ROAD TO SERFDOM

ECO 362

Dr. Watson

IS THE ROAD TO SERFDOM INEVITABLE?

NO The point of the book is to explain why there

is an incentive to take the next step once you’ve taken the last one

DOES HAYEK WANT LAISSEZ FAIRE

NO Government should:

Construct an environment to protect freedomCreate legal institutions and rule of lawCorrect market imperfectionsProvide a minimum income for everyone

HOW DO YOU PLAN INDUSTRY EFFICIENTLY?

The way to lower transaction costs for the government: create monopolies It’s hard to coordinate hundreds of small firms

Why we don’t like monopolieshigh prices and low quantity, but we can regulate

that Inefficiency because there’s no competition

Labor unions have moved philosophically towards collectivismOne of the greatest threats to freedom

WHAT DO WE DO ABOUT COMPLEXITY?

Socialist – complexity must be controlled Hayek – complexity means you can’t

understand it, leave it to local knowledge Voluntary exchange means both sides are

benefitting Price signals coordinate people into

“emergent orders” For more info, see his Nobel lecture: http://

www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1974/hayek-lecture.html

COALITION OF PLANNER WANNABES

Each one thinks, “Surely my policies will be followed” when they don’t have power.

Once they get power, we get fractures in government and infighting we can’t actually do everything, so we will have to make choices and priorities.

STATE AS A MORAL INSTITUTION

The state will have to have a policy on literally everything, prioritizing literally everything.

It is a moral institution not because it is benevolent (necessarily) but because it is going to explicitly make choices about what is good and not and enforce those choices on everyone else.

WHAT ARE THE LIMITS TO DEMOCRATIC GOVERNMENT? Government can only do those things we

agree on Create non-democratic institutions to carry on

the business of government without being bothered by elections and the people’s will and all those inconveniences.Sir Humphrey and Agnes Moorehouse

WHAT IS THE RULE OF LAW? Kant – Man is free if he needs to obey no

person but solely the laws. The same rules apply to all people evenly Equality in how the rules are enforced This does not mean that if there is not “rule of

law” that the government is doing illegal things

If the government create perfect income equality, it can only do that by destroying the rule of law

WHO PLANS WHOM? Hayek wants to see a lot of planning: you

plan for yourself, I plan for myself, they plan for themselvesSee the rap video

Collectivists want a small group of people planning other people’s lives

WHY DO THE WORST RISE TO THE TOP?

1. Ability to command the lowest common denominatorWho are foolish, illiterate, easily controlled, hate…

2. The more power is concentrated in any one place, people who want to use power will congregate

3. Willing to do bad things to get that power

EDUCATION IN EAST GERMANY UNDER

COLLECTIVISM I lived in East Germany for two years and saw

an old English textbook for 4th grade. One chapter was “A Holiday in England” where you wandered around explaining to people why socialized medicine is affordable if you don’t invest in the military; you watch and little old ladies and policemen smile at a passing peace parade and think to yourself “I wonder if they realize the peace movement supports the communist party.”

Students were told in school that God does not exist and told to pray for an apple. When it didn’t appear, government officials walked in and handed everyone apples, showing government>God.

BANDIT KING Hayek’s dictator is not in it for the money,

POWER The main people making decisions

In Hayek, only at the end Bates’ specialist in violence makes a choice

between being a predator or a guardian Hayek’s dictator is only a predator

Bates does not assume that level of planning and organization

The future matters to the Bandit King, the plan matters to the dictator

In both cases, it’s the people’s choice In BK, it’s a move from weak state to strong In Hayek, it’s a move from freedom to serfdom

Hayek – no challenge to the leadership, no other bandits

ACEMOGLU AND ROBINSON Planners are not inclusive

Socialism is HIGHLY extractive North Korea visitor to South Korea; East

German to West Germany If the economy isn’t free, the politics won’t be

If the politics aren’t free, the economy likely won’t be

Growth under extractive institutionsMoving from weak state to strong is Russia, moving from inefficient ag to industry

A&R are worried about poverty; H is worried about inequality

Checks and Balances are essentialFujimori in Peru – Media is essential

OKONJO-IWEALA She’s on the economic planning committee! Planning is made for all

What kind of planning?Mostly, Okonjo-Iweala’s plans were about the

rules Oil prices, sovereign wealth fund, restrict government

discretion, more rules

In the early stages, the plans are intended to benefit all

Support for the planning commission depended on their support for him as he perceived it

The larger coalitions are lowest common denominator

Okonjo-Iweala acknowledges fractured government, Hayek assumes it unites