Hayek the Evil Socialist

He can be seen through a reading of his book Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy (vol. 3) (London, 1979), pp. 41–64.

In particular, this striking passage could have been written by a Keynesian:

“On the other hand, it is merely common sense that government, as the biggest spender and investor whose activities cannot be guided wholly by profitability, and which for finance is in a great measure independent of the state of the capital market, should so far as practicable distribute its expenditure over time in such a manner that it will step in when private investment flags, and thereby employ resources for public investment at the least cost and with the greatest benefit to society.” (Hayek 1979: 59).

Hayek even goes on to give us a guide to fiscal rules for government spending (Hayek 1979: 59–60). In an earlier passage, we have Hayek’s defence of public goods, such as many of the amenities of modern life, such as most roads, government protection against violence, epidemics, and natural disasters such as floods or avalanches (Hayek 1979: 44), and the admission of negative externalities (Hayek 1979: 43–44) that can arise from private goods.

Passages like these in Hayek’s later writings lead anarcho-capitalists like Hans-Hermann Hoppe to complain that Hayek was really a social democrat: Mises was, he says, quite different.

But, frankly, the fundamental differences between Mises and Hayek are exaggerated. Mises was also a supporter of a limited state, with a monopoly on violence and coercion – just like Hayek.

Mises supported utilitarianism and allowed for (if not always approved of) restrictions on output by a democratic process using utilitarian arguments:

“Economics neither approves nor disapproves of government measures restricting production and output. It merely considers it its duty to clarify the consequences of such measures. The choice of policies to be adopted devolves upon the people. But in choosing they must not disregard the teachings of economics if they want to attain the ends sought. There are certainly cases in which people may consider definite restrictive measures as justified. Regulations concerning fire prevention are restrictive and raise the cost of production. But the curtailment of total output they bring about is the price to be paid for avoidance of greater disaster. The decision about each restrictive measure is to be made on the ground of a meticulous weighing of the costs to be incurred and the prize to be obtained. No reasonable man could possibly question this rule” (Mises 1998 [1949]: 741).

Now this type of utilitarian reasoning by Mises leads directly to many of Hayek’s “social democratic” positions.

Both Mises and Hayek are radically different from the anarcho-capitalist Rothbard. In fact, the private organisation that calls itself the “Ludwig von Mises Institute” is a gross misnomer, in many ways. How many libertarian supporters of a limited state who adhere to utilitarian ethics do you find at Mises.org? Not many.

In fact, to the average anarcho-capitalist cultist, everyone is a wicked, evil socialist, except for their fellow cult members.

BIBLIOGRAPHY

Hayek, F. A. von. 1979. Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy (vol. 3), Routledge and Kegan Paul, London.

Hoppe, Hans-Hermann. “Why Mises (and not Hayek)?,” Mises Daily, October 10, 2011.

Mises, L. 1998 [1949]. Human Action: A Treatise on Economics, Ludwig von Mises Institute, Auburn, Ala.