My friend and partner in econ video production, Russ Roberts, has an excellent piece in today’s Wall Street Journal on why he believes (as do I) that Friedrich Hayek is making a comeback. This article is a must-read primer for the key concepts and contributions of Hayek and why they are so vitally important for understanding our problems today and the way forward.

The most crucial point in the piece is a distinctly Roberts perspective on civil society:

Hayek understood that the opposite of top-down collectivism was not selfishness and egotism. A free modern society is all about cooperation. We join with others to produce the goods and services we enjoy, all without top-down direction. The same is true in every sphere of activity that makes life meaningful—when we sing and when we dance, when we play and when we pray. Leaving us free to join with others as we see fit—in our work and in our play—is the road to true and lasting prosperity. Hayek gave us that map.

This is an essential point that is routinely misunderstood. Being opposed to government actions in an area is not opposition to action in general. Too many people conflation the state with society itself.  The way nations are discussed every day on the news only magnifies this mistake. “America” did this. “China” thinks that. “Europe” must chose between this or that. This mindset and language is deeply flawed. Nations don’t act, think or choose. Nations don’t plan. People do.  People make up the society and come together in peaceful, private collective enterprises all the time.

Being against the state and it’s army of distant bureaucrats making our choices and plans for us is exactly that. Each of us at the local and community level have the specific knowledge and crucial vested interest in ourselves and each other to choose the means with which to seek our own individual and collective ends. Central planning, the great villain of Hayek’s collective work and of civil society at large, must come at the expense of local planning. When the Feds tell you to buy health insurance or else, you no longer have the choice.

Hayek was, indeed, a liberal in the classical tradition of Adam Smith and John Locke. He believed deeply in an open, dynamic society where change was to be expected and embraced and the order of life would evolve and emerge out of the actions of each of us working toward our ends in peace.

In comparison, his intellectual adversary, John Maynard Keynes, had a theory of economic life that both assumed and, in fact, advocated a static world where central planners would ultimately guide all investment decisions. Hayek said of his rival’s  theory that “Mr. Keynes aggregates conceal the most fundamental mechanisms of change”. In focusing on overly summarized (or aggregated) statistics like GDP, Keynes sought to maintain the status quo through spending immaterial of changes in reality on the ground. If people stop spending for some reason, the state should spend for them by force, saddling them with debt but (in theory) preserving their incomes and employment in the process.

Unfortunately, the debt part of the Keynesian prescription is the only aspect of his “stimulus” plan which pans out in reality. Meanwhile, some people benefit by the increases in government spending while others are hit with reduced investment opportunities and higher taxes. These changes are the dynamics which Mr. Keynes aggregate view conceals.

Rather than allow order to emerge from a natural process of discovery, Keynesianism fights that process through the status quo of the political system. It seeks to re-employ workers in their old jobs through force in fields for which there is no longer need through deficit-financed make-work and (often literal) ditch-digging rather than assist a rapid and sound readjustment to reality. These “hair of the dog” measures actually calcify the excesses of the prior boom rather than

It makes sense, then, to think about Lord Keynes as a conservative, not a liberal in the classical sense. He was, after all, a member of the political elite and stood only to lose from sweeping changes to the status quo of power. More disturbing, though was the disregard for individual freedom and bottom-up competition. The foreward to the German edition of Keynes’ General Theory includes this chilling passage:

Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.

Add to that distressing recommendation, the fact that Lord Keynes was an anti-semite and the treasure of the Cambridge Eugenics Society and a picture emerges that is, again, incredibly illiberal.

Keynes was a contradictory figure, oscillating between truly marvelous calls for peace and justice in “The Economic Consequences of the Peace”, to pitching his ideas of central control to the most murderous regimes in history. He called for the “socialization of investment” by the State as a means of silencing the volatile “animal spirits” of business, yet praised Hayek’s Road to Serfdom and it’s attack on central planners, saying:

You will not expect me to accept quite all the economic dicta in it. But morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement.

It remains an oddity of history that America’s modern “liberals” including self-proclaimed “Conscience of a Liberal”, Paul Krugman, have come to admire John Maynard Keynes as a hero and scorn F. A. Hayek as a right wing reactionary.

I want to bring this notion of liberality to the foreground because I think it underscores the moral concepts beneath F. A. Hayek’s philosophy of decentralized decision making based on sound money and property rights with that of his rival. Those who claim a moral high ground in activist central planning and big government in the spirit of Keynes must inevitably come to terms with the ethical shortcuts and disregard for the individual that such forceful action requires.

The dynamic world that the free and liberal society Hayek envisioned can be challenging. Change is hard for people. But efforts to counter the mechanics of dynamic change do indeed have severe and lasting social costs which I believe outweigh any benefits for particular groups.

I think it’s high time we revisit our cultural notions of liberality and “conservatism” with F. A. Hayek as our benchmark…

…but what the hell do I know?