Julian L. Simon 301-951-0922110 Primrose Street Chevy Chase, Md. 20815 THE MEDAL OF FREEDOM DESERVES FRIEDRICH HAYEK Friedrich Hayek, who will be awarded the Presdident's Medal of Freedom on Monday, is arguably the greatest social scientist of the twentieth century. During the past few decades, his system of thought has seeped pervasively into scholars' writings not only in economics, political science, and philosophy, but also in sociology, psychology, and anthropology. Hayek's ideas influenced Ronald Reagan's supply-side policy, and Margaret Thatcher's privatization program. He (along with Milton Friedman) is the most-respected economist in Eastern Europe. Most important, his ideas have been confirmed by events. His analyses of socialist as well as non-socialist societies have proven astonishingly correct. In the 1940s and 1950s, Freud and Keynes were the names to conjure with -- literally. No mainstream scholar doubted the basic validity of their systems. Those few writers who argued that the Keynesian or Freudian ideas are theoretically flawed, or lack validation by empirical test, were considered cranks. It then seemed unthinkable that by the 1980s either Freud or Keynes would be largely discredited. Yet that turnaround has occurred. [[Hayek jokes that when Keynes died in 1946, he expected to assume the mantle of best-known economist in the world. Instead, he immediately went into a two-decade decline in professional estimation.]] [Luckily he has lived to a ripe old age -- the word "ripe" perfectly fits the still- productive Hayek, who was born in 1900 -- long enough to enjoy the renaissance of his ideas and reputation, still on their upswing.] Hayek's great work all flows from the fundamental vision of classical economics and political science which Hayek terms "spontaneous order." This evolutionary principle (originally enunciated in 1705 by Bernard Mandeville) ascribes the development of society and economy to what Adam Ferguson - colleague of David Hume and Adam Smith - called "human action but not human design," Smith's "invisible hand." Hayek has flexibly and pragmatically adapted this principle to various conditions of modern everyday life. And he derives from this principle the corollary that because every set of circumstances is different, setting general policies from afar is usually inferior to decisions made on the spot by interested parties. On these insights, together with his rockbottom value of personal liberty under law, Hayek consistently builds his system of politics and economics. Hayek's central point with respect to policy is that economic activity cannot be effectively planned and coordinated from a central bureau. Socialism inevitably founders on the impossibility of even the largest computers effectively collecting and analyzing data about individuals' and groups' preferences, abilities, and perceptions of their circumstances. Only a system of decentralized decision-making and exchange-induced cooperation -- the "invisible hand" -- is feasible in a modern complex economy. Hayek teaches that progress arises from an evolutionary process of "discovery" wherein diverse firms and consumers experiment with a variety of profit-seeking activities. Most innovators fail in the marketplace, to their private cost. But some succeed, to the benefit of the public. Journalists routinely apply the label "conservative" to Hayek. But one of his most trenchant writings is entitled "Why I Am Not A Conservative." He says that conservatives are against change, but not he. He says that conservatives enjoy authoritarianism, but not he. Instead, he -- like Milton Friedman -- prefers the label "liberal," with the connotations it had in Great Britain in the early nineteenth century. Hayek is pragmatic and undogmatic, and his judgments are generally moderate. The main exception is his assertion that a country cannot be "just a little bit" socialist, and that there is no "middle way" between socialism and free enterprise. He believes that any element of socialism tends to spread its tentacles until it entirely corrupts a society. This anecdote illuminates Hayek's subtlety of thought. I wrote him about his belief that we should respect custom and authority, and asked: If you came to a red light in the early morning when the streets were deserted, and no car was to be seen, would you proceed on through the light? He wrote back that if the property were private, he would not proceed. But if it were public property he did not know what he would do. Would any other human make this distinction? Indeed, most people would think it ridiculous. But Hayek felt the need to separate his responsibility to a person from his relationship to an impersonal state. He also is disinclined to force every difficult decision into a general rule. Hayek's judgment has proven sound in most respects. His 1930s assessment of socialism's prospects has proven exactly correct. Luckily, Hayek has lived long enough to see this confirmation of his analysis in Eastern Europe. A difficult element in Hayek's thinking is his apparent condemnation of planned policy change. But Hayek is not against all self-conscious social change. Indeed, he considers the framing of broad-ranging, even- handed, law-based rules for human conduct to be perhaps the most important and challenging task in a society. He simply wants us to be leery of making social changes until we have inspected the matter exceedingly closely, and have done our level best to determine whether there are subtle hidden benefits from apparently dysfunctional or irrelevant customs or systems. Following Hume, Hayek tells us that we can never know why many valuable and important customs and systems evolved. Hence he hopes that we give vestigial practices the benefit of our doubt, and perhaps a bit more. His view may be summed up in a phrase attributed to Robert Frost: Never pull down a fence until you know why it was put up. [Hayek's generosity with his energy and reputation are noteworthy. He has participated actively in many policy arguments, especially the rent- control fights in Austria in the 1920s. Sometimes he has even been too generous, such as giving a blurb to a textbook that had a generally sound outlook on economics but that was not very competently done.] A typical bit of Hayekiana to close: After receiving the Nobel prize Hayek wrote that the prize should not be awarded in economics. His reason? After a person receives the prize, s/he is inevitably asked by journalists about subjects outside his/her special knowledge. And too often the laureate responds to such questions. The answers have a good chance of causing damage because they are taken as statements of expert knowledge even though they are nothing more than uninformed opinions. Hayek's personal modesty, reflected in this view of the Nobel prize, is part-and- parcel of his abhorrence of the "fatal conceit" -- the title of his 1989 book -- that the reasoning powers of clever people are capable of successfully remaking society at will. Julian L. Simon, University of Maryland, is the author of Population Matters and an adjunct scholar of the Cato Institute. hayek 88-164 article8 November 14, 1991 .pa To the Editor - If you need the piece shorter, possible cuts are bracketed. .ig hayek 88-164 article August 8, 1991 Julian L. Simon 110 Primrose Street Chevy Chase, Md. 20815 301-951-0922 FRIEDRICH HAYEK AT 91 Friedrich Hayek is arguably the greatest social scientist of the twentieth century. During the past few decades, his system of thought has seeped pervasively into scholars' writings not only in economics, political science, and philosophy, but also in sociology, psychology, and anthropology. References to Hayek may now be more frequent than to any other writer. His ideas influenced Ronald Reagan's supply-side policy, and Margaret Thatcher's privatization program. He (along with Milton Friedman) is the most-respected economist in Eastern Europe. Most important, his ideas have been confirmed by events. His analyses of socialist as well as non-socialist societies have proven astonishingly correct. In the 1940s and 1950s, Freud and Keynes were the names to conjure with -- literally. No mainstream scholar doubted the basic validity of their systems. Those few writers who argued that the Keynesian or Freudian ideas are theoretically flawed, or lack validation by empirical test, were considered cranks. It then seemed unthinkable that by the 1980s either Freud or Keynes would be largely discredited. Yet that turnaround has occurred. In economics, even the writers of introductory texts which have sections on the famous IS-LM machinery -- the central concept in Keynesian thinking -- confess that they include it only to keep the allegiance of some older teachers. John Hicks, who invented the IS-LM formulation, says it no longer makes sense to him, and is fundamentally flawed. Hayek jokes that when Keynes died in 1946, he expected to assume the mantle of best-known economist in the world. Instead, he immediately went into a two-decade decline in professional estimation. Luckily he has lived to a ripe old age -- the word "ripe" perfectly fits the still-productive Hayek, who was born in 1900 -- long enough to enjoy the renaissance of his ideas and reputation, still on their upswing. Hayek's great work all flows from the fundamental vision of classical economics and political science which Hayek terms "spontaneous order." This great principle -- originally enunciated in 1705 by Bernard Mandeville -- describes the development of society and economy by what David Hume called "human action but not human design," and whose operation in the economy Adam Smith called the "hidden hand." Hayek has flexibly and pragmatically adapted this principle to various conditions of modern everyday life. And he derives from this principle the corollary that because every set of circumstances is different, setting general policies from afar is usually inferior to decisions made on the spot by interested parties. On these insights -- which came to Hayek by way of the nineteenth century Austrian economist Carl Menger and Hayek's teacher, Ludwig von Mises -- together with his rockbottom value of personal liberty under law, Hayek consistently builds his system of politics and economics. Hayek's central point with respect to economic policy is that economic activity cannot be effectively planned and coordinated from a central bureau. Socialism inevitably founders on the impossibility of even the largest computers effectively collecting and analyzing data about individuals' and groups' preferences, abilities, and perceptions of their circumstances. Only a system of decentralized decision-making and exchange- induced cooperation -- the "invisible hand" -- is feasible in a modern complex economy. Hayek teaches us that progress arises from an evolutionary process of "discovery" wherein diverse firms and consumers experiment with a variety of profit-seeking activities. Most innovators fail in the marketplace, to their private cost. But some succeed, to the benefit of the public. Journalists routinely apply the label "conservative" to Hayek. But one of his most trenchant writings is entitled "Why I Am Not A Conservative." He says that conservatives are against change, but not he. He says that conservatives enjoy authoritarianism, but not he. Instead, he -- like Milton Friedman -- prefers the label "liberal," with the connotations it had in Great Britain in the early nineteenth century, sharing much with contemporary libertarianism. Hayek is less dogmatic and more pragmatic than many libertarians, however. Many of them elevate liberty so much above all other values that they oppose legal intervention even with respect to such practices as child pornography, and reject government sanctions against such collusive business practices as price-fixing. In contrast, Hayek is in favor of government sanctions against price-fixing, which horrifies many free- marketers. Hayek's judgments are generally moderate. The main exception is his assertion that a country cannot be "just a little bit" socialist, and that there is no "middle way" between socialism and free enterprise. He believes that any element of socialism tends to spread its tentacles until it entirely corrupts a society. This anecdote illuminates Hayek's subtlety of thought. I wrote him about his belief that we should respect custom and authority, and asked: If you came to a red light in the early morning when the streets were deserted, and no car was to be seen, would you proceed on through the light? He wrote back that if the property were private, he would not proceed. But if it were public property he did not know what he would do. Would any other human make this distinction? Indeed, most people would think it ridiculous. But Hayek felt the need to separate his responsibility to a person from his relationship to an impersonal state. He also is disinclined to force every difficult decision into a general rule. Hayek's judgment has proven sound in most respects. Following his mentor, Ludwig von Mises, to whom he gives extraordinary credit (perhaps more than von Mises deserves), his 1930s assessment of socialism's prospects has proven exactly correct. Luckily, Hayek has lived long enough to see this confirmation of his analysis in Eastern Europe. A difficult element in Hayek's thinking is his apparent condemnation of planned policy change. But Hayek is not against all self-conscious social change. Indeed, he considers the framing of broad-ranging, even-handed, law-based rules for human conduct to be perhaps the most important and challenging task in a society. He simply wants us to be leery of making social changes until we have inspected the matter exceedingly closely, and have done our level best to determine whether there are subtle hidden benefits from apparently dysfunctional or irrelevant customs or systems. Following Hume, Hayek tells us that we can never know why many valuable and important customs and systems evolved. Hence he hopes that we give vestigial practices the benefit of our doubt, and perhaps a bit more. His view may be summed up in a phrase of Robert Frost's: Never pull down a fence until you know why it was put up. Imperfect though our mental faculties necessarily are, Hayek is not against using our mental faculties to make changes after we have investigated thoroughly and the matter seems relatively clear-cut. Hayek's generosity with his energy and reputation are noteworthy. He has participated actively in many policy arguments, especially the rent-control fights in Austria in the 1920s. Sometimes he has even been too generous, such as giving a blurb to a textbook that had a generally sound outlook on economics but that was not very competently done. A typical bit of Hayekiana to close: After receiving the Nobel prize Hayek wrote that the prize should not be awarded in economics. His reason? After a person receives the prize, s/he is inevitably asked many questions by journalists about subjects outside his/her special knowledge. And too often the laureate responds to such questions. The answers have a good chance of causing damage because they are taken as statements of expert knowledge even though they are nothing more than uninformed opinions. Hayek's personal modesty, reflected in this view of the Nobel prize, is part-and-parcel of his abhorrence of the "fatal conceit" -- the title of his 1989 book -- that the reasoning powers of clever people are capable of successfully remaking society at will. hayek 88-164 article8 August 8, 1991 article8 hayek92/March 24, 1992