Saturday, January 17, 2009

Professor Samuelson, You Probably Shouldn't Go There

In writing about Hayek's Road to Serfdom, he says:
Two-thirds of a century after the book got written, hindsight confirms how inaccurate its innuendo about the future turned out to be.
If we are feeling smug today, then maybe we should talk about this:
"The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive."

Paul A. Samuelson and William D. Nordhaus, Economics, 13th ed. (New York: McGraw-Hill, 1989), p. 837.
Two years.

You'll find great discussion in the comments at TAE.


Admiral said...

Just as a disclaimer, I'm a libertarian Republican, but just for the sake of discussion: what *was* Hayek wrong about in The Road to Serfdom? I read it a long time ago, but my memories are about how basically regulations and Socialism constrict liberty. Isn't that still, as a matter of fact, true?

Emily said...

The Road to Serfdom is about how political and economic liberty are necessarily intertwined. The extensive reorganization of economic activity via collective ownership will inevitably lead to restrictions on the individual's political liberty. Economic freedom is political freedom. Restrictions on the former mean restrictions in the latter.

Hayek in effect was arguing that giving up the decentralization of the market mechanism for making economic decisions meant that the arbitrary will of other men would have to replace it.

Substitution of arbitrary will for voluntary exchange sets in motion a process that no one intends. The incentives of political decision making are such that the worst rise to the top.

What Samuelson (among many others) want to argue is that extensive regulation on exchange can co-exist in a society were people have extensive political liberties. Hayek on the other hand argues that restrictions on exchange are harmful restrictions of individual liberty.

Justin M Ross said...

Samuelson gives me the impression that Hayek held the view in The Road to Serfdom that any market intervention would ultimately lead to tyranny.

Do you agree with that assessment of Hayek, or is Samuelson misreading him? said...

The dude is completely just, and there is no skepticism.