In my post yesterday, I partially exonerated Henry Farrell for defending Tony Judt’s over-the-top statement that F. A. Hayek was explicit that:
if you begin with welfare policies of any sort — directing individuals, taxing for social ends, engineering the outcomes of market relationships — you will end up with Hitler.
This seems over the top, because we know that Hayek, unlike many more extreme libertarians — Hayek was not really a libertarian – of either Austrian or non-Austrian pedigree, was willing to support a variety of governmental income-maintenance and social-insurance measures that could plausibly be described as mildly welfare-statist. But Farrell subsequently explained that Hayek’s support for certain types of welfare-statist measures was beside the point, because Hayek had nevertheless argued that welfare-statist measures not carefully devised to satisfy Hayek’s own liberal criteria would indeed lead to a totalitarian result. Farrell cited Hayek’s introduction to the 1956 American edition of The Road to Serfdom in which he maintained that experience under the post-World War II Labour government had undermined British liberties and confirmed the warnings that he had voiced twelve years earlier. To Farrell, this demonstrated that Hayek was indeed making the argument that Judt attributed to him. I countered that Hayek had been sloppy in his 1956 introduction to The Road to Serfdom, and that the argument of the introduction was a tentative and contingent argument based on vague sociological assumptions in contrast to the logically more rigorous analysis on which the argument of The Road to Serfdom rested. The unfairness was to conflate uncritically two different kinds of argument and to ascribe to Hayek’s later warning about a possible slippery slope the same logical necessity that he attached to the earlier argument.
My admittedly equivocal response elicited a comment on my post from the ever-vigilant Greg Ransom rebuking me for not going beyond Hayek’s 1956 introduction to The Road to Serfdom, ignoring Hayek’s later work in which he more rigorously, and in greater detail, worked out his theoretical view on the consequences of government intervention in the market order. In a similar vein, Ryan Murphy on his blog dismisses The Road to Serfdom as a popular tract, directing our attention to Hayek’s later work, especially his less well-known Law, Legislation Liberty. To be sure, Ransom and Murphy make a valid point, but I am not so sure that it tends to undermine the charge against Hayek made by Judt and endorsed by Farrell, which is what I was concerned with.
Consider the following two paragraphs from volume 2 of Law, Legislation and Liberty (chapter 11, pp. 142-43 section heading: “Attempts to ‘correct’ the order of the market lead to its destruction”):
The current endeavour to rely on a spontaneous order corrected according to principles of justice amounts to an attempt to have the best of two worlds which are mutually incompatible. Perhaps an absolute ruler, wholly independent of public opinion, might confine himself to mitigating the hardships of the more unfortunate ones by isolated acts of intervention and let a spontaneous order determine the positions of the rest. And it is certainly possible to take entirely out of the market process those who cannot adequately maintain themselves on the market and support them by means set aside for the purpose. For a person at the beginning of an uncertain career, and for his children, it might even be perfectly rational to agree that all should insure for a minimum of sustenance in such an eventuality. But a government dependent on public opinion, and particularly a democracy, will not be able to confine such attempts to supplement the market to the mitigation of the lot of the poorest. Whether it intends to let itself be guided by principles or not, it is in fact, if it has the power to do so, certain [strong word] to be driven on by the principles implicit in the precedent it sets. By the measures it takes it will produce opinions and set standards which will force it to continue on the course on which it has embarked.
It is possible to “correct” an order only by assuring that the principles on which it rests are consistently applied, but not by applying to some part of the whole principles which do not apply to the rest. As it is the essence of justice that the same principles are universally applied, it requires that government assist particular groups only in conditions in which it is prepared to act on the same principle in all similar instances.
Hayek here produced a profound and subtle argument, far more cogent and compelling than his argument in the 1956 introduction to The Road to Serfdom. But, if we take him at his word, departing from the liberal principle of non-intervention in the outcomes of the market, except in ways that are completely external to the operation of the market order, is certain (Hayek’s word) to cause the market order to be undermined. But that is the argument of a “remorseless logician” as Keynes, in an unfortunate fit of pique, once disparagingly referred to Hayek. Democratic governments and democratic decision-making are not bound by the rules of individual rationality to produce a set of decisions that are fully consistent. Indeed, Kenneth Arrow, another Nobel laureate, proved a theorem that more or less asserts the logical impossibility of devising a system of collective decision making governed by democratic principles like majority rule, that would produce consistent, i.e., rational, decisions. Hayek, who was often a critic of excessive attachment to formal principles of rationality, would have done well to take a more skeptical attitude toward the consistency of democratic decision-making processes than he displayed in this passage. Indeed, this whole discussion is a bundle of logical contradictions and antinomies that must be sorted out ever so patiently.