The Road to Serfdom (1944) – F.A. Hayek, Chapter 6 – Planning & the Rule of Law

  • The Rule of Law is what distinguishes conditions of a free country & one with an arbitrary government.
    • Definition – government is bound by pre-announced fixed rules. It makes it possible to foresee with good certainty how authority will use its powers under certain circumstances & make plans based on that.
    • Discretion left to the executive wielding power should be reduced. While all laws restrict some freedom, under the Rule of Law, government is prevented from individuals by ad hoc action.
    • Within the rules, the individual can pursue his ends with certain on how the government will behave & that it will not frustrate his efforts.
  • Under Rule of Law, government confines itself to fixing rules & leaving individuals the decisions of what to do with their lives. Rules made in advance via formal rules.
    • Under an arbitrary government, government directs the use of means of production of particular ends.
  • In economic planning, government can’t confine itself to providing opportunities for people in general. It can’t tie itself down to general/formal rules. It must provide for the actual needs of people. It has to decided questions that can’t be decided by formal principles. When the government has to decide, its actions can’t be deduced from principles or settled well in advance. They depend on circumstances & it’ll always be necessary to balance one against another. But in the end, someone’s interest will come out on top & that will be “the law”.
    • The distinction between the 2 is important to see:
      • Rule of law is like the highway code – the rules of how to drive.
      • Arbitrary law is like telling people where to go.
  • It may seem paradoxical that under one system, we’ll know less about the particular effect of Rule of law so that social control is deemed superior because of our ignorance of precise results…
    • Economics – The state should confine itself to establishing rules applying to general types of situations ^ should allow individual freedom because only individuals concerned can full know their circumstances & make decisions based on that. But if the state’s actions are to be predictable, they have to be determined by fixed rules. If the state directed individual actions, the actions would have to be decided on the basis of all circumstances.
    • Morals/Politics – If the state is to foresee the incidence of its actions, it can leave those affected no choice. Whatever the state can foresee of the effects, the state chooses between different ends. If we want to create new opportunities, the precise results can’t be foreseen.
      • General rules v. specific orders must be operated in unforeseen circumstances. To be impartial means to have no answer.
  • When the precise effects of government policy for particular people are known, the government aims at them but it can’t be impartial. It has to impose its own values on the people & choose its own ends for them.
    • At this point, the law ceases to be an instrument to be used by the people & becomes an instrument of the lawmaker. The state then is no longer utilitarian machinery but a “moral” institution.
      • “Moral”, meaning an institution that imposes its views on all moral questions whether moral or immoral. The Nazi or any collectivist state is “moral” while the Liberal state isn’t at all.
    • It’s clear the planner didn’t necessarily have to use his own views bu the general conviction of what’s “fair” & “reasonable”. This idea is supported by experienced planners in specific industries, which are usually easy to see within a particular industry.
      • Those immediately interested in an issue aren’t always the best judges.
      • E.g. When capital & labor in an industry agree on a restrictive policy, it’s to exploit the consumers & to divide the spoils is pretty easy. The loss to the consumers is disregarded or not fully considered.
        • No general principle can be used.
      • In general, it’s hard to help one & not harm the other. In order to establish anything, you have to establish a complete system of values so that every want has a place in the system.
      • When planning gets more extensive, legal provisions need to be qualified, leaving more & more discretion to the judge.
        • Rule of Law had collapsed in Germany long before Hitler.
  • Planning necessarily involves deliberate discrimination between the needs of different people, allowing one man to do what another will be prevented from doing. A legal rule will be laid down on how well off particular people will be & what they’ll be allowed to do.
    • Rule of Law is regarded as the opposite as above. It’s the absence of legal privileges of particular people that safeguards that equality before the law.
    • The government deliberately aiming at material or substantive equality of different people is in direct conflict & is incompatible with equality before the law. Any policy leading that way will lead to the destruction of the Rule of Law.
      • Rule of Law produces economic inequality but it is not designed to affect particular people.
      • Socialists & Fascists have always protested against merely formal justice & object to a law that has no views on how well off particular people ought to be. They demand a socialization of the law, attack the independence of judges & support movements that undermine the Rule of Law.
    • For the Rule of Law to be effective, there should be a rule applied always without exception. That fact is more important than what the rule actually is – just enforce it universally. The rule enables us to predict other people’s behavior correctly but it must apply to all cases.
    • Conflict  between formal justice & formal equality before the law & the attempts to realize various ideals of substantive justice & equality – all account for the confusion about the concept of privilege & its abuse.
      • The most important abuse is the application to property. When the government grants rights to buy, sell & produce particular things to particular people that is government-granted privilege.
    • The unpredictability of particular effects is the distinguishing characteristic of formal laws in a liberal system. It also clears up another confusion about this characteristic attitude: the inaction of the state.
      • Even if the state has to act, it should be predictable.
      • Sometimes state inaction isn’t according to liberal principles while state action can be. The establishment of rules with respect to production (wise or unwise) don’t conflict with liberal principles as long as they are seen as permanent & aren’t used to harm or favor particular people.
  • Rule of law only evolved during the liberal age. It’s not just a safeguard but the legal embodiment of freedom. Kant said man is only free is he only needs to obey laws & not people.
    • It started with the Romans & advanced from there. But it’s never been so threatened as it is today.
    • The idea that there is no limit to legislators’ powers is the result of popular sovereignty. It is strengthened by the belief that as long as state actions are authorized by legislation, Rule of Law is preserved. That’s a misunderstanding of what “Rule of Law” means.
      • Just because someone has the authority to act as he does, doesn’t answer the question regarding the law giving him power to act arbitrarily or if the law prescribes how he is to act.
    • In a planned society, the Rule of Law can’t hold – that’s not to say that government action won’t be legal . It means coercive powers won’t be limited & determined by pre-established rules. The law can legalize arbitrary action. If the law says a board or authority can do as it pleases, anything it does will be legal. But its actions aren’t subject to the Rule of Law. By giving the government unlimited powers, arbitrary rule can be made legal. Then Democracy would set up a despotism.
    • If the law enables authorities to direct economic life, it must give them powers to make & enforce decisions. As planning extends, delegation of legislative powers will grow. Broad powers are given without fixed rules & with unlimited discretion.
  • Rule of Law implies limits to the scope of legislation, restriction to general rules known as formal law, excluding legislation for particular people.
    • This means not that everything is regulated by law but the coercive power of the law can only be used in cases defined in advance. Particular enactment can infringe on Rule of Law.
    • It’s not very important if Rule of Law is guaranteed by written constitution or by an established tradition. In any form, limitations of powers imply the right of the individual.
      • Many intellectuals have been led by conflicting ideals embodied in advocating for central planning. H.G. Wells claimed to defend the rights of man but ignored that those rights obstruct planning. Restrictions imposed on buying & selling are supposed to be necessary for the “common welfare”. There is no right of the individual not threatened by these restrictions.
  • Reformers who attack individual rights & insist only on individual duties are much more consistent. Progressives often label objections to their policies as “reactionaries” if individual rights are talked about. To them, there is no protection of individual rights that can never be touched by government & no limit to the power of the government is to have or to be opposed & criticized by people.
    • You can make a case for this in time of war. But this general idea is incompatible with Rule of Law & leads to totalitarianism.
    • Even formal recognition of individual rights loses significance in a state where it is possible to pursue a policy of discrimination against national minorities without infringing on a law or protection.
    • Oppression by economic means is facilitated by the fact that particular industries are held by national minorities, & many a measure aimed at an industry was aimed at a national minority.
      • Almost endless possibilities for such a policy are provided apparently innocuous principles as government control of industries has been demonstrated to all wanting to see how political consequences of planning appear in practice.

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