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Quotation of the Day…

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… is from page 193 of F.A. Hayek’s 1939 University of Chicago monograph, “Freedom and the Economic System,” as it is reprinted as chapter nine of the 1997 collection, edited by Bruce Caldwell, Socialism and War [2]:

The main point is very simple.  It is that comprehensive economic planning, which is regarded as necessary to organize economic activity on more rational and efficient lines, presupposes a much more complete agreement on the relative importance of the different social ends than actually exists, and that in consequence, in order to be able to plan, the planning authority must be able to impose upon the people detailed code of values that is lacking.

This point is subtle yet vital – and, unfortunately, it is also almost completely ignored in discussions of government direction or control of economic decision-making.  We can accept that it’s true that every person whose preferences deserve to be counted wants the economy to be “fair,” “equitable,” “equal,” “just,” “inclusive,” “sustainable,” and you-name-the-term-without-practical-content.  I’ve never in my life encountered someone who seriously champions an unfair or unjust or unequal or nonsustainable economy.  But expressed desires for these economic outcomes raise unavoidable questions.  These questions include

Note that each of these questions, like the larger point made here, applies not only to proposals for complete, economy-wide central planning of the sort that was fashionable during the mid-20th century.  These questions apply to any proposal for government direction of economic affairs, however ‘partial’ it might be (or seem to be).

We can all agree, for example, that economic equality is fine thing – but do we count only monetary income as relevant for assessing equality, or do we count monetary income plus monetary wealth?  What about the value of voluntarily chosen leisure: does it count? if not, why not? if so, how is it weighed against monetary income or wealth?  And even if we all agree upon just what sources of utility do and don’t count as relevant for assessing economic equality, and agree also on the weights of the various sources of utility for making this assessment, how is the goal of economic equality itself to be traded off against competing goals – such as economic growth, or environmental sustainability (however that might be defined!)?

The previous paragraph gives only one small example of a huge problem that confronts those who believe that entrusting the state with the power to engineer economic outcomes is really just a matter of science, of empirically discovering the allegedly objective costs and benefits of various economic arrangements and then choosing that particular arrangement that best satisfies society’s object preferences.

The very notion that there is an objective ‘best’ arrangement of economic affairs that can be discovered independently of actual market processes and then imposed by the state to improve everyone’s, or most everyone’s, well-being is, truly, a fatal conceit [3].

….

Many years ago an academically and publicly prominent left-leaning economist told me that Hayekian and public-choice objections to extensions of government power are really mostly just right-wing excuses, condoned by the selfish, (I quote from memory) “to prevent government from doing what we all really know that the government should do.”  This economist was serious.  I was – and remain – stunned by the mix of arrogance and naivete that such a sentiment reveals.

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