The Road to Serfdom (1944) – F.A. Hayek, Chapter 4 – The “Inevitability” of Planning

  • Few central planners even claim that planning is desirable. Most of them just say we’re forced to do it due to technological changes that can’t be reversed or prevented. The argument has little explanation behind it & is just repeated until it’s an “established fact”. This argument has dominated policy through repetition.
    • They claim that technology has made competition impossible. We’re left with 2 choices – production by private monopolies or direction by government.
      • Based on Marxist idea of “concentration of industry”
    • We’re not disputing growth of monopoly & restriction of competition as facts. We’re disputing that it’s a necessary consequence of technology. It could just be the result of policies pursued…
  • The claim that the monopoly is superior to the small firm is due to the efficiency of mass production. It causes decreasing cost per unit & large firms can take advantage of the efficiencies & small firms will die off because they can’t. That’s just one effect & not a complete picture.
    • The superior efficiency & economies of scale don’t necessitate monopolies & the abolition of competition. That is only done through collusion & promotion through public policy. If these are reversed, the competition can be restored.
    • Monopolists regularly ask for government help to establish control. There’s nothing inevitable about competition.
    • If monopolies were the result of advancing technology, we should see them first in the most advanced countries. But they appeared in younger industrial countries like the US & Germany.
      • The governments protected monopolies from competition by also regulating price & quantity, & that led to the creation & maintenance of monopolies.
      • German & American thinkers & industrial men pressed for highly protectionist policies due to what they saw as a “representation of universal tendency” toward monopolies being more efficient.
      • This was a result of deliberate policy. England, until 1931, remained competitive. Since then it has turned to protectionism & the growth of monopolies has boomed.
      • To claim this had anything to do with technology or competition is absurd.
    • Monopolies grew despite the public’s preference for competition. In Germany, suppression of competition was an explicit goal of policy to support “planning”.
  • Central planning claims to solve problems created by the modern industrial society.
    • Problems in modern towns are caused by contiguity in space & are said not to be able to be handled by competition.
      • These aren’t an argument for central planning. They just show how hard it is to coordinate anything.
      • The argument is made out of complete ignorance of how competition works. It requires understanding of how complex division of labor is under modern conditions – only competition can coordinate it. There’d be no difficulty about efficient control if conditions were simple. But it’s not possible to get a complete view to make central planning a good idea. Therefore, we must abandon the idea of central planning in favor of de-centralized coordination through competition as the most efficient way.
      • This is exactly what competition does to the price system. No other economic system can do that. It enables producers to adjust activities to what others are doing.
        • The more complicated things get, the more dependent we become on the impersonal mechanism of the price system.
    • If we had to rely on central planning, our society & industrial system would never have reached the level of differentiation, complexity & flexibility it has now.
      • Division of labor owes itself & effect to society by its reliance on the fact that it didn’t have to be created consciously.
  • Another theory connects growth of monopolies with technological progress using arguments opposite to what’s been said above. It’s also very influential.
    • Claims it’s impossible to make use of technological progress unless monopolies are protected from competition.
      • Larger companies can benefit from economies of scale & consumers can benefit from buying from one producer because it has all consumers on one uniform product or service (e.g. electricity & gasoline).
      • But the claims suggest we must choose between low prices & a wide range of choice.
        • It’s not clear that this is even true. But it’s possible by compulsory standardization or prohibition of variety.
      • Where is the connection between technological progress & central direction? We would be forced to choose between some minor progress today coupled with the freezing of technology, & taking away our freedom to choose. By foregoing present advantages of something slightly cheaper in favor of freedom of choice, we can actually take advantage of improvements of the product’s quality & the technological progress to come to drive costs & prices down.
    • Technological progress is often present as exterior to us as if it were something that compelled us to use new knowledge but only in a certain way. Why should we have to use it to take away our freedom?
  • The movement toward central planning is the result of deliberate action & there are no external necessities which force us to it.
    • Critics of the planners should remember that every single technological idea could be realized within a short time if it was the sole aim of humanity. But there’s an infinite number of good things in the world & we can’t achieve all of them – in fact, we can only hope to achieve a few of them imperfectly in our lifetime.
      • In order to achieve any of these things in a planned society, the planners would have to force the whole of society to value the objective enough to get it achieved.
        • German & Italian roads are often pointed to as an example – not possible in a liberal society. Technical excellence out of line with general conditions is evidence of misdirection of resources.
  • The illusion of the specialist is that in a planned society he’d secure more attention to objectives he cares about.
    • We all think our personal preferences for things in society aren’t person at all. But the more controlling members of society think that in a free discussion among rational people, they’d be able to convince others that their goals are the right ones.
    • It seems that the adoption of the social planning they clamor for can only bring out the concealed conflict in their aims. That’s because they don’t all agree in what the right thing to do is.
  • “Planning’s” popularity is due to the fact that it’s only an ambition & unites all single-minded idealists who devote their lives to a single task. It’s the result of a limited view of society, not a comprehensive one.
    • The men itching to plan society are the most dangerous because they want to sacrifice people’s freedom for the sake of their pet ideals.

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