Monday, June 29, 2015

F. A. Hayek and Why Government Can't Manage Society, Part II

Richard Ebeling emails:

Dear Bob,

I have a new article on the news and commentary website, “EpicTimes,” on, F. A. Hayek and Why Government Can’t Manage Society, Part II.”

Last week I discussed the historical context and significance of F. A. Hayek’s famous article on “The Use of Knowledge in Society,” since this year marks the 70th anniversary since its original publication in September 1945.

Hayek demonstrated why it was inherently impossible for central planner to manage a complex society better than leaving individuals free to make their own choices and decisions, because the essential and necessary knowledge to successfully plan and coordinate the actions of tens of millions is dispersed and decentralized in the minds of all the members of society. Only a competitive price system can integrate and coordinate that entire people do for their mutual benefit.

But Soviet-style socialist central planning has died. The world functions on the basis of various forms of market economies – both more or less regulated and controlled by governments. Are Hayek’s arguments still relevant in today’s world? The answer is yes., as I explain, now, in part II of this article.

The very importance of individual freedom and the competitive price system is shown when we look at: central bank manipulation of interest rates through monetary expansion; minimum wage laws that generate misallocations of resources, besides pricing the unskilled out of the labor market; and production regulations that prevent private enterprisers using their distinct localized knowledge of time and place in a changing market setting.

Thus Hayek’s message is as relevant now as when he penned “The Use of Knowledge in Society” seven decades ago.


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