution, and private ownership of firms.  Whether such a solidaristic social ethos can develop without a conflagration, such as the second world war, which not only united populations in the war effort, but also wiped out substantial middle-class wealth in Europe — thus engendering the post-war movement toward social insurance — is an open question.

There are some probably gated versions here.  He also explains later in the paper that socialism cannot work because a generally solidaristic social ethos will be undermined by a selfish minority, driven by greed, which will turn social institutions to their favor and evolve into a new ruling class.  In other words, Hayek’s The Road to Serfdom is not yet obsolete and still holds the power to sway men’s minds.

For the pointer I thank Kevin Vallier.   

Tony Judt’s new book *Thinking the Twentieth Century*

It is a wide-ranging dialogue with Timothy Snyder, you can buy it here.  I will gladly recommend this book, but I have mixed feelings about it.  It is Judt’s “deathbed conversations” with Snyder, when he was paralyzed.

Is it fascinating?  Yes.  Did I read it straight through without pausing?  Yes.  Did I learn a lot?  Yes.

Yet it doesn’t show Judt in such an overwhelmingly favorable light.  He is cranky, unfair to his intellectual opponents, and he repeatedly misrepresents thinkers such as Hayek on some fairly simple points.  He conducts unsubstantiated attacks on various New York Times columnists, as if they had once beaten him in a debate and this was his revenge.  It shows his lifelong and mostly unhealthy obsession with what Daniel Klein has called “The People’s Romance.”  Unlike in some of his previous writings, his proposals for a one-state solution to the Israel-Palestine problem come off as an irresponsible and somewhat flip symbolic gesture, easy enough to make because he doesn’t have to live with the outcome.  As a reader and reviewer it is hard to not wonder whether/how Judt was medicated during these conversations, and how well he had thought through his lack of editing options before publication.  Or is this the real Judt?  Are we all really like this?  Pondering that question is as interesting as the dialogue itself.

The Austrians will be happy when Judt writes: “The three quarters of century that followed Austria’s collapse in the 1930s can be seen as a duel between Keynes and Hayek.”  Yet he has the odd view that free market ideas were “imported to the U.S. in the suitcases of a handful of disabused Viennese intellectuals.”  Others may underrate the importance of central/eastern Europe but in these dialogues he overrates it.

One does not have to agree with Hayek’s Road to Serfdom to find this an unfair characterization:

Hayek is quite explicit on this count: if you begin with welfare policies of any sort — directing individuals, taxing for social ends, engineering the outcomes of market relationships — you will end up with Hitler.

My favorite part of the book comes at Kindle location 1294, here is part of that discussion:

But even when Blunt was outed as a Soviet spy, in 1979, his standing in high society, and in the distinctive codes of that society in England, still protected him…Thus Blunt — a spy, a communist, a dissembler, a liar and a man who may have actively contributed to the exposure and death of British agents — was nonetheless deemed by some of the his colleagues to be guilty of no crime serious enough to justify depriving him of the fellowship of the British Academy.

If you are seeking to “normalize” this review, I consider Judt’s Past Imperfect to be one of the best books of the last few decades, his Postwar to be one of my favorite books ever, and his late essays to be some of the best writing, in any genre, in a long time.  (Though I didn’t like Ill Fares the Land.)  I can recommend this too, as something worth consuming and pondering and spending money on, but I still have a slightly queasy feeling in my stomach.

Hayek and Modern Macroeconomics

David Warsh and Paul Krugman try to write Hayek out of the history of macroeconomics. Krugman writes:

Friedrich Hayek is not an important figure in the history of macroeconomics.

These days, you constantly see articles that make it seem as if there was a great debate in the 1930s between Keynes and Hayek, and that this debate has continued through the generations. As Warsh says, nothing like this happened. Hayek essentially made a fool of himself early in the Great Depression, and his ideas vanished from the professional discussion.

Warsh says much the same thing, adding, I am not making this up, a discussion of Hayek’s divorce. Neither Krugman nor Warsh attempt to argue for their positions, it’s all assertion. Both claim that Hayek is famous only because of the Road to Serfdom.

Let’s instead consider some of the reasons the Nobel committee awarded Hayek the Nobel:

Hayek’s contributions in the fields of economic theory are both deep-probing and original. His scholarly books and articles during the 1920s and 30s sparked off an extremely lively debate. It was in particular his theory of business cycles and his conception of the effects of monetary and credit policy which aroused attention. He attempted to penetrate more deeply into cyclical interrelations than was usual during that period by bringing considerations of capital and structural theory into the analysis. Perhaps in part because of this deepening of business-cycle analysis, Hayek was one of the few economists who were able to foresee the risk of a major economic crisis in the 1920s, his warnings in fact being uttered well before the great collapse occurred in the autumn of 1929.

It is true that many of Hayek’s specific ideas about business cycles vanished from the mainstream discussion under the Keynesian juggernaut but what Krugman and Warsh miss is that Hayek’s vision of how to think about macroeconomics came back with a vengeance in the 1970s.

David Laidler exaggerated but he was much closer to the truth than Krugman or Warsh when he wrote in 1982 regarding new-classical macroeconomics:

… I prefer the adjective neo-Austrian… In their methodological individualism, their stress on the market mechanism as a device for disseminating information, and their insistence that the business-cycle is the central problem for macroeconomics, Robert E. Lucas Jr., Robert J. Barro, Thomas J. Sargent, and Neil Wallace, who are the most prominent contributors to this body of doctrine, place themselves firmly in the intellectual tradition pioneered by Ludwig von Mises and Friedrich von Hayek.

Thus, Hayek was an important inspiration in the modern program to build macroeconomics on microfoundations. The major connecting figure here is Lucas who cites Hayek in some of his key pieces and who long considered himself a kind of Austrian. (Indeed, to the great consternation of some of my colleagues, I once argued that Lucas was the greatest Austrian economist of the 20th century.)

One can also judge Krugman’s claim that “the Hayek thing is almost entirely about politics rather than economics” by looking at who other Nobel laureates in economics cite. Is Hayek ignored because he is just a political thinker? Not at all, in fact in an interesting exercise David Skarbek finds that Hayek is cited by other Nobel laureates in their Nobel talks more than any other Nobel laureate with the exception of Arrow. (The top six cite-getters are Arrow, Hayek, Samuelson and then tied in citations for fourth place are Friedman, Lucas and Phelps.)

Addendum: Here is Pete Boettke and Russ Roberts and David Henderson.