The Fatal Conceit: The Errors of Socialism (The Collected Works of F. A. Hayek) Paperback – 1 Mar 1990
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From the Back Cover
Adopting an economic and evolutionary approach throughout, Hayak examines the nature, origin, selection and development of the differing moralities of socialism and the market order; he recounts the extraordinary powers that 'the extended order' of the market, as he calls it, bestows on mankind, constituting and enabling the development of civilization. --This text refers to an alternate Paperback edition.
About the Author
F. A. Hayek (1899-1992), recipient of the Medal of Freedom in 1991 and co-winner of the Nobel Memorial Prize in Economics in 1974, was a pioneer in monetary theory and the principal proponent of libertarianism in the twentieth century. He taught at the University of London, the University of Chicago, and the University of Freiburg.
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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).Read more ›
except to add that it is one of the most boring books that I have ever read.
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The Fatal Conceit's title captures the essence of the socialist/progressive/liberal impulse, born of a feeling of moral and intellectual superiority, to bring order to the free market, and in so ordering, destroy the very thing (capitalism), that allows modern civilization. Hayek writes of socialism in the introduction entitled "Was Socialism a Mistake?":
"...The dispute between the market order and socialism is no less than a matter of survival. To follow socialist morality would destroy much of present humankind and impoverish much of the rest.
"All of this raises an important point about which I wish to be explicit from the outset. Although I attack the presumption of reason on the part of socialists, my argument is in no way directed against reason properly used. By `reason properly used' I mean reason that recognizes its own limitations and, itself taught by reason, faces the implications of the astonishing fact, revealed by economics and biology, that order generated without design can far outstrip plans men consciously contrive..."
What a simple observation of the truth, "...order generated without design can far outstrip plans men consciously contrive..." Capitalism, spontaneously generated through centuries of human interaction, has proven the best way to conduct the economics of mankind. But socialists to try to "improve" upon something that no person invented, and, in so doing, ruin a healthy economy. Hayek admits that capitalism can look bleak to individuals who, through hard luck or laziness, can't make it - but he convincingly argues that helping the poor by enacting socialism out of a moral impulse "...would destroy much of present humankind and impoverish much of the rest."
This brings me to present day California with its burgeoning budget deficit brought on by chronic overspending on social programs twined with a tax regime regarded by The Tax Foundation as the 47th worst business tax climate in America. Very soon this system will collapse. The socialists/progressives/liberals who run the legislature are already proposing more taxes and more social welfare spending. Should California become America's tax dungeon by edging out Rhode Island to claim the worst business climate in the nation, the negative impact on the working class will dwarf all the combined intended good of every social welfare program enacted and yet conceived by the left as the paying jobs of the capitalists flee the state. Gazing at California, Hayek would surely shake his head sadly.
The Fatal Conceit should be required reading for every elected official in America, beginning with California.
Reviewer: Chuck DeVore is Vice President of Policy at the Texas Public Policy Foundation. He served in the California State Assemblyman from 2004 to 2010. Before his election, he was an executive in the aerospace industry. He was a Special Assistant for Foreign Affairs in the Department of Defense from 1986 to 1988. He is a lieutenant colonel in the U.S. Army (retired) Reserve. DeVore is the author of "The Texas Model: Prosperity in the Lone Star State and Lessons for America," the co-author of "China Attacks," and author of the novel "Twilight of the Rising Sun."
As Hayek shows, the central problem with socialism is that it based on the false idea of "constructive rationalism," the belief that man can order society based purely on reason (and therefore planning). However, social progress is based in large part on tradition, or -- as Hayek describes it -- "between instinct and reason." This progress is inherently evolutionary and proceeds by slow steps. As such it integrates all the knowledge that is dispersed in society.
The theory presented in this book is a mix of liberalism and conservatism. In many ways it is the application of evolutionary theory to social though. As he daringly says: "morals, including, especially, our institutions of property, freedom and justice, are not a creation of man's reason but a distinct endowment conferred upon him by cultural evolution." This certainly won't endear him to either religious thinkers or Randian libertarians.
Hayek proceeds to discuss the benefits of private property, free enterprise and trade from this evolutionary perspective and shows socialized planning is inevitable destructive of social progress.
Hayek provides an excellent refutation of the central errors of socialism. The reader might want to compare his approach with that of von Mises in THE ANTI-CAPITALISTIC MENTALITY and PLANNED CHAOS, which covers similar territory from a somewhat different approach.
The term 'socialism' as used in political discourse generally begs definition, and is used carelessly rather than precisely by both sides of the debate. Consider, for instance the conflation of the manifestly wildly disparate New Deal and Soviet Communism. Those supporting the New Deal, which preserved democracy and capitalism during economic catastrophe with government intervention, too often had a wistful, credulous view of the Soviet Union. The right extended a realistic view of Soviet tyranny to define even the mildly US left as not merely mistaken, but advocates of tyranny and treason. Hayek is more precise. He views socialism as any government interference in the free market, and argues that, at whatever level it is conducted and imposed, the results are for the worse. He states that the plight of those in need, while acknowledging its reality, is poorly, if at all, mitigated by dirigiste government action, if not worsened and perpetuated. His arguments are logical, historically informed and presented in clear prose that's a delight to read.
My differences with him begin with his acceptance of the necessity of government protection of private property and of citizens against violence. I'd argue that unregulated capitalism, much as unrestricted government, can result in appropriation of property by the strong at the expense of the weak, and that there are many forms of violence, many of which are characteristic of unrestricted business activity. The proper role of government in economic life, therefore, becomes a matter of debate, rather than an a priori rejection. He, too, doesn't consider the negative externalities consequent to many economic decisions in free-market environments, the costs of which are oft borne by others--too, perhaps, a form of theft--and that bringing those externalities into economic decision is not only a reasonable sphere of government activity, but even in service of a free market approach, in that the real costs of the decisions become part of them.
Hayek is essential reading for a lefty. He requires engagement on a level other than simple dismissal; he doesn't merely call names or indulge in superficial, supercilious rhetoric. Amongst other things, exposure to his thought tempered my youthful confidence in government dirigism as the only just and practical response to human need, and my prejudice that government always works more effectively and more to the good of the people than does capitalism. I don't go along with his entire corpus. But lefties, as well as those on the right, have much to learn from Hayek, and ignore him at their peril.
The book mostly deals with the concept of the extended order, which is basically the idea that in addition to our genes, our morals and politics come from an evolutionary process which is much too complicated to be intentially created by the human mind. This is an epistemological view that argues against the idea of system building in both morals and politics (specifically socialism which seems to be broadly defined as any top-down political and moral construction).
I would have liked to see the concept of the extended order flushed out into a more concrete moral and political philosophy, but this has been done (at least the political) in his earlier writings (Constitution of Liberty among others). Because of this, I'm not sure this book has as broad an appeal as some of his earlier classics, but as a Hayek fan who likes philosophy, I thoroughly enjoyed the book.