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Hayek and the Lasting Importance of the Rule of Law

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Young Americans like myself have come of age in a climate where arbitrary rule has steadily become the norm. Civil liberties, once guaranteed by the Bill of Rights, are now conditional; they are regularly disregarded in the pursuit of a specific end.

The war on terror, for example, ushered in an era where the government was given the power, or rather gave itself the power, to do anything it needed in order to keep the country secure. As long as the state’s violations against our inalienable rights were done in the name of national security, or prosperity, they were considered just, necessary even.

The Constitution that was specifically intended to protect the American people against this kind of rule has now just become a list of suggestions. President Bush is even rumored to have referred to it as a “goddamn piece of paper,” when confronted about his refusal to act within its bounds during the height of the War on Terror.

And in the wake of this “anything goes” rhetoric, the War on Terror was and continues to be used to suspend free speech, restrict travel, detain American citizens indefinitely, and even defend the American President’s use of a “secret kill list.”

It was with this jaded view of government restraint that I began reading the Sixth Chapter of The Road to Serfdom. Hayek uses this chapter to dig into the concept of the rule of law.

Hayek’s Day

Initially, I was surprised to find Hayek’s enthusiastic support of the belief that a government is capable of limiting itself within legal boundaries. I attributed this to modern hindsight. How on earth could Hayek know that the September 11th attacks would all but demolish the rule of law in this country?

But Hayek watched Hitler rise to power through constitutional means. He was no stranger to the very real possibility of arbitrary rule. Something he is certain to point out:

It may well be that Hitler has obtained his unlimited powers in a strictly constitutional manner and that whatever he does is therefore legal in the judicial sense. But who would suggest for that reason that the Rule of Law still prevails in Germany?

And yet, even though Hayek acknowledges its shortcomings, he still shows a great deal of reverence towards this oft-disregarded concept.

But this respect, while possibly naive, is not unfounded. Even if our government no longer adheres to the rule of law, it was an idea completely unheard of prior to the rise of classical liberalism. And without the rule of law, it is certain that mankind would have already succumbed to absolute despotism.

Credit Where Credit is Due

The concept of the rule of law was integral in the history of human progress. And not just in western civilization. Even though it may not have worked as well in practice as it did in theory, its implications were nothing short of revolutionary.

In 1215, when the landholding barons led an uprising and forced King John to sign the great charter, or the Magna Carta as history would come to know it, the rule of law experiment officially began. And the world was well on its way to finding out whether or not a king or some other authority could be tamed by written laws.

This idea floated around for a few centuries and was tried to varying degrees until it became a preoccupation for many classical liberal scholars. If the actions of state authority could not only be limited, but also predicted, the individual would be able to maintain his freedom, or so they thought.

So important was this principle to the concept of individual liberty, Hayek even claims that it is an essential feature of any country claiming to be free from tyranny.

Nothing distinguishes more clearly conditions in a free country from those in a country under arbitrary government than the observance in the former of the great principles known as the Rule of Law. Stripped of all technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand—rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge.

Thomas Jefferson expressed a similar sentiment during the time of America’s founding saying:

The two enemies of the people are criminals and government,

so let us tie the second down with the chains of the Constitution

so the second will not become the legalized version of the first.

It is important to understand that this idea had never been tried before in human history. The idea that a ruler would restrict his or her power seemed completely unfounded. Especially since prior to the American Revolution, the “divine right of kings” doctrine was so steadfastly believed.

Since a King was allegedly anointed by God, his word was beyond contestation. The only referee between the people and their ruler was God. And unfortunately, only the king had his direct line.

Given this bleak situation, you can imagine how empowering it must have been to be given the opportunity to live in a land where the ruler was bound, not just by fallible men, but by concrete doctrine.

The idea that government ought to be bound by written laws was pivotal to the American founding. It is what inspired our written Constitution and specifically, our Bill of Rights. A list of things government cannot do. And while in hindsight we might see that its power to restrain government has been exaggerated, it did change the world.

Dead Letter Law

It’s easy to lambaste Bush for calling the Constitution nothing but a piece of paper. But in a sense, he was correct. The Bill of Rights has become dead letter. When the people stop valuing the liberties that the law is supposed to protect, the entire system crumbles because no one is holding government accountable.

The Second Amendment, for example, is an explicit limitation on our government. By encouraging an armed populace, it also encourages politicians to stay within their limits for fear of just rebellion.

Yet today, the history behind the right to bear arms is disregarded as unimportant, unnecessary, and even dangerous. Without the ideological substance to back these ideas we seek to bind our leaders to, there can be no follow through. Each right we relinquish is a right we may never get back.

So while governments may always be looking for ways to violate the rule of law, it is important that as individuals we remember to keep them accountable as much as is humanly possible.

Hayek Warned against One-Size-Fits-All Health Care Policies

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What would Hayek say if he was around to see the ongoing fiasco that is Obamacare? Well, for one thing, he probably wouldn’t be surprised, but he would be deeply saddened. And while he could never know the specifics of our country’s progressive strides towards universal health care, he managed to predict the overall situation quite perfectly in the fifth chapter of The Road to Serfdom.

It is impossible to plan for an entire national economy comprised of individual beings. Each has different goals and desires, making one-size-fits-all economic policies unfeasible, to say the least. It’s also an expensive endeavor to attempt.

Yet, the Affordable Care Act sought to do just that. Economics and logic went out the window in favor of the supposed “general welfare” of the American public. So long as the end result was increased–if not universal– health coverage, then the means were rationalized.

And while it was fought by many who had read Hayek and heeded his warnings, Obamacare was approved by both chambers of Congress and was eventually upheld as constitutional by the SCOTUS.

Advocates championed this as a democratic victory. The American people had finally taken control of their health care back from the greedy, capitalist health care sector.

But just as many free market economists had predicted, Obamacare was a complete disaster both economically and democratically. And while many have been shocked by the implications of giving the government so much power over an entire market sector, Hayek warned of these dangers long before Obamacare’s conception.  

The Individual Gets Left Behind

Among other things, Obamacare claimed to know the health care priorities of every single American. From dictating what coverage must be provided by employers to fining individuals for not choosing to buy health insurance, Obamacare took away the ability to choose and replaced it with coercion.

But even worse, it cost the taxpayer $42.6 billion in the fiscal year 2017 alone. So not only did this lead to increased government control over health care, it was also a financial black hole. And it completely neglected the individual consumer by assuming that a small body of experts was better suited to make these intimate decisions in their stead.

But how could they be? Each of these alleged health care experts is incapable of knowing the wants and needs of every single American.

In the chapter fifth chapter of The Road to Serfdom, “Planning and Democracy” Hayek writes:

The point which is so important is the basic fact that it is impossible for any man to survey more than a limited field, to be aware of the urgency of more than a limited number of needs. Whether his interests center round his own physical needs, or whether he takes a warm interest in the welfare of every human being he knows, the ends about which he can be concerned will always be only an infinitesimal fraction of the needs of all men.

And sure enough, health care consumers were mad because they were not getting what they wanted or needed. President Obama’s infamous line, “If you like your plan you can keep your plan,” turned out to be nothing more than rhetoric. In fact many Americans lost their plans altogether, or couldn’t afford to pay the increased premium costs.

Many advocates of state-run health care excused this blunder by suggesting that perhaps this was in the people’s best interest. Maybe their original insurance premiums were insufficient, at least according to the new government standards. Perhaps Obamacare was doing these health care consumers a favor by stripping them of their prior coverage.

But even though the facts were staring every single American in the face, many still believed these “insignificant,” shall we say setbacks, were worth the result of increased national coverage.

And to be fair, there was increased national coverage. Fining or “taxing” citizens for not purchasing health care works as a powerful incentive. But it stifled individualism.

Anyone who dared to speak out against the state’s intervention in the health care industry was quickly made to feel selfish. Clearly, if you weren’t in favor of government interference in health care, you were unconcerned with what happens to those who can’t afford coverage.

Consequences be damned, if the desired end result of increased coverage was eventually obtained, that was all that really mattered.

But opponents of Obamacare are hardly selfish. They just understand that planning for an entire nation is an impossible task. The individual always loses.

As Hayek wrote:

This is the fundamental fact on which the whole philosophy of individualism is based. It does not assume, as 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 powers of imagination make it impossible to include in our scale of values more than a sector of the needs of the whole society, and that, since, strictly speaking, scales of value can exist only in individual minds, nothing but partial scales of values exist – scales which are inevitably different and often inconsistent with each other. It is this recognition of the individual as the ultimate judge of his ends, the belief that as far as possible his own views ought to govern his actions, that forms the essence of the individualist position.

The Problem with Democracy

It is odd that proponents of Obamacare often use the “greater social good” as their excuse since the implementation of a government controlled health care system necessarily leads to a breakdown of social order, or rather, a crackdown on individual liberty.

Hayek understood this far too well. But acknowledging this point was almost unavoidable in Hayek’s time since the world watched in horror as European empires sacrificed the individual in the name of nationalism.

But if it was difficult for Hayek to get this point across to others in his day, even as WWII was unfolding, it is not hard to understand how those in 2017 could easily forget and dismiss these historical lessons. Though this hardly makes it less frustrating.

When opponents of universal health care policies voice concerns over the power Obamacare gives a very small group of people, they are dismissed as hyperbolic and irrational. Clearly, this is what the people wanted, and needed! Those with hesitations should consider the great strides Obamacare has given people. If not for this intervention, the breakdown of the health care system would have resulted in chaos to the consumer. This is the only policy suited to meet the needs of the greatest number of people!

Of course, Hayek spoke to these fallacies too:

The fashionable concentration on democracy as the main value threatened is not without danger. It is largely responsible for the misleading and unfounded belief that, so long as the ultimate source of power is the will of the majority, the power cannot be arbitrary the contrast suggested by this statement is altogether false: it is not the source but the limitation of power which prevents it from being arbitrary.

But this power is absolutely arbitrary and untamable. Obamacare ushered in a new era of increased state control and brokedown constitutional “limitations” by increasing the scope, and thus the role of the federal government in healthcare. The rule of law was demolished, or at least broadened.

Not to mention, procedural rules were broken or bent in order to ensure its passage. “We have to pass it to see what’s in it,” Nancy Pelosi famously said when many members of Congress were enraged to have been given an absurdly long bill and only a short time to actually attempt to read its contents.

But again, Hayek predicted all this too:

And to make it quite clear that a socialist government must not allow itself to be too much fettered by democratic procedure.

And make no mistake, a socialist government is essentially what a post-Obamacare America is. And while Trump has made some rollbacks, the government will continue to encroach on the health care sector, which is precisely why constant vigilance is of the utmost importance. It’s also why everyone should read Hayek.

“The cry for an economic dictator is a characteristic stage in the movement toward planning,” Hayek astutely says. Whenever the people, or perhaps just the congressional leaders who claim to speak on their behalf, assert that economic or social chaos is coming, they often relinquish their sovereignty or do not even realize it has been taken from them until it is already gone.

In theory, democracies are supposed to safeguard the will of the people. And to be sure, democracy on its own is not necessarily negative, or at least it doesn’t have to be according to Hayek.

Hayek ends this chapter by arguing that a democracy, adequately limited in scope can serve as a safeguard to the individual. But unlimited democracies will always be the enemy of individualism. And unfortunately, our real-world experiences with democratic societies have proven to have more of a tendency towards the latter.

As Hayek says:

Democratic control may prevent power from becoming arbitrary, but it does not do so by its mere existence. If democracy resolves on a task which necessarily involves the use of power which cannot be guided by fixed rules, it must become arbitrary.

Hayek Was Right: Technological Progress Does Not Create Monopolies

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The fourth chapter of Hayek’s The Road to Serfdom deals with the issue of monopolies. Specifically, the myth “that technological changes have made competition impossible in a constantly increasing number of fields and that the only choice left to us is between control of production by private monopolies and direction by the government.”

Hayek explains how this fear that technology necessarily leads to monopolies played out in his own day. As labor saving machines were becoming the norm when it came to mass production, many smaller companies believed that technological innovation made them economically vulnerable. Technology created economies of scale, which favored big companies over small.

However, as Hayek pointed out, these fears neglect a host of circumstances regarding the very nature of monopolies altogether.  

Monopolies by Design

This belief that big companies always have the technological upper hand is simply untrue. As Hayek notes, even economies of scale reach an upper limit.  To be sure, large companies outcompeting the small do not inherently create monopolies. Instead, it is the policy crafted by the state that encourages the elevation of one company over another, as Hayek points out:

The conclusions that the advantage of large-scale production must lead inevitably to the abolition of competition cannot be accepted. It should be noted, moreover, that monopoly is frequently the product of factors other than lower costs….It is attained through collusive agreement and promoted by public policy.

Luckily for Hayek, time has proven his sentiment correct, as we are currently seeing today with the ridesharing economy and traditional taxicabs.

Before the advent of the sharing economy. Taxis enjoyed a near 80-year monopoly over the industry without having to deal with substantial competition. But this monopoly was not by coincidence, it was by design.

Medallion laws, as they have come to be known restrict entry into the traditional “cab” sector. Before a vehicle can be legally used as a taxicab service, it must seek the state’s permission and obtain a medallion.

In most major cities around the country, these laws exist primarily to restrict the number of cabs on the road and thus, control the competition. But what is more interesting about these medallion laws is who its biggest champions have always been: cab companies themselves.

By barring entry into this field, “taxi kings” have avoided any organic incentive to innovate because the need itself has been squashed by government policy. The state, with the help of cab company lobbyists, have crafted these policies so as to avoid any unwanted competition. If someone has a newer and better way to run the industry, they will have a hard time getting these ideas off the ground without paying sometimes as much as one million dollars just for one medallion.

However, this all changed when Uber came around.

Technology Levels the Playing Field

Taxi kings were seen to have the advantage over the cab market largely because they already owned fleets of cabs. These cabs were also already issued medallions by the state. While these factors would at least seemingly deter any new competitors from attempting to join the market, because it gave one industry a financial leg up over another, no one fathomed the rise of ridesharing.

Now, instead of access to technological progress causing large companies to squash their smaller competitors as was feared in Hayek’s day, technology and economies of scale are now actually working in the favor of upstarts.

Uber and Lyft, for example, have completely abolished the need for overhead costs when it comes to maintaining fleets of taxis. This is simply because the companies themselves do not own any physical cars. And since they do not actually own the cars, they have made the argument that the medallion laws do not apply to their model.

Since the sharing economy is based on individuals using property they already own in order to make a living, it negates any need for Uber or Lyft to make a costly investment towards owning a fleet of vehicles or permits in the form of medallions. Allowing them to compete with big cab companies who may have had the upper hand in an outdated market.

This has helped these smaller upstarts break into the market and break up the established taxi cartel. But this doesn’t mean their success has not been met with obstacles from the cab companies.

Technological advances, and especially smartphone technology, have completely restructured the way consumers even think about hailing a cab. Gone are the days when the only alternative to owning a car was standing on busy streets and hoping a cabby will notice you.

Without any real competition, there were no substantial reasons for the cab companies to alter their existing models. But once Uber, Lyft, and other ridesharing companies began rising in popularity, the cab companies got mad and demanded that the government take action. “We can’t compete with this new technology-reliant model,” some claimed, “This is unfair to our business.”

But just as in Hayek’s day, those who complained about technology putting their company’s at an unfair disadvantage only offered solutions that involved government intervention.

Last year, for example, a law was passed in Massachusetts that forced a tariff on the ridesharing industry. The purpose of this tax was to hold the ridesharing industry “accountable” for the cab industry’s inability to innovate and compete with their market competitors. In this case, it was the refusal to incorporate technological advances into their service models.

So instead of competing fairly, the cab companies got away with instituting a tax on their competitors that directly went towards funding the cab company’s apathetic quest to adopt new technology.

This is the reverse from Hayek’s day in that it is now lumbering incumbents scared of the technology savvy little guy instead of the reverse. But, in both cases, the fear-mongering capitalizes on the fear of technology. Both also reiterated the belief that the state should insert itself in the market to make competition more “just.”

And as Hayek has pointed out in every chapter of his book so far, state planning, whether in the form of new taxes or regulatory medallion laws, always serves to inhibit true competition. This is as true now as it was in the mid-1940s.

Be Cautious Of “Harmless” Government Regulations

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Humans are imperfect beings. Try as we may, each of us is subject to some degree of inconsistency in our own thought patterns. Even the greatest champions of liberty who have made invaluable contributions to the study of classical liberalism have fallen prey to error. And while these heroes and geniuses may come to an inconsistent conclusion every now and then, our admiration continues.

Hayek wasn’t infallible. And in chapter three of The Road to Serfdom, he makes some arguments in favor of “harmless” market intervention that call for scrutiny.  

No Such Thing as Harmless Regulation

As I made my way through chapter three, I did a doubletake after coming across this passage:

To prohibit the use of certain poisonous substances or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements is fully compatible with the preservation of competition.”

In this chapter, Hayek regularly uses the word “competition” to mean free market. He also asserts that “planning” is, in and of itself, the enemy of competition. Hayek argues that not all state action qualifies as “planning” and as an encroachment on “competition.”

Hayek reasons that since these types of regulation do not interfere with the means of production themselves, it is fully compatible with free market capitalism. He has also argued that since these are “blanket” regulations—no one can use these substances— and not individual regulations—only this group can’t use them—they do not inhibit the market’s ability to function freely. In Hayek’s mind, for example, the state limiting the number of widgets you can produce is far more intrusive than outlawing certain harmful substances.

Those of us alive today are blessed us with the gift of hindsight. This has allowed us to recognize (hopefully) that these types of policies necessarily rig competition in favor of one group over another. In fact, when it comes to the market, there is no such thing as a neutral intervention.

The Overtime Rule that Almost Was

For example, last fall, the Department of Labor set new regulations regarding overtime pay. Concerned that the American worker was being exploited, the department declared that those earning an annual salary of $48,000 or less would only be allowed to work 40 hours a week. If for some reason more than 40 hours of work was needed, the employer would be mandated to give overtime pay.

This kind of regulatory policy was explicitly conceded by Hayek as acceptable in the abovementioned passage.

But instead of safeguarding workers, the overtime rule would have hurt their ability to get ahead in their careers. The salary threshold that the Department of Labor had agreed upon disproportionately impacted entry-level workers. Since work hours were to be limited, young professionals no longer had the ability to work long hours in order to prove their dedication to their career and improve their chances at a promotion. As Jeffrey Tucker wrote:

“To really make it in an industry, you need more than a connection and a credential. You have to show that you have the stuff. You need to demonstrate your personal commitment. And you will typically be tasked to show this while living on a low salary — not so low as to qualify for overtime but not high either.

This exemption from overtime rules is what makes the Prada economy work. It permits workers to strut their stuff without imposing new financial burdens on employers. This is what the new rules would abolish.”

This would put young workers at an unfair disadvantage relative to those who had been in the workforce longer and had already put in the hours needed to move up the corporate ladder.

In fact, so concerned was the American worker about the negative impact this new overtime rule would have on their careers, that it ended up being killed before it was enacted.

Beware of Slippery Slopes

Another problem with “benign interventions” is that the state is incapable of self-restraint. This is why so many governments fall victim to tyranny and oppression. Once those in authority are given even the slightest increase of power, they will use it as precedent and leverage to incrementally take more until true freedom exists in name only. In other words, if you give the government an inch, they will take a mile.  

Mises made this same point in Human Action:

“But whoever is ready to grant to the government this power would be inconsistent if he objected to the demand to submit the statements of churches and sects to the same examination. Freedom is indivisible. As soon as one starts to restrict it, one enters upon a decline on which it is difficult to stop. If one assigns to the government the task of making truth prevail in the advertising of perfumes and toothpaste, one cannot contest it the right to look after truth in the more important matters of religion, philosophy, and social ideology.”

Such has been the case throughout history, and such will always be the case so long as governments are invited to regulate on behalf of consumers and workers alike.

This is why constant vigilance should be practiced and even “moderate” regulatory practices should be fought at every step. For even the most moderate of policies, with the most “rational” of justifications, will result in the unforeseen consequence of a controlled economy. As Mises wrote:

“All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which—from the point of view of their authors’ and advocates’ valuations—is less desirable than the previous state of affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it.”

As Dan Sanchez has written:

“In a brilliant bit of economic reasoning in his classic essay ‘Middle-of-the-Road Policy Leads to Socialism,’ Mises showed how even such a seemingly-minor intervention as a price ceiling on milk would inevitably lead to full-blown socialism, if the government pursued it to the bitter end, and if it undertook further interventions to try to deal with all of its negative consequences, as well as the negative consequences of those and all subsequent interventions. Thus, Mises called interventionism ‘a method for the realization of socialism by installments;’ or, as we would say, ‘socialism on an installment plan.’”

Hayek understood such dangers as it pertained to the collectivist mindset. The entire second chapter of the book was dedicated to warning that all forms of collectivism necessarily lead to tyranny. We would be wise to extend this wariness to even seemingly benign forms of intervention as steps, however small, down the road to serfdom.

Hayek’s Road to Serfdom Is More Applicable Now Than Ever

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I have never actually completed F.A. Hayek’s, The Road to Serfdom. I am completely comfortable admitting that. Still, like many who are intrigued with Hayek’s ideas but lack the willpower to read the entire book, I alway list The Road to Serfdom as one of my most influential readings.

To be sure, I had read the few chapters that were assigned to me by my school’s token libertarian political science professor. I assumed I had accurately interpreted its message. The three chapters I read were full of highlights and great quotes about the importance of the individual. But with all the other books out there in the world, why was finishing this one book so important?

It was not until my current mentor called me out on my inability to follow through on one of the most economically relevant books of all time, that I realized that I had robbed myself of an education by not finishing Hayek’s important work.

As a matter of millennial pride and also wanting to reclaim the knowledge I foolishly pushed aside as an undergrad student, I decided to dedicate the next sixteen days to both reading and liveblogging The Road to Serfdom.

The Individual Built the Modern World

Proponents of laissez faire capitalism and libertarian thinkers alike constantly throw around the phrase,” the road to serfdom.” And while most understand its general negativity towards socialism, the phrase is so ingrained in liberty speak that few often take the time to really explore what Hayek was trying to tell us.

In the book’s opening chapter, “The Abandoned Road,” Hayek makes it clear that this path refers to society’s “progressive” rejection of individualism. More importantly, he goes on to describe how this rejection of the sanctity of the individual has, and will continue to have, negative impacts on the society.

For a period of time, the western world had flourished under the 19th-century ideals of free market capitalism. For the first time in history, an individual was allowed to follow his own desired path without the status of his birth holding him back. All he needed was an idea and the ambition needed to make that idea a reality.

As a result, we saw a revolution in thought and an industrial revolution incomparable to anything the world had ever experienced. In fact, even with the advent of the internet, the world has still never progressed quite as dramatically as it did during this laissez faire revolution.

And while this period brought the world the wisdom of Adam Smith and the rebellion of the American Revolution, it did not maintain its momentum of popularity as the 20th century approached.

As Hayek points out:

“We still believe that until quite recently we were governed by what are vaguely called nineteenth-century ideas or the principle of laissez faire…But although until 1931 England and America had followed only slowly on the path which others had led, even by then they had moved so far that only those whose memory goes back to the years before the last war know what a liberal world has been like.”

If in 1944, Hayek thought the world had already forsaken and forgotten true liberalism, I can scarcely imagine what he might say today. And it’s true that he was writing about a period of wartime economic planning both in the US and the UK. Prices and wages were controlled. Censorship was in place. Rationing and quotas governed the production and distribution of all essential goods and services. But even given all this, government consumed a far smaller degree of overall national production than today.

So far removed are we in 2017, that the individual is not even a consideration when contemplating economic policy. In fact, the “greedy” “selfish” individual is often the villain in modern economics, as he seems to always operate contrary to the whims of the collective. Now, terms like “individual mandates” are used to convey each person’s “social responsibility” to care for the collective.

As common as this anti-individualist sentiment has become, it wasn’t always this way. As Hayek reminds us in this opening chapter, the most tremendous strides towards human and economic progress were taken during a time when the individual was allowed to innovate and create without worrying about interference from the state on the grounds of protecting the greater good. But even though the positive implications of a pro-individualist society were proven by the innovations created during that time, society had still been steadily moving away from it.

“We are rapidly abandoning not the views merely of Cobden and Bright, of Adam Smith and Hume, or even of Locke and Milton, but one of the salient characteristics of Western civilizations…Not merely the nineteenth- and eighteenth- century liberalism, but the basic individualism inherited by us from Erasmus and Montaigne, from Cicero and Tacitus, Pericles and Thucydides, is progressively relinquished.”

Again, I have to wonder what Hayek might say if he were alive today and around to see how groupthink and collectivism have shaped our modern policies.

This chapter, then, sets the stage. He names liberalism as the system that gave birth to the greatest of human achievements ever seen in history. It was individualism that caused the most spectacular effect. If you understand that–and vast numbers today do not understand this–you are prepared to see how the abandonment of this system and idea leads to not only the unraveling of liberty but even what we call civilization.

So, yes, this book is a warning, not just against one party but all ideological positions that reject individualism for one or another version of the planning state.

Now onward to chapter two!

The Hashtag and Hayek’s Use of Knowledge in Society

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Last month the world celebrated the birthday of the hashtag. As a writer, I am always looking for interesting and current topics to tackle. But this particular topic seemed completely insignificant to me. The symbol itself has existed for years. Why should I care about the anniversary of its repurposed use?

But upon further investigation, it became apparent to me that the advent of the hashtag should not simply be brushed off and dismissed as a silly pop culture trend. In fact, it actually answered many questions posed in F.A. Hayek’s essay The Use of Knowledge in Society.

The Hashtag is Born

Social media’s presence in our daily lives has reshaped the way our society exchanges information. But the fact that social media posts themselves are now able to be organized by a single “#” is quite remarkable. Now, all this decentralized knowledge is searchable on almost any social media platform.

Ten years ago, entrepreneur Chris Messina tweeted “#barcamp” from the then-obscure South by Southwest conference. By the end of 2007, it had been used on Twitter over 9,000 times. Today, over 125 million hashtags are used every day just on Twitter. With other social media platforms now utilizing this symbol, the total numbers are even grander.

But at its very core, the hashtag provides the means of connecting humanity with essential knowledge for better managing our lives – no matter where it comes from or where it ends up. The hashtag serves as a symbolic reminder of the remarkable information utopia that is emerging via technology in our time, and its existence portends vast increases in human well-being the future.

The Hayekian Roots of the Hashtag

In Hayek’s day, before the Internet, practical knowledge was less accessible than it is now. That knowledge, absent a means of accessing it, lives under conditions of radical dispersion and poses a potentially huge problem: How can society cumulate knowledge in a way that will protect it from centralization by one single entity?

FA Hayek explains this in “The Use of Knowledge in Society” by saying:

“The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”

The knowledge necessary for the emergence and sustenance of social order cannot be concentrated by a state or authority figure. The attempt has already proven itself to be detrimental to societies throughout history.

Under feudalism, when travel was impossible, you only knew what you could extract from the small world around you, and this inhibited economic growth. As the move to the city advanced, so too did the knowledge base of humanity because we could have more contact with each other.

In the ages, before literacy was commonplace, theocracies capitalized on this lack of knowledge to keep their people subservient to their whims. If the people feared God’s judgment, but could not actually read what God had commanded of them, the government could use the text to its own advantage, interpreting it however it sees fit.

This problem is not unique to tyrannical theocracies but to all authoritarian regimes. Once information is concentrated to a select few, the whole of humanity misses out.

In the history of human progress, other technologies helped too. The printing press incentivized reading. This new skill shifted the culture and boosted humanity’s prospects. We could share more, learn more, upgrade what we know, and act on that knowledge to each other’s mutual benefit.

Thanks to the use of the hashtag on social media, posts are now categorized in a way that makes knowledge more easily accessible to individuals living all over the globe while still maintaining decentralization. The government isn’t controlling who tweets and who does not. That is left to the social media platforms themselves.

Ideas are not intellectual property, and as such belong to no one person in particular. That is the beauty of the hashtag. Once it is used on a particular post, that information is now easily searchable to all interested parties. Hayek may not have envisioned the hashtag, but he did understand the importance of the idea of congregating information in a central place, without having this information controlled by a state.

Hayek says:

“It is a problem of the utilization of knowledge which is not given to anyone in its totality…It is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals.”

Iran’s Twitter Revolution

With the hashtag, individuals from all over the globe are organically sending knowledge and information out into the world by merely typing a symbol already in existence. But by doing so, all relevant posts have now been segregated by topic and are thus easily digestible to virtually everyone on the globe. In many ways, it is spontaneous order at its finest.

This knowledge as it exists on Twitter and other social media outlets today not only spreads intellectual information about a given topic. It goes further and spreads the human experience of a specific time or place associated with a hashtag. While Hayek probably never fathomed the hashtag, he did seem to grasp the importance of knowledge deriving from personal experience and eyewitness accounts.  

“But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place.”

Unless you were on the ground in Tehran during its 2009 elections, you would have had no idea what was going on during the country’s media blackout. However, thanks to Twitter and the use of hashtags, the oppressed citizenry was able to tell their stories, unique to a specific time and place, as Hayek says.

But because each Twitter user possessed their own unique knowledge of the situation relative to their experience, a wider range of information was able to be spread. Another phenomenon Hayek postulated without ever speculating the hashtag’s role in society:

“If it is fashionable today to minimize the importance of the knowledge of the particular circumstances of time and place, this is closely connected with the smaller importance which is now attached to change as such.”

Those tweeting from ground zero in Tehran may not have possessed skills that would usually warrant a demand for knowledge. They may not have been doctors or legal scholars. But they had their own experiences and by sharing their experiences, they brought about a change.

The government did not get away with blocking out all media. Videos of the atrocity were still shared. Students and other activists were still able to rally together because a simple hashtag helped them track down posts with location information. These Twitter users may not have known they were altering the course of history, but they undoubtedly were.

Spontaneous Order

Hashtags are the decentralized cooperation of many individuals. Each wanting to share their own opinions and knowledge with the world, they individually make the decision to actively participate in this sharing of ideas. This is another point made by Hayek in his essay:

“It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active coöperation.”

Social media sounds silly and almost dismissive when it comes to the exchange of information. With so much “fake” news out there it seems that a conglomerate of individuals would be the least likely place to seek knowledge.

But thanks to the hashtag, we now have a way to search specific topics and get a wide variety of viewpoints on one single matter. While it still may be up to the individual to discern what is true and what is simply sensationalism, the hashtag has given humankind the ability to organize information in what is arguably the most decentralized, spontaneous, and constantly evolving manner that has ever existed.

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