It is an age-old discussion and it is well alive today. Should the government design and drive the economy, in the search for the happiness of its citizens; or should people be free to decide their goals, and what and how to produce, and what to buy and sell? According to Hayek, allowing the government to set goals for individuals and to plan the economy is the a road to serfdom.
The book was written during WWII when Hayek emigrated from Austria to the UK and assumed a position at the London School of Economics. Despite his aspirations, the British government did not assign him any tasks pertinent to the war efforts. Perhaps a little frustrated, he put his time to good use and crafted this timeless foundational work, outlining the political principles of the so-called Austrian School of Economics.
Background ideas
The idea that the future can be predicted is at the core of many misconceptions that Hayek opposed. The question: Is there a way to predict the future of societies or individuals? The plain answer is this: no, there isn’t. There are not laws of history that, once applied to certain initial conditions, will tell us the future. There are not complex charts, mathematics, dialectics, or statistic or computer models, or secret data to be trusted. Perhaps the most successful investor of all times, Charlie Munger, said that pretending to know the future reading modern computer models is equally effective as reading eviscerated lambs.
Yet, many philosophers and politicians think that the future of society can be predicted at least to a certain degree of accuracy. The philosopher Karl Popper called that misconception historicism, “the doctrine that history is controlled by specific historical or evolutionary laws whose discovery would enable us to prophesy the destiny of man.”
The central reason why such a prediction are beyond our possibilities is that it is imposible to predict the growth of knowledge. New knowledge or inventions are genuinely new, inspired by thing of the past perhaps, but impossible to be predicted by them. They come only from human minds and are always attempted solutions to real problems. The growth of knowledge, and the innovations that comes with that growth, is the main driver of the increase in human productivity and the increase of whole human wealth.
That very fact - the intrinsic unpredictability of the growth of knowledge - is the reason why it is imposible to predict the future. It will be always impossible to predict inventions, because the prediction of the thing and the thing are the very same thing. If you thoroughly predict the new knowledge, you are creating the new knowledge. I think that this might be the real impossibility in effectively planning the economy rather than the too complex computation. People are just unpredictable, and make both rational and irrational decisions. It is not a problem of the amount of computation required, it is more the impossibility of writing a computing program that would take into account creativity, subjectivity, action, inaction, rationality and irrationality of decisions in a free society.
Historical events, according to the historicists, are govern by laws and are predictable. For example Karl Marx claimed the discovery of an important law of history, that events are always a consequence of class struggle. The working class Marx predicted will inevitably prevail at the end destroying capitalism and achieving the final society without classes. That was his failed prophecy and perhaps the most successful application of the faulty method of historicism. There are many examples of marxist and communist that with experience and thinking, changed their minds to lean towards liberalism. To be a marxist nowadays is to accept the profound epistemological dishonesty of holding a refuted theory. Unlike nature, history is not govern by laws nor is it predictable.
Prices in the free market signal information. They convey not only information about supply and demand, but very importantly about the growth of knowledge, and the subjective decisions of people. Knowledge in the minds of the producers, but also knowledge arisen afresh from the consumer’s mind.
The wealth of a society as a whole increases every time that new objective knowledge is created. It is again a genuine creation, and its source benefit usually first. The people that bring new better solutions to our problems use to become rich from the new created wealth. It is not wealth stolen from somebody else, it is new wealth. It is a fatal mistake to think that the wealth of those innovation is stolen from somebody else because, again, it is created anew. Economy is not a zero-sum game, is not splitting an existing pie, it is making the pie grow bigger and more beautiful.
Every social program, and among them every economical program come, in the real world, with unexpected and unpredictable outcomes. It is not possible to predict every outcome of any given social program. There are always unexpected results for good or for evil.
Knowing all the above, Popper proposed that the goals of the society as a whole (and the task of governments) should be limited not to increase the happiness of its citizens, but instead concentrate in avoiding unnecessary suffering. For those liberal minds (libertarian) the state is at best a necessary evil.
Chapter 1
The Abandoned Road
The abandoned road which Hayek refers to is that of liberalism that flourished especially in the XIX century during the Industrial Revolution. That road is abandoned to start the new road that might take us to the serfdom of totalitarianism and socialism.
I understand that liberalism is a mistreated word and that its meaning may vary. To Hayek liberalism is the oposite of collectivism. The first considers human individual freedom from coercion as the highest value. Nowadays, it is my understanding that “liberal” and “liberalism” are used in a complete different and often opposite sense, especially in the USA. After reading this chapter there is no doubt that the use of the term liberalism in Hayek includes those ideas that defend individual freedom, private propriety, and the reduction of the function and size of the State.
The main thesis defended in the first chapter is that socialism (and the attempt to collectively plan the society as a whole) will inevitably bring the lost of individual freedom.
Although Hayek does not uses the term “enlightenment”- as the movement of rebellion against authority that is going on in Europe and the West since the renaicesnce - he describes its main characteristics in a positive way and identifies the movement with the political liberalism and individualism.
Hayek focuses on the XIX century triumphant liberalism and its contradictions. Particularly, its failure to understand the problem of competition and monopolies, and the problem of monetary policy.
Those, according to Hayek, are problems and as such are due to the lack of specific knowledge. It should be a way to preserve the positive aspect of a free market, and at the same time, prevent bad consequences of monopolies and inflation.
Hayek compares the economy and society to a garden. He argues that just as a garden is a complex system that is impossible for a single person, like a central planner, to fully understand and control, the same applies to the economy and society. Hayek contends that the knowledge and information needed to make the best decisions about resource allocation and economic activities are widely dispersed among individuals, much like the knowledge of the unique conditions and preferences of a garden are spread among those who interact with it.
The central point of the metaphor is that, in a centrally planned economy or society, the central planner (or "gardener") cannot possibly have enough information and knowledge to make optimal decisions. Instead, Hayek argues that decisions about resource allocation and economic activities are best left to decentralized and spontaneous processes, where individuals, acting in their self-interest, can respond to local and specific knowledge to make the most efficient and effective choices.
Hayek denounces that instead of attempting to solve the problems of liberalism and free market, people mistakenly started proposing to get rid of the whole system at once and perhaps begin anew, throwing the baby with the bath water. Liberalism of the XIX was far from perfect but it was also the right track.
Chapter 2
The Great Utopia
The second chapter of Hayek's "The Road to Serfdom" explores central political concepts: Democracy, Socialism, Freedom, and Power.
Democracy is a system that grants individuals the central role of freely choosing their rulers.
While not quoted in the book, Popper's characterisation of democracy is worth adding here: It is the system that enables a society to remove bad rulers without resorting to violence. Put simply, it's the system that allows for a change of government without violence.
It seems to me an elegant solution to the problem that arises when discussing the fact that Hitler was democratically elected. Very quickly it became imposible in the Germany of the ‘30s to change government without bloodshed.
It is a sort of the same idea that Churchill famously stated “democracy is the least worse of the known systems”.
Perhaps it is interesting to note that democracy is NOT the system that tend to select better leaders, it is the system that allows bad officials to be push out of leadership positions.
Collectivism is the opposite to individualism. Collectivism understand that people must agree in common goals. Individualism understands that people are entitled to pursue their own unique goals. To me collectivism seems an attractive idea, but when one start thinking how to bring that idea to the real world, it become evident very quickly its indisoluble attachment to coercion.
Popper writes brilliantly about the misconception about individualism in “The Open Society and its Enemies”. Individualism is not egoism. Collectivism is not altruism. There is no contradiction between individualism and altruism, nor there is contradiction between collectivism and egoism. To some, the best way to help others is to pursue your own individual interest, because is in everybody interest to be surrounded with happy people.
The central idea of collectivism - that every rational human agree in the goals they should pursue in life - would make sense only if we could agree on the answer to a very old philosophical question: what is a life well lived?
Socialism is a variant of collectivism founded on the idea of redistribution of wealth from one segment of the population to another. It inherently involves the necessity to exert coercion upon individuals. After all, how often do people willingly pay taxes?
Freedom or liberty is defined as the absence of coercion and the eradication of arbitrary rule by those in power. In its fundamental essence, individual freedom represents the primary moral principle upheld by liberals.
Although both socialists and liberals profess to pursue freedom, their interpretations diverge significantly.
According to Hayek, the socialists have distorted the original meaning of freedom—freedom from coercion and arbitrariness—into a different concept: liberation from material needs that otherwise constrain the capacity to make choices; it is the freedom from necessity.
Freedom from coercion is the core concept in liberal ideology, while freedom from necessity is a principle often associated with socialism.
Socialist and liberals are not lying when they talk about freedom in opposite directions, but they are referring to different things. The socialist reinterpretation (“perversion” in the word of Hayek) of the concept of freedom involves a merging it with power. In the socialist perspective, freedom equates to the capability to carry out actions. According to socialists, “freedom is the effective power to do specific things”.
This distinction is pivotal in Hayek's thesis because, to attain the type of freedom envisioned by socialism, coercion of a segment of the population becomes imperative. This is the underlying reason why socialism cannot be realized without an authoritarian state. Socialist freedom is frontally opposed to liberal freedom.
The outcome of all forms of collectivism is authoritarian regimes. In this context, Hayek provides historical examples showing the resemblances among communism, fascism, and Nazism. These ideologies share characteristics such as authoritarianism, centralized planning, and a departure from the original sense of freedom. Additionally, they all have a common enemy: liberalism.
Chapter 3
Individualism and collectivism
The ultimate aims of socialism are social justice, equality, and security. The means to achieve those ends are the abolition of private ownership of the means of production and the creation of a system of central planned economy.
Hayek goes on and discusses the idea of central planning throughout the rest of the chapter.
When we want to carry out something, the rational way to do so is to plan and to apply as much oversight as posible. Planning is the way to go, in this sense, it is the rational way to achieve a certain goals. Hayek is not referring to this type of planning, his critique proposes that the planning must be in the hand of individuals and not the state. It is up to you to plan you life not to the government.
The discussion is not then planning as opposed to no-planning, the question is who should plan; should a coercive and powerful state set the goals and design a plan for the individuals to follow, or should the individual be left alone for him (or her of course) to set goals and plan whatever they want to do with their life.
I find that this is a profound question in the sense that there can not be any agreement about what means to live a moral life (what is the right goal), about what is the best way to live a life or what should give meaning or aim (if any) to any particular way of living.
“The question is whether for this purpose it is better that the holder of coercive power should confine himself in general to creating conditions under which the knowledge and initiative of individuals are given the best scope so that they can plan most successfully; or whether a rational utilization of our resources requires central direction and organization of all our activities according to some consciously constructed ”blueprint”."
Further clarification regarding the function of the state according to Hayek, in particular the design of institutions to protect competition (antitrust) among private enterprises.
“In no system that could be rationally defended would the state just do nothing.”
“the state is a necessary evil”
Karl Popper
“What in effect unites socialists from the Left and the Right is the common hostility toward competition and their common desire to replace it by a directed economy”
In these sense, for Hayek is an important rol for the state to preserve competition through the detailed control of the monopolies.
“Planning and competition can be combined”. He is referring here to the central design of a plan to avoid the formation of monopolies and the destruction of competition.
Chapter 4
The “inevitability” of planning
“Leave room for the unforeseeable free growth”.
This chapter discusses de following misconception: the progress of technology makes competition imposible, the only choice left is production by private monopolies and direction and planning by the government.
Hayek writes, “Modern methods [new technology], it is asserted, have created conditions in the majority of industries where the production of the large firm can be increased at decreasing costs per unit, with the result that the large firms are everywhere underbidding and driving out the small ones; this process must go on until in each industry only one or at most a few giant firms are left.”
We have seen recently a sort of that phenomena with big tech companies. For example, if you think of web search engine, Google seems to be kicking-out of the market everybody else. And yet, new technology arise, new search and related technologies all the time to compete with that giant.
Hayek attacks the idea of inevitability of planning in several fronts. First he checked on reality and quotes reports claiming that there is no evidence to support that technological progress must give rise to monopolies.
On the other hand, when this monopolies happened, Hayek argued that the cause (not the solution) was planning. That might be true today though what is called regulatory capture. Meaning that when new, usually complex regulations are applied to new technology by the state, the small companies struggle to find the necessary resources and knowledge to comply and are kicked-out not by the market, but by bureaucracy. This aberration might explain why some big tech companies support the rise of intricate regulatory rules.
Here is an idea which is also central to Popper’s philosophy:
“The assertion that modern technological progress makes planning inevitable can also be interpreted in a different manner. It may mean that the complexity of our modern industrial civilisation creates new problems with which we cannot hope to deal effectively except by central planning.”
But new problems always arise after a new solution is created.
According to Popper’s theory of knowledge we start with problems (P1). We then conjecture posible solutions which are controlled by several rounds or criticism. We then contrast our invented posible solution with observations in the real world. If we are lucky we can solve our problem. However, the result will be the emergence of new and better problems (P2) calling for new and better solutions. This process is unbounded, it is the beginning of infinity.
Certain technological solutions might give rise to the problem of suppression of competition and the emergence of monopolies. This last is the P2, the new and better problem. It is however a very important problem for the reasons that will be soon uncovered; the disruption of prices.
Here is perhaps the strongest argument against central planning:
It is the calculation problem that occur in absence of price signals. Price is the information needed to adjust the supply of goods and services and the demand.
Modern conditions imply that the division of labor is highly complex. Taming this complexity surpasses the capacity of the best possible planners. But, “competition is the only method by which such coordination can be adequately brought about”.
A little later Hayek writes, “This is precisely what the price system does under competition, and which no other system even promises to accomplish. It enables entrepreneurs, by watching the movement of comparatively few prices, as an engineer watches the hands of a few dials, to adjust their activities to those of their fellows. The important point here is that the price system will fulfill this function only if competition prevails, that is, if the individual producer has to adapt himself to price changes and cannot control them. The more complicated the whole, the more dependent we become on that division of knowledge between individual whose separate efforts are coordinated by the impersonal mechanism for trans mitting the relevant information known by us as the price system.”
Under undisrupted competition, price is the information [algorithm] that coordinates the highly complex economical tissue.
If we bring here ideas from Karl Popper and David Deutsch we can, perhaps, understand better the problem of calculation and its solution. It is imposible to predict the growth of knowledge. New knowledge or inventions are genuinely new, inspired by thing of the past but impossible to be predicted by them. They come only from the human minds and are always attempted solutions to real problems.
That very fact - the intrinsic unpredictability of the growth of knowledge - is the reason why it is imposible to predict the future. It will be always impossible to predict inventions, because the prediction of the thing and the thing are the same thing. I think that this might be the real impossibility in effectively planning the economy rather than a too complex computation. There are certainly computations that are intractable, that would exhaust our vast resources. My technical knowledge is too short to know that, but I guess that the market is a tractable problem or will become one when more powerful computers are available. And yet, the intrinsic unpredictability of knowledge creation will keep ruining the career of the modern prophets and futurologists.
The prices signal information. They convey not only information about supply and demand, but very importantly about the growth of knowledge. Knowledge in the producers minds, but also knowledge come to be new not for the world, but for the consumers minds.
In the last part of the chapter, Hayek discusses another argument that link technological progress and the emergence of monopolies. It is the opposite to the previous. It goes like this: “it will be impossible to make use of many of the new technological possibilities unless protection against competition is granted, i.e., a monopoly is conferred”.
Hayek recognise the force of this argument in several situation. But those must be very few…
Hayek further clarifies, “Though in the short run the price we have to pay for variety and freedom of choice may sometimes be high, in the long run even material progress will depend on this very variety, because we can never predict from which of the many forms in which a good or service can be provided something better may develop. It cannot, of course, be asserted that the preservation of freedom at the expense of some addition to our present material comfort will be thus rewarded in all instances. But the argument for freedom is precisely that we ought to leave room for the unforeseeable free growth.”
Chapter 5
Planning and Democracy
The collectivist systems have in common the organisation of labor towards a definite social goal. The establish goals on behalf of people. Popper find at the core of every form of collectivism and authoritarian regimes, the idea that the truth is manifest. That it is somehow obvious which the objectives of society as a whole should be. But truth is not manifest, is is actually the contrary of manifest, truth or truth-likeness is difficult to come by, and we can never be sure.
There exist several types of collectivism of right and left: socialism, communism, fascism, national socialism, etc. They differ only (and perhaps importantly) in the particular goals they set for society. By doing that, they deny the value of the immersible varied diversity of goals of individual humans. All forms of collectivism are also totalitarianism in the sense that they are not only concern with the public life, on the contrary they aspire to guide and regulate every aspect of human life.
Collectivist systems presuppose the existence of a detailed and complete ethical code in which every ethical value is listed precisely. But, since not such a ethical code exists or can possible be agreed upon, the ruler should impose one of their preference.
The oposite view, the one Hayek defends, is the individualism, a doctrine that values the uniqueness of every human been.
Hayek writes, “[individualism] It does not assume, as it is often asserted, that man is egoistic or selfish or ought to be. It merely starts from the indisputable fact that the limits of our power of imagination make it imposible to include in our scale of values more than a sector of the needs of the whole society […] individuals should be allowed, within certain limits, to follow their own values and preferences […] ”
According to the view of the author, common action should be limited to fields were people agree on common ends. Individualism is also perhaps the most efficient way to help others. At the very least if your are able to take care of yourself, you won’t be a burden for your fellows humans and that is to help them.
Can the economy be effectively planned in democracy?
Planned economy is in conflict with democracy. If such a planning is attempted in a democratic regime, it would be soon evident that the only way of effectively implementing through a strong leader and the use of violence. In other words the democratic regime will shift toward the authoritarism.
An economic plan is, in a sense, a more or less explicit theory about which are the economical problems of the time and how to correct them. As a theory, it must be coherent. It should be logically consistent, and it must be consistent with the best posible explanations about reality.
For this reason, in the case of economical planning a compromised solution does not make sense. If compromise is attempted among people (in congress or elsewhere) with differentiated interest then either the compromise is imposible or the compromised plan losses it internal consistency.
The problem with an inconsistent plan is obvious; some mesures might contradict of even annihilate others mesures of the same plan. But there is another problem since a coherent plan is a theory and the implementation would yield observations of its effects on reality, we can learn through error correction. On the other hand, nothing can be learn in a compromised plan since a certain effect could be attributed to opposed mesures.
“The cry for an economic dictator is a characteristic stage in the movement toward planning”
The conclusion is this. Either you have planned economy or democracy. In other words the initiatives for a planned economy in democracy will tend to produce authoritarian regimes.
Chapter 6
Planning and the Rule of Law
The Rule of Law is for Hayek “the great liberal principle”. Rule of Law means that the government is limited to take action according to a pre-specified set of rules. It is the absence of legal privileges of particular people designed by authority, it is equality before the law. It produces by necessity inequality of outcome and it is the opposite to attempting substantive material equality. Pursuing equality of outcome, suppose de destruction of the Rule of Law, because “to produce the same result for different people, it is necessary to treat them differently”.
The Rule of Law produces economic inequality.
The central idea of the chapter is that the Rule of Law can only work in a liberal system. The collectivist system must necessarily void the implementation of the original idea of the rule of law, but of course not the rules themselves or the law. Even under the Nazis, formal law were in place, for example the law that gave Hittler absolute power. Giving to the state unlimited power means suppressing the Rule of Law since the actions of the government won’t be limited by preexisting rules.
“Man is free if he needs to obey no person but solely the laws”
Voltaire
In a collectivist system, economic planning necessitates to set up a list of merit between the needs of different people. The first problem is who writes the list of needs and based on which set of ideas. It is far from obvious which need or whose’s needs is to be prioritised.
“When we have to choose between higher wages for nurses or doctors and more extensive services for the sick, more milk for children and better wages for agricultural workers, or better employment for the unemployed or better wages for those already employed, nothing short of a complete system of values in which every want of every person or group has a definite place is necessary to provide an answer.”
The difference between the two kinds of rules [liberal and collectivist] is the same as that between laying down a Rule of the Road, as in the Highway Code, and ordering people where to go […] commanding people which road to take.
In the collectivist system the state chooses the ends and imposes them to the individuals. The state decide which road every citizen need to take as well as the place they should reach. The collectivist state is a “moral” institution that imposes its moral.
the application of the term “privilege” to property as such […] is depriving the word “privilege” from its meaning.
What actually happens in the collectivist systems is an effective change of the Rule of Law for the rule of status. The more status you get, the more the inequality before law favours you. This collectivist approach is intrinsically totalitarian, I think, because in order to get more status you must transform every aspect of your life as an individual, your social interactions and you intimate life. In the liberal society you can ruin your status as many times as you may that your status before law would not change.
Chapter 7
Economic control and Totalitarianism
Directed economy must be run in a dictatorial way by a single staff of experts. The collectivist attempt to smooth this type of coercion by the state saying that it will apply “only” to economic matters.
Hayek defends in this chapter the idea that economy is not just a peripheral aspect of human life; on the contrary, economy is never separated from other ends in life, it is a central issue.
“money is one of the greatest instruments of freedom ever invented by man”
In a free economy, economical looses are experienced in a very different way. The individual might decide where to cut expenses, what particular goal leave in pause. The needs cut tend to be those at the margin, not at the core of the life of the individual. And what is on the margin is someone’s life, is to the core of others. In other words, we get to decide what is more important for us .
A pioneer farmer had five sacks of grain, with no way of selling them or buying more. He had five possible uses: as basic feed for himself, food to build strength, food for his chickens for dietary variation, an ingredient for making whisky and feed for his parrots to amuse him. Then the farmer lost one sack of grain. Instead of reducing every activity by a fifth, the farmer simply starved the parrots as they were of less utility than the other four uses; in other words they were on the margin. And it is on the margin, and not with a view to the big picture, that we make economic decisions.
Eugene von Böhm-Bawerk
In a planned economy, since the valuation of good is different for every person, in case of looses, the cut could well be not at the margins, but at the core. The central planning staff decides for us (and for the farmer of the example) the relative importance of the different needs. Who knows if that type of economy might save the parrots!
This is the reason why Hayek considered that the economic control is no “merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends.”
Planned economy affects our rol as consumers but also very importantly our rol as producers. According to Hayek “some freedom in choosing of work is, probably, even more important for our happiness than freedom to spend our income during the hours of leisure”
“Nothing make conditions more unbearable than the knowledge that no effort of ours can change them; and even if we should never have the strength of mind to make the necessary sacrifice, the knowledge that we could escape if we only strove hade enough makes many otherwise intolerable positions bearable.”
Chapter 8
Who Whom?
The title of the chapter is a quote from Lenin, it is the question that summarises the universal problem of the socialist society: who plans whom. Who gets to distribute the wealth and who has to patiently wait to receive something. How is the ruling elite, the ruling group, built and maintained.
Perhaps to compensate Lenin quote, Hayek cites John Stuart Mill:
“[…] that a handful of human beings should weigh everybody in balance, and give more to one and less to another at their sole pleasure and judgment, would not be borne unless form persons believed to be more that men, and backed by supernatural terrors.”
Justice is blind in the mythology, and competition should be also blind. “ In framing a law, we should not be able to predict which particular person will gain and which will lose by their application.”
“ […] In competition chance and good luck are often as important as skills and foresight in determining the fate of different people.”
In a free enterprise system there is not equality of opportunities due to private property and inheritance. Hayek recognise here that “There is, indeed, a strong case for reducing this inequality […]”. In a free society, the poor have fewer opportunities but they are equally free to shape their lives.
Transferring all private property and the means of production to the state means that the state will have to plan every aspect of the economy.
“It is only because the control of the means of production is divided among many people acting independently that nobody has complete power over us, that we as individuals can decide what to do with ourselves.”
The concentration of the means of production by the state (or, I would say, by any other actor) means the end of individual freedom.
According to Hayek, it is not rational conviction but the acceptance of a creed that is required to the people to accept a particular plan. People need to be brought to the creed through propaganda and through the design of organisation that would cover every aspect of human life, children education, organisation of the work life and the after work. Hayek brings the examples of “dopolavoro” and “Kraft durch Freude”. Those are both historical examples, during fascism and nazism, the regime not only told the people what job they should do, but also what to do after work.
The reaming part of the chapter is dedicated in discussing the internal struggles among factions of the socialism for the power.
Chapter 9
Security and Freedom
In this chapter, Hayek addresses the issue of economical or financial security as opposed to independence and freedom.
Independence comes, of course, with the risk of failure and financial ruin but also with the opportunity of boundless rewards. Freedom has a price and, of course, serfdom has its rewards too. It is the exercise of freedom in which people must use their ingenuity to create wealth and to avoid bankruptcy.
In the collectivist system, security is artificially planned and the income of the person is arbitrarily estimated based on things as credentials and subjective values.
Hayek distinguishes between two types of security: limited and absolute. The limited, that the author favours, include protection against uncontrolled catastrophe as diseases that impairs the ability to work. “ […] some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody”. This literal quote might sound as improper of Hayek and may hurt some current liberal hears (page 148). It is the case that that food and shelter and clothing and health services, should be paid with the money of others whom might not be willing to contribute and some coercion would be needed.
The other security, the absolute, when no matter the outcome of the company or the worker income is assure, is deleterious to society as a whole. If you think about, it becomes obvious that to manage to break the link between outcome of the worker or company and income you have to severely intervene in the market. For example you should push other actors with better outcome out of the market in order to preserve the income of the chosen or privileged ones. “Every restriction on the freedom of entry into a trade reduces the security of all those outside it”. “The more we try to provide full security by interfering with the market system, the greater the insecurity becomes […]”
It is impossible for me not to think about the current public health system in many European countries. They act as highly inefficient monopolies assuring credential based rewards to it workers that are disconnected from the results. That push out of the market other actors and effectively reduces de security of all outside. The wait list for attention is a clear symptom of the intrinsic failure of the system.
The societies that value security over independence make moral shame on the gains which make risk worth taking. People would say “it is not ok to make so much money” or worse “whom did you steal money to have accumulated that much”. It is no ok to be rich, if you are rich you can’t be good, and the like. The basic misconception behind that is the idea that economy is a zero-sum game, that wealth is already there a does not need to be created, that it is all about distribution and if someone gets a bigger portion is because someone else is getting a smaller. But it is all about creation of wealth rather than about distribution.
Hayek comments about this moral misconception “[…] where to employ a hundred people is represented as exploitation but to command the same number as honorable”.
Hayek closes the chapter quoting Benjamin Franklin: “Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety”.
Chapter 10
Why the worst get on top
References
F. A. Hayek. The road to serfdom. Edited by Burce Caldwell. The definitive Edition. Chicago Press.
Karl Popper. Conjectures and Refutations
David Deutsch. The Beginning of Infinity
Karl Popper. The Open Society and its Enemies.