His contribution to social science is his focus on distributed information in economic production. Think about how decision-making is distributed in capitalist economies: bankers, investors, asset managers, producers, distributors, retailers, brokers, executives, corporate planning departments, middle managers, marketing departments, advertising, etc. Just imagine trying to replicate all that effort with a few office buildings' worth of planners in Moscow (Compare that to just Wall Street!). You can't run an economy without enough planners.

Hayek never tells jokes. I think if he had any sense of humor at all it might have occurred to him that designing the perfect society without planners (or much democracy) was certainly a kind of planning. He's like the whiteboard in "Office Space" that says "Planning to Plan" except it says "Planning to not Plan" and it's three books and 700 pages long ("Law, Legislation and Liberty").

Don't corporations have growth targets and multi-year plans? Don't they (mostly) have a top-down management structure, where freedom of action and collective intelligence are constrained the further you get from the Central Committee (also known as the C-suite)?

Don't corporations regularly do incredibly stupid, naive, uninformed, and self-destructive things that would be impossible if the kind of distributed intelligence claimed in this article was a reality?

Are corporations any better at constraining the effects of toxic self-promoting and self-aggrandising individuals who talk a good game but are either incompetent or actively destructive?

And so on. It doesn't really matter that Hayek is misunderstood and (mis)used for free market propaganda in the same way that Adam Smith is.

What matters is that the existence of true freedom of thought and action is debatable in any culture which considers that kind of propaganda a necessity at all.

That said, planning on top-level is still needed and still done. The point of setting up feedback loops isn't to let them run unchecked, but to make it easier to control the whole system (including keeping it stabilized). Just like it would be stupid to build a thermostat without input, having the temperature be determined by the point at which the materials it's made of start to "sweat", you don't want to leave market totally unchecked, doing whatever the hell it wants. Governments still get to influence the market, the same way a temperature dial influences the thermostat.

--

[0] - as performed by humans with pen and paper; I don't see a reason why a centralized planning scheme could not work better than capitalism if performed by optimization algorithms in a hyper-connected world.

One very Hayekian (Austrian) reason is that you won't have [very useful] data on consumer preferences. The price system will aggregate this effectively. You can't really poll for this, but purchase decisions will reveal it.

UPDATE: And this applies not just at the consumer level, but in the decisions firms make regarding their supply chains.

Maybe I prefer Fuji apples, but only slightly; I'd be perfectly okay with a Nashi pear too, or if there's a shortage of Fuji apples, a Royal Gala.

Maybe a frost has reduced Fuji apple production; it would make sense for Fuji apples to be allocated first to the people who really prefer them, and then if any are left over they could come to people like me.

> If you want one brand of apples over the other, one brand's products_distributed variable increases by one.

Right, so how do you capture my "sure, a Fuji apple, but only if there's plenty"?

In a price system, it's easy: The price of Fuji apples fluctuates based on supply and demand, and I'll purchase the fruit based both on my internal, ever-changing preferences and the price. Regardless of the changing relative scarcity of Fuji apples, I will, apparently magically, end up with the fruit that more efficiently matches my wants and needs with the global fruit supply.

And this works even if you scale it up to 7 billion people and millions of products. That's a very difficult trick to match!

(And keep in mind, we also need to make decisions about distribution, stock levels, what apple types to grow, how much land to allocate to orchards, how much fertilizer to use, where to locate orchards to maximise growing season but minimise fuel usage for transportation. Every resource we have is limited in some fashion, often sharply so, yet our wants and needs are effectively boundless.)

Other than the fact one of them scales incredibly, has been proven to work in practice, has a strong theoretical basis, and the other has none of those and is entirely different in every way...

...yeah, they're very similar?

> Don't corporations have growth targets and multi-year plans?

Many corporations are managed internally along non-market ways (ie, socialist, bureaucratic, etc.), yes.

We're looking at a higher level: The entire market for copper, the entire supply chain for pencils, or the economy as a whole. At that scale, growth targets and multi-year plans do not work, have never worked, and will probably never work.

> Don't corporations regularly do incredibly stupid, naive, uninformed, and self-destructive things that would be impossible if the kind of distributed intelligence claimed in this article was a reality?

Of course. But the market as a whole works around it. At a big picture level, we don't know how to make companies that never do bad things, but we can create a system where bad companies are (mostly) starved of funds and killed off, whole good companies are (mostly) rewarded and allowed to grow. A planned economy also doesn't know how to stop companies (or the equivalent economic unit) from doing bad things but also can't allocate resources from the bad companies to the good ones. It's strictly inferior.

All the rest is just the natural result of cybernetic laws, such as the law of requisite variety: the controlling element has to be as complex as the system it controls. Under capitalism there's no limit to the complexity of the management system, because it's decentralized and dynamic; every grocery store has a full-fledged human brain working solely for the benefit of the store. Under communism the complexity of the central planning unit simply cannot match the complexity of the capitalist management system. There's an interesting quirk though: the governing system cannot be overthrown, so instead of the growing economy replacing the inefficient controller, the inefficient controller simplifies the economy. The defining characteristic of all communists societies is that their economy and technology are very primitive (aside from few selected branches). They kind of flew to the space, but you cannot buy decent underpants :)

When governments collapse, a lot of people tend to die.

Yes. IDK if Hayek addresses this or not, but Coase has a very good (and short) little book on the theory of the firm where he goes into exactly that. Basically, there are transaction costs to going to the market. So sometimes it's worthwhile to lose market feedback and centrally plan things.

Yes, and for the most part they are driven by the requirements of a relatively small community of fund managers and so-called activist investors.

The other things you list sound right to me. It's been a few decades since I actually read Hayek. For those who haven't read Hayek, I definitely recommend it.

"the freedom of the individual by no means need be extended to give all these freedoms to organized groups of individuals, and even that it may on occasion be the duty of government to protect the individual against organized groups."

https://goo.gl/JnftDO

You can see from the essay why a lot of right-wing American businessmen were disappointed in Hayek.

I think I got more out of John Gray's "Hayek on Liberty" than reading Hayek in the original. Look for it on libgen.

That seems very consistent with typical free market libertarian stand. I haven't seen any libertarian loving socialized medicine or unemployment benefit. Are you confusing Libertarianism with something else perhaps ?

We know that exchange is just one more activity that humans do, but, historically, in the thousand of years context, it was not fundamental.

We could argue that in the palaeolithic the social organization had little to do with markets. We could argue that in the neolithic, the social organization was, in most cases, hierarchical and top-down.

So, the implicit assumption of markets as the 'natural state' of human organization has not real basis. Even money is an invention of the state.

The idea that markets are powerful tools don't need to be defended. It's the idea that markets know what is better for us what many reject.

It's like saying that we should just start the lawnmower and leave it to decide what to cut. Then, when we don't like the garden, we have to accept it's for the best, because if a better garden was possible is what we would have.

I would agree. I don't think such a general statement is valid.

> Even money is an invention of the state.

This I highly disagree with. I think the evidence is quite clear that money was independently arrived at both by state and by trade. It depends a bit on how you define it, but I think no other conclusion is possible.

> It's the idea that markets know what is better for us what many reject.

I don't understand who is making that argument.The hole point of Hayek is that you can follow your own goals and as long as you are in a market structure you will be helped in doing so.

If with 'us' you mean a state by democratic rule then the matter gets more complicated because its not at all clear that the outcome of the democratic process is a better 'aggregation of wills' then a market process.

Money as debt, that I would argue is the modern conception of money, as opposite to an asset (like cigarettes in a prisoners camp or gold), comes from the state.

For examples of this I would recommend the book "Making Money: Coin, Currency, and the Coming of Capitalism" by Christine Desan.

Also, accounting (and maybe even numbers and writing!) were invented initially as a way as registering debt in Mesopotamia by what today we would call 'the state'

>> It's the idea that markets know what is better for us what many reject. >"I don't understand who is making that argument."

I don't understand what you say here. Maybe I misunderstand, but it's not the whole point that markets deliver better solutions for everybody that any kind of central planning?

I'm not sure how what I mean for 'us' is difficult to grasp. Human societies?

You can also keep accounts in your head. The concept stays the same if you write it down or not.

If the notes you are circulation are IOUs for that good then that does not change the underlying concept.

> Maybe I misunderstand, but it's not the whole point that markets deliver better solutions for everybody that any kind of central planning?

Markets come about as soon as you have property rights. Property rights come about in many ways (I have other comments in this thread making this point).

When you of course go impose a property rights solution on a society then that is of course a form of central planning.

So I would say again, you can have both, you can central plan a market, but not all markets are centrally planed.

And apparently the notion of debt exited long before the notion of money. And even afterwards money was something used between individuals that didn't know each other (different tribes effectively).

[1]http://nakamotoinstitute.org/shelling-out/

It may or may not increase the status of the borrower at the same time. As long as the lender's status and standing are increased, either outcome is acceptable.

But if the status of the borrower increases while the status of the lender is decreased - because of a "default", or some other outcome that damages the lender - the transaction is considered morally offensive.

Banks are simply professional lenders. If the transaction were purely numeric and not political they'd be peripheral to the economy instead of central to it.

This is question begging to say the least. Political obligation [0] is "the moral duty to obey the law". Debt is money owed to someone [1]. Is that a political obligation? Yes, if the laws concern themselves with debts. But what if the law didn't concern itself with debts do you cease to owe money to someone? Not if they are able to enforce the contract of the debt in some other manner.

> Banks are simply professional lenders. If the transaction were purely numeric and not political they'd be peripheral to the economy instead of central to it.

Yes, state intervention in money markets is of monumental importance in achieving the system we have now. But it wasn't always like this and those systems were far from peripheral [2]. Free banks put themselves in debt every time they issued currency and the state was absent from the interactions.

To clarify, I'm not advocating against the state's importance in defending debt money. The free banking days of multiple competing notes was one of volatility and disastrous crashes. What we have now is strictly better than before. But to say that fiat currency "comes from the state" as OP did is simply not a historical fact. Period.

0: https://plato.stanford.edu/entries/political-obligation/ 1: https://en.wikipedia.org/wiki/Debt 2: https://en.wikipedia.org/wiki/Free_banking

I think the idea they're getting at is that collective preference isn't always well defined / well-define-able.

You're aware of Condorcet's paradox, right?

(Generally, one expects a person's preferences to be transitive, I.e. , if you prefer a to b, and you prefer b to c, then it is generally expected that you will prefer a to c. However, if you have a collection of people, all of whom satisfy that property, and have the group vote on what the "group preference" is between each pair of options, the "preferences of the group" will not always satisfy the property.)

This, along with a number of similar things, seem to suggest that maybe, at least sometimes, there is no "group preference". That the group cannot be treated as if it is an individual with coherent preferences.

So, if "we" can't always be treated as an individual who has coherent preferences, then maybe there's no coherent way in which "we" prefer something else to what the lawnmower does, in some cases.

Now, maybe in many practical cases, this isn't an issue. Idk. I mean, it certainly seems like humanity would "collectively prefer" not to be destroyed by nuclear war, or tortured to death, or whatever. Maybe even for most important things. I think the question would then be "in which cases are societies 'collective preferences' well defined, such that there is an achievable outcome which is 'collectively preferred' to what the market outcome would be?". This seems like an important question to me.

Another thing I find relevant is the VCG mechanism for social choice.

This is actually a kinda fundamental thing. I think one big (if not the biggest) reason people often talk past each other on such topics is that the concept of a society as an entity that is endowed with agency and preferences seems natural to some people and absurd to others, and it rarely explicitly comes up precisely because both beliefs are so fundamental.

Also, few people literally hold that markets provide "better solutions for everybody that any kind of central planning", at least in the short run. Trivially, a central planner who imposes a 1% tax on all incomes and keeps all proceeds for himself is going to be much better off with central planning :)

The existence of money precedes sovereign governments. The only prerequisite for "money" is consumption decoupled from the instantaneous moment of the trade (aka not direct barter) and human memories to keep track of them. That form of "money" has been happening for thousands of years. The prerequisite for "currency" is any item (coins, cigarettes, hotel loyalty points, scrips, etc) that's frequently used as an intermediate store of value to obtain other items.

However, a fiat currency requires a modern state to convince citizens to put faith into authorized pieces of paper instead of cattle/tobacco/yams/gold/diamonds/etc. If the citizens lose faith in government-printed money (e.g. Zimbabwe, Germany Weimar Republic), people will fall back on underground "organic money".

If people exchange goods for cattle just because they want some meat, than it's not money.

> Can you give me some examples?

Nick Szabo has a great history of money paper, "Shelling Out: The Origins of Money" with some examples.

http://nakamotoinstitute.org/shelling-out/

Printing money is not by itself "evil" except in the eyes of several internet libertarians, and there is a reason it has been so popular: it is the easiest way to raise some money fast. It will always result in inflation, that's how it is paid. If the sovereign is sensible, that could also be how it ends.

Hyperinflation is quite another matter though: it is destructive to everyone, it is always a result of bad policy (that is, pushing segniorage beyond its' limits), and when and how it kicks in depends exactly on faith.

If it is used as a unit of account and a medium of exchange, then those things (as much as gold and silver coins) are certainly money.

What makes it a coin is that someone measured its purity, and stamped it with their mark to underwrite said purity.

The IOU, if not attached to a specific name, is just as good and exchange medium as that coin. Even better perhaps because the value is not in the material itself, but in what it can be exchanged for.

Frankly gold is nothing magical, it is just a material that is very corrosion resistant. Thus making weights out of gold would allow them to stay accurate longer while being transported around.

The coin form is just for exchange, gold itself is the base money.

> The IOU, if not attached to a specific name, is just as good and exchange medium as that coin.

This is where you are wrong. Exchanging a IOU of a third party increases the trust relationship to a third party. That is useful to do, and that's why banking exists, but it is not inherent or required.

> Even better perhaps because the value is not in the material itself, but in what it can be exchanged for.

Yes. But again. It is still bound to the base money. Look into how historical note issuing banking system work, there are great resources on this. The banks exchange the gold when they get other notes. Then they further abstract and establish clearing houses that do multiparty exchange.

Note here that the relationship always grow complex and more trust is involved, but it is all based on the soundness of the underlying base system.

The IOUs, banking and all are simple not required for something to be money.

Fernand Braudel has some wonderful books on this subject -- the second and third volumes of Civilization and Capitalism (the storied Structures of Everyday Life is the first), plus his book on the Mediterranean in the age of Philip II.

    This makes me think how 
    exchange is deeply engraved 
    in human nature.

[1] http://icm.clsbe.lisboa.ucp.pt/docentes/url/jcn/ie2/0POWCamp...

It's not like they served different courses for various tastes there...

I suggest reading the R. A. Radford paper that I linked in another answer, it's really fascinating.

The problem for the early revolutionaries is that they either ignored or mistook these preconditions, and relied on authoritarianism to try and "hasten history." This obviously didn't work.

We could argue that in the palaeolithic the social organization had little to do with markets. We could argue that in the neolithic, the social organization was, in most cases, hierarchical and top-down."

~~~~~~~~~~~

you've made a bold statement but somehow eluded an argument.

how is exchange (i.e., trade) not a fundamental human activity? two people meet, one has something other wants, and vice versa. what do they do? ignore the situation? scheme about how to steal from the other? fight?

or do they trade? even in a hierarchical, pre-historic society, do the two just stare each other down, groping for a way to get what they covet without harm to themselves?

i might be wrong here, but might you be mistaking exchange (trade) for markets, and markets for capitalism, in an effort to strike at the underpinnings of capitalistic markets? or am i missing the crux of a valid but hidden argument?

When trying to convince people who are of a differing ideology of something, I think it is often useful to use the terminology they are familiar with, and to use their shiboleths. Speaking to people in the language of their group probably often makes them more willing to take your ideas seriously.

Like, you use the term "labor-time", which probably makes perfect sense to the people who already agree with the ideology you are promoting, but for people who don't already agree (who are the people you are presumably talking to), they likely don't already have "labor-time" as a clearly understood concept that they recognize as important. If you want them to recognize the idea of "labor-time", you might have to convince them that it is an important concept.

I'm sorry that your comment has been downvoted more than upvoted, when you were answering a question that I asked.

While I don't really agree with the conclusions, I do think this very much helped clear up your point of view, and also what you mean by those terms, and I thank you for it (and also upvoted you).

thanks

PS: it is nice to see an actual Marxist! :) Even though I disagree with them on most things (really just LTV, but you can't really take that one out, can you), they deserve my respect for having an actual theory, and for having genuinely progressive goals. Too much of the left wing is occupied these days by people with muddled, vaguely regressive ideas who have obviously never heard of historical materialism.

Marx wasn't a proponent of the LTV, he critiqued previous formulations of it and then made his own contributions to the theory that some aspect of the value of a commodity is determined by the amount of socially-necessary labour time applied to create it. Although I'm still learning myself, I haven't rejected it outright.

If I recall correctly, some work conducted by Cockshott showed validity of the LTV as a good indicator for the prices about which changes in supply and demand cause fluctuations of the UK market. I can't find it at the moment though unfortunately.

I think it's a real shame that sometimes points I make are downvoted without explanation. I try to be civil, though many people feel the need to downvote and not explain. I'm not going to refer to specific comments I've made, but I'm noticing that even bringing up the theory of exploitation or alienation is enough to gather downvotes.

Is HN a libertarian forum? I didn't think so.

And yes labor input determines cost, and in equilibrium cost and value are the same, and would be correlated in the data -- but reasoning from cost imo amounts to putting the carriage before the horse, and leads to all kinds of shenanigans with the "socially necessary" component...

It's significantly older than that; "capitalism" was described and named by socialists over 250 years ago, but labor markets of the type you describe are much older (the transition from feudal to capitalist economies began several hundred years before "capitalism" was named by its critics.)

What surprises me about Hayek was that he had a radical conception of decentralization, managing to talk about human society as though on-par with an ant-colony. IMO, this sort of anti-humanism is a necessary ingredient for overcoming anthropocentrism in our current thinking and pivoting towards ecological thinking, rather than purely rational thinking.

However, I think Hayek makes some tremendous mistakes in his thinking. Firstly, by reducing the Collective Brain to merely the market/price-discovery, he ignores the possibility that price-controls and/or social-demonization could themselves be components of that brain (perhaps fulfilling the function of an OS's kernel). Hayek talks much about there being no one person who can understand everything, but fails to critique himself. Secondly, he fails to see how the setup of a market has an influence on the kind of information that gets processed. In order for some thing to be exchanged on the market, it needs to be commodified in some way. This transformation of /thing/ into /commodity/ is where the social slight-of-hand happens, necessarily discounting some aspect of it's worth. An example is having two identical mugs, but one of those mugs being /mine/ and therefore special to me. That specialness doesn't exist if the mugs are a commodity, and perhaps that specialness fulfills an informational/computational function. In the end, the price is a result of a collective brain, but the market itself is a human construct. Facebook, Wikipedia, Reddit and 4Chan all structure their 'markets' differently, with incredibly different results.

Hayek had some good ideas, but he was too much of an apologist for the existing economic order for those ideas to really be useful. As technologists resurrect his ideas to apologize for the existing technological order, the same will likely be the case.

He does not.

> he ignores the possibility that price-controls and/or social-demonization could themselves be components of that brain

Again. He does not. He actually talks about this question in actual interviews that you can listen to.

> Hayek talks much about there being no one person who can understand everything, but fails to critique himself.

Again, there are literal interviews where he talks about this exact question.

And making a argument myself, his point is that you can not understand everything and that's why you can not centrally control it, not that he actually knows how everything works.

Plus, he has spent a lot of time on actually trying to figure out how this processes happens, and again, there are audio recordings of him talking about it.

> In order for some thing to be exchanged on the market, it needs to be commodified in some way.

False. Prices work for uniques as well.

> This transformation of /thing/ into /commodity/ is where the social slight-of-hand happens, necessarily discounting some aspect of it's worth. An example is having two identical mugs, but one of those mugs being /mine/ and therefore special to me. That specialness doesn't exist if the mugs are a commodity, and perhaps that specialness fulfills an informational/computational function.

That is exactly what the price mechanism is for. If the mug has special value to you then you can not sell it or sell it at a higher price. You are signaling to the 'collective brain' that this is a special mug. That's the exact point.

> In the end, the price is a result of a collective brain, but the market itself is a human construct.

Nobody argued against that.

http://hayek.ufm.edu/index.php/Main_Page

Do you have a suggestion of which one is good to start? I really want to dive deep into this guy.

Also, to be fair, theory travels. A lot of time it's more interesting to see how a concept is misused than applied correctly.

EDIT:

lol. it seems that yea, he thinks price-signals are the only thing.

https://www.youtube.com/watch?v=dV7-2Aua4_4&feature=youtu.be...

A couple of things to note.

These interviews with some leading schooners came about because Hayek was old and he had not given many interviews on video. So what you are seeing there is a very old Hayek who does not always get everything correct about the past (as always happens in these situations).

Second, Hayek changed his position on some topics quite a bit. Please don't watch the interviews directly assume his book that he wrote earlier are the same.

Hayek's arguments by nature are hard to write and talk about. Him not being a good speaker (or writer) makes this very hard. He himself multiple times tried to invent new words for concepts because he felt the words that existed did not capture the meaning. Mostly he was not successful beyond his own works.

If you are open to reading, I would suggest "Hayek's Challenge: An Intellectual Biography of F.A. Hayek". The auther is leading authority on Hayek and is the editor of Hayek Collected works.

Depending on what aspect you are interested in there are different more specialized books. For Hayeks own works, I think "Road to Serfdom" is a easy first read but its written for a very specific people in a specific context, that has to be understood. Some people recommend "Fatal Conceit" as a nice 'summary' for lots of stuff, but there are also some issues with it. I think also that the essay collection "Individualism and Economic Order" is required reading.

There are a couple podcasts that I can recommend, specially for beginners. One is with the author of the book above. They address different aspects of Hayek.

- Boudreaux on Reading Hayek http://files.libertyfund.org/econtalk/y2012/Boudreauxreading... (this gives a good overview about his books)

- Caldwell on Hayek http://www.econtalk.org/archives/2011/01/caldwell_on_hay.htm...

- Caplan on Hayek, Richter, and Socialism http://www.econtalk.org/archives/2010/06/caplan_on_hayek.htm...

- Larry White on Hayek and Money http://www.econtalk.org/archives/2010/02/larry_white_on.html

The point where left vs right were == USA pre-90s model vs soviet model should be considered anachronic by now, as most leftists, and even china, are not for central planning as a rule, and neither is USA capitalism as defensible now. This is a perfect example of false dichotomy(probably one of the most abused nowadays, because its necessary to do so to sustain a certain narrative).

Libertarians(which are called liberals everywhere else on the world, with libertarian meaning non-authoritarian leftist) defend private property and so they are completely for states, police and prisons by consequence. And if you take the theories as nature's truth and apply it leaving out politics you end up with dictatorships like Pinochet's Chile, where only the kernell of state violence remains because it is necessary to keep a system which is not able to satisfy humans needs of survivorship and self-determination(aka freedom).

I do plan to take a closer look at Hayek as this one seems like one who was actually interested in science, philosophy, and truth and seems to be an honest free thinker and not as much an ideologue, Nassim Taleb praises him, it seems the reason he's not taken so seriously in Academy is actually because his ideas refused to 'solidify' and provide hard models which would be seem as "more sciency"(I could be wrong, but seems it's one of the points Nassim makes, that a Science with uncertainty at it's core is better than one that tries to cargo-cult its way through).... But damn the undead arguments and mythologizing of 'market is god and good and pure freedom for all all in itself' must die already, lets live in the real world, shall we?

Edit: some spelling

That being said, I could have done without the left leaning politics === extreme, oppressive, authoritarian government bologna.

Allende was not as socialistic and not as much in control as Hayek thought. Since WW2 Hayek had a huge fear of democratic socialism turning into what we would now call stalisim.

This fear never really came to pass because there is to much vested interest in the markets, thus the change happens slowly. Most democratic countries realize that they have gone to far, and then go back.

Yet centralized control is the hammer that everyone turns to whenever there is a problem. Instead of figuring out the root-cause and actually solving problems the default instinct of all modern state-heavy economies is always to add more layers on control. And I don't mean the 'state' but people... I see it all the time on HN and Reddit too.

A perfect example of this recently is all of the calls for price controls in pharma - prices are a great example of distributed knowledge systems. Despite the fact research points to gov-backed monopolies being the primary cause for drug price fluctuations [1], sometimes increasing prices 2000% at a time. In any other market if a company increased prices even 25-50% they would put themselves out of business because a competitor would step in to offer a better price.

This was demonstrated recently with the Epipen controversy [2]. They would never have been able to jack their prices so high if they had any competitors, and there are companies dying to compete with them, but they have been stuck in the FDA 'backlog' for years.

Plenty of other research shows that price controls results in shortages. Just like the massive food shortages that have been happening since Venezuela enacted price controls on food.

Yet the argument is being characterized as the evil selfish individualism which permeates American 'capitalism' making these pharma CEOs jack prices up.

Of course not all regulation is bad. There are many externalities that can't be controlled in the market (pollution is the perfect example). But this immediate instinct to always turn to more centralized control with blind trust, while villianizing markets, is an unhealthy obsession IMO. People act like capitalism is the shining star of American culture but as far as I can see it is continually villianized in movies and pop culture to the detriment of society. While government is held to such low standards that we only expect mediocrity from them.

For example, in response to pharma prices, how about cleaning up the existing regulatory system so the FDA doesn't have companies in the backlogs for years? Or investing more capital so they have enough people to handle the load? Or are we just so used to inefficient government that we just expect them to not do their jobs well? But no, clearly the solution is to give them even more work to set prices for thousands of drugs.

I'm all for Hayek being taught in schools, maybe people would hold both markets to higher esteem and governments to higher standards. So we get better policy and new policy only when centralized control actually makes the most sense.

/rant

[1] http://khn.org/news/government-protected-monopolies-drive-dr...

[2] http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-dr...

Many forms of pollution can be addressed by property right systems and the law. Meaning, just like everything else.

There is a long history of rivers being divided up and pollution was handled just like if you throw waste into your neighbors yard. This is just one simple example but there is a huge amount of resources around this. There is a hole field called Economics&Law or Property rights economics.

Pollution of things like Oceans and and the Atmosphere can not be handled like that. Problem is, our current state system fails as well. The current system fails for the exact same reason, there is no system of property rights.

Of course we have states and they do both enforce and sometimes create rules. That is why people like Hayek and many others were not anarchists. The hole philosophy of classical liberalism is based around the idea of a small state to enforce these rights.

The problem is that the solution 'the state' is not a complete one.

We of course also know that property rights do exist and persist outside of state systems. Many different types of system can and do provide rights and have mechanism for enforcement.

It is a major field of study in both economics, for legal scholars and many others. There has been a lot of work on this question and it is a hard one to answer. One possible that one economist/legal scholar provides is that it is all about the Schelling point, you pick some point and commit to overreaction. Once you have this idea even two people on a empty island can establish property rights. So its about commitment and signaling.

We can easily find situations like this in real live. There are tons of example both now and historically. Common Law for example was not created by the state, but was in essence eventually enforced by the state. The first Stock market in Amsterdam was neither created, nor enforced by the state.

There is a hole lot to be talked about. To tie it back together with the original discussion. If we are talking about pollution protection in the current world, it would of course have to be either rules created by the state, or rules that evolve as they did in common law (in fact many rules already exist in British common law).

The state could set the limits for a pollutant but then let it be enforced by normal law enforcement, more like civil rather then criminal law.

P.S: Many classical liberals believe in Natural Law, but many also do not. This debate is still active and has not gone away.

The idea is that some rights belong to the person, and they end at the point where one person can do harm to another person.

Who enforce the natural law, then, if not the state?

That's a great question. It could be the State. It could be others. The Bar Association enforces standards and behaviors on lawyers, and thereby your right to practice law. Cisco enforces standards on it's engineers (I'm thinking CCIE, etc), and the rights that go with that.

Here's the rub, though. The State should be a mediator between two parties. If I say that you destroyed my yard, I should get recourse in front of an unbiased and uninterested 3rd party. It doesn't have to be the State. It could be anyone that we both agree is impartial.

Obviously, the State can take away those rights. That's different from giving you rights.

Same is true for anyone with a gun (equating death with losing all rights).

(I am strongly on the natural law side)

I would also make the argument that most of the time its the most efficient, but certainly not the only one.

First, people use the hammer of centralized control just as they sell after the market has taken a big fall - because of fear. In both cases, it's the wrong action. Fear and greed are the two major reactions that humans have, at it'e hardwired into our brains. Discussion is a much higher brain function that is easily overruled by those functions. Hence crazy regulations upon crazy regulations.

Secondly, the Epipen issue exists because of the FDA. There is no such thing as a free market for drugs - it is COMPLETELY controlled by the government.

Personally, I think the CEOs can set whatever price they want. Our response should be demanding that the FDA promotes competition instead of killing it. This would allow for more rational pricing. To me, in a free(er) market, drug prices would look like Intel chip prices - high at the beginning to offset heavy capital costs, and then lowering over time. Obviously patent protection comes into play, making it less free, but this could be addressed as well.

One other example that we're going to see play out in the coming months is the Dodd-Frank regulation. There are an amazing amount of constraints on banks, when many of them could be eliminated by two rules: 1 - a bank has to eat the first 20% of losses on a loan, even if it sells it; 2 - if your bank goes under, the top two layers of management cannot work in or for the industry for the next five years. That would largely get rid of the bad actor problem, since the punishment would be significant.

He is talking about government control of the economy.

Also this hole point about DARPA creating the internet is just as dishonest. First of all because nobody ever claimed government can never do anything useful, second of all the internet is what it is because of millions and billions of dollers invested in it by both governments and private companies, because of millions and billions of people putting their creativity in it.

The idea that nobody would ever had the idea of networking without the government is just insanity. We can clearly push forward the development of the internet, develop, adopt and implement new protocols today without the government. Even without government there would be some sort of system where we can discuss stuff online.

Right. In fact, is there any human group that don't have some kind of central planning?

Ironically, the only kind I can think of is the anarchist meetings where, somebody told me, nothing is never decided.

I would however also say that Hayek has more to say on the topic and that the parent comment mischaracterized Hayek's arguments.

Little triva, Coase was a student at LSE when Hayek was there in the 30s. They are two of the best and most important economists of this century, both should be studied in depth.

It's a bit of a different situation. Giant companies can still look to prices on the market to make decisions about how to use their resources. Central economic planning, as I understand Hayek to have meant it, means getting rid of market generated prices.

Having shortages of medication is a serious risk.

The need for price controls is usually caused by other problems... lack of competition/monopolies, a weak economy, lack of a proper social safety net for poor people to afford basic necessities, etc.

But my comment was hardly just about price controls. It is a critique of the default instinct people have to look to centralized control (typically regulations) to solve problems in a marketplace.

Wow. The most obvious counterexamples involve resource allocation during wartime.

But regardless that is an extreme rare example. Not what I'm talking about at all...

You are correct, it is a usecase for them.

Hayeks arguments from "Road to Serfdom" and later books has actually been absorbed in many arguments by political economists and political scientists as well. They are highly sophisticated works of political economy. Of course he often was not the first person to make many of the arguments. People reading the "Road to Serfdom" will quickly find that there are lots and lots of footnotes pointing to obscure Italian political economists and of course people like Hume, Smith and such.

Its kind of funny, in economics we talk about how oligopolies will move prices up. So if all our 'real world markets' are 'monopolistic oligopolies' why are they not moving up? In the majority of markets and globally speaking this simply is not the case.

Medical market in the US right now is a 80 year shit-show of epic proportion on all levels of government. In the markets that are related but far less controlled like different kind of eye surgery or all kind of plastic surgery we simply don't see the same pattern, in fact, there prices are falling.

P.S:

Also the term 'Late Capitalist' sound like you not only believe that history moves in stages, but also that you know when one stage will end.

Marx ideas were based on his limited knowledge of history that was available at his time and was in no way generalist. Marxist historians have since tried to rewrite much history to comply with these ideas, but happy they have mostly failed and historians have moved on.

>Its kind of funny, in economics we talk about how oligopolies will move prices up. So if all our 'real world markets' are 'monopolistic oligopolies' why are they not moving up? In the majority of markets and globally speaking this simply is not the case

Because the models themselves are fictional games, with little relation to the realities of global history or politics.

>Also the term 'Late Capitalist' sound like you not only believe that history moves in stages, but also that you know when one stage will end.

Marxists did a better job predicting the trajectory of Capitalism than any one else, so this doesn't bother me.

You can call things what you like as long as you admit that most prices don't go up most of the time.

> Marxists did a better job predicting the trajectory of Capitalism than any one else, so this doesn't bother me.

Sure. Like when Marx said that workers will become poorer and poorer? How about the time when he predicted socialist revolutions in capitalist countries and the only place the happened were poor farm based countries? When Marx predicted that the amount of firms would decrees but turn into monopoly, and now 200 years later we have more firms then ever before.

Marx economic works has been completely rejected by all modern economics. This was not because of some sort of hate for Marxism. He was actually quite a economics star at his time. Only once people started to pointed out the flaws in his system and he had no answer did the economics profession turn against him.

The tech industry is actually a quite good example of the collapse towards monopolies. Venture Capitalists siphon up innovation created by underpaid labor using the guise of entrepreneurship, funneling ever greater wealth and control into a dwindling number of corporate giants. Small firms that do survive sell services to them. And I don't even really have to make this argument, as it is the express ideology of people like Thiel.

The failure of socialism to develop in more advanced economies is the result of a violent, rightist empire that toppled any governments that moved democratically too far in this direction. Take Chile, for example...

Marxist economics have been intentionally discredited by US institutions to serve their political ends. That much is true. But there are plenty of modern Marxists economists in European and Asian institutions. The bought and paid for US economists in their cozy corporate think tanks are not the totality of economic thought.

What? That is absurd. Maybe it could be claimed that other people who were partially inspired by Marx made modern states, but that's about all.

> Hilariously, Hayek predicted that they would devolve into serfdom, which is what is actually happening in the country that hemmed closer to his ideology.

Clearly you have not actually read or understood Hayek. This often gets repeated but everybody that knows anything about Hayek understands that this is false.

> The tech industry

I'm not gone address this because its so clearly false. There is a huge industry with 100000s of firms all over the world. Also I work in a small tech company who sells to other firms of very different sizes.

> The failure of socialism to develop in more advanced economies is the result of a violent, rightist empire that toppled any governments that moved democratically too far in this direction. Take Chile, for example...

True to some extent, but also a convenient excuse. Chile for example was never Socialist, they had a Socialist president for a while, but that's all. All the places that went for into that direction destroyed themselves as well, the hole Soviet Block, Venezuela and more.

Marx btw never really defined how these systems should work. Other people did that based on what they thought Marx was saying.

> Marxist economics have been intentionally discredited by US institutions to serve their political ends.

False again. Marxist economics was already discredit wildly in Europe before US had many economists or institutions interested in economics.

> But there are plenty of modern Marxists economists in European and Asian institutions.

Again simply false. You can look at any indicators of economist opinions and you will see a huge majority of opposition everywhere in the world.

> The bought and paid for economists in their cozy corporate think tanks are not the totality of economic thought.

Again, Marx was already discredited before there really were think tanks. Eugen Böhm von Bawerk was not payed by JPMorgen, and neither were most other economist at the time.

I'm still waiting for Lenin to hang me with the rope I sold him.

Fun story, not sure if they made a profit.

If he would disagree and argue that government should save failed banks, then he would not be a Hayekian at all.

I have heard some interviews with him, and that's my interpretation.

https://en.wikipedia.org/wiki/Matt_Ridley

He was made a board member because his father had been a board member. And then he was promoted to chairman of the board. His academic training was in zoology but he wrote for the Economist.

How amazing that the free market in employees would produce such a coincidental result! That the most economically efficient person would be a relative of another board member!

For some (easy to understand) reason government have taking into their heads to 'save' these institutions, but you can hardly blame that on the market as a organisational principle.

Also, you are ignoring the Major Major Major Major who ran this bank and now lectures us about economics. If Hayek is the marginal figure he is, it is partly because of the Ridleys championing him.

By the way the hole argument that you are making goes back to a British guy 100 years ago (Walter Badget, often called "Lender of last resort"). You would be to discover that this guy was actually against the idea of saving bad banks, and even more he was against central banks in general. His argument was that if banks can not expand liquidity themselfs as they did before central banks, then the central bank must do it, BUT ONLY TO GOOD BANKS AGAINST HIGHLY SECURE ASSETS AT HIGH RATES.

Sadly his arguments have been turned around into something different by people who don't want to read his point for political reasons or simply don't understand them. Now its, 'if you let any bank fail, a domino-effect will destroy everything', this is simply false, most of the time, most banks are good. The problem is liquidity, and the central bank is in control of that, that its job. The domino effect only happens if the central banks fails, as the Fed did in 1930 and 2008.

I'm not in detail informed about this particular case in England. I made a general point about markets and governments.

" [..] authoritarian, top-down rule is not the source of order or progress, but a hindrance. [..]"

by the 5th Viscount Ridley.

(2) The 'reduction of collective intelligence to the price mechanism' objection (which is often a specific case of generic objections to dimensional reduction, including e.g. perceptron thresholds) is addressed throughout Minsky's Society of Mind[0], esp. the 'frames' concept.

(3) The article doesn't mention the benefits of localized knowledge (as opposed to the 'practical reality' of localized knowledge, which may be lamentable and/or fixable), which iirc Hayek does get into (or maybe some other Hayekians? more modern systems-oriented folks? can't think of a source at the moment). If some knowledge (for example, within a community of practice) weren't pretty strongly localized, then every knowable would be in one truly global variable space, and abstraction would be incredibly computation-intensive, and knowledge growth would be horribly O(n!), and all of thought would work like JavaScript (ZING). This is a stronger kind of localization than technical specialization (which just maps onto SOLID class design rather than variable space).[1]

[0] Beautiful html edition: http://aurellem.org/society-of-mind/ [1] Broad philosophical musing on this sort of thing: https://mitpress.mit.edu/books/bubbles

I thought that economists in academia were largely Austrian, which would certainly not position Hayek as Voldemort.

...

that must be a bumper sticker...

Democracy: One person one vote.

Markets: Each person has tiny micro-votes, and they can get more votes by supporting initiatives that pan out. One individual with millions of micro-votes can easily out-vote a million individuals with less votes.

It's interesting to see just how "cargo cult"-like the practice of voting has become in many places.

> One individual with millions of micro-votes can easily out-vote a million individuals with less votes

No. In a market there exist property rights that are designed to not work like that. If I own a simple pen, somebody with a billion 'votes' can come along and if I refuse to sell my pen that just that.

In a pure democracy, this is simple not the case. The rule of the majority is a real thing, if I have a pen and there are a majority of votes for me to be forced to give away that pen, I can do nothing.

This is of course in theory, in practice their is no pure form of either. However it es a extremely important thing to point out. It is the exact reason why you can run a economy with markets but not with democracy.

The more we shift to an economy where people "own" things via debt and rent, it really becomes a matter of best bids.

--

edit: It's also interesting to keep in mind that the original distribution of land wasn't equal. So much of libertarianism is predicated on ideals like "homesteading", but in practice most parcels of land were unequally distributed from the very beginning. This was never corrected, and continues to reverberate.

A pen is made out of natural resources.

> The more we shift to an economy where people "own" things via debt and rent, it really becomes a matter of best bids.

No, a rent is just a transfer of right of use but not right of ownership. Once you have stable property rights you can actually make renting practical, and that opens many more options. It does not fundamentally change the system.

> edit: It's also interesting to keep in mind that the original distribution of land wasn't equal. So much of libertarianism is predicated on ideals like "homesteading", but in practice most parcels of land were unequally distributed from the very beginning. This was never corrected, and continues to reverberate.

Nobody ever said that life was fair, certainty not the classical liberals. No system can go back in time and fix all the morally wrong thing to establish a perfect system and then role history forward. This is not Kafka DB.

The argument is that the best societies establish a property rights system and based on that develop further. That's the best we can do. If there are identifiable rights violation that we can 'fix' then this should of course be done. The issue of course explode in complexity with time.

Once upon a time, society was really really really unfair. Aristocrats ruled everything autocratically and justified it via divine right, etc.

Then stuff happened, people fought, and democracy came along. Many hailed it as a much more egalitarian form of decision making. We still pay a ton of lip service to the idea that democracy is amazing.

However, then more stuff happened, and now democracy is very very weak. We barely use it to make serious decisions, we collectively prefer to delegate to experts or markets, and decision-making power more and more blatantly now falls upon those who have cash.

This is varnished over by saying "the markets decided x". It's not even necessarily a bad thing, some believe the wealth was accumulated meritocratically and therefore it's better in the hands of those who know what to do with it.

However, it doesn't erase the fact that markets and democracy are opposed to each other. This doesn't mean one is good and one is bad, it just means that when it comes to making a collective decision about what to do with a resource, one cannot both do it democratically and according to market principles. It's one or the other.

Life isn't fair but we get to decide if we make it a bit fairer. The notion that the best societies limit themselves to a property right system, and not further, into an education and health and entertainment systems, seems like it's very much up for debate.

I see no reason why it's in society's collective interest to maintain a security system to uphold private property rights, and not others for other rights.

---

People always like to talk about how "the invisible hand of the market" led to this or that conclusion. Even if a greedy horrible butcher wants to gouge people, the competitive nature of the market will stop him. So, pretty clearly, the invisible hand stops evil-doers from doing so much evil.

However, what's also increasingly clear, is that the invisible hand also works in the opposite direction. That is, if you want to do better things that what the markets allow, if you're a particularly benevolent butcher, the same invisible hand that stops the bad butcher, will stop the good butcher.

The market has a logic of its own, both for good and for bad, and we need to collectively decide when and where we want to utilize it, and when we want to use some other decision-making system.

This very question is what is addressed with Henry George's concept of private property in land (aka Georgism, aka Geolibertarianism, aka geoism).[0]

To quote the Wiki page to tie this into the article: "Austrian economist Friedrich Hayek credited early enthusiasm for Henry George with developing his interest in economics."

https://en.wikipedia.org/wiki/Georgism

You may be able to run an economy thusly, but can you run a society in that way? Left alone, 'the market' will push people into extreme conditions to obtain means of sustenance, for example sweatshop labour. Meanwhile proponents will talk about 'freedom to leave' at any time, while ignoring the fact that there is a whole class of people essentially forced to sell their labuor-time to gather means of sustenance.

A sweatshop worker can leave, but then what? They probably have to find employment under someone else. That's not freedom. Not everyone has such strong resolve as you with your pen. For example media corporations can also be bought out by companies who don't like what's being said about them. Monopolies can be formed, reducing choice. Et cetera.

That's why Bill Gates and I can coexist in peace - we are both doing what we want, and neither is harming the other (unless you count Microsoft Bob, which was an affront on humanity!)

Seriously though, BillG can do whatever he wants. Once he does something that harms me, I will push back.

Likewise, democracy is about the free exchange of ideas, limited only by when you harm another person.

The idea that every transaction is strictly rational and voluntary is a fantasy.