On the Difference between Hayek’s Road to Serfdom and Increasing Central Planning

Once, in another place, I had pointed out the misunderstandings of the common interpretation of Hayek’s road to serfdom thesis. This was not an unintended process by which government intervention on markets inevitably leads to further and increasing interventions. That might be Ludwig v. Mises’ thesis, but not Hayek’s.

What Hayek stated in The Road to Serfdom was that the checks- and-balances system of modern constitutionalism appears as an obstacle to the quick achievement of the concrete ends that an interventionist policy aims for. Thus, the road to serfdom is an unintended process by which legal constitutional processes are eroded by decisions based on expediency.

On that occasion it was left pending to solve the question of where the confusion on the central thesis of “The Road to Serfdom” came from.

The source of the answer to this question is yet Ludwig v. Mises. The Road to Serfdom was first published in 1944, but, previously, in essays published in 1935, we find Hayek, still heavily influenced by L. v. Mises, stating opinions that are very similar to the common confusion about the meaning of the road to serfdom: “In fact, however, if by planning is meant the actual direction of productive activity by authoritative prescription to be used, or the prices to be fixed, it can be easily shown, not that such a thing is impossible, but that any isolated measure of this sort will cause reactions which will defeat its own end, and that any attempt to act consistently will necessitate further and further measures of control until all economic activity is brought under one central authority” (“Socialist Calculation I: The Nature and History of the Problem”, first published in Collectivist Economic Planning, London,  1935, and reprinted in Individualism and Economic Order, Chicago, 1948).

F. A. Hayek did not change his opinions of 1935 in The Road to Serfdom (1944), he just shifted the realm of his inquiry from economics to political philosophy. Nevertheless, it would be a crass error to judge Hayek’s political and legal theory -for good or for bad- using his former opinions as an economist.

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The Political is about to disrupt the crypto-currency scene -or at least they say so.

According to this Financial Times report, Bitcoin is at the verge of a critical decision.

The implications of the chosen terms (“existential crisis,” “decisive leadership,” “political flaw”) are not casual. It looks like the market that crypto-currency had carried from the beginning contain the germ of its own destruction. As in an Escher’s drawing, Bitcoin has unraveled its political strand and its whole existence is, now, dependent upon a moment of decision of the sovereign: the assembly of miners. The decisionist narrative would be fulfilled if the political decision had to be taken by acclamatio instead of voting.

Nevertheless, the decision by acclamation would be still possible: the ones who want “Bitcoin Core” might follow one direction and the other ones, who choose “Bitcoin Unlimited,” might follow their own way. After all, no existential crisis can be solved by voting.

So, which is inside of which? Is the market framed in a system depending upon a political decision of the sovereign? Or does every decision need to be taken inside a spontaneous framework of rules?

We are used to praising Bitcoin for its independence from any political factor: Bitcoin supply depends on a set of rules which allows the public to form expectations about its value with a high degree of probability of proving to be correct.

Taken in isolation, Bitcoin emulates the market. Nevertheless, being independent of political institutions is not enough for being “the market.” The attractiveness of Bitcoin is that it operates in an open system of competition of currencies. In this system, there are many other crypto-currencies, and there might be several variances of Bitcoins as well –in esse or in posse.

Imagine, for example, that Bitcoin effectively splits into Bitcoin Core and Bitcoin Unlimited. Which of the two will prevail over the other? It does not matter. What really matters is that there will be several variances of currencies in competition. The factors that determine the selection of the prevailing currency depends upon a higher level of abstraction that impose an absolute limit to our knowledge.

So, is Bitcoin in an existential crisis? Does a political decision need to be made? Maybe.

But that does not imply that “The Political” will take over the reins of the crypto-currency market. Moreover, opposite political decisions are the linkages which the spontaneous selection process -in this case, of currencies- is made of. In this sense, “Bitcoin Core” and “Bitcoin Unlimited” are attributes of a competitive system and the final prevalence of one variance among other alternatives will not be the result of a deliberate decision but of an abstract process of evolution.

Freedom of Conscience and the Rule of Law

Of course the concept of “freedom of conscience” was forged in Europe by Spinoza, Locke, Voltaire, John Stuart Mill, and many other philosophers. But the freedom of conscience as an individual right that belongs to set of characteristics which defines the rule of law is an American innovation, which later spread to Latin America and to the Old Continent.

This reflection comes from the dispute which has been aroused in Notes On Liberty about the Protestant Reformation and freedom of conscience. Now, my intention is not to mediate between Mark and Bruno, but to bring to the Consortium a new line of debate. What I would like to polemize is what defines which rights to be protected by the rule of law. In this sense, might we regard a political regime that bans freedom of conscience as based on the rule of law? I am sure that no one would dare to do so. But, instead, would anyone dare to state that unification of language in a given country hurts the rule of law? I am afraid that almost nobody would.

Nevertheless, this is a polemical question. For example, the current Catalan independence movement has the language of Catalan as one of its main claims, so tracing the genealogy of the rights that constitutes the concept of rule of law is a meaningful task —and this is why the controversy over the Protestant Reformation and the origin of Freedom of Conscience at NOL is so interesting.

Before the Protestant Reformation, the theological, philosophical, scientific, and political language of Europe was unified in Latin. On the other hand, the languages used by the common people were utterly fragmented. A multiplicity of dialects were spoken all over Europe. The Catholic Kings of Spain, for example, unified their kingdom under the same religion, but they did not touch the local dialects. A very similar situation might be found in the rest of Europe: kingdoms with one religion and several dialects.

There was a strong reason for this to be so. Before the Medieval Ages Bibles in vernacular had existed, but the literacy rate was so low that the speed of evolution and fragmentation of the dialects left those translations obsolete and incomprehensible. Since printing books was extremely costly (this was before the invention of  the printing press), the best language to write and print books and constitutional documents was Latin.

The Evangelical movement, emerged out of the Protestant Reformation, meant that final authority of religion was not the Papacy any more but the biblical text. What changed was the coordination problem. Formerly, the reference was the local bishop, who was linked to the Bishop of Rome. (Although with the Counter-Reformation, in some cases, like Spain, the bishops were appointed by the king, a privilege obtained in exchange for remaining loyal to the Pope). On the other hand, in the Reformation countries, the text of the Bible as final authority on theological matters demanded the full command of an ability not so extended until that moment: literacy.

It is well-known that the Protestant Reformation and the invention of printing expanded the translations of the Bible into the vernacular. But always goes completely unnoticed that by that time the concept of a national language hardly existed. In the Reformist countries the consolidation of a national language was determined by the particular vernacular which was chosen to translate the Bible into.

Evidently, the extension of a common language among the subjects of a given kingdom had reported great benefits to its governance, since the tendency was followed by the monarchies of France and Spain. The former extended the Parisian French over the local patois and, in Spain of the XVIII Century, the Bourbon Reforms imposed Castilian as the national Spanish language. The absolute kings, who each of them had inherited a territory unified by a single religion, sowed the seeds of national states aggregated by a common language. Moreover, Catholicism became more dependent on absolute kings than on Rome —and that is why Bruno finds some Catholics arguing for the separation of Church from the state.

Meanwhile, in the New World, the Thirteen Colonies were receiving the European immigration mostly motivated on the lack of religious tolerance in their respected countries of origin. The immigrants arrived carrying with them all kind of variances of Christian confessions and developed new and unexpected ones. All those religions and sects had a common reference: the King James Bible.

My thesis is that it was the substitution of religion for language as the factor of cohesion and mechanism of social control that made possible the development of the freedom of conscience. The political power left what was inside of the mind of their subjects a more economical device: language. Think what you wish, believe what you wish, read what you wish, write what you wish, say what you wish, as long as I understand what you do and you can understand what I mean.

Moreover, an official language became a tool of accountability and a means of knowing the rights and duties of an individual before the state. The Magna Carta (1215) was written in Medieval Latin while the Virginia Declaration of Rights (1776), in English. Both documents were written in the language that was regarded as proper in their respective time. Nevertheless, the language which is more convenient to the individual for the defense of his liberties is quite obvious.

Often, the disputes over the genealogy of rights and institutions go around two poles: ideas and matter. I think it is high time to go along the common edge of both of them: the unintended consequences, the “rural nomos,” the complex phenomena. In this sense, but only in this sense, tracing the genealogy – or, better, the “nomology” – of the freedom of conscience as an intended trait of the concept of “rule of law” is worth our efforts.

The Behavioural Economics of the “Liberty & Responsibility” couple.

The marketing of Liberty is enclosed with the formula “Liberty + Responsibility.” It is some sort of “you have the right to do what you please, BUT you have to be responsible for your choices.” That is correct: the costs and profits enable rationality to our decisions. The lack of the former brings about the tragedy of the commons outcome. In a world where everyone is accountable for his choices, the ideal of liberty as absence of arbitrary coercion will be delivered by the resulting structure of rational individual decisions limiting our will.

The couple of Liberty and Responsibility is right BUT unattractive. First of all, the formula is not actually “Liberty + Responsibility,” but “Liberty as Absence of Coercion – What Responsibility Takes Away.” The latter is still right: Responsibility transforms negative liberty as “absence of coercion” into “absence of arbitrary coercion.” The problem remains a matter of marketing of ideas.

David Hume is a strong candidate for the title of “First Behavioural Economist,” since he had stated that it is more unpleasant for a man to have the unfulfilled promise of a good than not having neither the good nor the promise of it. The latter might be a desire, while the former is experienced as a dispossession. The couple “Liberty – Responsibility” dishes out the same kind of deception.

It is like someone who tells to you: “do what you want, enjoy 150% of Liberty”; and suddenly, he warns you: “but wait! You know there’s no such thing as a free lunch, if you are 150% free, someone will be 50% your slave. Give that illegitimate 50% of freedom back!” And he will be -again- right: being responsible makes everybody 100% free. Right – albeit disappointing.

Perhaps we should restate the formula the other way around: “Being 100% responsible for your choices gives you the right to claim 100% of your freedom.” Only a few will be interested in being more than 100% responsible for anything. But if it happens that someone is expected to deal alone with his own needs, at least he will be entitled to claim the right to his full autonomy.

The formula of “Responsibility + Liberty” is associated with the evolutionist notion of liberties, which means rights to be conquered, one by one. Being responsible and then free means that Liberty is not an unearned income to be neutrally taxed. It is not a “state of nature” to give in exchange for civilization, but a project to grow, a goal, a raison d’etre.

Putting first Responsibility and then Liberty determines a curious outcome: you are consciously free to choose the amount of freedom you are really willing to enjoy. Markets and hierarchies are, then, not antagonistic terms, but structures of cooperation freely consented. Moreover, what we trade are not goods, not even rights on goods, but parcels of our sphere of autonomy.

Some Comments on the Latin America Liberty Forum 2017

The Latin American edition of the Liberty Forum took place in Buenos Aires, Argentina, last week. From almost all of the addresses delivered by the speakers, the attendees could single out two main patterns. The first one: a shift from mere utilitarianism to the acknowledgement of the importance of emotions and moral values in the defense of individual liberties. In this sense, the legacy of David Hume was present and I celebrate it. Moreover, we could expect that in a few years’ time we would get rid of an argumentation exclusively articulated in terms of instrumental reason and recover a sense of a substantive raison d’être of the case for liberty.

The second pattern the audience could guess from the speeches concerns the role of education in the formation of public opinion on liberty. Almost everyone agreed on the strong influence of education over the political ideas held by the citizenship. If you look up the state of the opinion, both in academia and the general public, the rest of the conclusions will follow…

Nevertheless, I consider the importance of academia and education in the articulation of public discourse to be overestimated. After all, what educational institutions of every sorts and levels provide to their pupils are adaptive devices to get -or remain- inserted into society. All that the educational system could do to change public opinion is make marginal contributions to be achieved only in the long term.

Since the public opinion is in the short run almost autonomous, the main matter refers to where it dwells. The television? The blogosphere? The radio? The public parks? (In Ancient Rome, by the way, people were very fond of the graffitis). Perhaps it could be a combination of all of them.

They -including education- are stages of the process of production of public opinion –superior stages, to express it in Austrian Economics terms. And if one takes Austrian Economics seriously, one will have to admit that the value of the superior goods is determined by the value of the final good -and not otherwise.

Does business success make a good statesmen?

Gary Becker made the distinction between two types of on-the-job training: general and specific. The former consist of the skills of wide applicability, which enable the worker to perform satisfactorily different kinds of jobs: to keep one’s commitments, to arrive on time to work, to avoid disturbing behavior, etc.. All of them are moral traits that raise the productivity of the worker whichever his occupation would be. On the other hand, specific on-the-job training only concerns the peculiarities of a given job: to know how many spoons of sugar your boss likes for his coffee or which of your employees is better qualified to deal with the public. The knowledge provided by the on-the-job training is incorporated to the worker, it travels with him when he moves from one company to another. Therefore, while the general on-the-job training increases the worker productivity in every other job he gets, he makes a poor profit from the specific one.

Of course, it is relative to each profession and industry whether the on-the-job training is general or specific. For example, a psychiatrist who works for a general hospital gets specific training about the concrete dynamics of its internal organization. If he later moves to a position in another hospital, his experience dealing with the internal politics of such institutions will count as general on-the-job training. If he then goes freelance instead, that experience will be of little use for his career. Nevertheless, even though the said psychiatrist switches from working for a big general hospital to working on his own, he will carry with him a valuable general on-the-job training: how to look after his patients, how to deal with their relatives, etc.

So, to what extent will on-the-job training gained by a successful businessman enable him to be a good statesman? In the same degree that a successful lawyer, a successful sportsman, a successful writer is enabled to be one. Every successful person carries with him a set of personal traits that are very useful in almost every field of human experience: self confidence, work ethics, constancy, and so on. If you lack any of them, you could hardly be a good politician, so as you rarely could achieve anything in any other field. But these qualities are the typical examples of general on-the-job training and what we are inquiring here is whether the specific on-the-job training of a successful businessman could enable him with a relative advantage to be a better politician -or at least have a better chance of being a good one.

The problem is that there is no such a thing as an a priori successful businessman. We can state that a doctor, an engineer, or a biologist need to have certain qualifications to be a competent professional. But the performance of a businessman depends on a multiplicity of variables that prevents us from elucidating which traits would lead him to success.

Medicine, physics, and biology deal with “simple phenomena”. The limits to the knowledge of such disciplines are relative to the development of the investigations in such fields (see F. A. Hayek, “The Theory of Complex Phenomena”). The more those professionals study, the more they work, the better trained they will be.

On the other hand, the law and the market economy are cases of “complex phenomena” (see F. A. Hayek, Law, Legislation and Liberty). Since the limits to the knowledge of such phenomena are absolute, a discovery process of trial and error applied to concrete cases is the only way to weather such uncertainty. The judge states the solution the law provides to a concrete controversy, but the lawmaker is enabled to state what the law says only in general and abstract terms. In the same sense, the personal strategy of a businessman is successful only under certain circumstances.

So, how does the market economy survive to its own complexity? The market does not need wise businessmen, but lots of purposeful ones, eager to thrive following their stubborn vision of the business. Most of them will be wrong about their perception of the market and subsequently will fail. A few others will prosper, since their plans meet -perhaps by chance- the changing demands of the market. Thus, the personal traits that led a successful businessman to prosperity were not universal, but the right ones for the specific time he carried out his plans.

Having said that, would a purposeful and stubborn politician a good choice for government? After all, Niccolo Macchiavelli had pointed out that initiative was the main virtue of the prince. Then, a good statesman would be the one who handles successfully the changing opportunities of life and politics. Notwithstanding, The Prince was -as Quentin Skinner showed- a parody: opportunistic behaviour is no good to the accomplishment of public duties and the protection of civil liberties.

Nevertheless, there is still a convincing argument for the businessman as a prospect of statesman. If he has to deal with the system of checks and balances -the Congress and the Courts-, the law will act as the selection process of the market. Every time a decision based on expediency collides with fundamental liberties, the latter must withstand the former. A sort of natural selection of political decisions.

Quite obvious, but not so trite. For a stubborn and purposeful politician not to become a menace to individual and public liberties, his initiative must not venture into constitutional design. No bypasses, no exceptions, not even reforms to the legal restraints to the public authority must be allowed, even in the name of emergency. Especially for most of the emergencies often brought about by measures based on expediency.

A very short response to Bruno Gonçalves Rosi’s reflection on Latin American Conservatism

With his “The Problem with Conservatism in Latin America, Bruno Gonçalves Rosi brings to NOL a very interesting debate on politics and history. In the case of Hispanic America the controversy is quite severe: during the 17th-century Spain and its colonies were undergoing an incremental process of liberalization and modernization known as “Bourbon Reforms.” These reforms implied a language unification (adopting Castilian – later named “Spanish” – as the national language), an increasing centralization of political administration, and free trade between Spain and its colonies, among other aspects.

In the case of the Spanish colonies in America, the Bourbon Reforms implied that Spanish-born subjects were preferred over American-born ones to take up public duties, and also that American products could not compete with Spanish ones. Up until then, commerce among Spain and its American colonies was restrained to gold and a narrow scope of goods. Free commerce had been allowed only in cases of extreme scarcity (for example, between Buenos Aires and South Africa) and for a very short lapse of time. The Bourbon Reforms put a severe strain on the incipient local production of the Hispanic American colonies that had flourished as consequence of closed markets. Sometimes inefficient local processes of production were outperformed by more competitive Spanish goods. But in other cases, efficient local industries were banned because they were regarded as a menace to Spanish ones.

Thus, the reactions to the Bourbon Reforms were of two opposite kinds: the Liberals rejected them because they limited the free trade only to Spain and its colonies and the modernization process was too slow. Liberals demanded free trade with all countries. On the other side, the Conservatives sought to go back to the Habsburg era: they rejected Modernity and free trade and demanded protectionism. The Emancipatory process of Spanish America was carried out by the conjunction of the Liberal and the Conservative reaction against the Bourbon Reforms. Once independence was fulfilled, the two parties became acutely antagonist to each other…perhaps up until today.

The history of Latin American Conservatism and Liberalism is worth our attention not only because of political history itself, but because it gives us a model to ponder the processes of departure from political and economic commonwealths that have been seen in the recent years -and perhaps are not closed yet.