Thursday, January 26, 2012

Occupy Movement "Using Hayek" to Find Flaws in Capitalism

This anti-capitalism campaign launched by the elitists at the World Economic Forum in Davos, Switzerland is getting really over the top and landing in the winter mud of London. The latest is an op-ed in the Financial Times written by David Dewhurst and Naomi Colvin, who are identified as members of the economics working group at Occupy London.

Their screed is absurd from beginning to end and is titled, How Hayek Helped Us to Find Capitalism's Flaws.

They begin with this misleading hook:
Fans of Friedrich von Hayek may be surprised to learn that the Austrian economist is the talk of Occupy London. Hayek’s observation that distributed intelligence in a voluntary co-operative is a hallmark of real economy rings true beneath the bells of St Paul’s. Occupy is often criticised for not having a single message but that misses the point: we are committed to incorporating different preferences before coming up with policies. In this sense, it could be said we work more like a market than the corporate boardroom or lobbyist-loaded politics – our ideas are radical but also just and democratically decided.
What's the hook? When Hayek talked and wrote about "distributed intelligence", he was referring to the fact that much information is unique to  individuals at a given place in time and that therefore central planning is impossible. To flip this on its head and say,"we are using Hayek's insight to come up with central plans" is absurd. It is a contradiction. Hayek never suggested that central planning could become better by having more planners, or input from more people, or if the masses "democratically voted" for massive central planning.

Hayek said, and I quote:
If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders.
No "economics working group at Occupy London" planning for all of England needed, thank you.

So is Occupy London really about central planning? Here is more of what they write:
 Ultimately, we believe that all of us fare better when wealth and income are more equal. 
Not only would this require central planning, but Hayek believed the exact opposite about inequality, that inequality was important and necessary:
The rapid economic advance that we have come to expect seems in a large measure to be the result of this inequality and to be impossible without it. Progress at such a fast rate cannot proceed on a uniform front but must take place in echelon fashion, with some far ahead of the rest.

In the long run, the existence of groups ahead of the rest is clearly an advantage of those who are behind, in the same way that, if we could suddenly draw on the more advanced knowledge which some other men on a previously unknown continent or on another planet had gained under more favorable conditions, we would all profit greatly... 
The over-all speed of advance will be increased by those who move fastest. Even if many fall behind at first, the cumulative effect of the preparation of the path will, before long, sufficiently facilitate their advance that they will be able to keep their place in the march.

Improving the position of the poorest by giving them what we took from the wealthy, would temporarily quicken the closing-up of the ranks, it would, before long, slow down the movement of the whole and in the long-run hold back those in the rear. All obstacles to the rise of some are, in the long run, obstacles to the rise of all… To prevent progress at the top would soon prevent it all the way down.
Occupy London then goes on to call for money printing to help the homeless:
....housing is increasingly unaffordable and the social costs of homelessness are enormous. The Bank of England should use quantitative easing, not to buy gilts in the forlorn hope it will stimulate the economy but to fund housebuilding. This could serve the triple purpose of easing the housing problem, boosting construction and raising confidence in the economy.
This is about as far from Hayek as you can get. Hayek won the Nobel Prize for explaining how money printing leads to the business cycle and price inflation!

Second, Occupy London tells us that housing is increasingly unaffordable.

What the hell do they think is going to happen if the Bank of England prints more money?!

Here's more wacky central planning type thought from Occupy London, which indicates that they don't understand that wages are set by supply and demand:
We are also looking at the feasibility of directly linking executive pay with average or minimum wages in the company, or even in the country as a whole.
They obviously have no clue as to what distortions this will have. If I am an executive where my salary is tied to the average wage of my employees by some kind of formula, then my incentive is to fire all low paying workers and focus the company only on the type of business that requires high paid help. It's a prescription for massive unemployment.

Bottom line: The Occupy London group needs to study the flaws in their thinking, rather than make the absurd claim that Hayek's thinking is leading them to a multitude of central planning ideas.

In other words, the "economics working group" needs to crawl back into their tents and read more. They clearly have no understanding of Hayek, or capitalism for that matter.


  1. Not only is specific knowledge disbursed, but so are values. They vary and are not universal or "scientific" since all people are different. Who determines what's "EQUAL?" It is an absurd idea that you can come up with one final definition of equal - even if we all agreed that that should be our objective, which we do not.

  2. 1. Many of our laws (e.g., licensing, zoning) drastically increase the cost of living, and restrict economic adaptability and price adaptation. This is especially true in recessions when prices are trying to reset and people are looking for work. As example, Corzine can hypothecate your money and may walk free while Joe Sixpack cannot even sell muffins out of his house, or cut hair.

    The point is that we could all live much more comfortably if we were not artificially protecting established capital, much less bailing it out. Our cost of living may be up to 50% too high.

    2. Getting to the stars requires too things; continued cheap energy (upon which civilization depends), and space innovation. Both of these advances require multiple approaches, and a great deal of failure. IOW, government monopolies will not get it done. It requires very rich entrepreneurs. That implies MORE inequality, not less.

    The basic point is that economies must advance, and our governments and economics are all based on some statist, equilibrium BS that freezes societies in place while they redistribute wealth instead of helping to grow it. That is a silly and stupid thing to do with a debt avalanche headed our way as SS and health care swallow us whole because we spent the money instead of seeking an ROI for it. Monetary policies are a ruinous answer as well. No society on the face of the earth became prosperous by denigrating their currency.

  3. Shows the growth of the liberty movement. Before they could ignore the Austrians but now they have to try and bend over backwards to make them seem in favor of their idiotic plans. Not surprising that they are looking to Hayek rather than Mises or Rothbard though. This is why Rothbard called out Friedman and Hayek when they went down the statist path. He knew that eventually we would start hearing "even Hayek supported such and such".

    1. "Why Mises (and not Hayek)?"

    2. These people can't say "Even Hayek said..." because they don't even know what Hayek even said.

  4. This isn't a bad thing -- this is a good thing! If the Occupy folks are even THINKING about Hayek and market economy, that's a huge step in the right direction. Yes, they are misguided and off base, but let's encourage them -- they seem to like working "like a market" so the next step is to get them actually acting like a market! Support small business and entrepreneurship among this crowd, show them how getting the government off their backs would aid the process, and they'll flip over our way.

  5. Who is "Occupy London" (is it a person, a group of 5 people, everyone who sleeps outside in London) and why no link to the source of the quotes attributed to "Occupy London"? Without knowing who "Occupy London" is in the context of this post, I don't know what to make of it.

  6. This kind of "fixing capitalism" thinking is along the same line of nonsensical thinking that is pervasive in many areas of academia, where they become so attached to their theories that when they are proven not to work in reality they find it unacceptable and rather then reformulating their theories, they instead try to redefine reality.

    Its pretty clear that what drives the Occupy movement is confusion on a grand scale. What creates much of that confusion is that so many of its members are young and have no other basis for understanding how the world works, then the fallacious social, political and economic theories they were taught during their education process. What drives the nutty stuff that comes out of this group is that they are unwilling to let go of the fallacious theories so instead they are trying to redefine reality to match what they've been taught.

  7. Dan, couldn't of said it better!

  8. FT is promoting its "Capitalism in Crisis" series of articles, one of which you take down in your piece.

    Larry Fink called it months ago, "markets like totalitarianism." The elite hired Mark Penn of Burson Marstellar and the boys at WPP to come up with these nonsensical memes, so they can turn totalitarian.

    The Rubensteins of the world push these lines to their advantage. One look at The Carlyle Group's IPO shows the elitists remain in charge.

  9. a business owner hired a man in the first hour of the day for a day's wage. Then, each succeeding hour he hired another, until at the last hour of the day he hired a man for a day's wage. Well, all the others complained, especially the one hired first. This is not fair!

    The business owner told him, go away and shut up. Can't I do with my own money whatever I wish? And is it not true that you are evil?

    1. Sure, you can do what you want with your property, so long as you respect the autonomy of others to do the same with theirs.

      It only penalizes such activities, said Mises. "The shopkeeper is free to be rude to his customers provided he is ready to bear the consequences. The consumers are free to boycott a purveyor provided they are ready to pay the costs. What impels every man to the utmost exertion in the service of his fellow men and curbs innate tendencies toward arbitrariness and malice is, in the market, not compulsion and coercion on the part of gendarmes, hangmen, and penal courts; it is self-interest."

  10. reality is to move forward we need a hybrid form of our current government or we need to consume someone with many resources soon.....a socialistic movement back by capitolistic stains would move us into the next centurys. Imagine if with our tax dollars we didnt let them get stollen but used them to buy the companys that are leaving our country....then we hired americans back to run the companys and then used the profits to put back into the country...the american people need to start getting greedy

  11. Hayeks quote sounds a masculin world where a man was a man and a hand shake was as good as a contract.....wake up!!!! these men do not exsist anymore....they have either been silenced or scorn and it no longer pays to do whats right. .....Remember when the american banker was almost like a priest...if you wanted sound advice you could count on these people....they do not exsist anymore....people are starving for an honest uncorruptable man to come and say no longer will we tolorate the waste and lies and thieves......believe me you feel safe now but you won't find yourself high enough on the ladder when the true stuff hits the fan....this is not about the money that you make...its about the money you take....and when i say you.....i say it to anyone who has stollen...lied...deceived.....and cheeted for gains...these sell outs will sell out your child you your wife anyone and anything.....there is a thing called clean capitolism...we just need to remeber and go back

  12. The Occupy movement is about frustrated people who are seeking economic freedom. Their movement has been hijacked by the "left", and they are being misled to believe that rubbish such as central planning will lead to better life. But you should not minimalize the entire movement or perpetuate the divide the separates the "left" and the "right" - rather, look for ways to join the Occupy movement with the Tea Party movement. There are similarities if you look beyond the obfuscations that the political/financial establishment hope to put over your eyes.

  13. Ive always been a fan of Hayek. Her work on from dust till dawn made my childhood so much better