Books and Arts

The Road from Serfdom

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Socialism and War: Essays, Documents, Reviews Volume 10 of The Collected Works of F.A. Hayekedited by Bruce Caldwell(University of Chicago Press, 280 pp., $36)

Friedrich Hayek was the most persistent and influential critic of socialism in this century. For this reason, among others, he tends to inspire hero-worship, or at least devotion. John Gray writes, for example, that "there can be no doubt that Hayek's reformulation of classical liberalism" creates "a body of thought as powerful as any that can be found within the classical liberal writers and far more resistant to criticism than was classical liberalism itself." Hayek was also astonishingly prolific, with published works in no fewer than eight decades, from the mid-1920s until 1992, the year of his death. Born in Vienna in 1899, fully eighteen years before the Bolshevik Revolution, he wrote some of his greatest works during World War II, and also after the turbulence of the late 1960s. He received the Nobel Prize in 1974, at the age of 75, well before the publication of the last two volumes of his influential three-volume treatise, Law, Legislation, and Liberty. One of his most ambitious and far-ranging works, The Fatal Conceit, was published in 1988, just before he turned 90. A recipient of the Presidential Medal of Freedom in 1991, Hayek outlived communism. He died in a reunified Germany.

Hayek is best-known for The Road to Serfdom, which appeared in 1944. It attacked "collectivism" in the spirit of "classical liberalism"; and it was dedicated, without the slightest trace of irony, to "the socialists of all parties." Hayek urged that because of their enthusiasm for centralized government, England and America were going down the same path as Germany. "It is necessary now to state the unpalatable truth that it is Germany whose fate we are in some danger of repeating.... If it is no longer fashionable to emphasize that `we are all socialists now,' this is merely because the fact is too obvious. Scarcely anybody doubts that we must continue to move toward socialism.... Is there a greater tragedy more imaginable than that, in our endeavor consciously to shape our future in accordance with high ideals, we should in fact unwittingly produce the very opposite of what we have been striving for?"

After its initial printing of 2,000 copies, The Road to Serfdom became a publishing phenomenon, with millions of copies sold. Recently the book has been especially popular in Eastern Europe; a fiftieth-anniversary edition was published in 1994, and sales continue to climb worldwide. An ambivalent traditionalist, and author of a famous essay called "Why I Am Not A Conservative," Hayek has nonetheless been an inspiration to many modern conservat ives, whose thinking often bears his distinctive stamp. In the United States, England, and elsewhere, influential conservative movements are populated by people who are, in one or another sense, Hayek's descendants.

The University of Chicago Press is now in the process of publishing Hayek's collected works. The ultimate plan is for nineteen volumes. The Fatal Conceit, The Trend of Economic Thinking, The Fortunes of Liberalism and the Austrian School, Contra Keynes and Cambridge, and now Socialism and War have already appeared (not in the proper chronological sequence), together with an autobiographical work, Hayek on Hayek. Socialism and War is certainly the most fascinating volume so far, because it provides a snapshot of political debates before and during World War II, and because it contains early versions--as well as the analytical heart--of the arguments for which Hayek is most famous. Most important, the foundations of The Road to Serfdom are contained in a short essay from 1938 and in an expanded version of that same essay, published a year later. The book deserves careful attention, for its own sake and for the occasion that it provides for a more general assessment of Hayek and of the relevance of his ideas to contemporary debates.

Socialism and War is divided into three parts. The first is an attack on various versions of socialism, especially some creative proposals for "market socialism." Despite their apparent abstruseness, Hayek's skeptical remarks about the possibility of "so cialist calculation" bear a great deal on current debates in Eastern Europe, certainly, but also in other places, including the United States, Japan, England, France, and Germany. The second part of the book deals with the economics and the politics of war. Might a little socialism be necessary during wartime? In circumstances of war, isn't a form of national planning indispensable? Hayek's answer will not be surprising. The third and most important part of the book contains much of the core of The Road to Serfdom, and also some intriguing essays on the subject of planning and on the tendency of the intellectuals of Hayek's day to look kindly on socialism. The latter essay offers some fine remarks on how concern for the esteem of others can lead apparently independent people astray: "[A]lthough outside intellectual circles it may still be an act of courage to profess socialist convictions, the pressure of opinion among intellectuals will often be so strongly in favor of socialism that it requires more strength and independence for a man to resist it than to join in what his fellows regard as modern views."

Before getting to the details of Hayek's arguments, some historical notes are in order. The essays in this book were written in the 1930s and 1940s, and while most of the arguments do not seem dated, it is clear that they were devised in a context very different from our own. Sometimes Hayek writes as if he is a voice crying in the wilderness-- as if most of his friends are socialists, as if almost all intellectuals are socialists, as if socialism has become a kind of official religion. (In the same vein, his preface to The Road to Serfdom says that "I have every possible reason for not writing or publishing this book," especially because an attack on socialism "is certain to prejudice the reception" of his other, more technical work.) Throughout there is a sense of embattlement, of intellectual isolation. We should not doubt that his apprehensions had a basis in the realities of intellectual life in his time. At the end of the twentieth century, though, committed socialists of the old school seem to have vanished, even in academia. (Academic radicals exist, but most seem barely to care about government.) Are we all Hayekians now? If so, it would be good to know in what sense. If not, it would be good to know why not.

The central essay in Socialism and War, "Freedom and the Economic System," was published in 1939. Its immediate motivation is to show that fascism and socialism are not opposites, that they are of a piece. The defining characteristic that they have in common is centralized control of the economy. "The similarity between many of the most characteristic features of the `fascist' and the `communist' regimes becomes steadily more obvious." In this way Hayek's claims are a detailed response to the many people who thought, in the 1930s, that Germany's National Socialism was a capitalist reaction against socialism, or that socialism was the best or only alternative to fascism. In 1939, Hayek's thesis was violently controversial.

More generally, Hayek's argument might be seen as a distinctive answer to Hobbes, who thought that an all-powerful state, a Leviathan, was necessary to solve the problem of social order. Hayek argues that a market system, built on general law and producing an economy rooted in decentralized choices, can offer not only economic growth, but also freedom and order. According to this view, decentralization, not dictatorial control, is the solution to the problem of social coordination. Hayek's argument is based on the lack of information of any planner or dictator, and the comparative informational advantages of decentralized processes that incorporate the knowledge and the experience of thousands or millions of human beings. Thus Hayek's claims on behalf of the market are rooted not in human knowledge and rationality but in human ignorance. As he wrote elsewhere, the "argument for freedom ... rests on the fact of our ignorance and not on the fact of our knowledge."

The essay begins with an opposition between nineteenth-century liberalism, which Hayek sees as committed to freedom properly understood, and socialism, which, in various forms, is urged by twentieth-century liberals favoring "collectivism." Thus Hayek's basic target is the "gradual advance towards collectivism in the countries which still cherish the tradition of liberty." In his view, it is no mere chance that despotism follows any significant expansion in the powers of the state. When the state expands its control over economic life, there will also be suppression of intellectual and cultural freedom--a case study in the law of unintended consequences. "A careful examination of the transition undergone by countries which only recently seemed the most `advanced' in the social and political sphere and which have now passed into a stage which we are inclined to associate with the distant past, actually reveals a pattern of development which suggests that these were not unfortunate historical accidents but that a similarity of methods applied to achieve ideal ends, which were approved by almost all men of good will, was bound to produce entirely unanticipated consequences."

As Hayek recognizes, this point is not itself original. What he wants to identify, however, is the social mechanism that makes it true. Here he makes a significant contribution, showing that whether or not they "optimize" anything, markets tend to solve a problem of limited knowledge. Hayek's fundamental claim is that limits in information, and the limited rationality of human beings, are central elements of the argument for markets and against planning. Incorporating the private decisions of innumerable individuals, markets operate on the basis of far more information than any planner can possibly have.

At this point Hayek distinguishes more sharply between liberalism and collectivism, by identifying two different roles for law. In his view, there is nothing wrong with that form of "planning" that occurs through a system of general rules, which are announced in advance and equally applicable to all. In this kind of "plan"--Hayek later came to identify it with the rule of law--no one needs to know, in advance, who will benefit and what will emerge, and individual initiative is given a wide scope.

These rules (of civil and criminal law) are general not only in the sense that they apply equally to all people, but also in the sense that they are instrumental in helping people to achieve their various individual ends, so that in the long run everybody has a chance to profit from their existence. The very fact that the incidence of their effects on different individuals cannot be foreseen, because these effects are spread far too widely and the rules themselves are intended to remain in force for a very long period, implies that in the formulation of such rules no deliberate choice between the relative need of different individuals or different groups need or can be made, and that the same set of rules is compatible with the most varied indivi dual views about the relative importance of different things.

In the liberal system, government makes general rules without making concrete decisions about the ends to which production is directed. There is no judgment that some people should be benefited and other people should be burdened. People can act according to their individual goals. Above all, diverse people can coordinate their actions as they see fit.

At the opposite pole is a system of planning in which public officials decide "for the people what they have to do at each moment." In a collectivist system, the economy is "directed," in the sense that the central authority makes decisions about the concrete use of available resources. However well-intentioned they may be, the planners face a crucial deficit in information. "The knowledge which guides production is no longer combined knowledge of the people who are in immediate charge of the various operations--it is the knowledge of the few directing minds which participate in the formulation and execution of a consciously thought-out plan." This is the kind of planning that emerges when an industry is given price floors or ceilings, or told not to exceed a certain level of output, or restricted in its total number of shops.

It is here that Hayek introduces the organizing idea of this book, and of almost everything he wrote: the idea of spontaneous order. By this term, Hayek means to refer to what emerges from human interaction but not from human design. There is no authority, human or divine, that imposes order. Order comes from the decentralized decisions of individual participants. The model is the establishment of a price for goods. Prices are not chosen by anyone in particular, though they are an outcome of human choices. The "unconscious collaboration of individuals in the market leads to the solution of problems which, although no individual mind has even formulated these problems in a market economy, would have to be consciously solved on the same principle in a planned system."

Hayek submits that, on purely economic grounds, a system of spontaneous order is far better than one of planning. It is likely to be much more productive and efficient. Lacking the knowledge of market participants, planners will inevitably make big mistakes. Yet Hayek insists that the economic argument is secondary--that moral considerations are primary. The spontaneous order of the market has moral advantages too, and those moral advantages are the crucial ones. "The conflict is one of ideals rather than merely material welfare."

Hayek's moral argument is founded on the fact that a planner will have to make choices about people's ends, and about the hierarchy among them; and in his view, such choices are best made in a free society, by individuals in a decentralized fashion. Of course, people disagree a great deal about ends, unless those ends are stated at a high level of abstraction and generality. This creates a large problem for a planner, who must constantly choose among ends--between doctors and schoolteachers, between housing projects and electricity projects, between bathrooms and farms. "Comprehensive economic planning ... presupposes a much more complete agreement on the relative importance of the different social ends than actually exists, and that in consequence, in order to be able to plan, the planning authority must impose upon the people the detailed code of values that is lacking."

Planning, in other words, is necessarily a matter of favoring some and disfavoring others. For planning to work, therefore, a society needs something like a scale of values. Yet no such a priori and uncontested scale exists. In the absence of any absolute authority, democratic assemblies will have to delegate authority to a body of administrative agencies, or experts. But the experts are unlikely to agree with one another. Hence there is a further pressure, to shift authority to some kind of manager or director of affairs, one who is freed from the fetters of democratic procedure. If planning is really going to work, moreover, it will ultimately be necessary to control the spread of information. Thus the suppression of individual freedom will come not merely from dramatically expanding the scope of government, but also from the prerequisites of any acceptable "plan."

To this account, Hayek adds another point. Suppose that planning is undertaken for the sake of justice, which is often the specific ground on which it is defended. Once this begins, there will be no logical stopping point. "Inequality is undoubtedly more readily borne if it is due to accident, or at least to impersonal forces, than when it is due to design." Once the government is in the business of correcting perceived injustice, it "cannot refuse responsibility for anybody's fate," and "dissatis faction with one's lot will inevitably grow with the consciousness that it is the result of human decision." For this reason, planners often find themselves in the position of constantly redistributing income in socially preferred directions. This project is disastrous to liberty, says Hayek, and to the creation of wealth.

Hayek's claims about wartime policy follow directly from his argument against planning. He wants to show, against the common view, that rationing and price-fixing are bad strategies even in circumstances of war. A "scheme of rationing would not--and could not--take real account of the urgency of various needs." Here, too, the government's informational deficit is crucial. No national agency is in a good position to choose appropriate prices, or to decide how much of a specified material should be allocated to one industry and how much to another. And once goods are rationed or prices are fixed, a firm cannot know whether, in using some essential material when a cheap substitute is available, it is wastefully using a scarce good. Both price-fixing and rtioning will cause inefficiency and waste, and throw the "burden of securing economy on a bureaucracy which is neither equipped nor adequate in number for the task." This would have several bad consequences. It would greatly worsen the conditions of the civilian population; it would also harm the war effort--first, by making the economy in general work less well, which is not very good for national requirements during war, and second, by making the military authorities responsible for obtaining war materials know little or nothing about the actual prices and the costs of goods that they use.

Hayek's discussion bears on government controls in all emergency conditions, not just during war. His wartime papers also offer brief discussions of considerable historical interest. One of them broaches a surprising and illuminating alliance between Hayek and Keynes (who was, at the time, Hayek's great rival) about how to finance the war (basically, through a separate war tax, to be retained by the government as blocked savings accounts).

Hayek's objections to planning underlie his discussion of some unusual forms of socialism, including "market socialism." In the 1930s, many observers enthusiastic about socialist goals came to question socialist means. Above all, they agreed that central planning could not work. Some inventive socialist economists, most notably Oskar Lange, sought to combine the market with modest kinds of planning. Essentially, Lange urged that both wages and consumer good prices should be set by the market, while the prices of industrial goods would be set by a central planning bureau placed in charge of investment and accumulation. The planning bureau would "grope" toward appropriate prices.

The resulting debate is somewhat technical, but in some still-influential papers, bearing on continuing debates in the United States and actual practices in Japan, Hayek responded that if wages and prices of consumer goods were to be determined by the market, there was no justification for failing to allow in dustrial prices to be determined by the market, too. Owing to its limited knowledge, the planning bureau could not hope to keep up with people's changing tastes and preferences, and it could not possibly create appropriate incentives for firm managers to find the least costly methods of production.

Are Hayek's claims convincing? To the extent that he is making a purely economic argument, about the relevance of limited knowledge to failed plans, he is saying something true and important. To the extent that he is claiming that there is a tendency for old-style socialist economic planners to assume control over political and cultural decisions as well, he is clearly right (though contemporary developments in Singapore and China suggest that the association between capitalist order and political freedom should not be overstated). Of course, old-style planning has few supporters today, and no serious person urges a "directed" economy. So does Hayek offer arguments worth engaging now? I think that he does. Three of Hayek's more subtle claims raise enduring issues. The first involves the mix between government and the market, or the relationship between them. The second involves the rule of law. The third involves Hayek's most important idea, the idea of spontaneous order.

The term "socialism" can mean many different things, and when an American attacks socialism, or a European embraces it, we may not know quite what is at issue. Hayek's fundamental objection is to the centralized determination of prices and wages. From his papers in the 1930s and 1940s, it is much less clear that he is defending laissez-faire, or objecting to the redistribution of wealth, or attacking a regulatory-welfare state that tries not to plan. In 1976, in the introduction to The Road to Serfdom, Hayek observed, in the face of conventional wisdom, that Sweden was "very much less socialistically organized" than Austria or Great Britain; he explained that Sweden had far less central planning and far less nationalization of the means of production. And Hayek had no fondness for laissez-faire. Quite the contrary. He abhorred the term and the principle, insisting instead that markets do not come from nature or fall from the sky. "In no system that could be rationally defended would the state just do nothing. An effective competitive system needs an intelligently designed and continuously adjusted legal framework as much as any other."

On this view, markets are constituted by government and law. They depend for their very existence on legal rules allocating basic rights and saying who can do what to whom. And in some places Hayek suggested that the appropriate legal framework would contain and specify a great deal. In 1945, he wrote that he has always been "in favor of a minimum income for every person in the country," largely but not only in the form of social insurance. At various times he suggested that he would accept maximum-hour laws, laws banning dangerous products, and laws protecting against unsafe workplace conditions and environmental deterioration. Still, in his introduction to the 1976 edition of The Road to Serfdom, he acknowledged that "socialism has come to mean chiefly the extensive redistribution of incomes through taxation and the institutions of the welfare state," and from all this "the ultimate outcome tends to be very much the same." This, certainly, is a far less plausible claim. Nothing in his arguments in this book establishes it.

Still, there is in those arguments a more distinctive lesson for the modern state. It involves that form of centralized planning that, in the United States, sometimes goes by the name of "command-and-control regulation." Command-and-control regulation can be found in a wide range of areas, but it is perhaps most prominent, and most important, in the environmental arena. Through such routes government sometimes specifies the technology that firms must adopt, or requires pollution reductions on the basis of the technology that government believes to be "available," or calls for pollution to be eliminated by a specified percentage, or technologies to be improved in certain ways. Here we can find (correcting for certain obvious differences) America's home-grown version of Soviet-style five-year plans. And like their Soviet counterparts, such plans have had a mixed record at best, with excessive costs, endless extensions, and ineffective controls.

There is a distinctly Hayekian problem with these strategies. It is the government's informational deficit. When government is trying to "force" environmentally preferred technology, how can it know whether it is forcing too much or too little? How can planners possibly know which technology is (or is going to be) best, or what percentage reduction, in sulfur dioxide or particulates, makes best sense for each of hundreds or thousands or millions of pollution sources? The Hayekian solution need not be a form of environmental laissez-faire (which means reliance on the common law of tort, contract, and property). For good Hayekians, the proper approach is incentives rather than command-and-control.

Thus, government might impose a tax or fee on polluting activity and let the market do the rest. Financial incentives allow a great deal of flexibility for private adaptation; they provide for a kind of spontaneous order. And lest the proposal seem exotic, we might notice that the government's phase-out of both lead in gasoline and chlorofluorocarbons (which are destructive of the ozone layer) has been accomplished by Hayekian approaches of precisely this kind. Hayek's criticisms of socialist planning may seem anachronistic, but they undergird the most advanced and forward-looking revisions of modern environmental policy. Do Hayek's principles bear also on the redesign of other policies that seek to correct a genuine failure of the market but also strain government's limited capacities? This question lies at the heart of many current controversies, including welfare reform, health care, and education. These contexts contain important differences, of course; but if the environmental arena is any guide, Hayek's claims will provide a part of appropriate solutions.

The rule of law was one of Hayek's abiding concerns. We might suggest that the rule of law ideal imposes certain specific requirements: laws must be publicly accessible, noncontradictory, stable, announced in advance, and applied in the world as they are on the books. But Hayek thinks that the rule of law means a great deal more than this. On his view, the rule of law is entirely inconsistent with planning, simply because planners cannot provide and be bound by "general" law. Yet it is possible to imagine a plan that seems general, as in the idea that everyone must increase production by 10 percent each year. The mystery is: What does the requirement of generality forbid? As noted, Hayek does not disapprove of much that is done in the name of the regulatory state. He objects to measures that involve "arbitrary discrimination" between persons. This category includes most importantly "decisions as to who is to be allowed to provide different services or commodities, at what prices or in what quantities; in other words, measures designed to control the access to different trades and occupations, the terms of sale, and the amounts to be produced or sold." Hayek objects especially to price controls. Since they abandon the touchstone of supply and demand, fixed prices will not be the same for all sellers and will discriminate on arbitrary grounds.

Of course, government controls of prices and quantities are usually harmful and sometimes disastrous, and much of what can be said against them relates to their rejection of the forces of supply and demand. But what does any of this have to do with the rule of law? As Hayek recognizes, it is not impermissible for the state to require taxi drivers to show that they have good eyesight, or to ban people from practicing medicine without showing medical competence. Hayek thinks that the rule of law forbids " arbitrary" distinctions. But any judgment that distinctions are "arbitrary" stems not from the notion of the rule of law, but from an independent set of arguments, specifying the appropriate grounds for distinguishing among people and groups. Hayek's argument about "general" law is part of a powerful argument against planning, but it adds little to an understanding of the rule of law. Hayek makes the mistake of associating the rule of law ideal with a particular view about what government should be doing.

Let us turn, finally, to Hayek's most important idea. The idea of spontaneous order is the organizing one for this book, and in his later work Hayek urged that a kind of spontaneous order--a variety of the invisible hand--lies behind many precious social institutions, including language, morals, norms, money, traditions, culture, even law. Each of these can be said to have evolved over time, from no one's intention, and in a highly decentralized fashion--the product of human action but not human d esign. Through the acts of hundreds, thousands, or millions of people, extending over space and time, knowledge accumulates, errors are discarded, and enduring solutions are found. This idea lies at the heart of so-called Austrian economics, which takes as its central concern the problem of human coordination, through which order emerges not from a dictator, but from the decisions and judgments of numerous individuals in a world of highly dispersed and sometimes only tacit knowledge. In Hayek's own account, the notion of spontaneous order has an unmistakable connection to Burke's account of the wisdom of longstanding traditions.

It should be unnecessary to say that an understanding of spontaneous order presents an enormously important project. Yet it raises many questions. In exactly what sense can markets, Hayek's original concern, be said to be a product of "spontaneous" order? Recall that Hayek acknowledges that markets require not anarchy, but law and government--more specifically, the humanly designed rules of contract, tort, and property. These rules say who owns what and who can do what to whom. When one person owns a lot, and another owns a little, it is largely because the government and the law both announce and enforce certain distributions of wealth. Whatever bargains are struck are a product of background conditions, including legal rights of many kinds, for which public officials are responsible. When property-less people are forced off "private" property, government and law are crucial. Thus market ordering is "spontaneous" only against an elaborate, humanly designed background.

Hayek may respond (as some of his later work suggests) that the relevant law is itself a product of spontaneous order: that the legal rules (property, contract, and otherwise) that underlie markets are also a product of human action but not design, in the sense that they evolved, like the social norms that perhaps they codify, over long periods of time from the decentralized decisions of countless people. This is an arresting claim. It may even be true. Suppose that it is. A further question remains. When a social institution has evolved in Hayekian fashion, should the institution be protected, or respected, for that very reason? About this Hayek was never entirely clear. There is a peculiar and somewhat unruly mixture here of Charles Darwin and Adam Smith. The most basic model of spontaneous order is probably the process of biological evolution, in which Hayek was much interested and to which he was much indebted. Yet evolution has a particular function: the survival of the species. If adaptations have endured, there is reason to think that they serve that function, and if they serve that function, there is a good reason to respect them. But what is the corresponding argument on behalf of the outcome of the spontaneous order (if that is what it is) of the market? Do spontaneous orders really have moral claims as such?

Here Hayek is obscure. To some extent, his argument is based on economic efficiency, and of course markets have efficiency-promoting properties. Still, as Hayek recognized, there are also market failures, to which spontaneous orders may fall prey; and in any case Hayek does not argue that society should see itself as a kind of maximizing machine whose most urgent goal is to promote economic efficiency. Instead his argument has a great deal to do with freedom. Thus Hayek tends to identify spontaneous order with liberty, and to see interference with spontaneous order as coercion or tyranny. Something intelligible does underlie this judgment. If government tells people that they cannot apply for certain jobs, there seems to be an intrusion on freedom.

But surely markets, and the law that makes them possible, can produce coercion, too. In a market system, some people have the power to deprive others of their jobs; and it blinks reality to deny that this power can be coercive. In a market system, people unable to acquire resources may be forced to live in tenements or on the streets; and people's beliefs and preferences may themselves be a product of limited education and opportunities. It is reasonable to say, in such cases, that freedom is at risk. But these possibilities make it necessary to ask what particular understanding of freedom Hayek has in mind. What is the defense of that particular understanding, and why does freedom, thus understood, deserve to prevail over all other values?

Hayek is right to say that some interferences with markets require government to take contentious moral positions; but the ordering of the market itself embodies contentious moral positions. There is no avoiding contentious moral positions. And suppose, for example, that the spontaneous orders that we call markets (constituted as they are by law) ensure that people with the wrong skin color, or gender, are excluded from certain positions, or that markets put certain goods, including jobs and perhaps subsistence, out of certain people's reach. Are such orders, simply because they are spontaneous, immune from challenge?

Recall, too, that markets themselves operate on the basis of a single factor: how much people are willing to pay for various goods. Even those who abhor planning should find it extravagant to say that freedom and consumer sovereignty are the same thing. Perhaps citizens in a liberal democracy want to reassess existing preferences, in, say, environmental protection or television programming. The idea of freedom cannot immunize all market preferences from democratic judgment. On such issues Hayek has little to say. His celebration of spontaneous orders is puzzling: he recognizes that the moral argument has precedence over the economic one, but he does not offer much that qualifies as a moral argument.

In this way Hayek emerges as an unlikely and perhaps unmatched mixture of the brilliant and the exasperating. No one has offered a comparably intricate account of the relationship between markets and decentralized knowledge, or of how and why economic planning is likely to fail. In spite of Hayek's claims, however, his attacks on socialism have little to do with the rule of law. And it is possible to doubt whether he contributed much, in this book or anywhere else, to the analysis of freedom, though he was one of its most impassioned modern defenders.

Attacks on "collectivism" were indispensable and brave in the 1930s and 1940s, when so many people admired the Soviet Union and so many observers thought that some form of socialism was inevitable and desirable. But attacks of this kind are far less indispensable and brave at a time when so many people believe that there is nothing that government can or should do to improve the lives of their fellow citizens. To the extent that Hayek is offering a warning about government planning, his lesson is an end uring one. He remains socialism's best critic. Yet he provides no argument against liberal democracies that aim to ensure fair life prospects and decent floors for all, not because they oppose freedom but because they insist on it.

Cass R. Sunstein is the author of Free Markets and Social Justice (Oxford University Press).

By Cass R. Sunstein

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