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Friday, February 20, 2015

More on Hayek

Hayek is often credited with the observation that optimal central planning is in fact impossible.  But the important thing is what comes next-- what your argument is regarding what to do about it.  Hayek proceeds from there to conclude that "spontaneous order" (let an unfettered market handle it) provides the best outcome for the most people, and that ANY planning is therefore not only not necessary but guaranteed to be sub-optimal. Perhaps Hayek doesn't go quite that far, but many of his followers certainly do.  But that logic breaks down on several levels.

One, it presumes that a complete lack of any social planning is a condition that's even possible-- what's missing there is that social planning occurs not just within powerful governments but also within powerful individuals and nongovernmental entities, such as corporations.  And while you may, in a democracy, theoretically be able to minimize or even eliminate the government's planning operations, it's not possible to do that and also eliminate the social planning imposed by corporations and powerful individuals.  And at least when the government is doing the planning, if the government actually is beholden to the people, everyone has some input into that planning, where other powerful entities would have no one to answer to under a government without any mechanisms to protect its people's interests.  Some would chime in here no doubt and try to argue "except for it's customers" but that effect is FAR more limited-- the impact customers have on markets is vastly overrated here when scarcity,  monopoly, employment, diversity, and internationalization provide many ways for companies to subvert the market regardless of customer efforts to counter it.  How many customers even know which company is responsible for which product and what else they are doing?  And independently wealthy private individuals may not be subject to customer impacts at all.  Given that, I would say the social planning performed by a government I have some say in can absolutely be preferable to social effects imposed by entities I have little or no say in.

And second, Hayek's argument is in effect, the behavior of society is too complex to optimally plan for, so government should do nothing in regards to social planning.  This is like claiming that because the behavior of the weather is too complex to plan for, we therefore have no need for umbrellas.

But I think it's quite clear that yes, we do need umbrellas to protect us from the vagaries of the weather, and we do need social planning to protect us from the vagaries of the market.  Hayek's observation about complexity does not change this at all.  He then attempts to take it a step further by arguing that there's something about the market that would differentiate it from the weather to make his point, but he fails here.  He resorts to a Social Darwinist "survival of the fittest" paradigm to try to explain just what it is about the market that would make it fairer than any human strategic planning.  But he fails to observe that true natural selection is littered with its mistreated victims-- given it's goal is not the most good for the most individuals but instead survival of the fittest at any cost, unconcerned with the objections, injustices and interests of individuals.  What Hayek misses is the fact that blind evolution is ALSO not optimal-- makeshift, haphazard, and faulty solutions are more than common, and a lot of individuals get trashed in the process.  And while we no doubt should be modest in the presumptions of our abilities to improve on it, I've no doubt we can design a worthy umbrella now and then.