Archive for the ‘F.A. Hayek’ Category

It would seem that no advanced civilization has yet developed without a government which saw its chief aim in the protection of private property, but that again and again the further evolution and growth to which this gave rise was halted by “strong” government.

Governments strong enough to protect individuals against the violence of their fellows make possible the evolution of an increasingly complex order of spontaneous and voluntary cooperation.

Sooner or later, however, they tend to abuse that power and to suppress the freedom they had earlier secured in order to enforce their own presumedly greater wisdom and not to allow “social institutions to develop in a haphazard manner” (to take a characteristic expression that is found under the heading ‘social engineering’ in the Fontana/Harper Dictionary of Modern Thought (1977)).

– F.A. Hayek, The Fatal Conceit: The Errors of Socialism


He begins this discussion in Chapter 2 of the book and references classical antiquity and the trading societies surrounding the Mediterranean as a prime example of nations that went through that rise and decline, but as noted, modern society is going through much the same thing.  The Anointed, to borrow Thomas Sowell’s phrase, know better and begin to “nudge” society where they want it to go.  As Jonah Goldberg noted, American totalitarianism and government control comes with a smiley face, though they’re making pseudo-erudite academic arguments for more outright thuggery.

“The natural progress of things is for liberty to yield, and government to gain ground.”

– Thomas Jefferson


It’s a little break from blogging the relentless assault on Second Amendment rights.  It’s worth noting the same people who hate the free market are typically the same ones who hate firearms rights, or any citizen freedoms.

From Forbes & ZeroHedge:

President Barack Obama managed to overtake Republican challenger Mitt Romney on the exit poll question “Who is better for the economy?” and a strong majority of Obama voters felt that the economy is better off than four years ago. Indeed, anyone (particularly Bernanke) would concede that without the Fed’s zero interest rate policy we would be experiencing a far worse economy—the true Obama-Keynesian economy.

The danger here, as we have seen in every other bust for a century or more, is that we can only suspend the laws of economics for so long. And in general we are only good at considering immediate consequences, while being very, very bad at considering later consequences. As 19th century French economist Frédéric Bastiat observed, “The bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”

In the short run (and this is what is so insidious about the Fed’s artificially low interest rates), all we are seeing is an illusion of economic progress. Specifically, the Fed has manufactured a distortion intended to trap both consumers into spending more and entrepreneurs into investing more, or lengthening their production periods (becoming more “roundabout,” as the Austrian School economists said), as if savings were more plentiful. This combination would never occur in an unhampered, noninterventionist economy for the simple fact that higher consumption would mean higher interest rates (from less savings), which would discourage longer production.

Thus, investment in this illusory economy is malinvestment, or investment that always unravels with the intervention’s inevitable end, due to either untenable credit levels (such as today’s corporate debt-to-asset ratio, still at historic highs) or a resource crunch (rising commodity prices) that eliminates any advantage from printing money; and one or both of these scenarios is unavoidable.

Economic progress requires a chain reaction from lower time preferences: foregone current consumption and a higher pool of savings lowers interest rates and triggers a natural entrepreneurial response, greater productivity, and subsequent economic growth. (The “Paradox of Thrift” that warns of the hazards of higher savings is the nonsensical stuff of the ivory tower.) By circumventing this process, as we have today, we have built but a temporary façade.

Worth reading more highlights at ZeroHedge or the whole thing at Forbes.

Long story short, we’re kicking the can down the road.  There will be very hard times ahead financially due to this.

Also worth revisiting:


German police officers fired a total of 85 bullets in 2011, 49 of which were warning shots, the German publication Der Spiegel reported. Officers fired 36 times at people, killing six and injuring 15. This is a slight decline from 2010, when seven people were killed and 17 injured. Ninety-six shots were fired in 2010.

Meanwhile, in the United States, The Atlantic reported that in April, 84 shots were fired at one murder suspect in Harlem, and another 90 at an unarmed man in Los Angeles.

I love these kinds of stories because they’re so simple in what they’re trying to imply, yet how quickly they fall apart as a narrative.  The clear objective of them is to show how wonderfully marvelous Europe, European government control, and enlightened Europe is, and how backwards and gun-oriented we are in the US.

People are free to make bad decisions in the US.  And once deadly force is used it’s deadly force, whether it’s one round fired or one hundred.

“Our police officers are no thugs in uniform,” Lorenz Caffier, interior minister of Mecklenburg-Vorpommern, said at a press conference Tuesday.

“It is gratifying that the use of firearms by police officers against people is declining,” Caffier added.

It’s gratifying only if there is a lack of crime that necessitates fewer violent encounters.  Otherwise the police could be running away or ignoring crime, especially in Gastarbeiter neighborhoods.

There’s a joke about the difference between heaven and hell.  They’re the same, except different nationalities have different professions.  In heaven, the English are the cops, the Germans are the engineers, the Italians are the cooks, the French are the lovers, and the Swiss run everything.  In hell, the Germans are the cops, the English are the cooks, the Italians are the engineers, the Swiss are the lovers, and the French run everything.

Thing is, there’s little comparison in those statistics.  The German police deal with a mostly homogenous, aging society that for the most part doesn’t have that much crime.  There’s also the argument that they lost a lot of alpha males and their genes in WWI and then WWII, so they don’t even have the risk-taking types who end up skirting the line and becoming criminals anyway.   The US has a naturally more volatile society, but we have a more free society.  We have multiple ethnic groups (and as posted recently, we even have illegal criminal invaders), we have a vast, free country that leaves people to their own ends to a greater degree than Germany.

Ultimately, a few criminals and the regrettable, tragic losses of life that come from conflicts with the law that aren’t resolved well are a small price to pay.  See, there’s a reason the “Germans are the cops” line applies to hell.

F.A. Hayek dedicated entire chapters in The Road To Serfdom explaining why the worst get on top in a socialist system (slightly less so in other systems) – because ultimately, such a system is totalitarian, and desires control.  A system which makes for a pacified society ultimately leads to the violence at the hands of government authorities and police as per in Germany’s not-too-distant past.  Otto von Bismarck’s socialist state that began offering government benefits set the stage for a government with more and more and more control.

Ultimately, many of the instruments of government control were already in place by the time things got far worse.

American law enforcement, where some 150+ officers were killed in 2011, and a greater number of criminals were killed, even when spread out over 300 million people, looks like a large number.  Assuming that American cops kill ten times the number of officers killed, we could guess there are some 1500 people killed by law enforcement each year (a few internet searches couldn’t pull up a real number, so I’m just making that up based on a 10:1 ratio).

Just because I’m making numbers up, let’s assume it’s more like 5,000 per year.  Totally made up number.  It will still take 1200 years of 5,000 per year to equal Germany just from their famous years, and that’s with Germany’s lowest estimate.  More than likely it’d take some 2400 years, and that’s not including East Germany’s actions for 40 years, the actions of the Kaiser or Bismarck before a decidedly anti-freedom Austrian made Germany’s police famous.

Over at the Daily Beast, David Frum has this piece:

Read This Book, Obama!
by David Frum Apr 15, 2012 4:00 PM EDT

Emerging from JFK’s shadow, Lyndon Johnson wielded power ruthlessly—and delivered big results for liberals. In this week’s Newsweek, David Frum on what Obama could learn from Robert Caro’s new biography.

A great work of history is never only about the past.

The fourth volume of Robert Caro’s great biography of Lyndon Johnson—The Passage of Power—tells a story from seemingly long ago. Page after page conjures up a vanished world: a world in which labor unions had clout and lunch counters were segregated. Yet it’s also a world deeply familiar to us: a world in which urgent national problems go unaddressed year after year, and Americans despair over the paralysis of their government.

But no, we don’t.  We despair over government acting too much, spending too much money, printing money to create inflation to sustain itself, and we despair over government creating perpetual recipient-class voter blocs.  We despair over government that’s run amok, spending and spending and spending with no end in sight.  We despair over government’s absurdities, not society’s.  And in the 1960s, the labor unions had clout through government power, and the segregated lunch counters were being desegregated not through government force, but by people sitting down and demanding to be served.

This lunch counter isn’t famous because of government, it’s famous because of a sit-in.

For nobody, perhaps, is this turn of history more challenging than for Robert Caro himself. Over more than 2,500 pages of powerful prose, Caro has summoned Lyndon Johnson to vivid, intimate life. We come to know him better, thanks to Caro’s remorseless research, than almost any of Johnson’s contemporaries could have hoped to do. It’s not an attractive picture. Caro’s Johnson is a bully and braggart, a wheedler and manipulator, a man of bad personal morals and worse business ethics.

And it is this, frankly, monstrous character who realized more of Caro’s liberal ideals than any politician in modern times, Franklin Delano Roosevelt very much included—and vastly more than the charming, winning, but domestically ineffectual JFK.

In a story already rich with drama, this tension between author and subject—between Caro’s loathing of Johnson and his reverence for Johnson’s accomplishments—is the tensest drama of all.

How did Johnson do it?

Here is Caro’s disconcerting message: Johnson didn’t do it by inspiring or exhorting. He did it by mobilizing political power, on a scale and with a ruthlessness that arguably surpassed all other presidents, before or since.

The ends justify the means.  Hayek had something worth noting on this:

Advancement within a totalitarian group or party depends largely on a willingness to do immoral things. The principle that the end justifies the means, which in individualist ethics is regarded as the denial of all morals, in collectivist ethics becomes necessarily the supreme rule. There is literally nothing which the consistent collectivist must not be prepared to do if it serves “the good of the whole,” because that is to him the only criterion of what ought to be done. Once you admit that the individual is merely a means to serve the ends of the higher entity called society or the nation, most of those features of totalitarianism which horrify us follow of necessity. From the collectivist standpoint intolerance and brutal suppression of dissent, deception and spying, the complete disregard of the life and happiness of the individual are essential and unavoidable. … To be a useful assistant in the running of a totalitarian state, therefore, a man must be prepared to break every moral rule he has ever known if this seems necessary to achieve the end set for him. In the totalitarian machine there will be special opportunities for the ruthless and unscrupulous.

Meanwhile, LBJ had this to say:

"I'll have those n*ggers voting Democratic for the next 200 years." -- Lyndon B. Johnson to two governors on Air Force One according Ronald Kessler's Book, "Inside The White House"

The monstrous character realized leftist, socialist, Modern Liberal ideas through ruthless force.  The left has found the moral equivalent of war and ruthless application of force appealing since the Progressive Era of the early 1900s.  The end justifies the means.  They find the means “monstrous” but choose them because they really want the ends.  So why does something “good” have to be achieved at the cost of massive applications of force, corrupt men of “monstrous character”?  Because it’s the tyranny, stupid.

The lunch counter sitters and protest marchers were winning the hearts and minds of the public.  Civil disobediance won the day.  It showed the noble character of the both the mission and the people.

Johnson, by contrast, was the same ruthless monster the left loves to be ashamed of, but emulates and desires to be again and again.

It’s hard not to detect in these pages an unspoken critique of Barack Obama. Yes, certainly, Obama shares Lyndon Johnson’s gift for driving opponents crazy, if it is a gift. But the use of power Caro so vividly describes is not something that comes naturally to our current president. The constant searching for opportunities; the shameless love-bombing of opponents; the endless wooing of supporters; the deft deployment of inducements and threats—these are the low arts that led to Johnson’s high success.

Obama is fundamentally opposed to the success of the nation.  He doesn’t “drive opponents crazy”, he infuriates his opponents because they don’t find the US to be a cruel nation in need of “fundamental transformation”.  We have been a classic liberal representative republic focused on liberty.  What about that needs changing?

LBJ’s successes were ultimately at the cost of the nation.  Thomas Sowell often writes of what the black family was like in the 1950s and 1960s, and did a specific piece on black-owned businesses in California which were destroyed by LBJ’s “Great Society”, he often notes that political rhetoric never matches the effects in reality.

LBJ cared about power.  He is respected by the left for his use of power.  They find it “monstrous” but so appealing.  It’s as though they can get something done… their programs always need more money, more regulations, more authority; their campaigns always need more votes – no matter how they cheat to get them; they always need more power, power to control…

Hayek & Keynes Revisited

Posted: April 12, 2012 by ShortTimer in Economics, F.A. Hayek, free markets, Music

Posted this a while back in two parts, but it’s worth going back to:

Part 1: Fear The Boom and Bust

Part 2: Fight of the Century

Milton Friedman discussing Friedrich Hayek’s the Road To Serfdom back in 1994.  As relevant again today as ever.

Part 1:

Part 2:

Part 2 is perhaps the more interesting of the two, especially around the 12 minute mark on.  Friedman points out that experience may be more important than the influences of books or television; and how people have seen the failures in the former Soviet Union and the successes in Asia and the Pacific where unfettered economies succeeded.  Arguably the internet and the 24 hour news cycle has become even more important, because it shortens the memory and lessens experience, but as he mentions, it’s a sophisticated question not easily answered.

Some important quotes:

If an experiment in private enterprise is unsuccessful people lose money and they have to close it down.  If an experiment in government is unsuccessful, it’s always expanded.

Particularly relevant to the health care debate:

The founders of our country believed in individual freedom, believed in leaving people be, letting them be alone to do… whatever they wanted to do.  But our government has been increasingly departing from those Constitutional principles.  You know there’s a provision in the Constitution that congress shall not interfere with interstate commerce.  That provision had some meaning at one time.  But it has no meaning now at all.  Our courts have ruled that anything you can think of is interstate commerce and so the government exercises extensive control over things that it has no business interfering with.

Around the 17 minute mark, Friedman begins dissecting the Federal Reserve.

At the 19 minute mark, Friedman discusses the collapse of the nation under debt.  His belief was that the changes in public perception were going to allow the people to halt the expansion of government.

In response to why socialists would be happier about the history of the last 50 years (before 1994, though it works the same today) at the 21 minute mark:

Because the story they tell is a very simple story – easy to sell.  If there’s something bad, it must be an evil person who’s done it.  If you want something done, you’ve got to do it – you’ve got to have government step in and do it.

The story Hayek and I want to tell is a much more sophisticated and complicated story.  That somehow or other there exists this subtle system in which without any individual trying to control it there is a system in which people in seeking to promote their own interests will also promote the well being of the country – Adam Smith’s invisible hand.  Now that’s a very sophisticated story.  It’s hard to understand how you can get a complex interrelated system without anybody controlling it.  Moreover the benefits from government tend to be concentrated.  The costs tend to be dispersed.  To each farmer the subsidy he gets from the government means a great deal.  To each of a much larger number of consumers it costs very little.  And consequently those who feed at the trough of government tend to be politically much more powerful than those who provided the wherewithal.

Eloquently stated and encapsulating the relationship between people and government very succintly.

Afterwards he breaks down what parties mean what – bringing up liberalism as classical liberalism, and states he’s libertarian in philosophy, though not party.  He mentions Hillarycare in passing as incredibly socialist.  The EIC that he mentions at the end he supported as a replacement for all welfare programs with the EIC, a “negative income tax”, that helps to establish a baseline income.  He ended up fighting against it, because as we all know, the EIC just became another welfare program, not a replacement for the patchwork of welfare that was already in place.

Well worth watching.

And as a reminder:

No, the other Hayek.