Book Review: “The Road to Serfdoom”

Hayek makes the case that economic prosperity and peace require a respect for Rule of Law and private property.  Rule of law, to quote Hayek: “Stripped of all technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand – rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge.”  He then goes on to say, “It cannot be denied that the Rule of Law produces economic inequality – all that can be claimed for it is that this inequality is not designed to affect particular people in a particular way.”  In other words, he advocates for equal opportunity, not equal outcomes.  He quotes Kant and Voltaire, “Man is free if he needs to obey no person but solely the laws.”The last 100 pages of the book is an in-depth analysis of what happens when good people decide to fix society by planning for equal outcomes.  There’s a long section being very sad at how hoodwinked the German former middle-class have been by the concepts of socialism.  He plans for a future return to peace and prosperity after World War II, showing huge amounts of optimism considering this was written between 1939 and 1941, when the outcome was far from certain.

But the first 100 pages are straight economic philosophy, wisdom for the ages.  He is so well-read and brings so many things to bear that I feel like I’ve just done another graduate course in economics and political philosophy.  For example, one chapter revolves around Hayek’s interpretation of de Tocqueville’s quote: “Democracy and socialism have nothing in common but one word: equality.  But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.”  Don’t worry, these are not trollish assertions.  He dives deep into every thought.  It took me weeks to get through this book.  I read it with a highlighter and a pen in my lap, alternately underlining sections and making notes in the margin.  This is meaty stuff, not the work of a Sunday Morning political pundit.

Another subject that had meat was “freedom.”  He writes:

Hayek understands the ones I call zombies very well.  Whereas I object because they can only hold one concept in their heads at one time, he refers to them kindly as “single-minded idealists”.  Whereas I am frustrated because they never balance the costs of what they’re asking against the benefits, he says, “In his anxiety to escape the irksome restraints which he now feels, man does not realize that the new authoritarian restraints which will have to be deliberately imposed in their stead will be even more painful.”  He gets to the heart of it by sympathetically noting “that in a competitive society most things can be had at a price – though it is often a cruelly high price we have to pay…”  he then goes on to say that the appropriate person to determine which things you are willing to sacrifice in order to obtain other things, in other words, your specific values – is you.  But he understands that people don’t want to make choices, they want only good and never bad.  “People just wish that the choice should not be necessary at all.  And they are only too ready to believe that the choice is not really necessary, that it is imposed upon them merely by the particular economic system under which we live.  What they resent is, in truth, that there is an economic problem.”

There are some interesting things in the book about what I’d call “conservation of power”, in the sense that you don’t obliterate the power of the wealthy by giving it to the oligarchs, you just give the socialist planners the power instead.  He talks a bit about morals and how they are a matter of individual action, not corporate actions.  People behave much worse in corporate bodies than person to person, in essence.  He explores this subject a bit in relation to central planning issues, and made me think quite a bit about the way we view economic winners.  Writing around 1940, he says, “The younger generation of today has grown up in a world in which in school and press the spirit of commercial enterprise has been represented as disreputable and the making of profit as immoral, where to employ a hundred people [without coercion] is represented as exploitation but command the same number as honorable.”

Hayek came to the same conclusion as I have regarding universal health care and safety nets in general: they need to be available for all, but at a very minimum level.  He refers to this as “security”:

Lest you not catch the issue here, it is impossible to give people the level of security a person thinks he deserves.  The best you can hope for is to give everyone some security against “severe physical privation.”  Hayek diverges from Libertarianism here: he thinks that government DOES have a role to play in that baseline level of security, just as I do.  And he’s thinking internationally, too.  You think you deserve two cars and air conditioning?  How do the workers in Laos feel about having to work 20 hours at their wages to get what you only have to work 2 hours to get?  Who says the First World standard of living (in 1939!) is the one that gets to prevail if equality of outcomes is desired?  He says, “Until I find a sane person who seriously believes that the European races will voluntarily submit to their standard of life and rate of progress being determined by a world parliament, I cannot regard [a push for world economic order] as anything but absurd.”