Wednesday, April 4, 2012

My Day with Friedrich

Yesterday I watched this video of a speech Hayek gave in 1983. It's a bit dry. It's also a little hard to hear what Hayek is saying at times. But the content is worth the effort of concentration.


(There's also this audio of a similar speech he gave to 33rd Meeting of Nobel Laureates at Lindau also in 1983)

Of Hayek's later work my focus has always fallen on 'The Denationalisation of Money'. That was a controversial work which made people question whether he'd lost his marbles. I thought (and think now) that the ideas are exciting.

But this speech has to do with his last book (which I've not read) called The Fatal Conceit. Its anti-socialism theme didn't really press my buttons, but had I known that there was such an emphasis the 'pre-history' of economy I'd have been much more interested.

Hayek tackles the problem of Lamarckian inheritance - the idea that an organism can pass on characteristics that it acquired during its lifetime to its offspring. He suggests an idea of cultural or group inheritance. He also points out that despite the claims of biologists some mechanism like this must exist - after all, modern humans have only been 'modern' for 50 000 years. (Its worth noting that the denial of Lamarkianism is specific to C20th Western science - it was not the case on the other side of the iron curtain). There are a couple of other fellows that believed that organisms can pass on acquired characteristics - Darwin and Freud. Indeed, Freud's work has been 'rubbished' by science (in part) because his theory of civilisation relies on such a mechanism.

I also caught this short interview with Hayek about Freud.


I think Hayek misunderstands Freud. You'll see this in under a minute. He claims that Freud disregards the fact the civilisation is based on repression. That's simply wrong. Freud claimed that the repression of instinct was what civilisation was built on. See Totem and Taboo, Civilisation and its Discontents, Moses & Monotheism etc. Freud certainly claims that this repression creates a tension. And that tension is what Psychoanalysis seeks to resolve. But resolving tension in an individual is not disregarding its role in the development of civilisation.

It's a shame that Hayek didn't get Freud. I see so much common ground. More so now that I've heard Hayek talk about his ideas of how economy developed.

My key point of discord with Hayek (and Freud) is over Money. (Marx too). But whenever I revisit Hayek's thoughts I'm always impressed with how coherent his explanation of economics is. Basically, (I think) he's right about how markets and prices work, and crucially about the distorting effect governments can have. I like the fact that he's humbled by the magic of spontaneous order. Politicians might claim they're doing a good thing when spend taxes on this or that project, but when you closely examine it you realise that they 'can't' know they're doing a good thing. That in itself though, is academic rather than a political point.

A recent debate from the LSE brings this issue to the fore. Hayek Vs Keynes.


Intellectually, I'm on Hayek's side. But you can sense Lord Skidelsky's frustration (Hayek is on home ground at the LSE) . It can be summed up in the most well known of Keynes' quotes 'In the long run we're all dead'. Even if I ignore the intellectual argument that Keynes' side makes, it's much tougher to ignore the moral one. If people are starving today, they need food now. Being convinced of a policy that will provide for them in the long run, is no good for them.

That doesn't make Hayek wrong. Nor does it make his ideas any less moral. And neither does it make Keynes right. That should be plain from that classic problem of Keynesian theory - that six men digging a hole, and another six filling it in, results in economic growth. It might do - we just don't know. But our common sense tells us it won't. (The Keynesian hole digging thing is discussed in the debate). What we do know is that the taxes use to pay men for digging have been raised on pain of imprisonment. There are plenty of moral arguments in favour of taxes, but it'd be tricky to make one that says governments can raise taxes to spend on men digging holes then filling them in. So as such, a moral argument for tax is arbitrarily contingent.

Anyway, its an old debate - one as old as political economy itself. And if we didn't have this dilemma what on earth would we all talk about, and what would be the point of politicians?

As an aside, I think I've mentioned elsewhere that Skidelsky is the only economic historian whom I've seen mention Keynes and Freud in the same sentence. He scores points with me for that.

And I also side with the Keynesians on something else; Hayek's conservatism (with a small 'c'). I accept that his ideas predicate a conservatism based largely on the spontaneous, complex and unknowable nature of our economic and social systems. But let's be honest, if Keynes & Hayek held a party on the same night, I'd be firing up the Austin 7 and heading up the A10 to Cambridge. Having conservatism underscore one's moral and intellectual being, is a sure way to miss out on a lot of fun. And more importantly, when its backed with political will, it denies others the possibility of living full and satisfying lives. This is something that I think Freud understood, and Hayek didn't.

Hayek is guilty himself of what he accuses Freud. His intellectual project has political impact. When conservatism meets politics its effects can be disastrous for some individuals. Sure, he could argue that the proper expression of his libertarianism would - in the long run - protect the rights of the discontents, but the intellectual power he gives to conservatism is perverted by politics and used as a weapon to alienate and scapegoat those who want to live differently. We need difference in order to evolve; sameness is stasis.

What I hope is that Hayek's ideas are appreciated (regardless of one's politics). Economic ideas always seem to be distilled into charts, graphs, and numbers. They don't need to be, and in fact all that is just a distraction, the wizard's curtain. Hayek creates a coherent line of argument in works like The Road to Serfdom (although I prefer The Constitution of Liberty). The interrelationship of economic and individual freedom is something of which we all have experience. Hayek helps us to make some sense of it and to extend it. This helps us formulate principles around which economic judgements can be made. I recommend Karl Polanyi's 'The Great Transformation' to give a bit of Yang to Hayek's Yin. The books were written at roughly the same time.

I enjoyed my day revisiting the old chap. And I learnt something new. Not bad considering he's been dead 20 years (he died on 23rd March  - Discordians take note!)


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