Friday, October 29, 2010

Volcker Disses Hayek (and The Road to Serfdom)

During an interview with SmartMoney at WSJ, former Fed chairman Paul Volcker swatted away the warnings of Friedrich Hayek about the dangers of expanding regulation, like the warnings were just an annoying fly. Here's the exchange:
SM: And right now government agencies are expanding. The economist Friedrich Hayek warns of tyranny when the government controls economic decision making.

PV: Obviously, government should get more involved in the regulatory side than we have been in the last two decades. The government has a role in health care—we just had a big political fight about it. I don’t think people are ready to give up Social Security, Medicare or defense.

SM: Weigh in on the debate.

PV: I’m not in favor of big government by and large. I picked up Hayek’s The Road to Serfdom the other day, and it seemed less relevant than in 1945 [when it was published]. He wrote at a time when communism was a prime threat and socialism an existential ideal. We still have too much government interference, but we don’t have the communist bear looming down on us.
Like Alan Greenspan, Volcker seems to be one of those who is "theoretically" anti-big government, but when the marching orders come from his controls (Hint: His office is in the very high rent Rockefeller Center in NYC), he stays in hop-skip with the rest of them.

It is stunning that he doesn't get the general principles that Hayek discussed in The Road to Serfdom and that he doesn't understand their importance relative to today's growing government.

He also established his Keynesian credentials during the interview:

SmartMoney: You aren’t overly concerned by deflation.

Paul Volcker: No, I am not. It’s a difficult balancing question now. We are way below full employment. The immediate outlook is for extremely sluggish growth. It’s not the time to take strongly restrictive measures. But we do have to do so over time, or eventually we will be up to our necks in red ink. That’s the lesson, not just for the federal government but for state governments as well.
Again in "theory" he is against "red ink", but not right now.


  1. Volcker, like other octogenarians, has a compressed time horizon, and doesn't give a damn about what conditions will be like for today's children and young adults as they start their economic lives.
    Just apply whatever coercion and force it takes to today's children and young adults to keep the old folks supplied with unearned (by the old folks) and unaffordable (to everyone else) food, shelter, and medical care.

  2. Interviewer: Don't you think there are too many regulations, too much debt, or too high taxes?

    Volcker: No, I'm not a communist.

    Interviewer: But what about the condition of the economy?

    Volcker: Don't worry. I'll be fine.

  3. Why is it that "the time to take strongly restrictive measures" (as Volcker puts it here and which I take to mean ceasing Keynesian intervention) is always sometime in the indefinite future?

    When, in the last 80 years have we not had either significant, substantial, or ridiculously high levels of intervention and Keynesian stimulus?

  4. In defense of Volcker's comments...

    Hayek's "The Road to Serfdom", as Hayek would no doubt endorse, was very much oriented towards the "central planning" movement that was fashionable when he wrote it.

    I've heard Hayek himself in an interview draw a distinction between central planning and the welfare state. He saw a threat to liberty from the later as well, however he saw this threat as more diffused and less direct than the threat from central planning. My guess is Hayek would see the regulatory state in much the same terms as he would see the welfare state.

    Of course, Mises had an even less sanguine view of the welfare and regulatory states than did Hayek. He saw Hayek and the younger generation of 'neo-liberals' as overly socialistic.

    Mises even had some doubts about the "neo-liberals", like Ludwig Erhard, who implemented under the banner of "soziale Marktwirtschaft" free market reforms that kicked off West Germany's postwar revival. Mises believed the neo-liberals were selling qualified free market programs as a better means of achieving centralist objectives. This he believed was a mistake that could boomerang.

    See discussion here.

    Volker's position is perhaps not as far from Hayek's the discussion quotes would indicate. Mises would say "that's the problem."

  5. Rothbard's colleague Hoppe has an interesting interview on line here about how Hayek and the use of his name by modern post-cold war social democratic socialists as part of their campaign to expropriate the label of "liberal". not just 'modern liberalism', but 'classical liberalism' too.

  6. Paul Volker is an actor. He is a communist. He is an elitist who wants to bring about world government which is enslavement for everyone except for the elite 2-3% who want to "run the show." There is a good YouTube video with some guy talking about a former interaction he had with Mr. Volker and the gentleman was discussing being Republican or Democrat. He quoted Paul Volker who said "Don't worry, we control both of them(both parties)." 'We' being the elitists.

  7. The welfare state undermines family government and transforms the institution of marriage from one of self-governance to one leaning on the State. The state steals from the many to prop up a weak family institution. Professed Christians blame marriage weakness on sin, to the benefit of State programs that expand to meet the demand created when State government, by their failure to protect inalienable rights marriage creates. Walk-away divorce fuels growth in the welfare state. The Welfare state is a produce of the State that undermines marriage. The post modernist construct of legal positivism declares perfect society can be achieved through perfect "equality"; i.e. family without headship. Marriage without headship is anarchy, a society where statism and tyranny work best. Liberals who bought into the theory that family is egalitarian in nature leave the institution of marriage vulnerable to the fallen nature of the best and worse, and justify programmes like AFDC and TANF as economic schemes to shape and control failed marriage, when all is needed is law to protect the inalienable rights of husbands who possess in divine and natural law the inalienable right of guardian by nature. WIthout this protection, parents become defacto, state designated custodians. The modern state of lawlessness and fiat welfare statism is the business of societal self-annihilation.

  8. "Obviously, government should get more involved in the regulatory side than we have been in the last two decades."

    When cornered by Ron Paul, Volcker admits (@4:34) that "supervision and regulations aren't going to solve all these problems. You're quite right".

  9. Social Security proves Hayek's point about government control. Last I heard, the government doesn't reimburse you for SS taxes if you choose to emmigrate. Thus you are incentivized to remain in the US when you retire, in order to receive back the money the government taxed away from you in Social Security. Thanks to SS, you are on a citizenship leash.

    Also, the government collects SS taxes, but spends the revenue immediately. Thus retirees are forced to vote for the imposition of taxes upon younger people, lest their SS checks stop coming and they starve to death.

    The growth of government not only takes away your independence, it then incentivizes you to take away the independence of your own children.

  10. Libertarians (such as myself) need to realize that the banks are a huge threat to our freedom, and cutting them down, taking away their power (which they gained through government actions) would benefit liberty, not hurt it. Non-libertarians need to realize that the government is perhaps the worst institution to do this.