F.A. Hayek & “National Conservatives”: What Critics of Libertarian Economist Get Wrong



(Larry Downing/Reuters)

The libertarian economist’s body of work is much more complex and valuable than his critics imagine.


n a new piece published by American Compass, “Planning for When the Market Cannot,” Julius Krein critiques Nikki Haley’s recent unapologetic defense of capitalism. Taking aim in particular at F.A. Hayek’s case against heavy-handed government “planning” of the economy, he hopes to persuade the reader to cast Hayek-inflected conservatism aside in favor of the more interventionist economic policies favored by the new nationalist right.

Krein’s argument embodies a fatal weakness in “national conservative” intellectual strategy. But to understand why, it’s first necessary to grasp the various anti-planning arguments that he seems to conflate.

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Types of Planning

The worry that government interferes too much and too often goes back at least to Adam Smith and John Stuart Mill; Hayek was merely its most famous 20th-century exponent. The basic conservative/libertarian critique of government intervention in the economy is that it does not work because policymakers lack the knowledge that market participants have in solving social problems, and so are bound to do a poorer job than the market at making economic decisions. Within that basic critique are three related, but distinct, lines of argument.

First, there is the famous argument against central planning, specifically the proposal that governments own and operate a society’s capital on its behalf. Hayek argued that such a policy could not succeed because planners lacked the knowledge required to plan. On this, Hayek was right, and eventually just about everyone came to agree with him.

Second, there’s the argument that some kinds of government intervention tend to provoke calls for further intervention, creating a spiral of failure: an inefficient, corrupt economic policy that may just lead to full-blown socialism. (Note that this is not the same as arguing that central planning cannot succeed. It is a distinct and more modest claim that certain kinds of interventions lead to others, only a critique of “planning” in a broad sense.)

Then there is an even more modest line of argument that government intervention will tend to fail because government bureaucrats know less than market actors, and have poor incentives to generate good policy. We could characterize these interventions as “planning” but that would abuse the term.

Some defenses of the market run these lines of argument together, as Haley’s arguably does. It is tempting to shoot down modest proposals for government intervention by claiming that even these proposals will lead to tyranny and gross waste. But if Krein wants to engage conservative and libertarian ideas at their best, he must take them seriously enough to tease out the distinctions between them.

Krein Fails to Define His Terms

Instead, Krein practically guarantees that he will conflate the various arguments against central planning he complains about, because he never bothers to tell us what he means by “central planning.” (Indeed, he at one point seems to equate it with government intervention in general: “If anything, government intervention — and thus planning — becomes more necessary when less market and industry knowledge is available.”) He does note that Hayek was not against all planning, and that he favored some kinds of government intervention. He also manages to characterize some of the basic outlines of Hayek’s argument against socialism correctly. But his failure to define planning leads to some important, obvious, mistakes.

Consider, for instance, Krein’s claim that “for Friedrich Hayek and his followers, government planning was the root of all tyranny.” This just isn’t so. Yes, for Hayek, very extensive states will tend to be tyrannical. But what sort of “planning” leads to tyranny? Does Krein mean central planning, or modest industrial-development policies? What class of policies are supposed to lead to tyranny all by themselves? Krein doesn’t tell us.

Krein’s failure here is all the more curious because Hayek himself was clear on these questions. He did not think tyranny was solely the fault of certain institutional structures. As he explained in The Counterrevolution of Science, he believed one of the main sources of tyranny was a certain kind of thinker: the rationalist who wants to reconstruct his social order in line with his own ideology or philosophical system.

In The Road to Serfdom, Hayek claims that tyranny is not merely threatened by planning, but by certain tendencies seen in institutions that attempt to take on cognitively impossible tasks. Disagreement is endemic to any open, democratic society. Implementing a comprehensive economic plan requires that we agree on far more topics than such a society generally can, which means it can only be done through a popular dictator.

By placing all the blame on the undefined idea of “planning,” Krein misses the aim of Hayek’s arguments. He claims that “Price signals, even when perfectly undistorted, are not sufficient for either businesses or government to allocate resources effectively, much less do they engender a ‘spontaneous order’ that is the best of all possible worlds.” So, he says, we need some kind of “planning” to ensure efficient allocation of resources. But what sort of planning?

Whatever answer Krein has in mind, he doesn’t tell us, and what argument he does offer misses the nuances of Hayek’s actual views. Hayek acknowledged that price signals are noisy; his point was that they are still better than the alternative. Price adjustments “are probably never ‘perfect’ in the sense in which the economist conceives of them in his equilibrium analysis,” he wrote. The reason the market is such a “marvel” is that it can make so much out of so little.

Krein later claims that “because slavishly following market signals does not always produce the best of all possible worlds, government planning does not always represent the first step on the road to serfdom.” But here again, Hayek did not actually think we should slavishly follow imperfect signals. He argued that we don’t travel along the road to serfdom without other institutional and cultural preconditions in place.

Krein next complains that Hayek is wrong to think that market actors can adjust to prices without knowing the reasons that prices have changed. Of course, Krein exclaims, policymakers and investors have to know why prices have changed in order to make wise decisions. They must “plan” too. But Hayek’s point was not that we cannot make an educated guess about why a price has changed, or that doing so doesn’t help commerce and the making of public policy. It was that, by and large, market actors don’t need this information to coordinate their actions, so comprehensive central planning and closely related policies will be ineffective.

Crucially, Hayek’s worldview was not as absolute as Krein and other critics like to think: He did not believe all government interventions would fail, and in fact some policies that Krein loosely calls “planning” are ones that he thought could succeed. In The Road to Serfdom, he defended countercyclical monetary policy, government construction of transportation infrastructure, social insurance for natural disasters, government health insurance, a basic minimum income, and strict regulations with respect to working hours, health and safety on the job, poisons, deforestation, harmful agricultural methods, noise, smoke, and the prices of goods and services that are natural monopolies. Similarly, The Constitution of Liberty argued that government should be used to prevent depressions and, through vouchers, to provide pensions, medical care, and education for those who need them. Hayek repeatedly stressed that the “old formulae of laissez faire or non-intervention do not provide us with an adequate criterion for distinguishing between what is and what is not admissible in a free system.” He believed government could successfully intervene in the economy to produce better outcomes for people.

Krein gives some examples of successful industrial policy in order to show that “planning” works, but here, too, his points are not as strong as he thinks they are. Any Hayekian can admit that some government-led policies might succeed at times. The best Hayekian argument is comparative: Most industrial policy, understood as deliberate government action to guide industrial development, will be less effective than market-led industrial development. To refute this claim, we need to know the ratio of industrial-policy hits to misses. And Krein provides us little help with that.

Krein insists that “the availability of ‘knowledge’ is simply not a useful metric for evaluating the soundness or unsoundness of any particular government plan.” We still don’t know what a “plan” is in this case, so it is still hard to assess his claim, but it is obvious that the availability of knowledge is one important metric of evaluation for any policy, though obviously not the only one.

Hayek himself advocated a normative metric for evaluating the legitimacy of social order in The Mirage of Social Justice. He also, in Rules and Order and elsewhere, stressed the importance of the moral and cultural underpinnings of successful market systems. He saw law as older than legislation and evolving out of certain kinds of local property conflicts — a necessary precondition for a successful market order. And he saw the moral rules that constrain our behavior as just as important to creating and maintaining such an order.

Covert Hayekian Theology?

Despite never giving his reader a clear sense of what he opposes, Krein confidently concludes that Hayek’s theories “are completely useless as a guide for policy.” Indeed, to Krein, Hayek’s arguments are so useless that they probably aren’t empirical claims at all, but a kind of “theodicy” that helps Hayekians make sense of their place in the world. Krein claims that libertarianism “is best understood as an ideological project akin to Communism” and like Communism, relies more on “secularized theodicy than any serious reading of history or intelligent analysis of policy.” And so, “thirty years after the Cold War, it is time to stop performing Hayekian morality plays.”

It is true that some of Hayek’s views bordered on theological claims: Hayekian political theology, such as it is, stresses the need for intellectual humility and the importance of constraining sins of power in our attempts to live well with others. Sometimes, Hayek even made remarkable claims that new nationalists could agree with: He ended his last work, The Fatal Conceit, by admitting that a free society can only sustain its institutions if people believe morality has religious, and probably monotheistic, foundations. But the fact that he could make such a surprising concession should arouse skepticism of the notion that he was the cartoon free-market zealot his critics imagine.

Previous generations of conservatives understood that Hayek’s worldview was more complex than commonly claimed, which is why he became such an essential part of the conservative canon, and the old fusionist consensus it helped generate, in the first place. I understand why Krein wants to take him down a peg — he makes for a convenient sacred cow to slaughter. But I believe the new “national conservatives” would be wise not to kick him to the curb, because he has more to offer them than they think.

Kevin Vallier is an associate professor of philosophy at Bowling Green State University. His book, Trust in a Polarized Age, will be published by Oxford University Press in November. He blogs at Reconciled.


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