The Failed Political Economy of Socialism

Peter Boettke

Econ 828/Fall 2004

20 September

On Reading Hayek

Who is his audience? The intellectual elite in the democratic west

What does he treat as given? The essential correctness of:

Smith’s invisible hand theory of cooperation and coordination within markets The scientific contribution of methodological individualism --- marginalism and subjectivism The Misesian argument on the impossibility of rational economic calculation under socialism

What does he argue? The intellectual left had misleadingly believed that they had discredited Smith by

highlighting the problems with monopoly and business cycles, and ignoring the modifications to classical doctrine that were made by marginalism and subjectivism in theoretical economics. Because they ignored these modifications to the doctrine they failed to understand Mises’s damaging critique of the socialist project. Socialism wouldn’t be abandoned therefore, but instead would be pursued with a vigor even in those countries which valued political freedom, such as the democratic west. The unintended consequence of this pursuit would be economic depravation and political tyranny. False interpretation of capitalist development False application of war planning to peacetime

How successful was he in communicating his message? Ideological icon Analytically ignored

Hayek’s Contribution to Public Choice Since Hayek assumes benevolent intentions

does that preclude him from making a contribution to public choice theorizing?

Choice and Consequences within the political process Interest groups and the concentration of benefits

and dispersed costs Hayek and Arrow on the limits of agreement Hayek and the logic of comparative advantage in

discretionary power

Hayek’s Contribution to Economics Market economy as an information processing

system as opposed to strictly an incentive system for allocating resources efficiently Use of existing knowledge and the discovery of new

knowledge Cognition and Epistemic direction in economic

research Subjectivism, context (time and place) and learning

Methods and methodology Abuse of Reason project

Science and Ideology Fatal Conceit versus Humility

Conclusion

Socialism is incompatible with: Economic progress Political Freedom

Democratic decision making Rule of law

Liberalism requires a reinvigorated defense after socialism: Beyond wooden conceptions of laissez faire International Federalism

Competition as a discovery procedure in the market, politics and life