Leading the Revival of Individualism & Self Reliance

Hayek Warns of the International Road to Serfdom

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In the previous chapter of The Road to Serfdom, F.A. Hayek spelled out his concerns for the problems facing America in the aftermath of WWII. Moving away from discussing domestic policy, in chapter 15, “The Prospects of International Order” Hayek discusses the grave problems associated with global governance.

Making no effort to downplay the topic of foreign policy, Hayek says:

In no other field has the world yet paid so dearly for the abandonment of nineteenth-century liberalism as in the field where the retreat began: in international relations.”

Hayek has dedicated the majority of his book to explaining why planned economies on a national scale are bound to fail. You can understand his frustration then, when in the wake of World War II there was a bigger push for international governance.

Global Governance Is Not the Answer

As is understandable, there was an overwhelming desire to make sure the atrocities of WWII were never allowed to happen again. Since Germany’s nationalist sentiment had isolated it from the rest of the world prior to WWII, there was a sense that forced globalization would provide the necessary safeguard.

Hayek writes:

That there is little hope of international order or lasting peace so long as every country is free to employ whatever measures it thinks desirable in its own immediate interest, however damaging they may be to others, needs little emphasis now.

It was easy, after all, for the Third Reich to take full control of the Germany’s economy when all outside influences were cut off.

Many kinds of economic planning are indeed practicable only if the planning authority can effectively shut out all extraneous influences; the result of such planning is therefore inevitably the piling-up of restrictions on the movements of men and goods.

But international planning was not the answer to the problem facing the world after WWII. By assuming to treat each nation as an actor in the global economy, instead of realizing that each nation was comprised of individual actors, the world now faced new issues.

As Hayek explains:

Less obvious but by no means less real are the dangers to peace arising out of the artificially fostered economic solidarity of all the inhabitants of any one country and from the new blocs of opposed interests created by planning on a national scale. It is neither necessary nor desirable that national boundaries should mark sharp differences in standards of living, that membership of a national group should entitle one to a share in a cake altogether different from that in which members of other groups share.

Continuing to point out the dangers associated with this line of thinking, Hayek writes:

If the resources of different nations are treated as exclusive properties of these nations as wholes, if international economic relations, instead of being relations between individuals, become increasingly relations between whole nations organized as trading bodies, they inevitably become the source of friction and envy between whole nations.

But still, there remained this belief that a global authority was needed in order to foster the transactions between different nations all in the name of maintaining the peace and reducing instances of disagreement. But this is just not the case, as Hayek explains.

It is one of the most fatal illusions that, by substituting negotiations between states or organized groups for competition for markets or for raw materials, international friction would be reduced.

When a global governing body is the ultimate authority, rather than multiple sovereign nations serving as checks and balances to each other the opportunity for abuse is ripe. You effectively leave the world vulnerable to totalitarianism on a grander scale than has been seen before. And where there is totalitarianism, there will exist perpetual conflict as the scales of power attempt to balance themselves.

Hayek writes:

Economic transactions between national bodies who are at the same time the supreme judges of their own behavior, who bow to no superior law, and whose representatives cannot be bound by any considerations but the immediate interest of their respective nations, must end in clashes of power.

Hayek even hypothesized that if this push towards international authority was taken more seriously in the years leading up to WWI, as Wilson had hoped for his League of Nations, we may have found ourselves in an even worse situation than reality provided.

He says:

If we were to make no better use of victory than to countenance existing trends in this direction, only too visible before 1939, we might indeed find that we have defeated National Socialism merely to create a world of many national socialisms, differing in detail, but all equally totalitarian, nationalistic, and in recurrent conflict with each other.

The Bigger the Jurisdiction, the Harder to Plan

Planning economies for small entities comes with its own set of challenges and economic fallacies. But imagine how these would be magnified on a global scale. It is for this reason that Hayek and other free market economists believe that the individual is the only entity capable of planning his or her financial futures.

If there must be governance, as Hayek would argue, it would need to be as small and contained as possible. Much of the reason for this is because as smaller units, like families and communities, there are certain mutual goals and traditions that unite us and make it easier to agree on economic outcomes.

There need be little difficulty in planning the economic life of a family, comparatively little in a small community. But, as the scale increases, the amount of agreement on the order of ends decreases and the necessity to rely on force and compulsion grows. In a small community common views on the relative importance of the main tasks, agreed standards of value, will exist on a great many subjects. But their number will become less and less the wider we throw the net; and, as there is less community of views, the necessity to rely on force and coercion increases.

The individual is already a threatened entity easily swallowed up by the collective. Imagine what would happen if that individual was one among many on an international scale.

When in wartime Americans were asked to make sacrifices in the name of national security, it was easier to enforce these rationing policies because the of the guise of national solitude. But when asked to make sacrifices in the for unnamed people in a foreign country whose name you cannot even pronounce, this becomes a much harder task.

Hayek writes:

The people of any one country may easily be persuaded to make a sacrifice in order to assist what they regard as “their” iron industry or “their” agriculture, or in order that in their country nobody should sink below a certain level. So long as it is a question of helping people whose habits of life and ways of thinking are familiar to us, of correcting the distribution of incomes among, or the working conditions of, people we can well imagine and whose views on their appropriate status are fundamentally similar to ours, we are usually ready to make some sacrifices.

Brilliantly expanding on this, Hayek says:

Who imagines that there exist any common ideals of distributive justice such as will make the Norwegian fisherman consent to forgo the prospect of economic improvement in order to help his Portuguese fellow, or the Dutch worker to pay more for his bicycle to help the Coventry mechanic, or the French peasant to pay more taxes to assist the industrialization of Italy?

And to those who most fervently supported the idea of an international order in spite of its many obstacles, Hayek explains that these sympathies usually arise because they see themselves as calling the shots in this new order:

If most people are not willing to see the difficulty, this is mainly because, consciously or unconsciously, they assume that it will be they who will settle these questions for the others, and because they are convinced of their own capacity to do this justly and equitably.

And given the fact that most individuals would not agree with the sacrifices they are being asked to make for the good of global order, it would leave those in authority no choice but to rule by force.

Hayek writes:

To imagine that the economic life of a vast area comprising many different people can be directed or planned by democratic procedure betrays a complete lack of awareness of the problems such planning would raise. Planning on an international scale, even more than is true on a national scale, cannot be anything but a naked rule of force, an imposition by a small group on all the rest of that sort of standard and employment which the planners think suitable for the rest.

But as history had so recently shown the world in Hayek’s day, the Germans were not uniquely evil. But, they had adopted a system that opened its arms to a “by any means necessary” policy, which in itself was evil.

Hayek says:

It is a mistake to regard the brutality and the disregard of all the wishes and ideals of the smaller people shown by the Germans simply as a sign of their special wickedness; it is the nature of the task they have assumed which makes these things inevitable.

But even if you believe your path to be the right one, as many Germans undoubtedly did, once you have crossed the line between consent and coercion, morality in your quest cannot exist:

To undertake the direction of the economic life of people with widely divergent ideals and values is to assume responsibilities which commit one to the use of force; it is to assume a position where the best intentions cannot prevent one from being forced to act in a way which to some of those affected must appear highly immoral…This is true even if we assume the dominant power to be as idealistic and unselfish as we can possibly conceive. But how small is the likelihood that it will be unselfish, and how great are the temptations!

Individualism Is the Answer

But as is so typical of Hayek, he concludes this chapter by explaining that the only substantial alternative capable of effectively curbing authoritarianism is the individual. Without recognizing the role individual actors play in limiting power Hayek says, “We shall never prevent the abuse of power if we are not prepared to limit power in a way which occasionally may also prevent its use for desirable purposes.”

While the state’s ends may sometimes include prospects that might benefit us, consistency is of the utmost importance. We cannot condemn the state only when it acts in ways contrary to our own benefits. Because once we let the state in on one issue, they will soon invade as many as they can feasibly get away with.

It is for this reason that Hayek implores readers to consider the options ahead of us and realize that the path is clear:

Neither an omnipotent superstate nor a loose association of ‘free nations’ but a community of nations of free men must be our goal.

In a world comprised of individual actors certain occurrences are inevitable. We can do our best to follow the golden rule and do all that we have promised to do, but we may never be able to prevent wars and instances of great violence from occurring. But as Hayek warns:

While we must aim at preventing future wars as much as possible, we must not believe that we can at one stroke create a permanent organization which will make all war in any part of the world entirely impossible.

Hayek Was Right, Welfare Is False Philanthropy at Its Finest

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In chapter 14 of The Road to Serfdom, “Material Conditions and Ideal Ends,” Hayek focuses on the path forward now that the Second World War was coming to an end. Specifically, he explains that calling on the state to coercively act in the name of the “greater good” is not a moral act worthy of praise.

Employment

When the book was written in 1944, the country was anxious to see what America’s post-war economy would look like. One of the primary concerns in this regard was the issue of employment. Two million soldiers were returning from war. They needed work. What would be the effect on wages and growth?

Hayek writes:

That no single purpose must be allowed in peace to have absolute preference over all others applies even to the one aim which everybody now agrees comes in the front rank: the conquest of unemployment.

Keynesian economists claim that war is actually supremely beneficial to the national rate of employment. And on paper, this might appear to be true.

In times of war, and especially when a draft is instituted, employment does tend to rise. But this is due largely to the fact that when a draft forces many into military service, they are now considered “employed.” For many young adults who were otherwise unemployed prior to the war, being drafted bumped these men up to “employed” status.

Similarly, WWII saw an influx of working women. The Rosie the Riveter era of women entering the workforce also had significant impacts on the rate of employment. There was also a higher demand for jobs in the sectors that were part of what Eisenhower called the Military Industrial Complex.

As Hayek says:

One of the dominant features of the immediate postwar situation will be that the special needs of war have drawn hundreds of thousands of men and women into specialized jobs where during the war they have been able to earn relatively high wages. There will, in many instances, be no possibility of employing the same numbers in these particular trades.

But now that the war was coming to an end employment was going to once again become an issue. The soldiers coming back from war who were not mentally or physically fatigued would be looking to re-enter the workforce immediately. With less of a demand for weaponry and other war-related products, the employer’s demand for jobs would decrease at the same time the workforce market was increasing. Not only were veterans looking for work, but there were now also more women competing for some of these same jobs in the workforce.

This caused many to turn to the government to provide enough jobs to keep the employment rates high. Books like William Beveridge’s Full Employment in a Free Society asserted that the free market was not capable of creating full employment and so it was the state’s job to provide this to all individuals.

Hayek comments on this belief of “full employment” saying:

It is, in fact, in this field that the fascination of vague but popular phrases like “full employment” may well lead to extremely shortsighted measures, and where the categorical and irresponsible “it must be done at all cost” of the single-minded idealist is likely to do the greatest harm.

And while the answer for the country’s unemployment woes was not to be found within state bureaucracies, the prospect of massive unemployment was still a major problem in the post-WWII era, as Hayek explains:

There will be an urgent need for the transfer of large numbers to other jobs, and many of them will find that the work they can then get is less favorably remunerated than was true of their war job. Even retraining, which certainly ought to be provided on a liberal scale, cannot entirely overcome this problem. There will still be many people who, if they are to be paid according to what their services will then be worth to society, would under any system have to be content with a lowering of their material position relative to that of others.

But, most people do not want to lower their material positions, even after surviving a war. And as we see happen today, when this material status is in any way threatened, labor unions and activists began calling for a raising of wages to help correct this great “injustice.” But this can not be done with coercion threatening our liberties.

Hayek says:

If, then, the trade unions successfully resist any lowering of the wages of the particular groups in question, there will be only two alternatives open: either coercion will have to be used (i.e., certain individuals will have to be selected for compulsory transfer to other and relatively less well paid positions) or those who can no longer be employed at the relatively high wages they have earned during the war must be allowed to remain unemployed until they are willing to accept work at a relatively lower wage.

And, as many free market economists have tried to warn in our current day, there is the failure on the part of many of these labor activists to recognize that by artificial raising wages, other inflationary measures must be taken as well.

Yet to raise all other wages and incomes to an extent sufficient to adjust the position of the group in question would involve an inflationary expansion on such a scale that the disturbances, hardships, and injustices caused would be much greater than those to be cured.

And while the state could use its power to waive its proverbial magic wand and do its best to force full employment, it does not usually turn out as many would hope:

There will always be a possible maximum of employment in the short run which can be achieved by giving all people employment where they happen to be and which can be achieved by monetary expansion. But not only can this maximum be maintained solely by progressive inflationary expansion and with the effect of holding up those redistributions of labor between industries made necessary by the changed circumstances, and which so long as workmen are free to choose their jobs will always come about only with some delays and thereby cause some unemployment: to aim always at the maximum of employment achievable by monetary means is a policy which is certain in the end to defeat its own purposes.

False Philanthropy

Those calling on the state to provide jobs and higher wages to all individuals have a tendency to believe that they are standing on moral high ground. These people believe that forcing individuals to meet their “charitable” expectations is only right. Nothing could be further from the truth. Forcing “ideal” behavior through coercion does not make people moral. People will do almost anything when forced.

Touching on this, Hayek writes:

What our generation is in danger of forgetting is not only that morals are of necessity a phenomenon of individual conduct but also that they can exist only in the sphere in which the individual is free to decide for himself and is called upon voluntarily to sacrifice personal advantage to the observance of a moral rule.

An individual is not acting out of personal responsibility when he or she is forced to do something. Instead, whatever act is being forced is neutral, serving only the ends of the state and no moral ends that will serve to benefit the individual in any way. If someone held you at gunpoint and demanded that you give five dollars to a homeless individual, that would not make your “donation” moral, but it would make the gun holder’s actions immoral.

Hayek says:

Outside the sphere of individual responsibility there is neither goodness nor badness, neither opportunity for moral merit nor the chance of proving one’s conviction by sacrificing one’s desires to what one thinks right. Only where we ourselves are responsible for our own interests and are free to sacrifice them has our decision moral value.

When acting out of fear of state retribution, we are not acting of our own volition, we are simply doing what we have to do to stay out of a prison cell.

Hayek writes:

Responsibility, not to a superior, but to one’s conscience, the awareness of a duty not exacted by compulsion, the necessity to decide which of the things one values are to be sacrificed to others, and to bear the consequences of one’s own decision, are the very essence of any morals which deserve the name.

And after explaining that coercion is not on par with authentic philanthropy, Hayek laments the direction society is headed. As has been the theme throughout the last few chapters of this book, Hayek worries that by abandoning the English concepts of liberalism, we are quickly approaching collectivism.

That in this sphere of individual conduct the effect of collectivism has been almost entirely destructive is both inevitable and undeniable. A movement whose main promise is the relief from responsibility cannot but be antimoral in its effect, however lofty the ideals to which it owes its birth.

One of the primary elements of classical liberalism is the focus on self-reliance and personal responsibility, without which, a free society cannot truly exist.

It is true that the virtues which are less esteemed and practiced now—independence, self-reliance, and the willingness to bear risks, the readiness to back one’s own conviction against a majority, and the willingness to voluntary cooperation with one’s neighbors—are essentially those on which the working of an individualist society rests. Collectivism has nothing to put in their place, and in so far as it already has destroyed them it has left a void filled by nothing but the demand for obedience and the compulsion of the individual to do what is collectively decided to be good.

Looking to the Future

Hayek always tries to end his chapters on somewhat of a hopeful note. But at the end of this chapter, you can sense the sadness in his writing. Hayek, who as we have seen was a bit of an anglophile was sad to see the English liberal traditions fading from popular opinion.

Hayek has continuously written about his deep respect for the classical liberal tradition that derived from England. He truly believed that holding vigorously to these ideas was the right antidote to economic servitude.

If we are to succeed in the war of ideologies and to win over the decent elements in the enemy countries, we must, first of all, regain the belief in the traditional values for which we have stood in the past and must have the moral courage stoutly to defend the ideals which our enemies attack.

And closing the chapter with a rather frank statement that reflects the political rhetoric of the day, Hayek says:

Not by shamefaced apologies and by assurances that we are rapidly reforming, not by explaining that we are seeking some compromise between the traditional liberal values and the new totalitarian ideas, shall we win confidence and support. Not the latest improvements we may have effected in our social institutions, which count but little compared with the basic differences of two opposed ways of life, but our unwavering faith in those traditions which have made England and America countries of free and upright, tolerant and independent people is the thing that counts.

Chaos on the Road Is More Orderly Than You Think

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To most people, an “anything goes” approach on the road seems crazy, to say the least. And why shouldn’t it? Cars weigh thousands of pounds and once moving at high speeds are essentially large deathtraps all charging towards each other.

On its own, this concept is concerning enough without having to imagine what would happen in the absence of all traffic signals. How would cars know when to stop and when to go? Surely this type of system, or lack thereof, would result in increased fatalities and sheer madness on the streets.

But while conventional wisdom says that some sort of traffic authority is needed in order for individuals to travel safely from point A to point B without killing each other, spontaneous order provides an alternative to this tradition.

Broken Traffic Lights

We have been trained our entire lives to obtain permission from authority figures before acting. Since the age of five, those of us sent to public schools were even taught that we must ask permission before doing something as simple and self-regulating as leaving our desks to grab a tissue or use the restroom.

It is no wonder then, that so many naturally accept government regulation as a necessity. Our lives have been riddled with rules and we fear what might happen without them.

However, as I have explained previously, individuals have an amazing ability to survive and even thrive in the absence of regulation and authority. And since cars are operated by individual actors, roads are no exception to this rule.

We have all had the experience of pulling up to a busy intersection only to find that the traffic lights are not functioning. But instead of panic or chaos erupting throughout traffic, something rather amazing happens: Within a few seconds, all the vehicles involved have managed to figure it out and traffic slowly gets moving again.

As a society, we have determined that the best course of action in this situation is to treat the intersection like a four-way stop. There was no meeting held or book printed in order for this to come to pass, it was simply adopted by society as the best practice.

Economist Steven Horwitz comments on this phenomenon:

If everyone agrees—whether explicitly or tacitly—on a particular practice, we no longer have to outguess or outstrategize other actors. The classic example of such so-called coordination problems is deciding which side of the road to drive on. As long as all agree, the particular choice is irrelevant. A rule about which side to drive on reduces the need to make a fresh choice on a case-by-case basis.

He continues:

We are born into a social world of various norms, rules, and institutions into which we are socialized from an early age. We learn to form expectations of others’ behavior based on those regularized practices.

But in addition to these “regularized practices,” there is another component of spontaneous order on the road: self-interest.

The Invisible Hand

As Horwitz writes:

The appeal to self-interest is our best way to convince others to do what we wish when we do not know them well enough to appeal to their fellow feelings for us.

Unless you live in a tiny town, you likely do not know all the other drivers stopped at any given intersection. Since there are no personal relationships with the other actors, the best way to proceed is to act out of self-interest, which in the case of a busy intersection would be to act out of self-preservation.

Most everyone wants to get safely from point A to point B. And because of this innate need to live, when we encounter obstacles, like an intersection without functioning traffic signals, we proceed more cautiously out of our desire to protect ourselves against other drivers. This also makes us more willing to cooperate and communicate with others on the road.

When our own survival is at stake, this self-interest works to the benefit of others. Just like you are concerned with your own safety on the road, so are other drivers concerned with their own safety as well. All the actors are better, more alert drivers because each is primarily concerned with his or her own wellbeing.

No one is eager to speed through an intersection without lights simply because there are “no rules.” Instead, in the absence of authority, individuals are actually more conscious of their decisions because they are, in this manner, directly responsible for their actions. They cannot blame it on a traffic light or on a silly law. All actions are their own.

Is precisely this self-interest that helps keep all other drivers safe. And because we have each experienced this situation, it makes it easier to encounter in the future.

As Horwitz writes:

A larger number of rule followers makes using the rule more attractive to potential newcomers because more users implies more opportunities to use the rule as a predictor of behavior, enhancing the likelihood of coordinated outcomes. When the behavior in question is so widespread that we can call it ‘generally accepted,’ the rule has become a social institution.

It is in our best interest to work together, not for some greater altruistic purpose necessarily, but because our own survival often depends on it. It is for this reason that this ability to recognize and operated within these generally accepted practices is so important to spontaneous order, as we will explore in more depth as the series continues. 

England Inches Down the Road to Serfdom

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Hayek has spent the last few chapters of The Road to Serfdom explaining the roots and rise of totalitarian governments. In chapter twelve, Hayek highlighted prominent Marxist theorists who would later lay the roots for the German National Socialist party.

Hayek’s whole purpose in writing this chapter, “The Totalitarians in Our Midst,” serves as a warning to his readers. The mass death of WWII had devastated and shocked the world. But unless individuals were able to identify how totalitarianism had taken over Europe in the first place, they would be ill-prepared to prevent it from happening again.

It was for this reason that Hayek uses chapter thirteen to demonstrate to his readers that a similar perversion of truth was already occurring among England’s intellectual elite as had occurred in the leadup to the Third Reich.

Individualism in Danger

England, which, as explained in the last chapter, represented the origin of individualist thought, had steadily been heading down a similar road as Germany had in the decades prior to WWII. While it may have taken a different form, when looked at from the perspective of totalitarianism in all things economic, England, as it stood in 1944, had taken swift strides away from liberalism and instead found itself headed in the direction of complete central authority.

It is for this reason that Hayek’s writing sounds so urgent in this chapter. As fresh as WWII was in the minds of all people, Hayek is urging them to not become complacent. It was not enough to mourn the recent past; they needed to proceed vigilantly and look to the enemies in their own nations.

As Hayek writes:

Probably it is true that the very magnitude of the outrages committed by the totalitarian governments, instead of increasing the fear that such a system might one day arise in more enlightened countries, has rather strengthened the assurance that it cannot happen here.

But for those who pushed away any suggestion that England was in anyway comparable to Germany, Hayek says:

And the fact that the difference has steadily become greater seems to refute any suggestion that we may be moving in a similar direction. But let us not forget that fifteen years ago the possibility of such a thing’s happening in Germany would have appeared just as fantastic…

But the real problem, as Hayek has stressed throughout the entire book, is that the threat to economic liberty comes from both sides of the political spectrum.  

…but the Germany of twenty or thirty years ago to which conditions in the democracies show an ever increasing resemblance…We have already mentioned the most significant—the increasing similarity between the economic views of the Right and Left and their common opposition to the liberalism that used to be the common basis of most English politics.”

And most importantly, especially to Hayek, was pointing out how England was already well on their way down a most dangerous path.

England, or rather, Great Britain, is the birthplace of liberalism in many capacities. It is where many of the founding philosophies of the American Revolution came from. These same principles of contract law and property rights served as the roots of free market economics and also came from England. So it was all the more troubling for Hayek to see his this nation going astray.

How far in the last twenty years England has traveled on the German path is brought home to one with extraordinary vividness if one now reads some of the more serious discussions of the differences between British and German views on political and moral issues which appeared in England during the last war.

Men like Lord Morley or Henry Sidgwick, Lord Acton or A. V. Dicey, who were then admired in the world at large as outstanding examples of the political wisdom of liberal England, are to the present generation largely obsolete Victorians.

Although few people, if anybody, in England would probably be ready to swallow totalitarianism whole, there are few single features which have not yet been advised by somebody or other.

E.H. Carr

Beginning his accusations against those contemporary English figures who were having a dramatic impact on the political climate, Hayek writes:

There are, perhaps, few other instances in contemporary English literature where the influence of the specific German ideas with which we are concerned is so marked as in Professor E. H. Carr’s books on the Twenty Years’ Crisis and the Conditions of Peace.

Explaining why he views Carr (1892-1982) as dangerous to the future England, Hayek writes:

How little difference he is able to see between the ideals held in this country and those practiced by present-day Germany is best illustrated by his assertion that ‘it is true that when a prominent National Socialist asserts that ‘anything that benefits the German people is right, anything that harms them is wrong’ he is merely propounding the same identification of national interest with universal right which has already been established for English-speaking countries by [President] Wilson, Professor Toynbee, Lord Cecil, and many others.

What is interesting, at least to me, when reading this chapter is the tone Hayek takes. Hayek’s entire purpose for writing this book is to warn others not to repeat history, and yet here it is repeating itself and going almost completely unnoticed by the people. You can almost hear the frustration in Hayek’s voice when he condemns Carr’s dismissal of the 19th-century liberalism.

Does Professor Carr, for example, realize, when he asserts that “we can no longer find much meaning in the distinction familiar to nineteenth-century thought between ‘society’ and ‘state,’ that this is precisely the doctrine of Professor Carl Schmitt, the leading Nazi theoretician of totalitarianism and, in fact, the essence of the definition of totalitarianism which that author has given to that term which he himself had introduced?

Further commenting on Carr’s negative attitude towards free market capitalism, Hayek quotes Carr himself:

The victors lost the peace, and Soviet Russia and Germany won it, because the former continued to preach, and in part to apply, the once valid, but now disruptive ideals of the rights of nations and laissez faire capitalism, whereas the latter, consciously or unconsciously borne forward on the tide of the twentieth century, were striving to build up the world in larger units under centralized planning and control.

Referring to the principles of capitalism as “disruptive ideas” and praising planned economies was enough to for Hayek to say, “Professor Carr completely makes his own the German battle cry of the socialist revolution of the East against the liberal West in which Germany was the leader…”

Hayek also goes on to undermine Carr’s commentary on economics by writing, ”Professor Carr is not an economist, and his economic argument generally will not bear serious examination.

Professor Carr’s contempt for all the ideas of liberal economists…is as profound as that of any of the German writers quoted in the last chapter. He even takes over the German thesis, originated by Friedrich List, that free trade was a policy dictated solely by, and appropriate only to, the special interests of England in the nineteenth century.

C.H. Waddington

The next target of Hayek’s criticisms is C.H. Waddington (1905-1975) another prominent figure in the field of science British society in 1944 in the realms of developmental biology, genetics, and paleontology. Again, this was so close in time to the horrors of the Holocaust and the pseudoscience that accompanied it, and this concerned Hayek gravely.  

It is well known that particularly the scientists and engineers, who had so loudly claimed to be the leaders on the march to a new and better world, submitted more readily than almost any other class to the new tyranny.

But to make matters worse, Hayek’s warnings seem to increase in severity as he digs deeper into Dr. Waddington’s beliefs on totalitarian rule:

Dr. Waddington’s claim that the scientist is qualified to run a totalitarian society is based mainly on his thesis that “science can pass ethical judgment on human behavior”—a claim to the elaboration of which by Dr. Waddington Nature has given considerable publicity.

Further elaborating as to why he believes Dr. Waddington is a threat to liberty, Hayek attacks his belief in freedom in itself. Or rather, his lack thereof.

For an illustration of what this means we do not need to go outside Dr. Waddington’s book. Freedom, he explains, ‘is a very troublesome concept for the scientist to discuss, partly because he is not convinced that, in the last analysis, there is such a thing.’

He continues to make the connection between Dr. Waddington’s work and his own Marxist roots, writing:

As in almost all works of this type, Dr. Waddington’s convictions are largely determined by his belief in ‘inevitable historical tendencies’ which science is presumed to have discovered and which he derives from ‘the profound scientific philosophy’ of Marxism, whose basic notions are ‘almost, if not quite, identical with those underlying the scientific approach to nature.

But, coming to at least one area of agreement, Hayek points out that even those who are pushing England further down the road to serfdom recognize that the country had been on the decline since the height of the liberalism in the 19th-century.

Thus Dr. Waddington, though he finds it ‘difficult to deny that England now is a worse country to live in than it was’ in 1913, looks forward to an economic system which ‘will be centralized and totalitarian in the sense that all aspects of the economic development of large regions are consciously planned as an integrated whole.’

Where We Are on the Road

While Hayek is certainly more urgent in his tone during this chapter, he has not given up hope quite yet. In spite of the stumbling blocks inhibiting free-market competition, he still believes that society has the option of turning back before totalitarianism reached its full and ugly potential.

While there is no reason to believe that this movement is inevitable, there can be little doubt that if we continue on the path we have been treading, it will lead us to totalitarianism.”

But, as is obvious throughout this chapter, Hayek implores the readers to proceed with constant vigilance and to not be fooled by the ruling class once again. And, as is demonstrated in one of his final passages of the chapter, Hayek wanted really to drive home the importance of studying history in order to prevent it from happening again.

But to find it once more held after twenty-five years of experience and the re-examination of the old beliefs to which this experience has led, and at a time when we are fighting the results of those very doctrines, is tragic beyond words.

Perhaps Liberty Is No Longer The Right Word

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Liberty is one of our unalienable rights, enshrined in the Declaration of Independence. Yet there doesn’t seem to be much demand for it these days.

In politics, the Libertarian Party, which supposedly stands for more liberty and less government, gets very few votes. Virtually all of the votes go to the two wings of the Ever-Bigger Government Party, the Democrats and Republicans.

In Economics – the essence of civilization and of man’s human existence, according to Ludwig von Mises – we also seem to reject liberty. There is a well-established science of the role of free markets in raising the quality of everyone’s lives, and of the role of creative and ethical entrepreneurship in promoting justice and well-being. Yet we hamper free markets and shackle our entrepreneurs in regulations and legislative interference.

Where Are The Heroes Of Liberty?

It’s hard for most people to identify heroes of liberty today. Ron Paul made a strong splash but now ploughs a lone furrow. Inspiring individuals like Tom Woods have a following, but it’s small compared to mainstream media and late-night comedians. There are magnificent institutions like Mises Institute and the Foundation For Economic Education; they do great work for liberty and free markets and individual freedom, but they are hardly prominent in the grand scheme of Americans’ awareness.

If we look at this situation through a marketing lens, we would conclude that the product, liberty, lacks demand. It’s not persuasive. It doesn’t meet a compelling need on the part of target consumers.

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Let’s Use Language That Reflects What People Want.

So what do these target consumers want? A 2013 Pew Research Center report told us (among other things) that “Polls show they just want a better chance of achieving success themselves – they do not want redistributive government policies, they want ones that give everyone a fair shot at success, reflecting bedrock American belief in the individual’s ability to succeed through hard work.”

This is a highly revealing and encouraging insight from one of America’s truly non-partisan think tanks. It is highly consistent with our Hayekian bent at Center For Individualism, favoring rules of just conduct that provide inducements for all to try to identify their chance at success and work, through trial and error and long term effort, to seize the opportunity they are able to identify. There are no guaranteed outcomes, but there is the assurance that everyone has an equal likelihood to benefit from their own hard work. Skill and luck also play a part, and so there is no sense in calling the outcome either just or unjust. It’s the equal opportunity to try. The fact that Americans embrace this idea, making it a “bedrock belief”, is what makes America great.

What Americans are able to achieve via this bedrock belief is a spontaneous order that delivers the best result to the most people via the fairest shot at success, as opposed to the destructive and vindictive central planning wars that politicians promote. Should we place the word “liberty” on this system of social order? It might have had that meaning in 1776, when linked to the pursuit of happiness, but the word seems to have lost its attraction for people.

Our Word Is Individualism.

We prefer the term Individualism – “Individualism True” as Hayek wrote – to capture the idea of the individual’s ability to succeed through hard work. You can check out our manifesto for Individualism here. We hope you will join us.

Hayek Explains How Socialist Academics Contributed to the Rise Third Reich

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Throughout the last three chapters of F.A. Hayek’s The Road to Serfdom, I have found myself questioning whether I am still reading the same book. In chapters 1-11, Hayek went from being an economist to a philosopher, to a historian. But in chapter twelve, “The Socialist Roots of Nazism,” he takes on the role of biographer.

Hayek highlights the very important connection between the socialist and Nazi intellectuals by profiling a handful of prominent German Marxist supporters whose philosophical beliefs would radicalize during WWI. While their academic careers were centered on spreading socialist philosophy, many would later come to the conclusion that nothing short of Nazism would help bring about the necessary revolutionary change they each wanted.

But most importantly, Hayek points out that contrary to what many think, Nazism did not simply appear out of thin air and infect the minds of docile German people. There were academic roots that, while grown in the soil of socialist thought, grew into a philosophy that praised German superiority, ultimate war, and the degradation of the individual.

As Hayek writes:

It is a common mistake to regard National Socialism as a mere revolt against reason, an irrational movement without intellectual background. If that were so, the movement would be much less dangerous than it is. But nothing could be further from the truth or more misleading.

Speaking of socialism’s intellectual leaders who later helped lay the intellectual foundation for the rise of the Third Reich, Hayek says:

…It cannot be denied that the men who produced the new doctrines were powerful writers who left the impress of their ideas on the whole of European thought. Their system was developed with ruthless consistency. Once one accepts the premises from which it starts, there is no escape from its logic.

While touching on each of Hayek’s examples would be just as long as Hayek’s own twelfth chapter, I will touch specifically on Werner Sombart, Johann Plenge, and Oswald Spengler.

Werner Sombart

Hayek writes:

From 1914 onward there arose from the ranks of Marxist socialism one teacher after another who led, not the conservatives and reactionaries, but the hardworking laborer and idealist youth into the National Socialist fold. It was only thereafter that the tide of nationalist socialism attained major importance and rapidly grew into the Hitlerian doctrine.

Beginning his list of influential thinkers prior to WWII, Hayek begins with the dedicated Marxist who later embraced nationalism and dictatorship, Werner Sombart (1863-1941). Hayek says of Sombart:

Sombart had begun as a Marxian socialist and, as late as 1909, could assert with pride that he had devoted the greater part of his life to fighting for the ideas of Karl Marx. He had done as much as any man to spread socialist ideas and anticapitalist resentment of varying shades throughout Germany; and if German thought became penetrated with Marxian elements in a way that was true of no other country until the Russian revolution, this was in a large measure due to Sombart.

Sombart was no stranger to radicalized thought. In fact, he would never be allowed to rise to the ranks of university chair in the course of his career because of his ties to Marxism.

He was also a strong believer in the glory of war and, specifically, the German people’s global role as ideal soldiers. In his works can be found this belief that a “German War” between England’s capitalist society of “peddlers” and Germany’s warrior culture of “heroes” was inevitable and vital for the progress of the world. He seethed with criticism for the English people, who, in his mind, had lost their warlike instincts. This became a recurring theme for him in later writings.

His other main criticism of English culture was the emphasis placed on the individual. For Sombart, individual happiness was hampering societies from being truly great. As Hayek said of Sombart, “Nothing is more contemptible in his eyes than the universal striving after the happiness of the individual…

Sombart’s dismissal of the individual tied in with his obsession with and glorification of war. In Sombart’s view, the concept of individual liberty was a barrier, preventing Germany from obtaining its true greatness. As Hayek says of Sombart’s beliefs, “there is a life higher than the individual life, the life of the people and the life of the state, and it is the purpose of the individual to sacrifice himself for that higher life.”

This all plays in perfectly with the rise of the Third Reich, where people were seen as means to an end, rather than as ends themselves.

Johann Plenge

Professor Johann Plenge (1874-1963) was another leading intellectual authority on Marxist thought during this time. He also saw war with England as a necessary struggle between two opposite principles: emphasis on the individual and organization and socialism.

Hayek explains what organization meant to Plenge by saying, “Organization is to him, as to all socialists who derive their socialism from a crude application of scientific ideals to the problems of society, the essence of socialism.” But for Plenge, the Marxist doctrine did not take this belief far enough.

Quoting Plenge, Hayek writes:

Marx and Marxism have betrayed this basic idea of socialism by their fanatic but utopian adherence to the abstract idea of freedom.

Interestingly enough, many of these socialist philosophers eventually abandoned Marxism in favor of National Socialism because they considered the former too liberal. Since Marxists at least claim to incorporate principles of democracy into the philosophy, this was thought to give too much power to individuals and was thus seen as dangerous by these intellectuals.

The doctrines which had guided the ruling elements in Germany for the past generation were opposed not to the socialism in Marxism but to the liberal elements contained in it, its internationalism and its democracy…It was the union of the anticapitalist forces of the Right and of the Left, the fusion of radical and conservative socialism, which drove out from Germany everything that was liberal.

Both Sombart and Plenge would have agreed. In order to have an ideal world, an extreme regimentation of society would have to take place and strong intellectual ideas would need to form the basis for this new planned world.

In Plenge’s own words:

Because in the sphere of ideas Germany was the most convinced exponent of all socialist dreams, and in the sphere of reality she was the most powerful architect of the most highly organized economic system.—In us is the twentieth century. However the war may end, we are the exemplary people. Our ideas will determine the aims of the life of humanity.—World History experiences at present the colossal spectacle that with us a new great ideal of life penetrates to final victory, while at the same time in England one of the World-Historical principles finally collapses.

Plenge believed that Germany’s war economy born in 1914 was:

The first realization of a socialist society and its spirit the first active, and not merely demanding, appearance of a socialist spirit. The needs of the war have established the socialist idea in German economic life, and thus the defense of our nation produced for humanity the idea of 1914, the idea of German organization, the people’s community (Volksgemeinschaft) of national socialism… The feeling of economic responsibility which characterizes the work of the civil servant pervades all private activity.

If Marxism, as it was believed, allowed too much of an emphasis on democracy, many of these intellectuals believed that their socialist views had to be taken even further to achieve the ends they wanted. By 1918, Plenge was already reflecting his new belief that something stronger and more authoritarian than Marxism was needed.

Plenge writes:

It is high time to recognize the fact that socialism must be power policy, because it is to be organization. Socialism has to win power: it must never blindly destroy power. And the most important and critical question for socialism in the time of war of peoples is necessarily this: what people is pre-eminently summoned to power, because it is the exemplary leader in the organization of peoples?

However, while Sombart and Plenge are thought to have provided the intellectual basis for Nazi thought, it was Oswald Spengler (1880-1936) who took the thoughts of these men and directly channeled them into the burgeoning philosophy of the National Socialist Party.

Oswald Spengler

Like the other two intellectuals, Spengler believed philosophy wasn’t enough to ensure the continuation of the German people and viewed liberalism as a dangerous English philosophy that was spreading throughout the world.

For Spengler, the Prussian model stood in opposition to England’s liberalism and was the ideal example of what Germany should aspire to. In the Prussian political model, the individual has no other role than to be a part of the whole and to serve the collective’s interests in the name of the state.

As Hayek says:

The three last nations of the Occident have aimed at three forms of existence, represented by famous watchwords: Freedom, Equality, Community. They appear in the political forms of liberal Parliamentarianism, Social Democracy, and authoritarian socialism… The German, more correctly, Prussian, instinct is: the power belongs to the whole. . .  Everyone is given his place. One commands or obeys. This is, since the eighteenth century, authoritarian socialism, essentially illiberal and anti-democratic, in so far as English Liberalism and French Democracy are meant.

And while Prussian militarism was seen to be the enemy of socialism, Spengler helped bridge that gap. Both schools of thought require an abandonment of the individual identity and a dedication to the greater good of society. Explaining the similarities, Hayek says:

In Prussia there existed a real state in the most ambitious meaning of the word. There could be, strictly speaking, no private persons. Everybody who lived within the system that worked with the precision of a clockwork, was in some way a link in it. The conduct of public business could therefore not be in the hands of private people, as is supposed by Parliamentarianism.

This sounds shockingly similar to the requirements made of the German people by the Third Reich. This is exactly why Spengler hated English liberalism so much. He targets it as the enemy of the Prussian model.

But unlike the other two, Spengler’s views were directly manifested in his support for Nazism. Spengler, more so than the others, wanted to incorporate these views in a tangible way that made Germany the ultimate authority on the matter.

Spengler writes:

The decisive question not only for Germany, but for the world, which must be solved by Germany for the world is: Is in the future trade to govern the state, or the state to govern trade? In the face of this question Prussianism and Socialism are the same…Prussianism and Socialism combat the England in our midst.

The Birth of National Socialism

At its very core, and as specified by these German thinkers, liberalism was the archenemy of planning and organization. And unless full-fledged National Socialism was adopted, the individual would not be sufficiently squashed as to allow for authoritarian rule.

This hatred and fear of the individual is the worldview espoused by these thinkers and it continues on with those who claim to be socialists today. Unless the concept of individualism is completely eradicated, the glorified state cannot come into existence. Let this, of all things, be a lesson on why Hayek places so much importance on the individual.

It is the individual, above all things, and the philosophical outlook that defends his or her rights, who presents the greatest obstacle to totalitarianism.

Trump Is Deregulating All the Things and No One Isn’t Talking about It

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Most people alive in America today have probably never had the experience of sending a telegram. There are a host of reasons for this, the main one being that the telegram stopped being fashionable decades ago as burgeoning technology replaced its use in the modern world. The very last Western Union telegram was sent 11 years ago.

Over a decade too late, the FCC has finally decided to end burdensome regulations that stifled telegraph technology. As Reuters reported:

AT&T Inc, originally known as the American Telephone and Telegraph Company, in 2013 lamented the FCC’s failure to formally stop enforcing some telegraph rules.

‘Regulations have a tendency to persist long after they outlived any usefulness and it takes real focus and effort to ultimately remove them from the books even when everyone agrees that it is the common sense thing to do,’ the company said.”

Regulations are far easier to create than they are to dismantle. As Milton Friedman said, “Nothing is so permanent as a temporary government program.” Yet lately, there has been an undeniable trend of repealing these types of regulations, the likes of which America hasn’t seen since the Reagan Administration. And in the spirit of giving credit where credit is due, this current regulatory rollback is due largely to President Donald Trump.

Setting a New Record

Ronald Reagan left many legacies during his duration in the White House. And while many were less than praiseworthy—the War on Drugs springs to mind—he did accomplish some deregulation.

In fact, during the Reagan presidency, both the Federal Register and federal regulations decreased by more than one-third. And as impressive as this record surely was, it’s already been broken by Donald Trump.

Upon taking office, Donald Trump signed an executive order telling federal agencies that they must cut two existing regulations for each new regulation proposed. Contained within this executive order was the demand that each federal agency create a task force with the explicit purpose of finding regulations worth slashing. This act was intended to help the newly sworn-in president reach his promise of cutting 70 percent of all federal regulations.

While the talk of regulatory cuts is typical red meat rhetoric, the left was obviously less than pleased with this executive order. A coalition of left-leaning organizations even joined together in February and sued Trump on the grounds that his executive order would potentially “block or force the repeal of regulations needed to protect health, safety, and the environment, across a broad range of topics – from automobile safety, to occupational health, to air pollution, to endangered species.” But the lawsuit did not scare Trump away from his objective.

When Obama had been in office as long as Trump currently has, regulations were 28 percent higher. But since taking office, Trump has repealed hundreds of these regulations.

And when it comes to regulations in general, the score speaks for itself. During the same point of time of their respective presidencies, Obama’s regulatory tally was at 1,737 while Trump’s is 1,241. And while Reagan’s own regulatory cuts were admirable, they still don’t compare with Trump’s if you judge them by the same timeframe.

Earlier this October, Trump announced his plans to further cut taxes along with red tape that negatively impacts both businesses and consumers. According to CEI, the current level of federal regulatory burdens have amounted to nearly $2 trillion. And while business owners may pay the initial costs, it will inevitably trickle down to the consumer. When overhead costs are raised on entrepreneurs, that cost must be made up for somewhere. And as CEI also estimates, these hidden costs can account for about $15,000 per household in any given year.

As the 2017 fiscal year came to a close this month, the White House also released its initiative to cut more red tape to jumpstart the economy. Obviously, the “do nothing” method is a far cry from Obama’s overbearing regulatory intervention.

However, while this rhetoric is pleasing to much of the American public, which is fed up after almost a decade of a stagnating economy, Congress has yet to act on any substantial reform in either the House or the Senate.

Still, the White House has continued its efforts to encourage regulatory relief by pushing for three specific reform efforts, listed by CEI’s Clyde Wayne Crews as follows:

  1. Trump’s January executive order requiring agencies to eliminate at least two rules for every new regulation adopted, and that they ensure net new regulatory costs of zero;
  2. A sweeping  Reorganization Executive Order that requires the Office of Management and Budget to submit a plan aimed at streamlining and reducing the size of the administrative state generally. This plan will set the tone for Trump’s budget proposal next year.
  3. A memorandum from the new Office of Information and Regulatory Affairs (OIRA) administrator Neomi Rao directing agencies, for the first time as far as I can tell, to propose an overall incremental regulatory cost allowance for the agency in the new edition of their “Unified Agenda” on regulations. This report will appear in the fall. Prior editions, since the 1980s, would label rules as “economically significant,” but never has there been such a “regulatory budget.” Rao says, “OMB expects that each agency will propose a net reduction in total incremental regulatory costs for FY 2018.”

But what is, perhaps most interesting is how silent the media has been. Usually, the media doesn’t miss an opportunity to criticize the president, making it all the more strange that these massive regulation rollbacks have managed to slip under the radar.

The Importance of Economic Liberty

Just as it is important to give credit where credit is due, it is also important to acknowledge that excelling in one area does not negate one’s terrible behavior in another. The appointment of Jeff Sessions by itself is enough of a reason to be wary of Trump. Especially given Sessions’ obsession with reigniting the drug war in a time when public opinion is overwhelmingly trending in the opposite direction. Though in many capacities this makes one of Trump’s weak points similar to Reagan’s.

And the Sessions issue is just one of many. Diplomacy also appears to be one of Trump’s weak points. Taunting a world leader who is threatening to use nuclear arms against your country may not be the wisest idea, but that hasn’t stopped Trump from referring to Kim Jong Un as “Rocket Man” at the height of tensions. And in general, President Trump’s hawkish foreign policy has made a mockery of candidate Trump’s non-interventionist rhetoric.

But increasing economic freedom is no small feat. If there is any doubt of this, just look how long it took to deregulate the telegraph industry. Without economic liberty there can be no general freedom, which is precisely why Trump’s pushback against the regulatory state is so important.

Our modern economy has no doubt been burdened by regulations that have held back the market and prevented others from even entering the workforce. So as hard as Trump is to stomach most of the time, these regulatory scale-backs are cause for celebration.

Education Is the State’s Greatest Tool for Propaganda

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In chapter 10 of The Road to Serfdom, Hayek describes how some of the worst people always end up rising to the top of the political heap. Continuing to touch on this theme in the eleventh chapter, Hayek digs even deeper and discusses the control of information and the very basis of truth in a planned society.

In a society where totalitarianism reigns, truth is found not in objective principles, but in a government’s desired ends. Once these ends have been established, all other forms of information are tailored to reinforce that “truth.” Reason is henceforth thrown out the window and the state’s version of truth is beyond contestation. As George Orwell wrote:

Nazi theory indeed specifically denies that such a thing as “the truth” exists. … The implied objective of this line of thought is a nightmare world in which the Leader, or some ruling clique, controls not only the future but the past. If the Leader says of such and such an event, “It never happened” – well, it never happened. If he says that two and two are five – well, two and two are five. This prospect frightens me much more than bombs.

But this on its own is not enough to sway entire nations. Instead of the people merely accepting these “truths” it is important that the state convince them that these truths are their own. When individuals begin to tie their interests to the state’s interests a terrifying unity occurs, the likes of which can be seen in almost every deceptive dictatorship throughout history.

As Hayek says:

The most effective way of making everybody serve the single system of ends toward which the social plan is directed is to make everybody believe in those ends. To make a totalitarian system function efficiently, it is not enough that everybody should be forced to work for the same ends. It is essential that the people should come to regard them as their own ends.

In order to do this, all propaganda is orchestrated to reinforce these ends in order to push individuals in the desired direction. Common themes and slogans are repeated over and over again in order beat these goals into the minds of the people. Anything contrary to the end goal must be squashed immediately. Anyone speaking out against them must too be destroyed in the name of national security. As Hayek says, “But the minority who will retain an inclination to criticize must also be silenced.”

And while most people associate propaganda with political posters and multimedia, there is no greater tool for propaganda than a nation’s education system.

State-Controlled Education

No matter how intelligent an individual may be, almost every person is susceptible to propaganda. This is because, in many instances, most are unaware that they are falling prey to it. It seeps into our lives through all forms of entertainment but most especially through state-sponsored education.

In Nazi Germany, indoctrinating the youth was one of the easiest ways to ensure the fervent support of future generations. Adolf Hitler himself said, “He alone, who owns the youth, gains the future.” Children were forced into youth groups where their role in the Third Reich was reinforced continually. Germany even tailored toys, games, and books towards the desired ends of the Reich, ensuring that children would believe whatever they wanted them to believe.

Hayek writes:

If all the sources of current information are effectively under one single control, it is no longer a question of merely persuading the people of this or that. The skillful propagandist then has power to mold their minds in any direction he chooses, and even the most intelligent and independent people cannot entirely escape that influence if they are long isolated from all other sources of information.

And this was the aim of the Third Reich. If the German people were to not only accept but condone the acts of their government, there was no better way to do it then to teach them young, and lead them to believe that this has always been the case.

Touching on this, Hayek says:

The most effective way of making people accept the validity of the values they are to serve is to persuade them that they are really the same as those which they, or at least the best among them, have always held, but which were not properly understood or recognized before.

Or, to pull from Orwellian speak, the goal is to make these children believe that, “we have always been at war with Eastasia.”

But this deliberate molding of minds does not only occur in young students. In fact, once these children’s minds have been sufficiently indoctrinated, they are passed off to institutions of higher education where a belief in intellectual elitism is then instilled.

The Educated Elite

Trained to learn by rote methods rather than critical thinking, young adults, eager to assert their independence, were thrown into colleges and universities and told that they are now part of the intellectual elite. But from this comes the dangerous tendency to stop questioning the information that is presented to you. After all, your professors are highly regarded for their intellect. Why would they steer you in the wrong direction?

But when these professors begin to present state opinion as unquestioned truth, this is where the real problems arise.

The field of eugenics, for example, was once taught as if it were doctrinal truth. If racial superiority could be “scientifically” proven, or, rather, if the state could assert that this was fact, then questioning this doctrine became heresy.

As Hayek says:

The need for such official doctrines as an instrument of directing and rallying the efforts of the people has been clearly foreseen by the various theoreticians of the totalitarian system. Plato’s “noble lies” and Sorel’s “myths” serve the same purpose as the racial doctrine of the Nazis or the theory of the corporative state of Mussolini. They are all necessarily based on particular views about facts which are then elaborated into scientific theories in order to justify a preconceived opinion.

And, as has been seen throughout history, once a theory becomes part of the scientific narrative, it contributes to the direction of all societal ends. Hayek comments on this saying, “Thus a pseudoscientific theory becomes part of the official creed which to a greater or lesser degree directs everybody’s action.” While the eugenics example may seem rather extreme, it was very applicable to the time that Hayek was writing.

And while it is not easy in hindsight to understand how an entire population could fall for theories this callous, Hayek reminds us, “It is not difficult to deprive the great majority of independent thought.”

It may be easy to cast blame on the media and the entertainment industry for being natural propaganda machines, but history tells a different story. As we have now seen, state-controlled education is one of the worst and most effective propaganda tools that has ever existed.

What Uber Can Teach Us about Scarcity and Choice

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Every so often, stories of outrageous surge pricing in the ridesharing industry make their way around the internet. As these stories typically go, a rider was shocked upon reaching their final destination to find that they were charged sometimes hundreds of dollars for a trip that might normally cost $20-30.

It is easy for most of us to sympathize with the furious consumer since no one likes to find large surprise charges on their bank statements. But as most people who use Uber know, these charges are actually consensual. And the entire surge pricing apparatus is actually a practical example to use when explaining scarcity and demand.  

Since ridesharing is very much a spontaneous entity that allows drivers to drive only when they want to and not on a predetermined schedule, there are often instances where there are not enough vehicles on the road to keep up with the demand for rides.

When this happens, the ridesharing app of your choice, be it Uber, Lyft, or something else, will let you know what the rate of this surge pricing before finalizing your ride request. In fact, with Uber specifically, riders not only have to accept the surge pricing fare, they also have to manually type in the surge rate to signify that they understand that they will be paying significantly more than usual.

The problem comes in when these riders may not have paid close enough attention to what they have agreed to, much of this happens when the ride may be a bit intoxicated. But that mistake is not on the end of the ridesharing apps. In fact, this model, while frustrating for those who do not plan accordingly, is actually extremely helpful to understanding supply and demand.

Understanding Demand

Throughout the various schools of economic thought, there are few things on which most economist will agree. However, as an intro to economics class will teach you, the principle of supply and demand is usually universally agreed upon, even though it is often used to different ends.

Since Uber drivers are limited, when the demand for rides the surge pricing actually works in the consumer’s favor by incentivizing more Uber drivers to get out on the road. A driver who may not have wanted to leave home for a typical night’s earnings will suddenly have the financial motivation to get out and drive.

As the consumer, you are always in the proverbial driver seat. If you feel like the cost of a good or service does outweigh the benefit of arriving home at that exact moment,  you can choose not to use a ridesharing service at all. Or, you can choose to wait out the surge pricing and see where it goes. Since Uber’s surge pricing is a direct response to consumer demand, sometimes riders are able to bypass these higher prices by waiting for the demand to lessen.

Additionally, users familiar with ridesharing understand that they will pay higher prices on busier nights when more people are out and drinking and in need of safe rides home. And by knowing this, they can plan accordingly and plan their rides around peak hours. Again, the consumer is the one that must initiate the final screen tap that confirms the ride, so it is ultimately their choice.

As economist Bob Murphy writes:

“So if people understand the principle of a certain ride having a market price of (say) $10 on a normal day, they shouldn’t balk at that “same ride” having a price of (say) $40 on a busy party night.”

And Uber has even grown accustomed to warning its users what days surge pricing may be coming and what times it is expected to occur. This is actually a huge convenience to the consumer as Murphy also explains:

“In this way, people could spread their ride demands out according to their willingness to pay: the people with flexible plans could make way for those who (say) had babysitters they needed to get home to by 1:00 a.m., or for those who really didn’t want to leave right at midnight and were willing to pay extra to leave at their preferred time.”

The Great Price Gouging Debate

This responsive pricing is the same we see happen during storms or other natural disasters. Price gouging, as it has come to be called, is usually condemned as immoral. Many supporters or government-controlled prices condemn the practice as many in vulnerable areas are told that if they want water they must pay significantly higher prices.

But what those who criticize “price gougers” they forget that this act incentivizes an increased supply, allowing more consumer needs to be met. If you are in an area where water will be scarce for an extended period of time, bottled water is essential. And since demand is increased, most businesses are unable to keep up, resulting in widespread shortages.

This means additional merchants will have to come in. And if it is a storm of great magnitude, many of these merchants are risking a great deal in bringing the product to these affected areas. By increasing the price of their water, they make it worth their risk while also ensuring that the supply of water is increased, making it available to more people.

But in this instance, many governments have been prone to putting restrictions on price gouging, which in many ways prevents people from getting water. Luckily with Uber, attempts at curbing their surge pricing mechanism have not been successful, though India’s government has banned the practice in 2016.

But just like with price gouging, government’s attempting to manipulate the price disincentivize demand and end up putting consumers at a disadvantage. And in the case of Uber, surge pricing allows more people the opportunity to get to where they want to go during the busiest times if they so choose.

NFL Players Are Confusing “Kosmos” With “Taxis”.

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The debate about the NFL Players’ protests during the playing of the national anthem at the beginning of their games continues. Is it appropriate for them to make an act of protest, during the implementation of their contractual obligations to their employer, against social conditions they perceive as being unacceptable to them?

Emergence.

The emergence of this conflict between players and team owners, and players and some part of their fan base, and between players and media commentators and politicians, can be traced to a single spontaneous act. At an August 14, 2017 NFL pre-season game, Colin Kaepernick, a player, sat instead of standing during the playing of the national anthem. He explained why: he wanted to bring attention to people who, according to him, are being oppressed.

As we might expect in spontaneously ordered activities, the protest expanded and morphed. More players joined in, and the act became “taking a knee” during the anthem, in addition to sitting. It also generated controversy: is the protest activity appropriate?

Taxis And Kosmos.

If the NFL players had read their Hayek, they might realize that they are confusing two forms of social order, and doing so in a way that is inappropriate if we want to preserve our society.

Hayek, a philosopher who probably never attended an NFL game (although that fact might be in the realm of the unknowable) had a strong point of view about this issue. He distinguished between two kinds of order: taxis and kosmos. He used the term taxis to refer to concrete order, deliberately designed and resting on hierarchical structures of commands and obedience. Kosmos, on the other hand, is spontaneous, self-generating order based on abstract, unspoken relations and expectations of others’ behavior, without specific hierarchical rules or organizational purpose.

NFL Players Work In Taxis.

The NFL players work, voluntarily, in a taxis. They each signed a contract, which binds them to the specific organizational purpose of the NFL to provide entertainment to consumers, preserve and grow the NFL brand, and generate a profit for their team owners. The owners, Hayek points out, “will normally prefer a larger return from their efforts to a smaller one”, and have the power to tell players “what they ought or ought not to do” to abide by this rule. These kinds of taxis organizations exist throughout the economy and have proven themselves to be beneficial to society by generating popular products and services, innovation, and economic growth. They are necessary and beneficial.

NFL Players Live In Kosmos.

Taxis organizations exist within kosmos systems that are self-organizing and self-generating. Society is an example of such a system – it’s a spontaneous order that emerges, Hayek tells us, “from the individual elements adapting themselves to circumstances which directly affect only some of them”. Spontaneous orders can’t be “deliberately arranged” because we do not have “power over the details of such an order”. There are no owners in a spontaneous order system, and no-one can dictate specific rules to individuals in such an order.

The protesting NFL players are adapting themselves to circumstances they subjectively observe in their kosmos. They feel that some individuals in society are oppressed by taxis organizations, such as police and the courts. It is their subjective individual right to express an opinion about how they feel and to offer their expressions to others, so that those others can consider their own opinion and their own expression.

Crossing The Line.

However, by translating their kosmos perceptions into behavior in the taxis without the owners’ approval, the players are crossing a line that disrupts order. It is necessary for social order that the kosmos and the taxis co-exist but do not conflict. We cannot “combine them in any manner we like”.

Rules within an organization “must be rules for the performance of assigned tasks”. The place of each individual in a fixed structure is determined by command. “The rules each individual must obey depend on the place which he has been assigned and on the particular ends which have been indicating for him by the commanding authority.”

By contrast, “the rules governing a spontaneous order must be independent of purpose…and their application (by individuals) will be independent of any common purpose.” The players want to protest, which is an abstract idea with no specific purpose. That’s OK. They can do so as individuals on social media and in their life outside their contractual obligations to their employer. The owners have specific purposes to which the players have bound themselves in their NFL life, and they are contractually obligated. If they prefer to pursue other abstract ideas, they must do so outside of their contractual restrictions.

It’s when we confuse taxis and kosmos that we cause dangerous disorder.

All quotes are from F. A. Hayek; Law, Legislation and Liberty, Vol 1.

Photo by Sandro Schuh on Unsplash

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