Bruce Caldwell observes that sales of The Road to Serfdom boomed in November 2008 and haven’t slowed down since. And he offers a few hypotheses on why that is.
Much has been written about whether Hayek is right or wrong as a matter of history or historical inevitability. To my mind that’s largely a side issue. What I think is timeless and relevant about The Road to Serfdom is what I think of as the key philosophical-economic insight that drives the book. Which is that there is a central economic issue that characterizes all human societies, namely the problem of scarcity. Governmental intervention cannot repeal the reality of scarcity. So, at root, we have a basic choice to make: either each of us chooses for ourselves (classical liberalism) or government chooses for us (or to put it otherwise, we all choose for each other). On this central insight, I think that Hayek has the matter exactly right–either we choose for ourselves or someone else chooses for us.
Hayek’s historical prediction follows from this basic insight–in a world where government chooses for us, somebody has to decide whose needs get met and whose do not. Which further means that government has to come up with some array of which needs are more important than others. Taxes provide the paradigm example: each dollar in taxes basically means that the individual has one less dollar to spend on what he wants and instead one dollar is given to the government to spend. At the margin, each dollar in taxes means that you have to sacrifice some of your leisure (in order to work more) or forgo some consumption activity that otherwise would have spent money on (a book, vacation, a clarinet for your child, or whatever). But Hayek’s crucial insight is keeping this central question front and center–either you decide what to do with your own money or someone else decides. Those are the only two choices.
The open question is whether it is compatible with democracy and freedom in the long-run for everyone to claim that their preferences should be on the menu of those that are worth being met. Hayek drew the lesson from the 1930s that democratic government allocation of economic resources led in the short run to budget deficits, in the medium run to inflation and monetizing the debt, and in the long run dictatorship that imposed a standard of values on society (and totalitarian impulses designed to brainwash people into to subordinating their own preferences to the preferences of the collective). A corollary is that when government allocates resources, rent-seeking and influence peddling become endemic to the system of trying to get your needs met rather than someone else’s.
And isn’t this in the end what all the fuss is about health care, cap and trade, financial regulation, and even deficit spending? Although dressed up as questions of economics, as The Road to Serfdom makes clear, these are really questions of freedom and individual liberty. Hayek’s eventual solution (as developed in Law, Legislation, and Liberty) was that it was both more efficient and more moral to have these basic allocational decisions made by impersonal processes like markets and the rule of law (especially the common law, as he understood it (perhaps in an unrealistic fashion)) rather than conscious political decisions as to who should get what. But it seems to me that regardless of whether he offers the right solution, he certainly asks the right question and won’t let us sweep under the rug the core recognition that everyone one of these decisions are fundamentally issues of personal liberty and who gets to decide.
Carbon taxes fundamentally amount to a choice that political decisionmakers believe that you should not drive so much or live in such a large house. The resource-allocation decisions at the heart of health care are obvious in terms of deciding which medical needs are more important than others. Paternalistic financial regulation proposals implicitly rest in part on the idea that some people disapprove of the way others spend their money and the reasons for which they borrow, so that it is an acceptable cost that some people will be unable to get credit cards or other types of good credit. People recognize that massive deficits to subsidize our consumption today mean massive taxes tomorrow meaning less for our children to spend on their own needs and happiness.
So I’m not surprised that Hayek is becoming a text for the current age.
A few people have mentioned that John Stossel’s show last week was on The Road to Serfdom. I found the show here.