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Episode #139 ... Friedrich Hayek - The Road to Serfdom — Transcript

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0:00hello everyone I'm Stephen West this is
0:03philosophize this big warm heartfelt
0:06thank you this week to the people that
0:07support the show on patreon you make my
0:10life possible
0:11you make this show possible thank you
0:13very much for all that you do today's
0:15episodes on the philosopher Frederick
0:16von Hayek and his influential work the
0:19road to serfdom I hope you love the show
0:21today so all the way back in the late
0:2419th century shortly after the work of
0:26Marx shortly after the economic changes
0:29associated with the Industrial
0:30Revolution there were several groups of
0:32thinkers that began to create what would
0:34eventually become an all-out movement
0:36towards centralization the central
0:39planning of economies let me explain
0:42what central planning is by explaining
0:44why the thinkers felt compelled to start
0:46a movement in the first place so in the
0:48late 19th century the Western world was
0:50primarily made up by market economies
0:52people like Marx and several others come
0:55along and start throwing around
0:56critiques of capitalist market economies
0:58they create enormous inequality they
1:01lead to the alienation of the worker
1:02they fragment economic efforts and
1:05create waste because people can be
1:06engaged in so many different
1:07incompatible tasks at once but not the
1:10least of these criticisms was the claim
1:12that these market economies based on a
1:15flaw and design inexorably lead to
1:17massive herbs and flows within the
1:19market booms and crashes crashes it
1:22ended up negatively impacting the lives
1:23of potential billions the late 19th
1:26century was rife with thinkers looking
1:28for replacements for market economies
1:29and waiting for their inevitable demise
1:31well time went by and along came August
1:35of 1929 the beginning of the Great
1:36Depression global economic collapse and
1:39it seemed too many of these thinkers
1:40that this was the day of reckoning for
1:42capitalist market based systems this was
1:45Marx's prophecy finally coming true when
1:48trying to figure out what caused this
1:50global meltdown there were many theories
1:51but one of the more common ones was that
1:53the technological advances of the
1:55Industrial Revolution produced so many
1:57more goods it's such a more efficient
1:58rate that market economies couldn't
2:01handle it and became flooded there was a
2:04real feeling at the time that our market
2:06economies of the past were an outdated
2:08way of doing things that just can't keep
2:10up with the sort of economies that are
2:11going to have to
2:12exist in a post-industrial revolution
2:14world the solution for so many of these
2:17countries affected by the Great
2:18Depression was to have the government
2:19step in and try to prop up the economy
2:21in various ways until it was functional
2:23again this is where central planning
2:25comes into the picture the idea is that
2:27we would remove markets from the
2:29equation altogether and instead rely on
2:32a central body like the government to
2:34come up with a plan for how they want
2:36the economy to look and then they'd
2:37control aspects of the economy and do
2:39their best to ensure that plan is
2:40executed markets weren't getting the job
2:43we wanted done so let's call upon the
2:45government to make sure it gets done
2:47this was the logic behind central
2:49planning or centrally planned economies
2:51so world war ii comes along during the
2:54Great Depression and on display our
2:56multiple world powers that have moved
2:58towards central planning by the way
3:00certainly not the only kind but the most
3:03popular version of central planning at
3:04this time was socialism but during World
3:07War two there were all types of
3:09centralization on display you had Soviet
3:11Russia you had National Socialism in
3:14Germany you had more marginal versions
3:16of socialization in the United States
3:18through FDR's New Deal or in the UK
3:20stemming from the Fabian Society he had
3:22what was going on in Italy once again
3:25major world powers were turning towards
3:27central planning and especially during
3:29the war effort you saw the governments
3:31of these countries control giant
3:32sections of the economy in an effort to
3:34make sure things kept going not to
3:37mention even prior to the extreme cases
3:39of the war you had labor cartels
3:41emerging in socialist countries where
3:42they would set up arrangements between
3:44the government businesses and labor
3:45unions and they'd use price fixing they
3:48determine how many products would be
3:49made determine how many people could
3:51work who could work and more during the
3:54war central planning had staked a claim
3:56to the world which brings us to one of
3:59the most significant economic events of
4:00the 20th century the end of World War
4:03two because now that nations weren't
4:05facing an existential threat where they
4:07needed the government to step in and
4:08ensure economic order what do they do
4:11do they return back to the market
4:13economies that were so popular before
4:15all this chaos broke out do they take
4:17this as a sign and stick with central
4:19planning many nations did stick with
4:23central planning so it was right at this
4:25snapshot in time right after World War
4:27two that the Philosopher's we're gonna
4:29talk about today wrote one of the most
4:30influential books of twentieth-century
4:32economics he is Nobel Prize winning
4:35economist Frederick von Hayek and to put
4:38it very simply Hayek thought that all
4:40these societies that were using the
4:42government to control aspects of their
4:44economy we're making a huge mistake and
4:46that economists and philosophers of his
4:48time didn't even realize just how much
4:51market systems were accomplishing for
4:53the world until they weren't there
4:54anymore Hayek was a fan of the Austrian
4:57School of Economics which if you
4:59remember from our episode set their
5:01sights on refuting many of the ideas
5:03that were core to socialism so it's
5:05impossible to divorce a critique of
5:07socialism from his work entirely but it
5:09would be equally impossible to
5:11understand the scope of Hayek's work
5:12without also considering that he was
5:14ultimately critical of the primary idea
5:16behind socialism which is the central
5:19planning of economies should also be
5:21said in a clarification later on in his
5:22life he said that he defines socialism
5:25as any system where the government
5:27exercises significant control over the
5:29economy hike would probably want to
5:31start out by talking about this movement
5:33towards centralization that began in the
5:34late nineteenth century these people
5:37were no doubt trying to solve problems
5:39they saw with market economies but let's
5:41really take a look at what their
5:42solution was we have a way that we want
5:45the economy to be so let's make a plan
5:48and then use this really powerful tool
5:50we have called the government to execute
5:53that plan which was essentially to say
5:55let's have a meeting get all the
5:56smartest people we can find put them in
5:58a room and plan what our entire economy
6:01is going to look like now on one hand
6:03that sounds like one of the most
6:04arrogant things you've ever heard but
6:05then again we do have this long
6:07tradition within philosophy of optimism
6:09towards this idea of being able to come
6:11together have rational discussions about
6:13things and come up with the best
6:15solution why shouldn't we be able to
6:17come up with a plan or design for the
6:19entire economy Hayek once said quote the
6:22curious task of economics is to
6:24demonstrate to men how little they
6:26really know about what they imagine they
6:28can design end quote
6:30Hayek is known as an anti rationalist in
6:33this regard now I get it philosophically
6:36loaded term but you know the best way to
6:38describe it in this kind
6:39text is to say that Hayek believes that
6:41a total understanding of how the economy
6:43should be structured is unknowable and
6:46even if it were knowable it certainly
6:48wouldn't be something we could arrive at
6:49by assembling a handful of thought
6:51leaders in a room just talking about
6:53stuff the economy - Hayek is the sum
6:56total of billions of transactions each
6:58one of them giving us crucial
7:00information the best comparison to
7:02understand how high exceeds the
7:03functions of the economy is to think
7:05about how similar it is to language you
7:08can't sit in a room come up with a bunch
7:10of new words chisel them into stone and
7:12say here's a new language everybody no
7:15that's not how language or words work
7:17you know as we talked about on our
7:19Vidkun stein episodes language is a
7:21living breathing organism words derive
7:24their meaning from the way they are used
7:26by people within a particular linguistic
7:28community so in this way language is a
7:32collective agreement between people that
7:35is constantly moving constantly evolving
7:37based on the sum total of the choices of
7:39sometimes millions of people the economy
7:42- Hayek is a similar sort of collective
7:45agreement between people that can't be
7:46planned predicted or ever fully known
7:49the government should never be in the
7:51business of coercing the economy because
7:53the government can never have an
7:55exhaustive understanding of the billions
7:57of transactions that are going on -
7:59Hayek the only people you could say kind
8:02of have a sort of fragmented version of
8:04total knowledge of the economy it's the
8:06aggregate of people that make up the
8:08economy and their local knowledge of
8:10their respective fields
8:11let me explain say grandma Beatrice owns
8:14a flower shop in the suburbs of Seattle
8:15Washington no matter how smart the
8:18people are that you could ever gather
8:20into a room there is no way the
8:22government or any centralized body for
8:24that matter can ever know as much as
8:26grandma Beatrice knows about her
8:27customers what flowers they're gonna buy
8:29what prices they're willing to pay for
8:31things
8:31what decorations they like on their
8:33flowers how many flowers are gonna buy
8:35in a particular circumstance the list
8:36goes on forever
8:37grandma Beatrice has what Hayek would
8:40call localized knowledge of her little
8:42section of the economy by the way in the
8:45same way she has local knowledge of the
8:47way words are used around her in Seattle
8:49Washington markets allow for societies
8:52to have a deist
8:53centralized approach to the way the
8:54economy evolves based on the choices of
8:56consumers and suppliers rather than on
8:58some plan a few people thought sounded
9:01good at the time one of the big problems
9:03with having a centralized group that
9:05makes all the plans for the direction of
9:07society is that whenever new problems
9:09come up it always requires you to give
9:11more power to the state to be able to
9:13solve those problems see when you remove
9:15markets from the equation and instead
9:17say we're gonna plan everything you miss
9:19out on so much localized knowledge that
9:22actually makes understanding the economy
9:24even possible take an example used in
9:26the work of Erik Mack let's say you have
9:28a centrally planned economy what is to
9:31stop any central planner from deciding
9:33one day that we should take all of our
9:35titanium resources and dedicate them to
9:37the production of license plates what
9:39he's getting at here is that when you
9:41remove markets when you remove the
9:43localized knowledge of people like
9:44Grandma beatrice and everything she
9:46knows about the supply and demand of her
9:47business the price of something within a
9:50market system relays so much information
9:53to people about how much supply there is
9:54for something versus how much demand
9:56there is for something how is the
9:58central planner to ever know what the
10:00true value is of anything what we're
10:02supposed to just trust they know
10:04everything and we'll keep things ordered
10:06like their God or something sounds a lot
10:08like God the idea that if we don't have
10:11a designated group of people planning
10:13the economy that the alternative is that
10:15society's gonna collapse into complete
10:17disorder no order within an economy
10:19emerges spontaneously for Hayek just as
10:23words derive a new meaning spontaneously
10:25we don't need a centralised body
10:27planning language and we don't need one
10:29for the economy either both are self
10:31ordering systems more than that the
10:34knowledge we need if we want anything to
10:36work be it language or the economy or
10:38any other example there are many kinds
10:41of these self ordering systems all
10:42around us if you look for them the
10:44knowledge we need for those to work is
10:46fragmented across all individuals and
10:48this is probably where Hayek would want
10:50to introduce how important the concept
10:51of freedom is to him sometimes he also
10:54uses the word liberty but his point is
10:56that we need everyone to be able to act
10:58freely if we can ever hope to have all
11:01the information their choices provide
11:02each person's individual varying choices
11:05and by
11:06another crucial perspective of localized
11:08knowledge for example apply the concept
11:11of central planning to the idea of
11:12social order this is the equivalent of
11:14looking at everyone's individual skill
11:16sets and then allocating them as
11:18resources that a cabal of people have
11:19chosen will best benefit the plan of
11:21society does that remind you of any
11:23examples of centrally planned societies
11:25in the 20th century not only should we
11:28not want to live like we're an ant
11:29colony hike would say self ordering
11:31systems like the economy have lesser
11:33potential when you limit a person's
11:35liberty and as such one of our primary
11:37goals we should have is to maximize
11:39people's Liberty to choose once again
11:41government should not be deciding the
11:43ins for people it should be protecting
11:45our Liberty so that we can choose the
11:47ins for our self society should not be
11:50thought of as an organization society
11:52should be a spontaneous self ordering
11:54system that said Hayek isn't against all
11:56organizations he doesn't think there's
11:58zero room for planning just not at the
12:01government level he's all for word
12:03people starting businesses or synagogues
12:04or charities or sports teams or whatever
12:07you want these things have specific
12:09planned objectives they're trying to
12:10bring about the difference is the people
12:13involved in those organizations
12:14volunteered to be a part of them you
12:17can't run a country like it's a lemonade
12:19stand the role of government to Hayek is
12:22to enforce the rule of law this is an
12:24absolutely crucial thing to have if
12:26you're gonna have a market economy but
12:27then it's also to do two other things
12:29one it should execute the projects the
12:31public needs that voluntary transactions
12:33don't provide and to give assistance to
12:36quote some unfortunate minorities the
12:38weak or those unable to provide for
12:40themselves
12:41end quote Hayek strongly opposes the
12:44idea of equality of outcome because it
12:46is utterly incompatible with a society
12:48of free people see if you're going to
12:50treat people fairly across the board
12:52when it comes to the legal system
12:53you can never aspire to any sort of real
12:56equality of outcome to Hayek because if
12:58for no other reason people are different
13:00people make different choices they care
13:03about different things people want
13:05different things out of their life and
13:06that's ultimately a good thing for us
13:08because giving people the freedom to
13:09choose give society access to their
13:12unique set of localized knowledge you
13:14either have to sacrifice a quality of
13:16outcome or a quality under the law you
13:18can't ever have both too high
13:20so take your pick but Hayek I live in a
13:24socialist society and things are great
13:26here I mean you say socialism so bad
13:28shouldn't the whole society have burnt
13:30to the ground by this point socialism
13:33can work for long long periods of time
13:36but only through the use of government
13:38coercion sometimes extreme government
13:40coercion you can be very happy living in
13:44a socialist country but only as long as
13:46what you want to do with your freedom
13:48corresponds well with certain
13:49pre-planned aspects of your life that
13:51the government has already chosen as
13:53long as you never want to stray from the
13:54pack too far you're gonna be golden in a
13:56socialist country see under a
13:58market-based economy people can agree
14:00and disagree and dedicate resources to
14:02things that are completely incompatible
14:04with each other but under central
14:06planning the resources have to be used
14:08in a way that is planned by the
14:10government the choices people make about
14:12the Preferences of their lives so often
14:14need to be approved by the government
14:15and oftentimes what both of these things
14:18require is the use of propaganda by the
14:20government to Hayek sometimes incredibly
14:22subtle propaganda to keep people's
14:24subjectivity and desires aligned with
14:27the goals of the central plan the use of
14:30central planning within economic systems
14:32puts the citizens of that country on
14:34what Hayek calls the road to serfdom
14:36which is also the title of the book he
14:39wrote in that context immediately after
14:40World War two what's meant when he says
14:42the road to serfdom is quite simply that
14:45movement towards central planning or a
14:48socialist society is the first step for
14:50citizens on the road towards
14:52totalitarianism he gives a ton of
14:54different reasons for this throughout
14:55the road to serfdom some of them are
14:57obvious just because of what we've
14:58already talked about so far but let's
15:00talk about a couple other ones one has
15:02to do with the nature of power
15:03structures within these socialist
15:05societies central planning requires that
15:08we give an extraordinary amount of power
15:09to a small handful of people that'll be
15:11making decisions for planning Society
15:13how this is panned out historically is
15:15that sometimes this responsibility evens
15:18up falling into the hands of a single
15:19person be it some sort of dictator or
15:21even just a single person that dominates
15:24that group that's making the decisions
15:25well not only is this a dangerously
15:28narrow point of view to run a society
15:29from that
15:31in itself may run the risk of
15:32totalitarianism consider additionally
15:35what Hayek says in a famous chapter from
15:37the Road to Serfdom titled why the worst
15:39get on top Hayek asked the question what
15:43sort of person would be drawn towards
15:45one of those positions of power in a
15:46society with a centrally planned economy
15:48what sort of person when you tell them
15:51at the job interview you're gonna be one
15:52of the very few that decide the plan for
15:55society what kind of person not only
15:57nods enthusiastically and is excited
16:00about that prospect but then is also
16:01willing to run an elaborate campaign
16:03just for the luxury to have that
16:04position of power you're campaigning to
16:07be in the business of government
16:09coercion Hayek thinks all the people
16:11that you'd ever really want to be in a
16:13position like this the tolerant the
16:15measured the wise the empathetic etc
16:17wouldn't ever want a job like central
16:20planner or there's such a disparity of
16:21power and that's probably healthy the
16:24type of people that are attracted to
16:26positions like this seemingly are always
16:28the ones that stand to gain the most
16:30from the position which also makes them
16:33the person motivated to campaign the
16:35hardest most willing to exploit the
16:37office once they get it most likely to
16:39use any means necessary to maintain that
16:40position which for Hayek means that
16:43they're often the politicians willing to
16:44take advantage of the uneducated the
16:46gullible and will even use hatred
16:48towards other groups as a way of
16:49generating support Hayek describes this
16:52person in the Road to Serfdom here quote
16:54he will be able to obtain the support of
16:56all the docile and gullible who have no
16:58strong convictions of their own but are
17:00prepared to accept a ready-made system
17:02of values if it is only drummed into
17:04their ears sufficiently loudly and
17:06frequently end quote because these are
17:09effective tactics for getting elected
17:11you're always going to end up with the
17:13people willing to use those tactics in
17:15office this person will always be able
17:18to beat the tolerant measured and wise
17:20person to Hayek the person that's
17:22willing to act differently in the public
17:24sphere than they do in the private
17:26sphere will always have an advantage and
17:28thus that is why the worst get on top
17:31but also consider even if you were to
17:33get a decently well-meaning person in
17:35office for a period of time that
17:38whenever you give someone a position of
17:39power in the world whether it's the
17:41dictator of a country or the assistant
17:43manager at Dairy Queen
17:44whenever there's power involved there's
17:46a sort of self-reinforcing nature about
17:49it people tend to think if I'm not using
17:52this power that's been given to me can i
17:54really say that I'm doing my job not to
17:57mention the need to justify your
17:58position and power to the people that
17:59gave it to you so often resulting in
18:01making pointless choices mistaking
18:03movement for progress this is just one
18:06reason of many why otherwise perfectly
18:09well-meaning people whose intentions
18:11were just to come up with a plan for how
18:12we want society to look and then get
18:14busy on executing it this is one way to
18:17Talat arianism can take hold but this is
18:19just one Road to Serfdom there are many
18:23others sometimes it happens gradually
18:24over the course of hundreds of years you
18:27know the famous economist Milton
18:28Friedman who was a friend and colleague
18:29of Hayek's and knew his work very well
18:31was asked once to do an interview in
18:33part talking about Hayek's book the road
18:35to serfdom and what he was trying to
18:37convey with it during the interview he
18:39gives an anecdote describing the effects
18:41of this type of gradual centralization
18:44in the United States throughout the
18:45course of his life this is taken from
18:47the interview quote I'm a very old man
18:50and I was graduated from high school in
18:521928 that's a long time ago now if you
18:55looked at the situation in 1928 we were
18:58much poorer in terms of physical goods
19:00we didn't have microwaves we didn't have
19:02washing machines you can go down the
19:03line there's no question that were
19:05enormous ly wealthier today in that
19:07sense and enormous ly have a higher
19:09standard of living from that point of
19:11view on the other hand we were safer
19:14more secure freer in 1928 than we are
19:17now as of that time government was
19:20spending something like ten to fifteen
19:21percent of the national income the
19:23private sector eighty five to ninety
19:25today government controls over half the
19:28national income and private enterprise
19:30controls only the rest where have all
19:32these good things come from can you name
19:35any of those additions to our well-being
19:37that have come from government it wasn't
19:39the government that produced the
19:40microwave it wasn't the government that
19:41produced improved automobiles it wasn't
19:44the government that produced computers
19:45that led to the Information Age now on
19:48the other hand consider our problems our
19:50major problems are not economic our
19:52major problems are social our major
19:55problems are the underclass in the
19:57Center City
19:58the development of crime so that today
20:00were much less safe than we were when I
20:01graduated high school we have much less
20:03feeling of security
20:05much less optimism about what the future
20:07is going to be like and all the problems
20:09have been produced by government
20:11consider the school's the quality of
20:13schooling I got in a public school in
20:151928 was almost surely a great deal
20:17higher than you can get in any but a
20:19small number of schools now you have the
20:21dropouts you have the decline in scores
20:23of the SAT and the like why because
20:27education is the most socialized
20:29industry in the United States 90% of our
20:31kids are in public schools 10% in
20:34private and education is a completely
20:36centralized socialized system and it
20:39behaves just the way every other
20:41socialized system does it produces a low
20:43quality output benefits a small number
20:46of people currently mostly those who are
20:48associated with the National Education
20:49Association and harmes does a great deal
20:52of harm to other people end quote
20:55you know a few episodes ago I gave the
20:57example of it maybe being possible that
20:59instead of treating other members of
21:00society as though we're in competition
21:01with them maybe we could start thinking
21:04about them more like members of one
21:05giant family well Hayek is a great
21:09example of someone who would have heard
21:10me say that and smack me right in the
21:12mouth because one of the bigger ideas
21:14that Hayek offers up and it's work is
21:16the idea that society is not a family
21:18nor can it ever be like a family or it
21:21would completely collapse Hayek says
21:23that life in this modern world forces us
21:26to live two very distinct parallel lives
21:29on one hand we are members of a family a
21:32group of friends and when we're in that
21:34setting we think of those people and
21:36treat them in a very specific way the
21:39example from the episode was that
21:40everybody goes over to Grandma
21:41Beatrice's house for the holidays and
21:42because she's getting older all the kids
21:45cooked the holiday meal for her but
21:47Hayek would ask just imagine if we
21:49really did extend that way of treating
21:51grandma Beatrice to the rest of society
21:53because the other life we're constantly
21:55living in parallel is our life as an
21:57economic agent a person trying to
21:59provide value to people in exchange for
22:02a living let's see our chef do you cook
22:05Thanksgiving dinner free of charge for
22:07every grandma Beatrice that decides to
22:08walk through your doors of course not
22:11you'd be out of business almost
22:12instantly but it's not just you we all
22:15would be out of business society would
22:17be out of business
22:17the same way it may sound ridiculous for
22:20someone to go to their grandma's house
22:21and not give her any food because she
22:23didn't pay for it
22:24hike would say it's equally ridiculous
22:26for people engaged in markets to treat
22:28customers like members of their family
22:30living in the modern world requires you
22:32to play both rules and things would not
22:34be good if either of these spheres tried
22:37to act like the other the work of
22:40Frederick von hayek went on to become
22:42some of the most influential work in
22:43economics in all of the 20th century but
22:46even if you're not convinced even if
22:48you're totally unconvinced by the
22:49economic arguments forget the rule of
22:51law couldn't care less about markets
22:53Hayek after listening to his case at the
22:56very least would want you to remember
22:58one thing it's something he saw as one
23:00of the sharpest differences between what
23:02we call a free society and a centrally
23:05planned society he says it in a famous
23:07quote while the last resort of a
23:10competitive economy is the bailiff the
23:12ultimate sanction of a planned economy
23:14is the hangman thank you for listening
23:17I'll talk to you next time

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