The problem of inequality - Some thoughts by Friedrich Hayek

If you haven't noticed, one of the main goals of the Obama administration is the redistribution of wealth and equalization of income between the wealthy and the poor. This is not speculation. During the last campaign the White House authenticated a tape of the president previously promoting redistribution and only recently he has announced equalization as a major goal. His raising of the minimum wage for federal workers is precisely a move in that direction.

Certainly the goal is a noble one, born of not only sympathy for those less fortunate and perhaps even desperate. We find this throughout history. Solon, deemed one of the wisest, if not the wisest man of ancient Greece, certainly tried. It is a basis of many economic philosophies, including for centuries the Catholic Church (and before that the primitive church). It is the preeminent goal of Marxism, socialism, Jacobinism, collectivists, levelers and all like -isms. It is certainly one of the goals of modern progressivism or liberalism.

It should not be thought that these political movements or philosophies of the left have an end game different than most of those on the right. They often want the same things but have different views of how to get there. Libertarianism sometimes seems associated with the right or the left, depending on the issue. Certainly the libertarianism to which I claim to lean does not associate itself with either the right or the left, although the thinker I am considering today certainly seemed more opposed to the left, particularly socialism, while also eschewing the right as well as being dedicated to conserving while at the same time, in reality, being just a slower form of progressivism. For Friedrich Hayek, to whom I have referred many times in this blog, conservatism is necessary to slow many of the worst aspects of socialism, but is no answer itself.

I have read Hayek as close as my free time has permitted, in fact, transcribing hundreds of pages of his works word for word and reading others. Many people who know of him are familiar with only one book, The Road to Serfdom (TRTS), which is a political, not an economic or scientific tract, as are many of Hayek's work. I say familiar because I doubt many who have picked it up have actually read it.  Others know him from a video pitting an avatar of him in a rap battle against his economic nemesis (but, to some degree, friend), the far more famous and successful, John Keynes. TRTS is an excellent, if boring to read, book. TRTS is far from my favorite or, in my opinion, the most valuable of his works, from which comes the best explanation of capitalism, liberty and politics that I have ever read. The award would go to his Constitution of Liberty (COL), a much larger work where he goes much deeper in explaining the reasons for his beliefs. It is a deeply scholarly work. He is certainly not the only one to write on what we call libertarianism (he did not like the word, but preferred classical liberalism).

I find that many commentators who write about him do not understand him and associate him with Ayn Rand or other more "strict" libertarians (she didn't really prefer that title either - her philosophy was called Objectivism). But, though there are more similarities than differences, certainly those differences do exist.

I am not going to even begin to attempt in the little space I give myself here to make any attempt at a comprehensive explanation of Hayek or differentiate him from anyone else. But, I would like to delve into COL and transmit some of his thoughts on the necessity of their being different economic success. That too cannot be comprehensive, and the best thing I can do is encourage others to get a copy and read it slowly themselves. I don't expect that, but I will recommend it and it is the point of quoting him here. In reading Hayek, I was constantly amazed how his thoughts seemed timeless, as appropriate to historic periods as they are to modern times. I found that true in the selections I chose below. I plan on going back to him several times for the next few months on related topics. But, this selection should suffice for now.

The following is edited, that is, sentences plucked out of paragraphs, and often broken up with ellipses where I thought necessary in order to try to use his words to make a somewhat pithier explanation. I will, just to help a little, give a one short paragraph synopsis first:

It is necessary and better for poor people and nations that other people and nations are economically superior to them; this is the way the world progresses. To artificially stop it through coercion - directly by physical force or indirectly by law, not only impedes the natural progress and success of man in general, but particularly those who are poorer. I'll let him do the rest to explain why many people want Obama to "fail." Because, in order for us to succeed, and that includes those of whom he is most concerned, he must.

*****

Not all that is the result of the historical development of the West can or should be transplanted to other cultural foundation; and whatever kind of civilization will in the end emerge in those parts under Western influence may sooner take appropriate forms if allowed to grow rather than if it is imposed from above.

[O]ur freedom is threatened in many fields because of the fact that we are much too ready to leave the decision to the expert or to accept too uncritically his opinion about a problem of which he knows intimately only one little aspect. . . .

[I]f we want to convince those who do not already share our moral suppositions, we must not simply take them for granted. We must show that liberty is not merely one particular value but that it is the source and condition of most moral values.

Liberty in practice depends on very prosaic matters, and those anxious to preserve it must prove their devotion by their attention to the mundane concerns of public life and by the efforts they are prepared to give to the understanding of issues that the idealist is often inclined to treat as common, if not sordid.

Th[e] confusion of liberty as power with liberty in its original meaning inevitably leads to the identification of liberty with wealth, and this makes it possible to exploit all the appeal which the word “liberty” carries in the support for a demand for the redistribution of wealth. Yet, though freedom and wealth are both good things which most of us desire and though we often need both to obtain what we wish, they still remain different.

Above all, however, we must recognize that we may be free and yet miserable. Liberty does not mean all good things or the absence of all evils.

By “coercion” we mean such control of the environment or circumstances of a person by another that, in order to avoid greater evil, he is forced to act not according to a coherent plan of his own but to serve the ends of another. . . .

Coercion . . . cannot be altogether avoided because the only way to prevent it is by the threat of coercion. Free society has met this problem by conferring the monopoly of coercion the state and by attempting to limit this power of the state to instances where it is required to prevent coercion by private persons.  

The Socratic maxim that the recognition of our ignorance is the beginning of wisdom has profound significance for out understanding of society. . . It might be said that civilization begins when the individual in pursuit of his ends can make use of more knowledge than he has himself acquired and when he can transcend the boundaries of his ignorance by profiting from knowledge he does not himself possess.

Many of the utopian constructions are worthless because they follow the lead of the theorists in assuming that we have perfect knowledge.

In a sense it is true, of course, that man has made his civilization. This does not mean, however, that civilization is the product of human design, or even that man knows what its functioning or continued existence depends upon.

If we are to advance, we must leave room for a continuous revision of our present conceptions and ideals which will be necessitated by further experience. We are as little able to conceive what civilization will be, or can be, five hundred or even fifty years hence as our medieval forefathers or even our grandparents were able to foresee our manner of life today.

The scientific methods of the search for knowledge are not capable of satisfying all society’s needs for explicit knowledge. Not all the knowledge of the ever changing particular facts that man continually uses lends itself to organization or systematic exposition; much of it exists only dispersed among countless individuals.

The more men know, the smaller the share of all that knowledge becomes that any one mind can absorb.

Liberty is essential in order to leave room for the unforeseeable and unpredictable; we want it because we have learned to expect from it the opportunity of realizing many of our aims.

Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.

Man learns by the disappointment of expectations. Needless to say, we ought not to increase the unpredictability of events by foolish human institutions. So far as possible, our aim should be to improve human institutions so as to increase the chances of correct foresight. Above all, however, we should provide the maximum of opportunity for unknown individuals to learn of facts that we ourselves are yet unaware of and to make use of this knowledge in their actions.

The argument for the freedom of some therefore applies to the freedom of all. But it is still better for all that some should be free than none and also that many enjoy full freedom than that all have a restricted freedom.

Freedom of action, even in humble things, is as important as freedom thought. . . .

It is a fact which we must recognize that even what we regard as good or beautiful is changeable—if not in any recognizable manner that would entitle us to take a relativistic position, then in the sense that in many respects we do not know what will appear as good or beautiful to another generation.

It is, of course, a mistake to believe that we can draw conclusions about what our values ought to be simply because we realize that they are a product of evolution. But we by the same evolutionary forces that have produced our intelligence. All that we can know is that the ultimate decision about what is good or bad will be made not by individual human wisdom by individual human wisdom by the decline of the groups that have adhered to the “wrong” beliefs.

At most, we understand only partially whey the values we hold or the ethical rules we observe are conducive to the continued existence of society. Nor can we be sure that under constantly changing conditions all the rules that have proved to be conducive to the attainment of a certain end will remain so. Though there is a presumption any established social standard contributes in some manner to the preservation of civilization, our only way of confirming this is to ascertain whether it continues to prove itself in competition with other standards observed by other individuals or groups.

[C]ompetition on which the process of selection rests must be understood in the widest sense. It involves competition between organized and unorganized groups no less than competition between individuals. . . The endeavor to achieve certain results by co-operation and organization is as much a part  of competition as individual efforts. . . It is only when . . . exclusive rights are conferred on the presumption of superior knowledge of particular individuals or groups that the process ceases to be experimental and beliefs that happen to prevalent at a given time may become an obstacle to the advancement of knowledge.

The argument for liberty is not an argument against organization, which is one of the most powerful means that human reason can employ, but an argument against all exclusive, privileged, monopolistic organization, against the use of coercion to prevent others from trying to do better. . . To turn the whole or society into a single organization built and directed according to a single plan would be to extinguish the very forces that shaped the individual human minds that planned it.

The rationalist who desires to subject everything to human reason is thus faced with a real dilemma. The use of reason aims at control and predictability. But the process of the advance of reason rests on freedom and the unpredictability of human action. Those who extol the powers of human reason usually see only one side of that interaction of human thought and conduct in which reason is at the same time used and shaped. They do not see that, for advance to take place, the social process from which the growth of reason emerges must remain free from its control.

If it is true that evolution does not always lead to better things, it is also true that, without the forces which produce it, civilization and all we value—indeed, almost all that distinguishes man from beast—would neither exist nor could long be maintained.

It is not in this sense that social evolution can be called progress, for it is not achieved by human reason striving by known means toward a fixed aim. It would be more correct to think of progress as a process of formation and modification of the human intellect, a process of adaptation and learning in which not only the possibilities known to us but also our values and desires continually change. As progress consists in the discovery of the not yet known, its consequences must be unpredictable. It always leads into the unknown, and the most we can expect is to gain an understanding of the kind of forces that bring it about. . . Human reason can neither predict nor deliberately shape its own future. Its advances consist in finding out where it has been wrong.

Even in the field where the search for new knowledge is most deliberate, i.e., in science, no man can predict what will be the consequences of his work. . . It is knowing what we have not known before that makes us wiser men.

But often it also makes us sadder men. Though progress consists in part in achieving things we have been striving for, this does not mean that we shall like all its results or that all will be gainers. And since our wishes and aims are also subject to change in the course of the process, it is questionable whether the statement has a clear meaning that the new state of affairs that progress creates is a better one. . . The question whether, if we had to stop at our present stage of development, we would in any significant sense be better off or happier than if we had stopped a hundred or a thousand years ago is probably unanswerable.

There can therefore be little doubt that Adam Smith was right when he said: “It is in the progressive state, while society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the labouring poor, of the great body of people, seems to be happiest and the most comfortable. It is hard in the stationary, and miserable in the declining state.

[N]ew knowledge and its benefits can spread only gradually, and the ambitions of the many will always be determined by what is as yet accessible only to the few. It is misleading to think of those new possibilities as if they were, from the beginning, a common possession of society which its members could deliberately share; they become a common possession only through that slow process by which the achievements of the few are made available to the many. This is often obscured by the exaggerated attention usually given to a few conspicuous major steps in the development. But, more often than not, major discoveries merely open new vistas, and long further efforts are necessary before the new knowledge that has sprung up somewhere can be put to general use. It will have to pass through a long course of adaptation, selection, combination, and improvement before full use can be made of it. This means that there will always be people who already benefit from new achievements that have not yet reached others.

Progress at such a fast rate cannot proceed on a uniform front but must take place in echelon fashion, with some far ahead of the rest. The reason for this is concealed by our habit of regarding economic progress chiefly as an accumulation of ever greater quantities of goods and equipment. But the rise of our standard of life is due at least as much to an increase in knowledge which enables us not merely to consume more of the same things but to use different things, and often things we not even know before.

[T]he new things will often become available to the greater part of the people only because for some time they have been the luxuries of the few.

A large part of the expenditure of the rich, though not intended for that end, thus serves to defray the cost of the experimentation with the new things that, as a result, can later be made available to the poor.

Even the poorest today owe their relative material well-being to the results of past inequality.

The contention that in any phase of progress the rich, by experimenting with new styles of living not yet accessible to the poor, perform a necessary service without which the advance of the poor would be very much slower will appear to some as a piece of farfetched and cynical apologetics. Yet . . . that is fully valid and . . . a socialist society would in this respect have to imitate a free society. It would be necessary in a planned economy (unless it could simply imitate the example of other more advanced societies) to designate individuals whose duty it would be to try out the latest advances long before they were made available to the rest.

In the long run, the existence of groups ahead of the rest is clearly an advantage to those who are behind, in the same way that , if we could suddenly draw on the more advanced knowledge which some other men on a previously unknown continent or on another planet had gained under more favorable conditions, we would all profit greatly.

[E]ven countries or groups which do not possess freedom can profit from many of its fruits is one the reasons why the importance of freedom is not better understood.

At any given moment we could improve the positions of the poorest by giving them what we took from the wealthy. But while such an equalizing of the positions in the column of progress would temporarily quicken the closing-up of the ranks, it would, before long, slow down the movement of the whole and in the long run held back those in the rear.

The individual does not have it in his power to choose to take part in progress or not; and always it not only brings new opportunities but deprives many of much they want, much that is dear and important to them. To some it may be sheer tragedy, and to all those who would prefer to live on the fruits of past progress and not take part in its future course, it may seem a curse rather than a blessing.

The changes to which such people must submit are part of the cost of progress, an illustration of the fact that not only the mass of men but, strictly speaking, every human being is led by the growth of civilization into a path that is not of his own choosing. If the majority were asked their opinion of all the changes involved in progress, they would probably want to prevent many of its necessary conditions and consequences and thus ultimately stop progress itself. . . This does not mean, however, that the achievement of most things men actually want does not depend on the continuance of that progress which, if they could, they would probably stop by preventing the effects which do not meet with their immediate approval.

Regardless of whether from some higher point of view our civilization is really better or not, we must recognize that its material results are demanded by practically all who have come know them. Those people may not wish to adopt our entire civilization, but they certainly want to be able to pick and choose from it whatever suits them.  We may regret, but cannot disregard, the fact that even where different civilizations are still preserved and dominate the lives of the majority, the leadership has fallen almost invariably into the hands of those who have gone furthest in adopting the knowledge and technology of Western civilization.

At some future date . . .we may again have it in our power to choose whether or not we want to go ahead at such a rate. But, at this moment, when the greater part of mankind has only just awakened to the possibility of abolishing starvation, filth, and disease; when it has just been touched by the expanding wave of modern technology after centuries of millennia of relative stability; and as first reaction has begun to increase in number at a frightening rate, even a small decline in our rate of advance might be fatal to us.