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Friedrich Hayek on Evolution and Spontaneous Order (1983) [video] (youtube.com)
113 points by eigenvalue 80 days ago | hide | past | favorite | 106 comments



It's a bit hard to focus on because of his accent and slow speaking style, but if you can stick with it, this is a fantastic lecture filled with interesting and stimulating ideas. I hadn't realized prior to listening to this that Darwin had in fact gotten many of his ideas on evolution from the social sciences, particularly Adam Smith's Wealth of Nations.


Friedrich Hayek put the Austrian in Austrian Economics; the term was invented by the Germans and was meant to be disparaging towards him and others like him.

Hayek has an extensive body of written work, the jewel of which is “The Road to Serfdom”. Russ Roberts of the Hoover Institute has hosted an ongoing podcast called EconTalk[1] that while not studying Hayek specifically, often brings a Hayekian viewpoint to his discussions with guests.

[1] https://www.econtalk.org/


This an interesting interview with Hayek from 1982:

https://www.cato.org/policy-report/february-1982/interview-f...

His quote here makes me think he would have rejoiced at the idea of Bitcoin:

"Well, I have despaired of ever again finding a way of restraining government abuse of any money which it issues. My proposal to denationalize money was always in a sense Utopian because governments will never freely allow competition in this business. I believe there are ways around this, and my present view—which I hope before long to state in detail—is that there is probably a possibility of not issuing currency but starting with credit accounts under some other name—say, call the unit a “stable” and promise to redeem it with enough of whatever current monies are required to buy a certain list of raw materials. So it doesn’t involve issuing any circulating money, but it enables the holder to keep a stable unit in the form of a credit. Once you’ve succeeded in this, the next step would be issuing credit cards on these accounts. And then you have circumvented the whole monopoly of government. Since it is politically impractical to deprive the government of its monopoly, you have to circumvent it."


If you’ve ever tried paying your taxes in Bitcoin you’ll have discovered the limitation of this viewpoint.

The government monopoly isn’t over money. You can use and issue whatever money you can get others to accept.

The monopoly is over the denomination required to extinguish the liability that government has the legal power to impose upon you and while you live in its sovereign area. Aka taxation

Ultimately you cannot circumvent state money while there are states that control land areas. You will always need their money to pay taxes and that need is sufficient to allow a state to provision itself - since the only place to get the denomination is from the state in exchange for goods and services


The monopoly includes laws around legal tender, which of course, is government money. The government money can be used to settle any debt - this isn't true for other monies. This means that even if the legal tender is rapidly losing its purchasing power and there exists a harder money which creditors would rather receive as payment, they are forced to accept the legal tender instead.


"The government money can be used to settle any debt - this isn't true for other monies."

Legal tender is often misconstrued as an argument. Legal tender laws relate to the settlement of enforcement in courts. Nothing else.

You can require that your customer pays you in Highland Sheep if you want - and refuse to sell anything to them unless they produce those Sheep.

However if you advance them credit (aka creating your own money) and the customer refuses to pay in the Highland sheep denomination as they promised, and then you go to court to enforce your contract, the court can dismiss the case if the customer has offered "legal tender" to discharge the debt.

What legal tender laws do, in effect, is force you to peg your own currency and your own credit advances to the denomination of the state you choose to enforce your contracts in.

Bear in mind you can change the jurisdiction by adding a jurisdiction clause to your contract. Even though I'm in the UK I can guarantee payment in US dollars simply by making my contract subject to the laws of California (say).


> You can use and issue whatever money you can get others to accept.

Nope. You can't just issue money, and you have to accept the state currency in most places on Earth. Paying taxes using Bitcoin is mostly easier than using cash thanks to services that will do a bankwire for you, so what.


"Nope. You can't just issue money,"

Look up "contra entry". http://desktophelp.sage.co.uk/sage200/sage200standard/Conten...

All business credit is issuing money, and as the contra shows you can easily settle debts with it.

"Paying taxes using Bitcoin is mostly easier than using cash"

Where do those services get the state money from? The service are providing the exchange for you. That's not paying taxes in Bitcoin. That is paying an exchange service to pay your liability in dollars for you. Exchanging a liability isn't extinguishing it.

The Treasury account at the Fed doesn't accept Bitcoin. At that's ultimately the bit you've missed. Follow the transactions through transitively and see if you can eliminate state money from the process completely. You won't be able to.


> His quote here makes me think he would have rejoiced at the idea of Bitcoin:

Except for the “stable” part


Bookmarked (well, saved to Instapaper). Thank you for link.


Another good place to start is with his 1945 paper, The Use of Knowledge in Society [1]. It’s readable in a single sitting, and packed with insights that go far beyond economics.

[1] https://en.m.wikipedia.org/wiki/The_Use_of_Knowledge_in_Soci...

https://www.fee.org/articles/the-use-of-knowledge-in-society


> Friedrich Hayek put the Austrian in Austrian Economics

No he didn't. The concept of 'Austrian Economics' was applied to Carl Menger a central part of the marginal revolution of the late 1800s. His books 1871 – 'Principles of Economics' and 'Investigations into the Method of the Social Sciences with Special Reference to Economics'. Are the foundation stone of Austrian economics.


Hmm, if that’s the case then my understanding here was shallower than I thought and I have some reading of Menger to do.


If you want some more detail, the term Austrian specifically was defined by the German Historical School. It was over a debate of method.

See here: https://en.wikipedia.org/wiki/Methodenstreit

The most important Austrians you might want to study are:

- Carl Menger (Microeconomics, Methodology)

- Eugen von Böhm-Bawerk (Capital Theory, Famous for Marxist critics)

- Friedrich von Wieser (Oppertunity cost)

- Ludwig von Mises (Methodology, Buissess Cycle Theory, Political Philosophy)

- F.A. Hayek (Buissess Cycle Theory, Information Economics, Political Philosophy)

- Joseph Schumpeter (Austrian educated but went his own way in many ways)

- Fritz Machlup (Buissess Cycle Theory, Trade)

- Israel Kirzner, not actual Austrian (Entrepreneurship)

- Murry Rothbard, also not Austrian (Political Philosophy)

Of these Hayek, Schumpeter, Machlup and Mises all eventually tought in the US and Kirzner and Murry are US studends of them.

There are books on the topic:

- The Austrian School of Economics: A History of Its Ideas, Ambassadors, & Institutions

Today there is split between those influence by Murray Rothbard, who has a perticular interpretation of Mises and very extrem views in many ways. The 'Ludwig von Mises Institute' is pushing this view, they are partly a lobby organisation. I don't think much of them. They tend to dislike Hayek.

There is the more traditional more academic branch, tody mostly represented by George Mason University.


In the same vein: https://cafehayek.com


Darwin’s On the Origin of Species is surprisingly readable to laypeople.


Hayek deserves so much more recognition. Now more than ever - we need people to understand the fundamental inadequacy of central planning.


Hayek said epidemics were an obvious exception to most of his ideology and called for government planning:

https://twitter.com/nntaleb/status/1274130684337172481


David Friedman and others have come up with decentral ways to deal with complex externalities like disease transmission risk. You can read "Machinery of Freedom" for a taste of how this works. It would probably involve health insurance standards for the negotiation of transit rights, just like we have car insurance standards for the negotiation of vehicle transit rights.


The problem I have with your particular statement is that you seem to be using a conspicuous lack of central planning as evidence that it's completely ineffective while past episodes involving central planning applied to deal with somewhat similar circumstances have shown it to be effective in tackling issues like ebola outbreaks, swine flu or other pandemics that do not respect federalism, "local control" or pure ideology divorced from rational thought.


Federalism reflects a principle that works even in a pandemic response, which is that local units of government are better equipped to evaluate the local situation and respond accordingly. The federal government was too big and ponderous to quickly react to the situation in NYC (which after all comprises a mere 2.5% of the US population). Meanwhile, other states locked down too quickly and for hard because that’s what was required in NYC.

Note that when the pandemic hit, the EU room a back seat to the National governments, even though the EU has a CDC itself. And in Japan success was largely due to local effort: https://fee.org/articles/did-japan-beat-covid-19-with-a-dece...

See also: https://www.hoover.org/research/decentralize-covid-19-respon...


Note that federalism is much more vulnerable to local interests. So instead of having to watch out for “Big- whatever” bending the State to their will, “microlocal” governments can fall prey of laughably small interest groups (see the Covid outbreak in Lombardy: just a couple local businesses interfered enough to procrastinate lockdown until their products shipped. It cost thousands of deaths)


That might make sense with respect to things like lockdown plans, but the PPE and ventilator shortage seems like a clear counterexample.


What need is there to centralize those resources?


The inability of any one state to marshal those resources as effectively as the central government can, not to mention the supply chain debacle of the central government interfering with the acquisition of those resources.


That seems to contradict the empirical outcome of COVID, where smaller nation-states (Denmark, Singapore, Taiwan, New Zealand, etc) were able to provide for their citizens much more adequately than larger counterparts.

I recommend listening to this podcast that outlines exactly why smaller polities were able to be nimbler: https://soundcloud.com/reuters/the-exchange-too-small-to-fai...

Yes, economies of scale provide advantages for procurement, but after a while, there are diminishing returns from more scale. That is to say, New Zealand's population is a sufficient scale, it need not pool its procurement operations with Australia. It's a key differentiator between Federalism and Individualism.


That’s an artificial limitation, not helped by the National government’s penchant for seizing State orders and stockpiles under the current administration.

Without crap like that, there’s no reason California or New York couldn’t create their own medical stockpiles. They could run their own testing regime at least as effectively as the Federal government, but the FDA actually hindered testing both by the States and private companies early on due to an old regulation based in an old law that they could not shed fast enough. States were also quick to shed regulatory barriers of their own making, which should probably remain shed after this is all over.


I guess the idea that all 50 states can replicate this effort effectively is something you can believe.


You don’t need all 50 to do it. Wyoming’s largest metro area isn’t that far from Colorado’s, and two of Missouri’s largest cities are on its East and West borders.

States stockpiling or relying on Federal stockpiles or making agreements to share stockpiles is as much a choice as any other. Seeing as how the Federal stockpile was not properly maintained and refilled by either the Obama administration or the Trump administration (who could have at least checked on it) after H1N1, maybe at least one of them would manage to do a competent job of it.


Missions would be inefficient if they weren’t centrally planned. Markets would be inefficient if they were centrally planned.


But this is just what Hayek's work is all about: to show _why_ central planning is ineffective. It works with theoretical arguments and there is no need to use real-life examples.


Most of his ideas came from Mises, so I would say it is Mises who deserves the recognition


If central planning is so inadequate, why are all the most successful capitalist corporations using it? I don't know any highly profitable company that operates in a decentralised way. They are very hierarchical, with organisational power concentrated at the top.


He deals with this kind of question explicitly. Humans have evolved to be able to work efficiently at tribal sizes - this is Dunbar's Number. So yeah, you'll see organization around this size doing very well. But as companies grow beyond that, you'll see them turn into the hulking dinosaurs that can no longer operate agilely.

Hayek talks about the error of trying to use in government that in-built but limited capacity for managing relationships at too great a scale.


The most famous example is when Sears was internally organized around free market ideology by an Ayn Rand adherent. It did not go well. Declining profits drove a viscous cycle of back-stabbing and secrecy among competing units inside the company.

My impression is that the people who argue against central planning always rationalize backwards from a pre-established conclusion. The fact is that the experiment has never been allowed to proceed on a national scale without violent undermining from the forces of private capital, both internal and external.


> My impression is that the people who argue against central planning always rationalize backwards from a pre-established conclusion.

If you study the origins of central planning and the birth of the progressive movement in the early 20th century, you'll see that private capital loved central planning. Notions of ultimate efficiency through experts directing organizations through central planning went hand-in-hand with a lot of evil stuff. The obsession with perfection through "science" and tending to the "societal organism" was really contra the idea of free markets, individual rights, etc. They drew on evolution in precisely the worst way(narcissism and hubris).

Whereas Hayek draws on evolution to say that culture and society develops through independent actors discovering traditions, organizations, etc. Through the observation of many people/organizations attempting things and either failing or succeeding, society picks up things to copy and reproduce - the lesson being that we can't direct evolution, it emerges!


I agree, it’s well documented that private capital loves fascism and totalitarianism. I’m speaking of socialist central planning though. The idea that free-marketism provides the ideal environment for human freedom and societal development is just demonstrably false in so many ways.


While his company and name seem to trigger a whole lot of people, Charles Koch has applied such a free market philosophy throughout his company, which is undoubtedly successful. I would recommend reading his book (Good Profit) to get a viewpoint of his approach, though unfortunately bias will preclude many from this.


Do you have any sources which aren't the person in charge congratulating themselves?


His critique was that you would need astronomical amount of data, like a gigabyte, to model the US economy.

Computer systems have gotten fast enough that a 00s Pentium 4 can handle all of the US economy, with the rest being a problem of gathering inputs.


His critique goes well beyond just the quantity of data.

This is, perhaps, also the point where I should briefly mention the fact that the sort of knowledge with which I have been concerned is knowledge of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form.

His bigger argument though, is even if it were effective, it is inherently undemocratic.

It will often be necessary that the will of a small minority be imposed upon the people


Exactly. This was a big part of the thesis of The Road to Serfdom.

He makes the point that so long as everyone is on the same page, working to the same goal, central-planning can be very effective. We can see this historically when a nation unites in defense, as America (and much of the world) did during WWII.

But when every person has their own goals and values, the central planning is no longer able to work effectively. It's not simply that it's hard to optimize that many functions at once, but that much more fundamentally, it's impossible for the central planner to know what those individual functions even are.

So the titular road to serfdom is when we agree to unite toward a central goal and thus subject ourselves to the central planning, that central authority can't easily be removed later when the shared goal has been achieved. Thus we find the central authority acting as an obstacle toward the individual goals that we've returned to.


The issue is that it's impossible for a computer to know what everybody values. When people participate in a market, this allows their values to be expressed: at a particular time, if they spend their money on A over B, then they valued A over B. Talk is cheap (people can say anything they want; it conveys extremely little information if they're not putting their money where their mouth is, so to speak).


On top of this, there is also all the distributed information about the available quantity and quality of goods and services in a particular location. The knowledge that a bunch of good machine parts for a certain piece of equipment are gathering dust in some warehouse can be extremely valuable if that equipment is in shortage, and that kind of data is routinely the source of profit to enterprising people in the real economy. It’s impossible to gather and process all that data and to make it available to everyone. It requires a distributed effort of people and firms acting in their own interests.


No, market participation just requires constraining one’s values to the options afforded by the market system. E.g., lots of people would be willing to take a pay cut for an extra day off per week but the job market does not provide that option. Why not?


This guy gets it.


For sure, central planning is so inadequate. And China's economic failure compared to liberal countries like India is a great illustration of that. Oh wait…

(Also relevant, in the 20s and 30s, USSR came from a shithole agricultural country with no industry, to the second biggest industrial economy of the world).

I'm not saying that central planning is desirable, but it's for sure more than adequate of your goal is development.


China started thriving in early 80ties precisely because they considerably loosened the central planning. For example, they allowed plant directors to have some input into what a plant is going to produce and into setting prices of their products. Beforehand, it was all decided centrally, with plenty of absurdities unimaginable for Western people. One tiny example is the shortage of bread in Poland in the eighties, which was caused by the centrally set price of bread being lower than the price of the ingredients... So, bakeries did everything to bake as little bread as possible, to minimize their losses - resulting in a nation-wide shortage. There's actually a whole subgenre of comedy in Polish cinema, focusing on realities in living in a centrally planned economy.


>And China's economic failure compared to liberal countries like India is a great illustration of that.

Better to compare China to Korea, Singapore, Hong Kong and Taiwan, which all started at a similar position (and have similar cultures), but now those others all have way higher GDP per capita than China.


> liberal countries like India

India is probably the most bureaucratic country on earth. It may be a democracy but that does not mean it is economically more liberal than China.


And it inherited this taste for bureaucracy from the British Empire, which was the former biggest bureaucracy in the world while being economically very liberal.


Russia's industrial power before WW I was larger than a lot of people remember.


I would say that China prosperity is very related to the Free Economic Zones which allows for non-centrally planned zones within China.


If you even the slighest bit of understanding of Indian history and Indian economics calling it 'liberal' is complete nonsense.

After WW2 India adopted a diliberatly socialst agenda, often called Indian Socialism the was all about top down managment of all markets with heavy government guidence and intervention. This concept was popular in pre-WW2 British Socialism and India served as a huge experiment. While some of this has been removed you can still see it all over Indias economic policies today. India is still a far, far away from any sort of free market economy or liberal political order.

> (Also relevant, in the 20s and 30s, USSR came from a shithole agricultural country with no industry, to the second biggest industrial economy of the world).

Its is another bunch of nonsense socialist myth making. The trope of Imperial Russia being a backwards shithole then as soon as Soviets take over its some paradise is nothing but Communist propaganda.

In fact before WW1 Russia was one of the fasted growing nations, that itself was one of the reasons for WW1 as the Germans realized that within a generation Russia would probebly match or be more powerful then them.

If you look at Russia WW1 economy, you will see that in terms of manufacturing it actually performed incredibly well. They had a problem with food distriubtion and political authority, more then with production. The Imperial Russian economy was already one of the biggest industrial countries by a lot of different measures. This is clearly confirmed when you look at the weapons output during WW1.

In the 20s Soviet economy first of all starved millions of people and only by the end of the 20s did they reach pre-war levels of output.

From 1928 they started collectivisation and even more agressive industrialisation, but it should be noted that it required millions of people dead, many more millions put into forced labor and massive starvation of the whole population to export grain and thus import pretty much everything from the West.

To make a point of this, the Soviets literally copied US and German factories and payed tons of money for them and then used lots of forced labor to build them. Putting that as some great success of centralised planning is dubious to me.

And this great plan also didn't lead to much improvment for the actual people, it was primarly about the production of military equipment.


Yes Russia was growing fast but from a low base but the handling of this growth was totally botched.

And pre and pots ww1 arms production was not massive Russia was buying massive amounts of guns from the USA and look at the performance of Russia vs Japan.


So Imperial Russia was bad because it grew fast from a low base. But the Soivet Union is great because it grew fast from a low base. Makes total sense.

> And pre and pots ww1 arms production was not massive Russia was buying massive amounts of guns from the USA and look at the performance of Russia vs Japan.

Russia did produce a large amount of war material and every academic source agrees on this.

Military production certaintly wasn't the issue in that war. That war more then anything else shows the weakness of the political system that was again evident in WW1.


They where buying lever action Winchesters off the USA - not normally a sign that your military production is up to providing what you need


Wow rifles. Clearly the most modern kind of weapon in WW1.

Russia had a gigantic army, rifles are a simple mass market commodity the the US was selling cheaply on mass. Simply sensible to buy some when there are so many other important things that you need to produce. Rifles are very small part of the overall military economy.

It starts with raw resources like steal, coal and everything you need to make explosives. Munitions production, heavy artillery and so on. Railroads, planes and so on.

Again, scholars pretty much agree on the success of Russia military economy. Compared to the state in the beginning of the war they did incredibly well.

Check out this serious of 24 lectures that goes a bit into technology and so on, the last couple are about the time we are talking about:

https://www.youtube.com/playlist?list=PLEETkM6vwQPHJHhXinsuQ...


Winchester lever actions where second tier rifles at that point not Lee Enfield's. Gewehr 98 and so on and used different cartridges

Having to buy basic stuff like that on the open market is a sign that your in trouble.

Wikipedia says

"With the start of World War I, production was restricted to the M1891 dragoon and infantry models for the sake of simplicity. Due to the desperate shortage of arms and the shortcomings of a still-developing domestic industry, the Russian government ordered 1.5 million M1891 infantry rifles from Remington Arms "


What is your obsession with rifles? Non of this proves anything. Is your argument really is 'they buy some things from outside' then that applies to every country. Russia has insane numbers of troupes that needed basic equipment and much higher priority things they need to produce that were actually vital to not losing the war.

This even said 'with the start of WW1' to it not even an argument about how they did during the war.


> After WW2 India adopted a diliberatly socialst agenda, often called Indian Socialism the was all about top down managment of all markets with heavy government guidence and intervention.

Yes, and with tremendous success (literacy exploded, and starvation plummeted), but such movement is long dea and now. For the past 30 years Indian economic policies have been heavily inspired by the western “neoliberal” trend (which is itself heavily inspired by Hayek's work) . And looking back how China where in 1980 and how they are now is quite telling. Five-years plans really add up in the long run…

But if you don't like the comparison with India (which, now I realize, is pretty ill-advised in this period of nationalist tensions between both countries …), you could do the same with most Western countries and still be astonished how China went and how stagnant we have been.

> And this great plan also didn't lead to much improvment for the actual people, it was primarly about the production of military equipment.

You are mixing up periods: here you are referring to the cold war era (with the arm race with the US) but that wasn't the case at all pre WWII (and they didn't really started the war with stockpiles of new weapons to say the least…).


There is a lot of talk about India and the freeing up of the economy. However it is quite clear that there is a massive legacy there.

All that said, I think the diversity and distributed power structure in India could not be overcome by any purely economic philosophy.

About China we should also mentioned that decreasing the control over the economy is what allowed them to grow. Current policy in China is much more like the West then it was under Mao or afterwards. So success came by reducing control over the economy and to reintroduce private property. Market economy today is as powerful in China as it ever was in the history of China by far.

China so far has profited from massive catch up growth and China is not unique in that, just much bigger. The same thing happened with the Asian Tigers. China is now starting to pull ahead in some technologies, but it has yet to be seen if how far that is possible. People also thought Japan would blow past US and the West.

In the end if you have a reasonable competent government and a reasonable market economy with reasonable polices regarding global trade you will likely end up on the same overall growth path of all the advanced economies.

If China manages to avoid this keep growing after the have reached per person parity, I would be incredibly impressed and it would challenge my thinking on economics.

> You are mixing up periods

I am talking about the pre-WW2 period where production was overwhelmingly focused on everything needed for military production. There were exceptions like housing construction but the overwhelming focus was military buildup.


> All that said, I think the diversity and distributed power structure in India could not be overcome by any purely economic philosophy.

While I agree with you that it definitely shouldn't (mankind already had one too many cultural revolution last century), I think you vastly underestimate the destructive power of totalitarian states…

> The same thing happened with the Asian Tigers. China is now starting to pull ahead in some technologies, but it has yet to be seen if how far that is possible. People also thought Japan would blow past US and the West.

The Asian tiger are also a good example of sucessful central planning though… And Japan did indeed blow past the west by most metrics… including population aging, which has since then crippled the country.


>And Japan did indeed blow past the west by most metrics…

What metrics exactly? Certainly not GDP per capita. It also has the lowest productivity per hour of the OECD countries.


> Certainly not GDP per capita.

Japan has been almost stagnant for nearly 30 years now, mainly because of demographics (and other reasons, but with such an aging population it's pretty much game over no matter what), but by 1990 Japan has a better GDP per capita than any of the biggest economies in the world at this point, by far (more than 20% over some most western countries). Obviously, when your GDP stay flat for 3 decades, other end up catching up…

> It also has the lowest productivity per hour of the OECD countries.

Productivity is a poor metric, because there is little correlation between time spent working and GDP, so culturally workaholic (Japan) countries ends up with poor results, while hedonistic countries (France) score super well, but that doesn't reflect much.


> The Asian tiger are also a good example of sucessful central planning though

Not really. I think people wastly exaturate the amount of central control because that is what they want to focus on. People love to say things like 'look the government invested in X industry and that insutry is now successful'. Ignoring the tons and tons of wasted investment and industries that didn't go anywere. It also ignored the massive amount of success private companies had that didn't explicity been pushed by specific government planning.

The believe that Japan only has problems because of an aging population is also pretty false and was even more so in the early 1990s. I disagree that Japan blew past the West in most metrics, in some maybe but in others they are worse.


> And China's economic failure compared to liberal countries like India is a great illustration of that. Oh wait…

China's success is actually a very powerful illustration of this, in fact. Through the 1980s-1990s, China went through dramatic economic reform, and the results largely speak for themselves[1].

Before the reforms, the Chinese economy was dominated by state ownership and central planning. From 1950 to 1973, Chinese real GDP per capita grew at a rate of 2.9% per year on average, albeit with major fluctuations stemming from the Great Leap Forward and the Cultural Revolution. This placed it near the middle of the Asian nations during the same period, with neighboring capitalist countries such as Japan, South Korea and rival Chiang Kai-shek's Republic of China outstripping the PRC's rate of growth. Starting in 1970, the economy entered into a period of stagnation, and after the death of Mao Zedong, the Communist Party leadership turned to market-oriented reforms to salvage the failing economy.

The first stage, in the late 1970s and early 1980s, involved the de-collectivization of agriculture, the opening up of the country to foreign investment, and permission for entrepreneurs to start businesses. However, 87% industry remained state-owned. The second stage of reform, in the late 1980s and 1990s, involved the privatization and contracting out of much state-owned industry, followed by the 1985 lifting of price controls. The private sector grew to the extent that it accounted for as much as 70% of China's gross domestic product by 2005. From 1978 until 2013, unprecedented growth occurred, with the economy increasing by 9.5% a year.

India actually experienced a similar trajectory — from 1947 until the late 80s/early 90s, India's economic system was described as "Nehruvian socialism". It was more derogatorily called a "License Raj"[2]. Under the License Raj, India's annual economic growth rate stagnated around 3.5% from the 1950s to 1980s, while per capita income averaged 1.3%. In the same period, Pakistan grew by 5%, Indonesia by 9%, Thailand by 9%, South Korea by 10% and Taiwan by 12%. Before 2015, India grew at a slower pace than China, which had been liberalizing its economy since 1978. In 2015, India's GDP growth outpaced that of China.

[1] https://en.wikipedia.org/wiki/Chinese_economic_reform

[2] https://en.wikipedia.org/wiki/Licence_Raj


The fore-mentioned EconTalk recently had a discussion of China’s centralized politics but relatively open economy.

Less than 10% of Chinese agriculture employment is in state owned enterprises now, for example.

https://www.econtalk.org/branko-milanovic-on-capitalism-alon...


The Uighurs and Ukrainians might disagree that your examples are adequate.


Hayek was influenced by Bastiat's idea of Economic Harmony -- a story of spontaneous order.

Also, Hayek was influenced by Henry Charles Carey, who wrote about harmony in economics and the unity of sciences. He was Abraham Lincoln's economic advisor and put in place "The American System".

Both theorists offer a classical middle ground between completely free trade and government control. They identify the objective principle as harmony and indicate the way to get there is through liberty -- and a sprinkling of protectionism.


Why is spontaneous order desirable? Pandemics are spontaneously ordered too.

IIRC, when pressed on this, Hayek resorted to a kind of crude biopolitcs -- market societies had more population growth so that made them better.


> Why is spontaneous order desirable? Pandemics are spontaneously ordered too.

I don't think it's a question of what is "desirable", but rather a question of what is inevitable.

Sure, bacterial/viral/parasite outbreaks are part of natural systems, and have their own spontaneous order, but the way their host systems react and respond is also a manifestation of spontaneous order.

In modern society this is true whether we're talking about planned/centralised economies or more laissez faire ones. I.e., even in a relatively centralised society like China, grassroots decisions and actions still play a highly significant role in overall activity, including in the pandemic.

It's a subject of ongoing study and debate as to the effectiveness and efficiency of centralised attempts to control organic processes.


> I don't think it's a question of what is "desirable", but rather a question of what is inevitable.

inevitable is a smart way of pushing something you want to happen though. The famous quote from Margaret Thatcher “there is no alternative” is tge best example of that.

Also, as twentieth century shown us, their is nothing really impossible for a sufficiently motivated government, sometimes for the better but often the worse (from “landing on the moon in a decade” to “eradicate the Jews”).


> inevitable is a smart way of pushing something you want to happen though

Sure but that's not what I'm talking about. As I said in the comment, whether it's Thatcheresque “market fundamentalism” or some form of extreme central planning, there will still be a spontaneous order at the grassroots level. Individuals and groups will always respond organically to their conditions. The only question is how much governments can influence it, and how beneficial are their attempts. But that doesn't change the inevitability of some form of spontaneous order.

> [there] is nothing really impossible for a sufficiently motivated government

Programs like the "war on drugs", the "war on cancer", the "war on obesity" and the "war on terror" would suggest otherwise, and demonstrate that vast interventions can be not only hugely wasteful but can have precisely the opposite of the desired effect.


> Programs like the "war on drugs", the "war on cancer", the "war on obesity" and the "war on terror" would suggest otherwise

Because declaring “war on something” isn't political action in itself, it's electoral communication. How many times did the US government perquisionned Ivy league colleges or trading desks to seek cocaine? Why not ? And why are the US still cooperating with Saudis and other gulf states if they really cared about terrorism? And for the health issue wars you mensionned, the government has zero political will to shut down the huge agro-industrial complex which has a big responsibility in both.

Hitler once said to somebody complaining about the inflation risk caused by his policies: “I'm gonna send the SA in the grossery shops, and will'll see if there is inflation”.


Clearly it's not true that "there is nothing really impossible for a sufficiently motivated government". Governments can and do succeed at some things, but the scope of things they can do without negative consequences is very limited.

History shows that very clearly, including the examples I suggested (which as you point out were messaging labels, but they all have had real and vast interventions to go with them), that you attempted to refute with more examples of government interventions playing out badly.

To be clear, I'm not any kind of anti-government anarcho-capitalist or anything like that. I'm from Australia and am supportive of the mixed economy we have here.

Also, please stop blithely invoking 1930-40s Germany as an example of governments achieving intended outcomes. It's not what I come to HN for, it makes my skin crawl, and even if you insist on a dispassionate evaluation of that system, our ability to determine how it would have played out long term is obviously very limited, but even then we know for sure it was horrific and not at all the kind of thing that should be described as "desirable", which is the very word that kicked off this subthread.


Adding to this, the subthread that followed on from my comment ends up illustrating the point quite well: the harder governments try to override spontaneous order, the further they go down the path to totalitarianism, which I hope people here would agree is not "desirable".

Which is not to say there is no legitimate role for government. Hayek himself identified pandemics and a social safety net as legitimate cases for government intervention.


> Why is spontaneous order desirable?

Because it is not order obtained through force? What other means are there to obtain order?


Hayek himself recognized that people are forced to submit to the market. He just approved of that kind of submission.

I got bad news for you guys, Hayek was just making excuses for rich people running the world.


Because many thing, perticularly complex system can only be 'created' by spontaneous order.


Very surprised to see F.A Hayek on HN. I would recommend the Road to Serfdom to anyone who is interested in learning more about his viewpoint. Also reading Thomas Sowell wouldn’t hurt either.


I agree that the Road to Serfdom is an interesting read. Even if you don't share the really conservative view of the author (and the Austrian school as a whole), it gives you the ideological background that underlied the dismantling of the western Welfare State (which is what Hayek calls “road to serfdom”) during the 80s and 90s.


In Raod to Sefdom Hayek acknowledges that basic welfare, health and retirment polices are consistant with a liberal state.

What it gave a backround to was dismanteling a lot of the idioitc regulatory structures and inflationary spending of the 1970s.


> In Raod to Sefdom Hayek acknowledges that basic welfare, health and retirment polices are consistant with a liberal state.

True, and it was actually a surprise to me since this part of the book have completely disappeared from later policymaking. It's not that uncommon though, most people using Adam Smith as a reference tend to forget the part where he goes full socialist and calls landlords parasites… I even saw a reedition of Wealth of Nations (in French, from an independant libertarian publisher) where the said chapters where simply removed from the book!

> idioitc regulatory structures

Oh yeah, and the 2008 crisis was a good illustration of how good of an idea it was to remove those “idiotic” regulations. Oopsie


> What it gave a backround to was dismanteling a lot of the idioitc regulatory structures

Guardrails are so idiotic: people are always bumping into them and getting annoyed. It'd probably be best if we just removed most if not all of them. /s

The thing about regulations is you can always cherry-pick a couple mind-boggling stupid ones. But then there are the ones that look silly, but only if you've never experienced or witnessed the problem they were meant to solve.


These regulations included things like monopoly in many industries, truckig, airlines and so on. There are lots of example like this. I'm just absoulty mindboggled by the current liberal idea of literally and regulation is always great and any removal of any regulation always responsable for the next crisis. Even saying 'deregulation' gets view on basically like saying that you are a neonazi.

Simularly the view that all regulation exist for a good reason is also flat-out false. It flys directly in the face of any serious study of political science and the formation of regulation in the real world.


> I'm just abso[lutely] mindboggled by the current liberal idea of literally an[y] regulation is always great and any removal of any regulation always respons[i]ble for the next crisis.

> ...Sim[i]larly the view that all regulation exist for a good reason is also flat-out false.

You're boggling your own mind, since that's a straw man position. I made it clear I didn't hold it ("the thing about regulations is you can always cherry-pick a couple mind-boggling stupid ones..."), and I don't think "liberals" hold it either.

The position I do hold is that to actually evaluate a particular regulation is difficult and requires a lot of thought; and it's easy to to mislead someone into taking an ignorant, broadly anti-regulation stance by cherry-picking examples of bad ones. I've seen a lot of that, and at one time I even found the cherry-picking persuasive.

Deregulatory zeal has a tendency of throwing the baby out with the bathwater. Also, some specific cases of deregulation can merely re-introduce negative externalities that some connected group stands to benefit from (to the determent of the public good).


There have been a number of Hayek posts, though sadly few of them gained much traction: https://hn.algolia.com/?q=hayek

For those new to Hayek, here is an entertaining overview:

Fear the Boom and Bust: Keynes vs. Hayek https://www.youtube.com/watch?v=d0nERTFo-Sk

Fight of the Century: Keynes vs. Hayek https://www.youtube.com/watch?v=GTQnarzmTOc


I love Thomas Sowell. It’s extraordinarily impressive that while Dr. Sowell is 90 years old, he’s still sharp as an arrow. As a matter of fact he’s about to release a new book.

Also, from what I could gather from Twitter, it appears that recently more and more people are following his unofficial Twitter account. I’ve counted thousand new followers by the day.


Yeah, Sowell is still writing books like age never impacted him! He's amazing. He's also very careful to stay politically neutral about every issue he touches upon.

His book "Basic Economics" keeps getting updates every 5 years or so, at this stage it's almost an encyclopedia of economic principles.


> He's also very careful to stay politically neutral about every issue he touches upon.

It's worth noting that the most effective propaganda is the kind that convinces you it's "neutral."


Surprised me as well. Milton Friedman's Free to Choose (book and tv) remains so much relevant reading in 2020. Hayek was very hard to comprehend because his writing is information dense. You have to read a sentence carefully few times to full comprehend it.


The Road to Serfdom should be required reading for anyone who considers themselves a thinking person. I am a libertarian but have read a lot of philosophy from the major thinkers who encompass all points on the political spectrum. If you consider yourself educated and convicted in your beliefs, you should especially focus on those who disagree with you to ensure you truly believe in your principles.

The Austrian School of economics has a niche diehard following but I'm not sure how seriously they can be taken for several reasons. However, I am a fan of their opinions on "hard money", and do not like governments printing endless "fiat" currency, which is also why I have devoted several years of my life to cryptocurrency.

Don't dismiss Hayek out-of-hand. Give him a fair shake, even if you are on the left.

Edit: amused by the downvoted from lurkers. People don’t like to read about views that disagree with their own, in these monoculture times.


Don’t worry about the imaginary internet points, I’ll back your motion that “The Road to Serfdom” should be required reading for anyone who considers themselves a thinking person.


Couldn't agree more, as someone very much on the left. I read The Road to Serfdom and along with Smith and Basquiat it made me a libertarian early on. Later I turned and I'm now very much on the left but still respect Hayek's ideas and arguments.


You may want to look into Kropotkin (Conquest of the bread, Mutual Aid) or maybe Max Stirner (The Ego and Its Own).


Libertarianism has left and right variants: the right retains private property, and the associated government functions, while the left is also known as anarcho-communism.

We really need special economic zones for experimenting with alternative economic and social systems. Unfortunately, the tradition has been to have a single system for an entire country, and if not all people want it, too bad.


So a little SEZ if you want to experience what it was like to live under the Divine Right of Kings and its associated aristocracy and serfdom[1][2], a little SEZ if you want to experience Christian theocracy[3][4], a little SEZ if you want to experience a degenerate lawless unproductive commune without domestic agriculture[5], and a little SEZ if you want to live free[6]?

States don’t exist in a vacuum. We’re constantly experimenting as it is, if you want to call politics experimenting, and every new law or ordinance passed, every new executive order issued, every new opinion written by the courts and every new verdict reached by a Jury changes the “system” a little. You could call it the ultimate experiment in reflective social programming if you want to get nerdy about it, but I wouldn’t use such terms myself.

[1] https://en.wikipedia.org/wiki/Saudi_Arabia

[2] https://en.wikipedia.org/wiki/North_Korea

[3] https://en.wikipedia.org/wiki/Vatican_City

[4] https://en.wikipedia.org/wiki/Papal_States

[5] https://en.wikipedia.org/wiki/Capitol_Hill_Autonomous_Zone

[6] https://en.wikipedia.org/wiki/Free_State_Project


Pretty much. Some of these would probably turn out to be more popular than others. It would be contradictory for libertarians to try to impose their systems on others against their will. But given the unpopularity of libertarian parties in elections, libertarianism is unlikely to be implemented, even on an experimental basis. What finished off the 1930s anarchists in Spain? It's not a very well-run economic experiment when it's shut down by Marxists and Fascists. A bit more tolerance would be helpful.


I paid minimal attention to the Libertarian Party nomination debates, but from what I heard when Justin Amash briefly considered running for President as a Libertarian, the debates within the Party were centered around running to win versus just trying to influence the direction of the Overton window. I suspect Amash chose not to proceed because he realized that the Libertarian Party while not without worth, does not have the killer instinct to actually win elections and that will forever hamper their effectiveness. Amash wanted to win.

I have strong libertarian sympathies, but the reason I’m not a full throated libertarian is that it isn’t an ideology that effectively seeks to acquire power, and without being able to win elections, they can never pave the way for the society they seek, nor would it be able to withstand aggressive neighbors or slight changes in values across the community. A libertarian state is transient at best.

I also don’t want to prop up SEZs that would massively violate peoples’ natural rights for the sake of experimentation. Freedom is without Kings or Serfs or Slaves.


[flagged]


Do you have any actual criticisms of the policies he proposed?

> systemic student and other debt

The student debt problem is due to student loans not being dischargeable in bankrupty; this is certainly not something Hayek argued for.

>by monopolistic privatised healthcare

The cost of healthcare is to a significant degree driven by artificial limitations on the supply of doctors due to the government granting the AMA a monopoly on deciding who gets to be a doctor (and artificially limiting the number of medical places per year). This is also not something Hayek supported.

>fraud/boom/bust cycle that has replaced real game-changing technological progress

A lot of people would disagree that there has been less technological progress in the past decade or two than in earlier time periods. Even a decade ago, it was unthinkable that a machine could beat a human at Go.

> set out to destroy its really rather successful economic record of relative stability and prosperity.

The US experienced a higher rate of economic growth in the 1800s and early 1900s, before Keynesian policies were adopted, than it did afterwards.


The Mont-Pelerin society was established in 1947 by Hayek to promote more liberty with the world elites. There are pictures of him on the first conference with Mises. I'm genuinely curious what relative stability and prosperity you refer to. This was after the second world war.


Friedrich Hayek is a Republican poster boy. There is no way to have an objecting conversation about Hayek in the United States, as his reputation has reached god-like status among the "free independent thinkers".


Yawn. Boring. I'd rather discuss his actual ideas than his misuse by party politics bullshitters.


What a brilliant critique...


Not a critique, just pointing out discussion of his ideas is not possible in the States due to irrational elevation of Hayek by Conservatives.




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