When Hayek Abandoned Mises

Reality Check

In June 1960, I received in the mail two books: Frederick Hayek’s The Constitution of Liberty and Ludwig von Mises’s Human Action. I had ordered them from the Foundation for Economic Education. I paid $7.50 for Hayek’s book; I paid $10 for Mises’s book. In 1960, that was the equivalent in today’s money of about $140. That was a lot of money for someone who had just come home from his first year in college.

I marked the inside cover of both books: June 1960. Over the next two years, I got each author to autograph his book.

I began reading The Constitution of Liberty (1960) almost immediately. I did not read Human Action (1949) until the summer of 1963. I read it after I had read Murray Rothbard’s book, Man, Economy, and State (1962), which I also read in the summer of 1963. The Constitution of Li... Friedrich A. Hayek Best Price: $5.99 Buy New $51.93 (as of 10:40 EST - Details)

In 1960, I regarded Hayek’s book as one of the most profound books I had ever read. In retrospect, it was the first profound book that I had ever read. I have reread it two times since then, and I still regard it as a profound book. It is also a deeply flawed book. Part I of the book, The Value of Freedom, is a defense the ideal of freedom. Part II, Freedom of the Law, is his attempt to outline the kind of political order that is necessary to sustain freedom. Part III, Freedom in the Welfare State, is probably the most profound defense of conceptual errors in the history of the libertarian movement.

When I reached Section 5 of Chapter 16, I came to these words:

There are all kinds of public amenities which it may be in the interest of all members of the community to provide by common effort, such as parks and museums, theaters and facilities for sports — though there are strong reasons why they should be provided by local rather than national authorities.

At that point, a yellow flag went up in my mind. Warning: danger ahead. The danger was not long in coming: the next few sentences in the paragraph.

There is then the important issue of security, a protection against risks common to all, where the government can often either reduce these risks or assist people to provide against them. Here, however, an important distinction has to be drawn between two conceptions of security: a limited security which can be achieved for all and which is, therefore, no privilege, and absolute security, which in a free society cannot be achieved for all. The first of these is security against severe physical privatization, the assistance of a given minimum of substance for all; and the second is the assurance of a given standard of life, which Human Action: The Scho... Ludwig von Mises Best Price: $6.75 Buy New $15.36 (as of 05:45 EST - Details) is determined by comparing the standard enjoyed by a person or a group with that of others. The distinction, then, is that between the security of an equal minimum income for all and the security of a particular income that a person is thought to deserve.

I knew that something was seriously amiss. I knew that what I had read in The Freeman over the previous three years was here being jettisoned as a matter of what appeared to be political and moral principle.

I continued reading. Section 6 began as follows:

Though some of the aims of the welfare state can be achieved only by methods inimical to liberty, all of its aims may be pursued by such methods. The chief danger today is that, once an aim of government is accepted as legitimate, it is then assumed that even means contrary to the principles of freedom may be legitimately employed.

I knew at that point that I was dealing with a defender of the free market social order who had sold out intellectually to the fundamental error of the modern world, namely, the welfare state’s programs for the aged. I knew of his reputation from The Road to Serfdom, yet here I recognized clearly that this was the first step on the road to serfdom. I was 18 years old, and at that point I was inoculated against his writings. From that point on, I knew Man, Economy, and Stat... Murray N. Rothbard Best Price: $23.43 Buy New $29.95 (as of 08:10 EST - Details) that I would have to pick and choose carefully from his writings.

This is not a minor issue. The Social Security system, which includes state subsidized medical care for the aged, is by far the most widely accepted institution associated with welfare state economics. More than any other pair of institutions, in every western nation, Social Security and government medicine are guaranteed to bankrupt all national governments. There is no escaping this. There will be a great default. They will abandon the programs which have been promised to the masses as the absolute guarantee provided by the state. Hayek defended these programs in the name of liberty. People who have not read Hayek are unaware of this. The first thing I ever read of a Hayek’s was this, and I never trusted him again. I would trust him on certain issues. On certain issues, he is reliable: socialist economic calculation, the decentralization of knowledge, and the market system as a discovery process, and the market as a means of coordination. These ideas he extracted from Mises’s writings prior to 1925. Hayek’s were published in the in the early part of Hayek’s academic career: before 1946. They were not original. In stark contrast, in terms of an overall philosophy of liberty, Hayek abandoned Mises in his discussion of the legal framework of the free market order. He did this mainly in the work that is generally regarded as his most original defense of liberty: The Constitution of Liberty.

Chapter 16, “Social Security,” is so profoundly compromised both morally and conceptually that it still amazes me that the libertarian camp would regard Hayek as anything except a man who had no conception of an overall system of political liberty. If he had had any principle of interpretation of the free society which provided something like a coherent set of standards by which a defender of liberty could evaluate a particular political program, he would not have written the following. The Road to Serfdom: T... F. A. Hayek, Bruce Cal... Best Price: $3.06 Buy New $1.99 (as of 03:40 EST - Details)

What we now know as public assistance or relief, which in various forms is provided in all countries, is merely the old poor law adapted to modern conditions. The necessity of some such arrangement in an industrial society is unquestioned — be it only in the interest of those who require protection against acts of desperation on the part of the needy. It is probably inevitable that this relief should not be long confined to those who themselves have not been able to provide against such needs (the “deserving poor,” as they used to be called) in the amount of relief now given in a comparatively will the society should be more than is absolutely necessary to keep alive and in health. We must also expect of the availability of this assistance will induce some to neglect such provision against emergencies as they would have been able to make on their own. . . .Once it becomes the recognized duty of the public to provide for the extreme needs of old age, unemployment, sickness, etc., irrespective of whether the individuals could and ought to have made provision themselves, and particularly once health is assured to such an extent that it is apt to reduce individuals efforts, it seems an obvious corollary to compel them to ensure or otherwise provide against those common hazards of life. . . .

Finally, once the state requires everybody to make provisions of the kind which only some had made before, it seems reasonable enough that the state should also assist in the development of appropriate institutions. . . .

Up to this point the justification for the whole apparatus of “social security” can probably be accepted by the most consistent defenders of liberty.

Include me out.

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