Brad DeLong's Semi-Daily Journal (2004)

If only it was *Salma* Hayek they were talking about.

I would like to see a serious site that figures out how the Austrian school can relate to the current levels of public participation in the stock market and the housing mortage market (aka "housing bubble"). When von Mises was worrying about fiat money (when do you hear that term on CNN?), no one seriously imagined the 21st century level of public participation in these markets. But I never hear anything except that nasty ineffective government should keep it's hands off the credit card industry and its God-given right to 24% interest.

And perhaps explain why the von Mises mostly neutral references to the "Deity" have transmogrified into "Jesus Christ, Free Market Messiah."

I see a lot of borderline-credible rightwing think tanks on their blogroll. . .

"If one asks what substantive contributions [Hayek] made to our understanding of how the world works, one is left at something of a loss. Were it not for his politics, he would be virtually forgotten." -- Paul Krugman

I don't see why those 'taking Hayek seriously' should be expected to be more appreciative of Krugman than Krugman is of Hayek.

"inaccuracy and unintelligence in the sites you link to is a sign of low quality."

(1) They link to Brad DeLong

(2) I can't for the life of me even find the word "Krugman" on their website

I think that Hayek's biggest contribution is his emphasis on the Rule of Law as a universal principle that should guide all cases, as well as his distrust toward particularistic interests that might drive governance. In this he was a precursor of Buchanan and the publc choice school. This led in the end to the serious questioning of the early progressive belief in inherrently good government that governs for the whole of society.

Sure, today, there's nothing special, but in the late seventies this was rather counterintuitive and a good medicine to the excesses of governmental interventions of the 60s and 70s.

I don't think CNN et. al. mention von Mises and related writings because it would scare the heck out of everybody. And scare them out of their maybe some day worthless FRNs.

Neither the republicans nor Pat Buchanan are the least bit Austrian. Dems and Repubicans are Keynesians, with Bush as the penultimate Keynesian.

Say what you will about von Mises and the related writings by Rothbard and Richenbacker, but they are sober. The essays they publish are funny to read they are that critical of our central planners.

It's sad there are only these few comments on Hayek.
I think that the writing style of von Mises and Hayek has an unequaled clarity that multiples both the conviction with which they wrote and the message they impart. A lot of their ideas need to be updated but there is no one with the brains or the flair to do it.

p.s. Tech Central Station, eat my shorts.

Some of Hayek's followers appear to believe the thesis that regulation leads to socialism, but has this ever actually happened? It is likely that in democracies, voters ultimately decide the sort of government that they want to have. Some conservatives now also appear to have swallowed the inverse proposition: that free markets indubitably inculcate democracy, e.g. with regard to China.

It seems to me that the macro history shows that the Vietnam War, and the oil price shocks following the Yom Kippur War, led to an inflationary straightjacket for the U.S., and this was broken by Volker’s recession and the drop in oil prices. Then the economy got back into growth and productivity, not least because microcomputers could be hooked up via the internet, which existed due to a classic bit of big government spending on its precursor...

Onto this history the conservatives have piggybacked an ideology of deregulation--enter Ronald Reagan, Hayek’s book held aloft--which appeared to be validated by events which occured almost entirely for other reasons. Of course, a perusal of the literature shows that, aside from the usual casuistry in vacuo, the results to efficiency and productivity by deregulation are minor, and the salutary effects upon the general welfare are proved largely by careful manuevering of cost-benefit analysis--now aided and abetted by corporate interests hiding behind demurrers about public choice. And so there can be no altruistic public servants, because sophistry has proven that they do not exist...

With regard to information, the ignorance of ecological systems by Hayek and his followers invalidates the more systematic observations. This failure is also curious, since he began to toy with cybernetic ideas, and should have learned that markets hardly provide all information. Perhaps he became confused by a belief that markets might encompass the whole system--here, sadly, Hayek and his followers have missed the obvious. Wildlife ecosystems are disappearing fast, while understanding and protecting them is a fulltime job for dedicated naturalists, armed with government injunctions. The promulgation of Hayekian freedom in this policy area since Reagan’s time is an intellectual scandal and a spiritual tragedy.

Let's be fair to Reagan.

The current deregulatory fervor really started under Carter.

The S&L crisis was his, as were relaxation in FDR ear regulations, reduced margin requirements, etc.

My take on the pros and cons of Hayek:

Contributions:

1. His intuitive explanation of the role of prices and information in the socialist calculation debate.
2. An implicit model of habit-formation in government activity--the frog in the pot effect. At least this is falsifiable; I'm not sure if I believe it. But it was an interesting theory.
3. Politically, an understanding that personal and economic freedom are inseparable.
4. Later on in life, an understanding of institutions as representing past information. This goes in the direction of institutions as being endogenous and this sort of link particularly interests me.

Problems with his views:

1. A reluctance to use even simple mathematics. This led to his failure to identify situations where prices may not reflect actual tradeoffs--for instance if there are big externalities or nonconvexities. It also leads to a lot of muddled thinking and exposition.
2. A curious view that equilibrium implies settling down to a steady-state. Again, this is an argument about mathematical terms that Hayek tried to tackle verbally.
3. People taking his starve-the-beast views as dogma rather than something to be tested. I don't think that the slippery-slope argument is a particularly good one given actual developments. Unfortunately this is where he's often the most quoted by ideologues.
4. His view of evolving institutions potentially protecting freedom is in my opinion sound, but this muddles some of his prescriptive ideas. How does a country liberalize successfully if it has terrible institutions? Chile may have pulled it off but the jury's still out on China.

Hayek's an interesting figure in that although he was an economist, he's had a much greater influence outside his field than within it. He belonged to a group of literary intellectuals right when the field became more technical. Some of his monetary and macroeconomic views are downright cranky by modern standards. Yet his views of institutions and the inseparability of different types of freedom provide one of the better expositions that I've seen of right-liberal thought. This at a time when such thinking was deeply unpopular.

Chris,

I think that the starve the beast theory is Friedman's.

As for the inseparability of political and economic freedom, I am not sure it holds. Hayek is famous for arguing that more state intervention will eventually lead to political authoritarianism.

Hence Churchill campaigning against Labor saying that Labour's ideas on the Welfare state will lead to a police state.

OTOH, there is some evidence that by having people depending on the state, their political freedom is curtailed a bit. For example, if you depend on the state for rents, you will avoid speaking freely on the issues of the day.

I agree with Chris, except that I think Chris is too generous towards Hayek on Contributions 4. It seems to me that the European experience has shown that "The Road to Serfdom" was spectaculary wrong. The Swedes and Finns should be Nazis or Commies by now, but they aren't. In the opinion mags, the debate on social democracy, especially in Scandinavia, went from predictions of future totalitarianism to lectures on how the evils of social democracy were so subtle and so pervasive that it had ruinously transformed their psychology so that they actaully liked it (Beware, Night of the Walking Swedes! Night of the Living Swedes!). And we should feel sorry and behold them with horror as pathetic psychlogical cripples. Then it advanced to bizarre comments upont their minor, corrective moves toward more conservative market based policies imply that extreme laissez-faire market radicalism (or corporate radicalism in the case of Bush) here in the US was right all along (see even those Northern Commies are doing it). That type of comment echos even today on this blog.

If the Hayek/von Mises crowd is responsible for the Elections/Rule-of-law/Markets quick-n-easy recipe for good US-style societies, then I think that has been a harmful development and that is a mark against them. The US founders had a much more sophisticated, subtle and grown-up understanding of society and government. The quick-n-easy recipe is infantile by comparison.

"especially in Scandinavia" above should be "especially re Scandinavia"

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I agree with Chris, except that I think Chris is too generous towards Hayek on Contributions 4. It seems to me that the European experience has shown that "The Road to Serfdom" was spectaculary wrong. The Swedes and Finns should be Nazis or Commies by now, but they aren't. In the opinion mags, the debate on social democracy, especially in Scandinavia, went from predictions of future totalitarianism to lectures on how the evils of social democracy were so subtle and so pervasive that it had ruinously transformed their psychology so that they actaully liked it (Beware, Night of the Walking Swedes! Night of the Living Swedes!). And we should feel sorry and behold them with horror as pathetic psychlogical cripples. Then it advanced to bizarre comments upont their minor, corrective moves toward more conservative market based policies imply that extreme laissez-faire market radicalism (or corporate radicalism in the case of Bush) here in the US was right all along (see even those Northern Commies are doing it). That type of comment echos even today on this blog.