7 of 8 people found the following review helpful
Must read for all: socialists and libertarians alike,
This review is from: The Fatal Conceit: The Errors of Socialism (Collected Works of F.A. Hayek) (Paperback)
I have enormous respect for Hayek because he has an interesting methodological take on economics and because he supports evolutionary methods in economics. First, he takes a methodological position opposing the position taken by most economists because he often advocates a non-mathematical approach. Second, he argues for strongly for an evolutionary perspective on economics, which results in him advancing a theory of group selection. But I do not agree with the conclusions he draws from the positions he takes, namely that of high libertarianism, or a state that exists purely to uphold laws and to act as defence against outside forces and not to 'interfere' in other ways. Nevertheless, I believe that many of his arguments against socialism are accurate and should be better recognised and negotiated by socialists and statists alike. But Hayek also makes several errors, some of which I will bring up in this review, mainly those conceived by academics I have read, but about which you may not know.
First, he conflates a notion of a firm as actor and an individual as actor when firms are not individuals and markets often do not operate with an internal market structure, i.e., people are not priced within firms, they are managed. The problem with this is that corporatism and competition are often incompatible, or, at least, firms that have obtained substantial market share will spend substantial amounts of money to maintain that market share (see Herbert Simon on this). Second, he does not discuss the benefits of monopolies, and neither does he do much to consider Schumpeter's arguments about the roles of monopolies and entrepreneurs as innovators (maybe I've missed something), nor does he consider the extent to which markets facilitate lock-in and monopolization and which, if harmful, cannot be undone without suitable government intervention. Third, he articulates how human society needs both filial ties and commercial ties for it to function well, but he does not accurately specify the exact limits of each, and when he tries to make some arguments as to some limits (i.e. market interactions are 'commercial' family interactions not), they often seem forced rather than well-argued or evidence-based, that is what about gift exchange, or charitable giving, or helping a neighbour, doing volunteer work? Where exactly does the boundary lie and why? Does the boundary exist at all, or is it a hangover of Adam's Fallacy (as Duncan Foley might put it). Fourth, and probably most importantly, Hayek does not speak about power and the market - not market power, but how individuals with amassed market share have political power outside of the market and in the political sphere. They can, and do, exert power over others in a way that is anti-democratic and anti-liberty (Gerry Cohen wrote about this in his critique of Nozick Self-Ownership, Freedom, and Equality). There are several other problems with the book, but these are the ones that leapt out at me.
That said, Hayek commands his territory well. He bulwarks private (several) property with many strong arguments, defends an epistemology based on evolutionary arguments for economies and group selection in particular, marshals an attack on more mainstream economic thinking (his famed 'Fatal Conceit' chapter) and socialistic thinking in particular, and continues onward to garner a position that stands for both a minimal state, yet with specific liberties. But when reading the book, I got the sense, disturbingly, that Hayek would rather live in an authoritarian state that defends private property than a democracy that does not, would this be to prevent the slide down the The Road to Serfdom (Routledge Classics)? This jars with my senses of liberty and democracy. Nonetheless, the book is a landmark of libertarian philosophy and must be read by any ambitious scholar of the institutions and mechanisms of capitalism and human cooperation.
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Initial post: 26 Oct 2011 19:38:50 BDT
Last edited by the author on 26 Oct 2011 19:39:37 BDT
I think you may be asking too much from The Fatal Conceit. That book came after The Constitution
of Liberty & the three volumes of Law, Legislation & Liberty. As well as anthologies such as Studies in Philosophy, Politics & Economics. These books set out Hayek's positive proposals. While the Road to Serfdom & The Fatal Conceit are critical books for the most part. If you have read only the Fatal Conceit then your mistake in thinking that Hayek advocated ''high libertarianism'' or ''a state that exists purely to uphold laws and to act as defence against outside forces and not to 'interfere' in other ways''. Hayek attacks laissez faire as bone headed in the Road to Serfdom & is comfortable with government intervention on the political level as long as it does not require arbitrary authority for its exercise.(thus coming under his concept of the rule of law)
''First, he conflates a notion of a firm as actor and an individual as actor when firms are not individuals and markets often do not operate with an internal market structure''
That strikes me as unusual given his discussion in Law Legislation, and Liberty of spontaneous & made orders which relates to 'the market' & hierarchical organisations such as firms respectively. He was well aware that every firm is its own little command economy.
''The problem with this is that corporatism and competition are often incompatible''
That depends on what we mean by competition. Hayek wrote a piece called The Meaning of Competition where he attacked the idea of competition as conceptualised in the perfect competition model, which he considered a false standard by which to evaluate real world competition. Instead he considered competition a 'discovery procedure'(also the name of one of his articles) to discover & use the facts of time and place which can be known to no one prior to the continuing process of market rivalry.
Regarding Monopolies & power & the market chapter fifteen of vol. 3 of Law Legislation titled Government policy and the Market deals with all the points you raise.(how adequately is up to you)
''I got the sense, disturbingly, that Hayek would rather live in an authoritarian state that defends private property than a democracy that does not''
Hayek was a liberal, by that Hayek meant that people should have a large personal sphere where he is not ''irrevocably subject to the will of another''. This is what he means by freedom. Explicitly he does not include in his definition of freedom political rights. The distinction is important for differentiating authoritarianism & totalitarianism often conflated in popular culture. Authoritarianism is merely the lack of political participation in government. While totalitarianism is the complete subjugation of the subject to the will of the state. In an authoritarian government it is at least conceptually possible to be free in the meaningful sense of making your own choices & experiments in living without coercive interference from others, the state or otherwise. While in a totalitarian system the subject is by definition a slave. Having the right to vote & participate in government does not rule out a complete lack of options in all other areas of life. So I too following Hayek if asked to choose between a totalitarian direct democracy & an a liberal authoritarian state.(such as the one that Hayek grew up in coincidentally), then I too would choose the latter.
In summary The Fatal Conceit represents the concerns Hayek had at the end of his life. Applying some of the idea he developed in his later work post the Constitution of Liberty. It helps to have read previous works such as: Individualism & Economic order(for economics), the Constitution of Liberty(for politics), & Law, Legislation & Liberty(which covers much of the contents of The Fatal Conceit but with far more scope and detail) when evaluating Hayek as a whole. It is also helpful to remember that The Fatal Conceit was only the uncompleted notes of one volume of a planned three volume work cobbled together (and heavily edited) by W.W. Bartley the III.
In reply to an earlier post on 26 Oct 2011 20:04:35 BDT
Mr. S. D. Halliday says:
Thanks for the comment. Of Hayek's books, I have only read The Road To Serfdom and The Fatal Conceit. I plan to read the books you mentioned later (after I have completed my PhD). Notice, further, that I gave the book 5 Stars. I think it is a crucial contribution to our understanding of the methodology of the social sciences generally and economics in particular. My comments were not meant to be a comment on his entire work as I have not read all of it.
I read The Fatal Conceit after The Road To Serfdom, and I think that it is the more important contribution to economics. Serfdom seemed more polemical to me and a response to the politics in the UK and Europe at the time rather than a statement of his position for all time. Maybe I need to go back and re-read it (I suppose I shall have to). Even so, it remains important for all kinds of reasons beyond simply 'contemporary 1940s commentary', though I'm a bit unimpressed with how people have misinterpreted and misunderstood it in applying it to present day issues while ignoring the 70 years of writing in between.
Anyway, thanks for the comments and I'm glad for the clarifications.
In reply to an earlier post on 19 Oct 2012 16:59:23 BDT
[Deleted by the author on 19 Oct 2012 18:58:34 BDT]
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