Easterly on Fukuyama

by Russ Roberts on May 9, 2011

in Hayek

Bill Easterly does a nice job on Fukuyama’s claim that Hayek’s confident distrust of government made him unHayekian. Easterly sums up his argument this way:

Hayek’s skepticism about government was NOT based on his certainty, as Fukuyama would have it, but on his awareness of his ignorance. (and everyone else’s)

Don’s reactions to Fukuyama are here and here.

Here is Fukuyama’s concluding paragraph:

In the end, there is a deep contradiction in Hayek’s thought. His great insight is that individual human beings muddle along, making progress by planning, experimenting, trying, failing and trying again. They never have as much clarity about the future as they think they do. But Hayek somehow knows with great certainty that when governments, as opposed to individuals, engage in a similar process of innovation and discovery, they will fail. He insists that the dividing line between state and society must be drawn according to a strict abstract principle rather than through empirical adaptation. In so doing, he proves himself to be far more of a hubristic Cartesian than a true Hayekian.

My take on this is that trial and error is indeed a great way to make progress as long as there is a mechanism for generating the trials and a mechanism for choosing which are the errors, rejecting those, and moving forward. What is the mechanism for rejecting errors in the political system? The Edsel is dead. New Coke, dead. Corfam shoes, pretty much dead. Big SUVs, pretty dead for a while until gas prices go south. Phones the size of WWII walkie-talkies, dead. Big mainframes the size of a warehouse, dead. Shirts that need ironing, on their way out. They survive because they’re cheap. That’s fine. Gives people a choice. The market culls losers and shunts them off to the side or keeps inferior products around if they’re cheap enough to make someone happy.

How good is the political system at culling losers? Not great. Not horrible–really really bad ideas do get shunted to the side–communism isn’t real popular right now. Price controls on gasoline aren’t on the table. That’s pretty good. But we do have price controls at the state level for items after a natural disaster. We do have price controls rampant throughout the medical system. How about ethanol? Even Al Gore thinks ethanol subsidies are a bad idea. There is talk about getting rid of them. We’ll see. Or sugar quotas. Still here. They benefit a few American families and punish the rest of us.

I think it’s Hayekian to be skeptical of systems where feedback loops don’t work very well. “More from the bottom up or more top down?” More bottom up, please.


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