I’m inclined to think of George Orwell and F. A. Hayek at the same time. Both showed great courage in writing the truth, undaunted by the consequences awaiting them. Both valued freedom, though they understood it differently.

Orwell, a man of the “left,” could not remain silent in the face of the horrors of Stalinism. Twice — during the Spanish Civil War and again at the dawn of the Cold War — he refused to permit his comrades to blind themselves to where their collectivism had led and could lead again. For his favor he was called a conscious tool of fascism, a stinging accusation considering he had gone to Spain to fight fascism. (But for a few inches, the bullet that penetrated Orwell’s neck in Spain would have denied us the latter warnings, Animal Farm and Nineteen Eighty-Four. We would have never known what the fascists had cost us.)

Hayek, a man of the “right,” risked ostracism and worse in 1944 by publishing The Road to Serfdom, in which this Austrian-turned-Briton, writing in England at the height of World War II, warned that central economic planning would, if pursued seriously, end in a totalitarianism indistinguishable from the Nazi enemy. That couldn’t have been easy to write at that time and place — central planning was much in vogue among the intelligentsia. While a good deal of the reception was serious and respectful, a good deal of it was not. Herbert Finer, in Road to Reaction, called Hayek’s book “the most sinister offensive against democracy to emerge from a democratic country for many decades”; it expressed “the thoroughly Hitlerian contempt for the democratic man.”

Orwell’s Review

Not surprisingly, it was The Road to Serfdom that brought Orwell and Hayek together in print. Orwell briefly reviewed the book along with Konni Zilliacus’s The Mirror of the Past in the April 9, 1944 issue of The Observer. The man who would publish Animal Farm a year later and Nineteen Eighty-Four five years later found much to agree with in Hayek’s work. He wrote:

Shortly, Professor Hayek’s thesis is that Socialism inevitably leads to despotism, and that in Germany the Nazis were able to succeed because the Socialists had already done most of their work for them, especially the intellectual work of weakening the desire for liberty. By bringing the whole of life under the control of the State, Socialism necessarily gives power to an inner ring of bureaucrats, who in almost every case will be men who want power for its own sake and will stick at nothing in order to retain it. Britain, he says, is now going the same road as Germany, with the left-wing intelligentsia in the van and the Tory Party a good second. The only salvation lies in returning to an unplanned economy, free competition, and emphasis on liberty rather than on security. In the negative part of Professor Hayek’s thesis there is a great deal of truth. It cannot be said too often — at any rate, it is not being said nearly often enough — that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamed of.

This is a significant endorsement, for no one understood totalitarianism as well as Orwell. Indeed, in Why Orwell Matters, Christopher Hitchens points out that Nineteen Eighty-Four impressed Communist Party members behind the Iron Curtain. He quotes Czeslaw Milosz, the Polish poet and Nobel laureate, who before defecting to the West was a cultural attachéfor the Polish communist government: “Orwell fascinates them [members of the Inner Party] through his insight to the details they know well…. Even those who know Orwell only by hearsay are amazed that a writer who never lived in Russia should have so keen a perception into its life.” (An audio interview with Hitchens about Orwell is here. [UPDATE: Hitchens died December 15].)

But true to his left state-socialism, Orwell could not endorse Hayek’s positive program:

Professor Hayek is also probably right in saying that in this country the intellectuals are more totalitarian-minded than the common people. But he does not see, or will not admit, that a return to “free” competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State. The trouble with competitions is that somebody wins them. Professor Hayek denies that free capitalism necessarily leads to monopoly, but in practice that is where it has led, and since the vast majority of people would far rather have State regimentation than slumps and unemployment, the drift towards collectivism is bound to continue if popular opinion has any say in the matter.

…Capitalism leads to dole queues, the scramble for markets, and war. Collectivism leads to concentration camps, leader worship, and war. There is no way out of this unless a planned economy can somehow be combined with the freedom of the intellect, which can only happen if the concept of right and wrong is restored to politics.

Short Shrift

It’s disappointing to see Orwell give such short shrift to Hayek’s positive thesis. He is glib and dogmatic, which is unbecoming a serious intellectual such as Orwell. His ignorance of economics leaps from the page.

“[A] return to ‘free’ competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State.” It’s hard to believe that someone so familiar with Stalinism could have written that. Even without knowing much economics, could he really have thought that what goes on in market-oriented societies, even during depressions, could be worse than the famine Stalin inflicted on the Ukrainians, the show trials and executions, or the labor camps in Siberia?

“The trouble with competitions is that somebody wins them.” In a market producers compete to better serve consumers. The losers in that competition are not exiled or executed. They find other ways to serve consumers, just as producers are trying to serve them.

“Professor Hayek denies that free capitalism necessarily leads to monopoly, but in practice that is where it has led….” Where has monopoly arisen without the aid of the State? We find no market-generated monopoly in England or the United States. There, major business interests actively promoted protectionism and other interventions precisely to tamp down competition and protect their market shares. Of course, for many people, Orwell presumably among them, that is capitalism, a topic I return to below. (I should note that Hayek forswore laissez faire in his book, but that is a topic for another day.)

“[T]he vast majority of people would far rather have State regimentation than slumps and unemployment….” But that’s a false choice. Slumps and unemployment, as Hayek and his mentor Ludwig von Mises taught, are products of central-bank manipulation of money and interest rates, that is, of government not of the free market. The Great Depression, which must have been on Orwell’s mind, was no exception. The real choice is between freedom and security (including mutual aid) on the one hand, and State “regimentation,” slumps, and unemployment on the other.

I must pause here to focus on Orwell’s disgraceful use of the word “regimentation.” I say “disgraceful” because he committed the sin he himself so eloquently condemned in his justly famous essay “Politics and the English Language”: the sin of euphemism. In that great essay he wrote:

In our time, political speech and writing are largely the defence of the indefensible. Things like the continuance of British rule in India, the Russian purges and deportations, the dropping of the atom bombs on Japan, can indeed be defended, but only by arguments which are too brutal for most people to face, and which do not square with the professed aims of the political parties. Thus political language has to consist largely of euphemism, question-begging and sheer cloudy vagueness. Defenceless villages are bombarded from the air, the inhabitants driven out into the countryside, the cattle machine-gunned, the huts set on fire with incendiary bullets: this is called pacification. Millions of peasants are robbed of their farms and sent trudging along the roads with no more than they can carry: this is called transfer of population or rectification of frontiers. People are imprisoned for years without trial, or shot in the back of the neck or sent to die of scurvy in Arctic lumber camps: this is called elimination of unreliable elements. Such phraseology is needed if one wants to name things without calling up mental pictures of them. Consider for instance some comfortable English professor defending Russian totalitarianism. He cannot say outright, “I believe in killing off your opponents when you can get good results by doing so”. Probably, therefore, he will say something like this:

“While freely conceding that the Soviet regime exhibits certain features which the humanitarian may be inclined to deplore, we must, I think, agree that a certain curtailment of the right to political opposition is an unavoidable concomitant of transitional periods, and that the rigors which the Russian people have been called upon to undergo have been amply justified in the sphere of concrete achievement.”

Regimentation is the least of what goes on under a totalitarian regime.

Capitalism versus the Free Market

“Capitalism leads to dole queues, the scramble for markets, and war.” I think that part of the problem for Orwell is that a truly free market is not among the possible options. For him and many others, the choice is between a system run for employers and one run for workers. (The preferable alternative is not obvious.) In this view, the former is capitalism, sometimes dressed up as “the free market,” and the latter is socialism. We shouldn’t be too hard on Orwell for thinking this way, for many defenders of the market are just as careless when they write about mixed economies such as the one in the United States. Despite pervasive government intervention, we often hear business conduct defended because “under capitalism” consumers have the power to punish firms that ill-serve them. Tell that to consumers who chose not to buy GM and Chrysler cars. Tell that to people who lost land through eminent domain so that a big-box chain might prosper. Generations of business-inspired intervention to some extent must have rigged the market against consumers and workers. If not, what are the economists complaining about?

As for his inclusion of war in his list, let it be said that the scramble for markets and other economic objectives cannot be a sufficient condition for war. War requires the State, that is, the socialization of costs through taxation and conscription.

One wonders how Orwell avoided despair. He couldn’t accept (state) capitalism, and he saw the totalitarian tendencies of socialism up close. Yet he could write, “There is no way out of this unless a planned economy can somehow be combined with the freedom of the intellect, which can only happen if the concept of right and wrong is restored to politics.” (Emphasis added.)

Hadn’t he just read Hayek’s Chapter 11, “The End of Truth,” in which Hayek described how a serious commitment to central planning must produce “contempt for intellectual liberty”?

The word “truth” itself ceases to have its old meaning. It describes no longer something to be found, with the individual conscience as the sole arbiter of whether in any particular instance the evidence (or the standing of those proclaiming it) warrants a belief; it becomes something to be laid down by authority, which has to be believed in the interest of unity of the organized effort and which may have to be altered as the exigencies of this organized effort require it.

The general intellectual climate which this produces, the spirit of complete cynicism as regards truth which it engenders, the loss of the sense of even the meaning of truth, the disappearance of the spirit of independent inquiry and of the belief in the power of rational conviction, the way in which differences of opinion in every branch of knowledge become political issues to be decided by authority, are all things which one must personally experience — no short description can convey their extent.

But of course Orwell had experienced those things in Spain and knew how it was in Russia. He certainly put a heavy burden on that word “somehow.” How restoring the concept of right and wrong to politics would make central planning either decent or practical is a mystery no one has solved. (Of course, Mises had long before shown that socialism could not be practical because without prices arising out of the exchange of privately owned means of production, the socialist planner could not make rational calculations with respect to what should be produced, in what manner, and in what quantities.)

To end on a partly optimistic note, though Orwell presumably would not agree, central economic planning is not on the modern agenda. The threat today is not state socialism. It’s bureaucratic corporatism dressed up as progressive democracy.

Editor’s Note: This column first appeared in September 2010.

One of F. A. Hayek’s most accurate, and oft-repeated, lines about John Maynard Keynes comes from a review of Keynes’s 1930 book, A Treatise on Money.  Hayek wrote: “Mr. Keynes’ aggregates conceal the most fundamental mechanisms of change.”  That Austrian macroeconomics rests firmly on the microeconomic “mechanisms of change” that ultimately comprise economic activity remains a crucial reason why that insight can better explain both the mistakes of the boom and the way out of the bust.

The Austrian insight is relevant to both capital and labor.  In standard Keynesian models (as well as most other macroeconomic models), capital is understood as an undifferentiated mass.  The Keynesian model also assumes that interest rates do not equilibrate the supply of savings and the demand for investment funds.  Thus when people save more, there’s no signal transmitted to investors that they should build more for the future.  As a result, the decline in consumption that accompanies the increase in savings causes firms to invest lessas their inventories pile up without any offsetting increase in investment elsewhere due to the lower interest rate.

In the Austrian view investment cannot be treated at this high a level of aggregation.  The production process that leads to consumption goods comprises a number of stages, starting with the “early” stages of research and development and raw materials, and finishing with the “later” stages, such as wholesaling or inventory management, which are closer to the final consumer purchase.  Looking at the structure of production this way enables Austrians to note that when saving increases and causes interest rates to fall, resources will indeed be drawn away from the late-stage investments in inventory, but they will be drawn toward investment in early stages of production, as the interest lower rate makes longer-term production processes involving more stages relatively less costly.  Over time, savings promotes those longer-term processes, which are more productive and provide us the capital base for economic growth.

By disaggregating investment, the Austrian model also reminds us that different kinds of  capital goods have to “fit together” to be productive.  This is most clear when central banks try to inflate to generate growth.  In this case, the lower interest rates produced by excess money lead to increased investment in those same early stages.  However, unlike the first story, where that increased investment is financed by reduced investment in the later stages, inflation also increases consumption as the lower interest rate reduces savings.  The credit expansion creates no new resources but leads to more investment at both the very late and very early stages of production. This is the boom of the business cycle.

However, like a railroad being built, misaligned, from two directions, the plans of both sets of investors are unsustainable and the capital projects are left unfinished.  We have a recession.

Labor Too

All that is true of capital here is also true of labor.  Most Keynesian models also treat labor as an undifferentiated aggregate, speaking of “the” labor market and “the” wage rate.  Once we look at the microeconomic processes underlying the structure of production, we see that each of these stages has its own labor market.  Thus when resources move from one stage to another, the demand for labor will shift also, leading to changes in each wage rate.  Growing sectors will attract labor, and shrinking ones lose it.

During an inflation-generated boom, labor, like capital, is misallocated across stages.  And when the boom turns to bust, workers will lose their jobs as the projects they were working on are abandoned.  Unemployment results as we enter the recession.  However, that unemployment, like the misallocation of capital, will not be evenly distributed across the economy.  To see the real costs of inflation-generated business cycles, we need to get behind the aggregates to see the fundamental mechanisms of change.

Being too focused on Keynes’s aggregates can also mislead us as to the best ways to get out of the recession once we’re in it.  It may look as if all we need more is investment or more jobs. But once we understand that the “fundamental mechanisms of change” have to do with the boom’s microeconomic misallocation of capital and labor, we see that what is needed is a reallocation of resources not just more of them.  Capital needs to move out of unproductive lines and back toward productive ones, and the same is true of labor.

Stimulus spending, bailouts, and extension of unemployment benefits only prevent the fundamental mechanisms of change from doing their work in unwinding the errors of the last decade.  The cure for macroeconomic discoordination is freeing up the entrepreneurial market process to reallocate and coordinate resources.  But 80 years after Hayek first made the point, the fascination by economists and politicians with Keynes’s aggregates continues to conceal the fundamental mechanisms of change, and in so doing, also continues to block the processes through which a sustainable recovery can take place.

Thus a faltering corporation may use its political connections to win a government bailout paid for by taxpayers.  Environmentalists may protect vulnerable wetlands from uses they don’t approve of, not by buying the property in question, but by using government to stop its current owner from developing it.  In today’s interventionist world one could come up with a zillion examples.

The Political Logic

It would be a mistake to pass a government program if the full economic cost would be $100 million while its full economic benefit would amount to only $1 million — there would be an economic loss of $99 million.  But if those costs were spread over 100 million taxpayers, each taxpayer would only pay $1.  On the other hand, if the $1 million benefit went to 100 beneficiaries, each would get a hefty $10,000.  In such a case a given taxpayer probably wouldn’t fight very hard against the program because doing so would save him only $1, but a beneficiary would likely make a lot of noise and spend a considerable amount (but less than $10,000) to make sure the program passes.

Many economists argue that this is the logic that drives our political system, resulting in chronically inefficient legislation and morbidly fat government budgets.  It’s sometimes pithily stated as “concentrated benefits, dispersed costs.”

If the political rules allow it, calculating and opportunistic people will game the system to their narrowly selfish benefit.  Armed with full knowledge of the consequences of their actions, they can exploit the rest of us, and we won’t bother to follow what’s going on because it’s just not worth it.

Hunting for Goodwill

When I teach my course on public policy I assign Friedrich Hayek’s famous book of 1944, The Road to Serfdom.  A passage that stands out in my mind in this context is from chapter one:

Against the innumerable interests which could show that particular measures would confer immediate and obvious benefits on some, while the harm they caused was much more indirect and difficult to see, nothing short of a hard-and-fast rule would have been effective [71].

He means that it may be desirable for people to hold certain libertarian principles even when they may not fully understand why they do.  The point that struck me, however, is how he contrasts the “immediate and obvious” benefits of a government policy with its negative consequences, which are “indirect and difficult to see.”  This is similar to but different in important ways from the “concentrate benefits . . .” idea.

Hayek dedicates The Road to Serfdom “To the Socialists of All Parties.”  Some think Hayek was mocking his opponents on the left when he wrote that, but they are wrong.  Hayek’s raison d’être for writing the book was to warn well-meaning socialists in England that, just as he had seen happen a few years before in Europe, the policies of collectivism and central planning they were advocating during World War II were essentially the same that socialists in Germany (and Russia) had implemented before the war and that eventually led to fascism and national socialism.  He warns that while socialism in theory may be internationalist, in practice it becomes violently nationalist (162).

But the logic of his argument is not that socialists are merely calculating opportunists who want to use the political rules of the game for their own personal gain.  No doubt some of his ideological opponents were indeed political opportunists and he knew this.  But his targets were the men and women of goodwill – socialists of all parties – who sincerely believed that the government interventions they sought would promote the general welfare.

Their problem from Hayek’s perspective was not that they were stupid or evil.  It was that they were ignorant and mistaken.  There were things that they didn’t know.  That is, for Hayek the central political struggle is not one of fighting evil people but of fighting bad ideas, ideas that he hoped to persuade his reasonable opponents to drop once they heard and understood his arguments.  He wanted them to look beyond the “immediate and obvious” to the consequences “indirect and difficult to see.”  He hoped that sound economics and recent experience would convince enough people to reject the collectivist doctrines that, if left unchecked, would lead Great Britain down the road to serfdom.

Be Tolerant and Criticize!

In a world of heated ideological differences and partisan political conflict, it’s tempting to paint our opponents as stupid and evil, as calculating opportunists.  Again, often they are, and from their point of view often so are we.  We need to get past that.  We need to keep learning.

Learning, though, means exposing yourself to ideas that you find strange, perhaps even repugnant at first.  Even if we end up rejecting them, we will, having been able to correctly state the opposite case, have a better idea why we reject them.  Learning through personal interactions requires dialogue, and genuine dialogue between grownups who disagree cannot begin with name-calling and smirking cynicism.  No.  Genuine dialogue means treating our ideological opponents as people of goodwill with the hope that they will treat us the same way.  Only then can we learn and grow.

As a young libertarian scholar recently summed it up, “Treat people kindly but ideas harshly.”  Exactly!

Economics and business reporter David Warsh is getting much attention for suggesting that F. A. Hayek, far from being one of the two most prominent economists of the 1930s – the other being Keynes – is rather more like the woman who was thought to have won the Boston marathon in 1980 when in fact she had joined the race, mostly unnoticed, a half-mile from the finish line.

Hayek’s fans “have jumped a caricature out of the bushes late in the day and claim that their guy ran a great race,” Warsh writes. “. . . But the fact remains that Hayek just didn’t contribute very much to the development of technical economics,” he continues.

Warsh, whom we may judge by the fact that he calls The Road to Serfdom “an embarrassment,” nonetheless does have some positive things to say about the 1974 Nobel Prize laureate: “With the publication of ‘The Use of Knowledge in Society’ in the American Economic Review in 1945, he essentially won on the ‘calculation debate,’ conducted with Ludwig von Mises and Oscar Lange, concerning the possibility of central planning.”

Considering how many respectable economists favored central planning – essentially the abolition of spontaneous competitive markets — until fairly recently, that would seem to be no mean feat. And there’s more:

[I]t is pleasing to think that Hayek himself may yet turn out to have been a very great economist after all, far more significant than [Gunnar] Myrdal or [Joan] Robinson, when seen against the background of a broader canvas.  The proposition that markets are fundamentally evolutionary mechanisms runs through Hayek’s work. [Bruce] Caldwell, of Duke University, notes that, starting with the Constitution of Liberty, “the twin ideas of evolution and spontaneous order” become prominent, especially the idea of cultural evolution, with its emphasis on rules, norms, and decentralization.

These are today lively concepts in laboratories and universities around the world. ‘It could have been that Hayek was running a different race, and the fact that he didn’t do well in the [mainstream] Walrasian race was that he wasn’t running in it — he was running in the complexity race,’ says David Colander, of Middlebury College. Hayek may yet enter history as a prophet of evolutionary economics, a discipline dreamt of since the days of Thorstein Veblen and Alfred Marshall in the late nineteenth century but not yet forged, whose great days lie ahead. [Emphasis added.]

In other words, maybe Hayek’s critics judge him by an inappropriate standard. We’ll get back to this.

Krugman Pile-on

As Jacob T. Levy surmises, not everyone eager to dismiss Hayek as a lightweight read Warsh’s post to the end. Take Paul Krugman, ever ready to trash anyone who doubts that Keynes was the fount of all wisdom:

David Warsh finally says what someone needed to say: Friedrich Hayek is not an important figure in the history of macroeconomics.

These days, you constantly see articles that make it seem as if there was a great debate in the 1930s between Keynes and Hayek, and that this debate has continued through the generations. As Warsh says, nothing like this happened. Hayek essentially made a fool of himself early in the Great Depression, and his ideas vanished from the professional discussion. . . .

[T]he Hayek thing is almost entirely about politics rather than economics. Without The Road To Serfdom — and the way that book was used by vested interests to oppose the welfare state — nobody would be talking about his business cycle ideas.

Hayekians Strike Back

The Hayekian wing of the blogosphere (which really has nothing to do with the right wing) has responded in force, and properly so. A common theme is that Hayek furnished the grounds for a proper skepticism about macroeconomics, the branch of economics launched by Keynes that treats large statistical aggregates (demand, unemployment, and so on) as though  they were concrete entities that interact with each according to fixed quantitative rules rather than historical “summations” of individual purposeful actions in a particular institutional context. As Hayek wrote,  “Mr. Keynes’ aggregates conceal the most fundamental mechanisms of change.” (See Steven Horwitz’s “Mr. Keynes’s Aggregates.”)

George Mason University professor (and FEE trustee) Peter Boettke at Coordination Problem wrote:

Hayek’s influence in modern economics is ubiquitous, even if sadly modern economics is not as Hayekian as I would like it to be.  Information economics, theories of dynamic competition, equilibrium theory of the business cycle, and complexity theory all owe a debt to Hayek’s economic contributions.  The work on legal origins owes a debt to Hayek’s work on law and political-social philosophy as well.  Hayek impacts the DNA of economics and political economy to such an extent that many are unaware of the pervasive influence. . . .

The final problem I have with both Krugman and Warsh is that they don’t actually consult the historical record and the accounts of those who were there in the 1930s when the battle was engaged or the direct citation evidence from post-WWII thinkers. . . . Instead they rely on impressionistic accounts from their education and discourse communities, and cherry pick from recent journalistic histories of economics.

Back with a Vengeance

And there’s this from GMU professor Alex Tabarrok at Marginal Revolution:

It is true that many of Hayek’s specific ideas about business cycles vanished from the mainstream discussion under the Keynesian juggernaut but what Krugman and Warsh miss is that Hayek’s vision of how to think about macroeconomics came back with a vengeance in the 1970s. . . .

Hayek was an important inspiration in the modern program to build macroeconomics on microfoundations.

Tabarrok notes that “in an interesting exercise David Skarbek finds that Hayek is cited by other Nobel laureates in their Nobel talks more than any other Nobel laureate with the exception of [Kenneth] Arrow.”

GMU’s Russ Roberts responded this way at Café Hayek:

Was Hayek an important macroeconomist? I would argue that the macroeconomic skepticism of the later Hayek is more valuable than the macroeconomic theorizing of the early Hayek. But he wasn’t an important macroeconomist in the mainstream sense of the title. So what? That’s a badge of honor. He was merely a great economist, without any prefix.

Rejecting the Rules

There are others, but I will close with a post from New York University’s Mario Rizzo at ThinkMarkets, one of the most perceptive people I know. Remember the remark above that “It could have been that Hayek was running a different race”? That’s Rizzo’s take.

I think the real issue is this. Hayek’s approach attacks, root-and-branch, the macroeconomic way of thinking. It is not simply a challenge to a particular theory of the determinants of mass unemployment, inflation, business cycles and the like. Hayek is not accepting the rules of the game or the parameters of the sub-discipline of modern macroeconomics. . . .

In short, he does not want to focus on aggregate spending and aggregate consequences. Hayek’s approach says: Let us pierce the veil of aggregates and look at the distortive effects on relative prices and relative output produced by boom-time credit expansions. Let us look at the distortive effects that booms leave us as we work our way through a recession. . . .

Suffice it to say this greatly erodes the intellectual capital of a field of economics – although one not noted for its successes. It mocks the claim that Keynes was a true revolutionary in economic thought. It opens the possibility that he was muddled, inconsistent and unaware of the contributions to monetary and business cycle theory made by the “classical economists” on the eve of the General Theory.

(By cutting out many details, I have not done these blog posts justice. Follow the links for the particulars.)

Hayek was important politically for demonstrating the practical social necessity of individual freedom. But he is just as important for what he taught us about markets: namely, that they provide the only way for human beings to overcome their individual deficiencies in knowledge, which would otherwise keep them from flourishing through social cooperation and the division of labor.

A recent contribution to this genre is Kenneth R. Hoover’s Economics as Ideology. A political science professor at Western Washington University, Hoover wants to find out what made Harold Laski a socialist, F. A. Hayek a proponent of free-market liberalism, and John Maynard Keynes, well, a Keynesian.

Laski was one of the most prominent and influential advocates of socialism in Great Britain in the decades from World War I to the early 1950s. His writings and political activities helped move his country in the direction of central planning and the welfare state. Hoover concludes that Laski’s ideology and politics were driven by a falling out with his businessman father and the Orthodox Judaism of his family. His whole life was supposedly a revolt against the chains and apparent social insensitivity of religious and cultural conservatism.

Keynes was the product of a British intellectual elite and a generation at the beginning of the twentieth century that was determined to break free of Victorian morality. A focus on the pleasures of the moment and a probabilistic theory of uncertainty concerning the future resulted in Keynes discounting many of the long-run consequences from short-run policies. In Hoover’s account, his homosexual adventures as a young man and his failure to father children after he married also made him think a lot less about the future impact of present policies.

Hayek, on the other hand, resented the rules and regulations that come with greater government control of social and economic affairs because of a bad marriage he entered into when he was a young man and a difficult divorce immediately after World War II. Untangling himself from an unwanted marriage, according to Hoover, supposedly is the key to understanding Hayek’s desire for a society with fewer restraints on the choices of individuals.

The difficulty with taking all such psycho-ideological analyses seriously is that they can be used to explain almost anything, and therefore explain nothing. There have been Jews who renounced their religious and cultural ancestry and became classical liberals. There have been free-spirited homosexuals who became social and political conservatives. And there have been people trapped in bad marriages and difficult divorces who became radical socialists.

An equally crucial weakness in Hoover’s book is his failure to come to grips with many of the important issues and arguments that separated these three protagonists in the decades between the two world wars. He gives the clearest analysis when critically evaluating Laski. He shows that Laski could not reconcile a desire for participatory democracy and greater human freedom with his ideal of economic planning. Hoover points out that as the years went by, the argument for centralized government control increasingly replaced Laski’s defense of personal liberty. And he explains that Laski never attempted to seriously grapple with the practical difficulties of centrally planning the production and consumption activities of tens of millions of people.

But in many ways Hoover’s discussion of Laski is a sideshow to his central purpose: to argue that Keynes and his political-economic views represented the level-headed and moderate course that was relevant in the 1920s and 1930s, and is still important and relevant today. In making this case, Hayek becomes a foil, the extreme “right-wing” opponent of reasonable government action, blinded by a near-irrational hatred of political power applied for good social purposes.

Through all the details of Keynes’s and Hayek’s personal lives and academic activities in the period between the wars, Hoover devotes practically no time to an exposition of their competing theories of what caused the Great Depression or how to get out of it. Hayek is merely portrayed as the advocate of “do-nothingism” in an epoch of massive unemployment, while Keynes was designing practical policies to save society from want and waste.

The shallowness of Hoover’s understanding comes out most clearly in his discussion of Hayek’s critique of socialist planning. Hayek argued that the division of knowledge that inevitably accompanies the division of labor precludes any group of central planners from being able to integrate all the information required for central planning to succeed. Only the system of competitively generated market prices can coordinate the activities of multitudes of interdependent human beings.

Without any detailed discussion of the types and qualities of the knowledge used in a market society (which Hayek spent a good deal of time explaining in many of his writings), Hoover merely asserts that he sees no reason for thinking that most if not all such knowledge and information could not be absorbed and used by intelligent regulators and planners. And he conveys an unbelievably naïve conception of democracy as a forum for inclusive social participation, which suggests a total unawareness of the Public Choice literature about the actual special-interest-group workings of the political process.

In a nutshell, Hoover’s book is another rear-guard action by one who wishes to rationalize the continuation of the interventionist-welfare state and the presumed ability of an intellectual elite to guide the economic affairs of others—all for their own good, of course.

The MPS was an organization of academics and some businessmen founded in 1947 by F. A. Hayek. Hayek is considered one of the founding fathers of and influences on the American political ideology “libertarianism”—which posits that the proper role of government is, at most, the preservation of private property and personal liberty.

The term “libertarianism” is barely used in this book, and the various authors (most of whom are clearly opposed to what they are studying) are conflicted or confused about how that pro-liberty, small-government notion defines the MPS/neoliberal perspective.

Various writers conflate their own theoretical assumptions with reality. Far more evidence is needed than coeditor Dieter Plehwe provides to insist that MPS intellectuals attempted to “develop an agenda diverging from classical liberalism.” Indeed, beyond Hayek himself, that sort of deep concern with intellectual history was rarely part of the working agenda of most major MPS thinkers. And other parts of the book correctly note that a strongly classical-liberal view of the State defined many Pelerines in the 1940s and now.

They undoubtedly saw liberalism as an unfinished intellectual project facing new problems in the postwar world. But to stress that point as much as this book does—coeditor Philip Mirowski cites “laissez-faire classical liberalism” along with socialism as one of neoliberalism’s “primary foes”—makes too much of the interesting gaps between a Hayek and, say, his uneasy MPS ally Leonard Read, the purist libertarian founder of FEE.

That the MPS mentality privileged freedom cannot be avoided. Plehwe quotes the original draft statement of aims for MPS, which states that freedom can only be preserved “in a society in which an effective competitive market is the main agency for the direction of economic activity” and promotes private property, “complete intellectual freedom,” and the nondiscretionary rule of law.

But Plehwe and Mirowski think all that freedom talk was a dodge, hiding the neoliberals’ aim to give strong power to a State they’d control in order to construct the unnatural world the Pelerines craved, largely to privilege corporate power. Yet the curious list of goals betraying an alleged “engineering mentality,” discussed by Mirowski and Rob Van Horn in their essay on the Chicago school, includes such things as eliminating conscription and allowing educational consumers a choice about where to spend the money the State steers to education. The difference between preventing the State from acting in certain ways and the State’s enforcing particular outcomes or income shifts eludes the authors, but it is key to understanding neoliberal thought.

The book’s first section traces the history and personalities behind neoliberal ideas in France, England, Germany, and the United States, all linked with MPS members. The chapter on England by Keith Tribe posits that the spread of democracy there in the twentieth century killed classical liberalism since strict limited-government principles were so politically unpopular that pushing for them became utopian. The chapter on the United States boldly attempts to rewrite the history of the Chicago school, claiming Hayek as its true founder, by weirdly conflating one Volker Fund-supported project at the University of Chicago to write an American version of Road to Serfdom with the Chicago school of economics writ large. (That the same chapter later points out that Hayek, the school’s alleged linchpin, wasn’t even able to get a job in the actual University of Chicago economics department doesn’t deter the authors from their strange and unsupportable thesis.)

The second section traces the evolution of MPS ideas toward unions, monopoly, and development, showing in all cases a shift toward greater advocacy of markets free of prescriptive rules from above or State-forced transfers of wealth or power.

The third section traces neoliberal ideas and alleged figures in the world of policy, including Chile’s Pinochet and Hernando de Soto’s promotion of property rights as the most effective way out of Third World poverty. The link between certain neoliberal economists and the hated Pinochet regime in Chile is used to condemn free-market policies as inherently authoritarian (even though Pinochet’s economic policy departed greatly from free-market prescriptions). Most of the intellectual weight of the critique of neoliberalism here comes from an overly clever insistence that the Pelerine belief in private property and minimal government comprises its own authoritarian project by rejecting majoritarian democracy.

If you wish to learn the history of MPS without a deceptive attack on its founders’ motives, look elsewhere.

“The central bank has to be, in a way, a neutral player, and yet we find ourselves trying to stimulate, and the effect is further leveraging,” he said. “If I thought zero rates would bring jobs, I’d want it forever. But it distorts the economy.”

He continued, “In 2003, when we lowered rates and kept them there because unemployment was 6.5 percent — look at the consequences.” Those consequences included the nation’s mortgage feast, followed by its current economic famine.

Selgin points out that Hoenig, whether he knows it or not, is saying what F.A. Hayek would have said. “I can’t help feeling that Hayek deserves a lot more credit than he’s getting for having put forward a theory which, whatever its general merits may be, seems to fit the recent boom-bust experience so well,” Selgin writes. “…[I]t seems to me that anyone who believes that the recent bust is to some important extent a consequence of past malinvestment that was sponsored by easy monetary policy ought to acknowledge the fact that F.A. Hayek spent much of his early career warning against this very possibility, and later won a Nobel prize for the work in question. That something akin to his theory, if not the very thing itself, is now subscribed to by many non-Austrians, either with no mention of Hayek’s contribution or with somewhat grudging acknowledgment of it only, seems to me both strange and unfair.”

But I think markets are more important for the problems they create than for the problems they solve.

Solving Problems Rationally

In 1920 Ludwig von Mises explained that a given individual in society can only plan rationally – that is, find the most efficient, least-cost means to achieve a given end – if she has money prices to guide her.  Would it be better from her point of view to build a bridge out of molybdenum or steel or perhaps some combination of the two?  Or should she build a bridge at all  rather than invest in a ferry service?  These questions are difficult enough in a world with money prices, but they would be impossible to answer absent money prices for steel, molybdenum, and all the other inputs used to build a particular kind of bridge (or a particular kind of ferry service for that matter).

In this way money prices — prices that emerge from the free exchange of private property on a free market — help her solve the problem of how and whether to build a bridge.  With their help she is at least in principle able to estimate what the cost of the various alternatives might be.  And the one that generates the most profit, where she estimates the expected benefits to exceed the expected costs the most, will also tend to be the most efficient (that is, she will be getting the highest return on her investment).

About 20 years after Mises’s article, Friedrich Hayek explained how these market-created prices enable an imperfectly informed individual to coordinate her plans with a vast number of people scattered across the global economy without needing to know that or how she is doing it.  If the price of gasoline goes up, no one has to tell her to use less, even though this is precisely what the increased relative scarcity of gasoline (which is behind the higher price) necessitates.

Taken together, Mises’s and Hayek’s analyses of the market economy added greatly to our understanding of what Adam Smith in the mid-eighteenth century referred to as the “invisible hand.”  And so where this is repeated again and again for all goods and services produced in an economy, it’s easy to see why many economists are impressed by the problem-solving capabilities of the market.

And it also sheds light on how government policies, collectivist or interventionist, that eliminate or distort these prices tend to make the world a whole lot dumber.

Before You Can Solve a Problem…

As marvelous as the market economy is at problem solving, in a sense the real genius of the market process is in how it brings problems to people’s attention in the first place.  Before you can solve a problem, you have to be aware that there is a problem.  This, I believe, is the great insight that Israel M. Kirzner, beginning in the 1970s, contributed to our understanding of the market – in particular, that it is a process of entrepreneurial discovery of error.

One implication of this is that government policies which undermine the (admittedly imperfect) reliability of money prices also make the discovery of inefficiencies profoundly problematic, because it casts doubt on the very meaning of inefficiency.

Markets Are Inefficient and that’s a Good Thing

Strictly speaking, an inefficiency exists when, for a given person at a given time and place, the cost of an action outweighs the benefit.  We’ve seen that to rationally calculate costs and benefits you need money prices of inputs and outputs, of steel and bridges.  So when government erodes private property rights, interferes with trade, distorts prices, and manipulates money, it doesn’t just make it harder to be efficient; it also pulls the rug from under the very ability to spot inefficiencies at all.

Using the rules of arithmetic, for example, it’s easy to see that the statement 1 + 2 = 4 is wrong; but what about _ + _ = _ ?  What’s the solution to this “problem”?  Is there even a problem here?  Money prices “fill in the blanks,” as it were; they literally “create errors” that alert entrepreneurs might perceive and then address.  If these inefficiencies didn’t exist, the search for more efficient ways of doing things could never get off the ground.

An economy without inefficiencies is either one where knowledge is so perfect that no one ever makes a mistake, or it’s one in which government policy has effectively foreclosed the very possibility of inefficiency.  In a world of surprise and discovery, of experiment and innovation, the former is impossible; the latter sort of economy, as Mises showed almost 100 years ago, is impossible as well as intolerable.

So a living economy needs to create inefficiencies, and lots of them, to set the stage for greater efficiency and ongoing innovation.  And that’s just what the market process does all the time – thank goodness!

Daniel Stone, in the November 13, 2010, issue of Newsweek, addresses the dilemma in his article “Hail to the Chiefs.” The essay’s subhead summarizes the problem: “The presidency has grown, and grown and grown, into the most powerful, most impossible job in the world.” Stone’s solution, as suggested by his article’s title, is to devolve presidential power either to cabinet members (oligarchy?) or to “outside agencies” (technocracy?).

Stone dismisses the notion that government or the president could simply do less. “It’s hard to imagine,” he writes, “how the office could sizably shrink, allowing the president to return to a more aloof, strategic role.”

The job’s impossibility stems from the sheer scope of government power and therefore the incredible array of issues with which any president must grapple: unemployment, Middle East peace, energy, homeland security, drug abuse, Iraq, offshore drilling and oil spills, foreign trade, terrorism, scandals, greenhouse-gas emissions, Afghanistan, North Korea, health care, the financial industry, pollution, education, transportation, nuclear proliferation, the national economy, the global economy—the list is endless. How can any one person competently deal with all that, no matter how many advisers he or she might have?

In Stone’s words, “Days in the West Wing are a constant, head-spinning oscillation between dozens of domestic, foreign-policy, and political eruptions and concerns.”

Imagine the mass of information flooding into the White House each day. Who could digest it? Some half-dozen aides are needed just to deal with incoming mail. Stone relates former chief of staff Rahm Emanuel’s instructions to senior staff members trying to deal with the daily deluge: “We need to make his memos shorter. Last night we sent the president a phone book.”

Yet a library of “phone books” would be needed to adequately cover all the issues a president attempts to handle. A country, not to mention the world, is too complex for anyone (or any group) to manage; they simply cannot gather, analyze, and act on the necessary mass of information in a timely fashion. In fact, this understates the problem: The most critical knowledge on which a society depends for its smooth operation—“knowing how” rather than “knowing that”—is widely dispersed and cannot be fully articulated. This is the “knowledge problem” emphasized by F. A. Hayek. Delegating power to cabinet members or agencies cannot solve that problem.

Consider the process by which a government policy is instituted. First, the goal must be clearly defined or the problem to be solved properly diagnosed. Next, a policy is formulated to achieve the goal or address the problem. Then a bill must make its way through Congress relatively intact. Once enacted, it has to be properly implemented and enforced. Finally, the policy’s impact must be monitored so that adjustments can be made in a timely manner. Performing any one of these steps successfully is difficult; performing all successfully is virtually impossible. And this only begins to identify the obstacles.

The chances of success decline rapidly as the complexity of the system to be controlled increases. Not only does predicting the impact of a given change become more difficult, but assessing the results also becomes harder. Did the policy really cause an observed behavior or was it the result of something else entirely? Further reducing the ability to determine cause and effect are the filters that ideology places on incoming information.

Ideological Filters

People use simplified models of the world to deal with its complexities. These models (aka paradigms, worldviews, or ideologies) provide logical frameworks for understanding cause and effect. Models also help filter out apparently unnecessary information from the flood of data we face every day, allowing us to concentrate on what we believe to be important. To the extent that our models are incorrect or only approximate reality, though, we can overlook important information that does not fit our worldview. This is known as “confirmation bias.”

Consider the CIA’s acceptance of the face the Soviet Union presented to the world during the 1970s, including its claim that its economy was enjoying an impressive 3 percent annual growth rate. President Ronald Reagan, familiar with free-market critiques of central planning, did not believe a command economy could work as well as the CIA thought. William Casey, Reagan’s CIA director, tasked agency analysts with exploring the possibility that the Soviet financial system was in fact crumbling. Specifically, Casey asked them what might be expected from a Soviet Union whose economy was shrinking.

The analysts speculated that popular discontent would rise. In response, Moscow would shift military spending to the civilian sector, perhaps by using steel to build locomotives instead of tanks. The Soviets might also purchase foreign technology to boost consumer-goods production, obtaining the necessary hard currency by increasing oil and gas sales to Europe.

Casey then asked analysts to determine whether any of these predicted signs of economic distress were in evidence. Within days, reports flowed in confirming the predictions. This data had long been available but was ignored as irrelevant given the assumption of a solid Soviet economy. (See articles by former intelligence official Herbert Meyer here and here.)

The lesson is not that models are inherently bad but that they must be periodically and critically examined to ensure they accurately mirror reality.

The Great Recession offers a more recent example of entrenched paradigms at work. There are many competing explanations for the current financial crunch: (1) an investment bubble produced by the Federal Reserve’s inflationary actions; (2) a housing bubble created by federal pressure on mortgage companies to lend to bad credit risks; (3) the federal government’s implicit backing of Freddie Mac, Fannie Mae, and other financial institutions, leading them to take excessive risks; (4) deregulation, notably the repeal of the Glass–Steagall Act; (5) unregulated derivatives trading; (6) housing speculators; (7) predatory lending; (8) Wall Street greed; and (9) tax cuts that allowed imprudent investments by wealthy individuals leading to a financial bubble.

Any of these views can be supported by citing isolated nuggets of carefully selected data. Predictably, libertarians and conservatives prefer explanations predicated on government failure. Proponents of government control favor theories rooted in market failure, while class warriors promote those blaming the rich in general and Wall Street in particular.

Theoretically, corrective policies based on each explanation could be implemented one after another. A policy’s success or failure might indicate whether the explanation on which it was based is correct. But a nation is not a laboratory, and uncertainty caused by such experimentation would bring the economy to a grinding halt. Furthermore, success or failure would not be conclusive. Opponents of a successful policy might argue that conditions improved despite, not because of, the action taken. Similarly, supporters of a failed policy could claim that things would have been far worse without it.

Rather than experimenting, policymakers might consult history to determine the results of similar past policies. Yet history is also seen through a filter. After 70 years of hindsight, economists and historians still argue whether market or governmental failure caused the Great Depression and whether the New Deal helped or hurt.

Politicians generally surround themselves with people who share their fundamental beliefs. The president’s staff controls the information he sees, and that information is likely to comport with their shared worldview. This alignment of “paradigm filters” exaggerates the importance of those bits of information that are consonant with the White House consensus and discounts those that are not. Failed programs are therefore more likely to be expanded than ended. The president and his advisers will want to believe that any problems were caused by insufficient funding or enforcement rather than an unsound worldview. Reinforcing this tendency is self-interest—admitting mistakes can shorten a politician’s career.

Increasing Efficiency, Dispersing Information

The notion that a president can oversee an economy is a fantasy. Unfortunately, although central planning has been discredited, Keynesian-style policies for maintaining employment or aggregate demand are still thought feasible—despite overwhelming contrary experience grounded in proper theory. But anything more complex than the most primitive economy simply is not amenable to such “assistance” from a central authority.

In Capital and Interest, Eugen von Böhm-Bawerk explained that economies become more efficient by employing increasingly “roundabout methods of production.” For example, a caveman could catch small animals for food with his bare hands, or he could increase his efficiency by using tools, perhaps using rocks or sticks as clubs. Hunting becomes marginally more complex, but the result is a bigger “harvest.” The caveman could raise his productivity further by crafting better tools—clubs, spears, snares, bows and arrows. It costs the caveman time and effort to construct tools and become proficient with them, but his investment is likely to be well rewarded.

The process of constructing hunting implements could itself be improved by fabricating tools such as knives and scrapers. The use of these tools is a further step removed from the process of hunting, constituting a yet more roundabout method of “producing” small game. This progression can be continued indefinitely as still other tools are created to facilitate the production of each new tool set.

Further efficiencies can be realized, as Adam Smith explained, through the division of labor. For example, while some cavemen hunt, others can concentrate on crafting snares or spears. With each improvement, either by creating new tools or further subdividing tasks, efficiency is increased, though at the cost of additional time and complexity. This process is repeated endlessly as economies advance.

In undeveloped countries, manufacturers must be relatively self-sufficient because suppliers and transportation are expensive and unreliable. This was true in the Soviet Union and in early twentieth-century America. The first U.S. automakers built their cars from the ground up. Nearly everything—nuts, bolts, springs, and engines—was made in a single factory. A company’s employees did everything from fabricating parts, to assembling them, to sweeping up afterward. As the nation’s economy and infrastructure developed, however, auto companies discovered they could make better cars at lower prices by purchasing components and services from specialized firms.

With inexpensive transportation, tools and subcomponents can now be fabricated far from final assembly points. Parts once built in one area of a plant then moved to another to be bolted onto a chassis are now transported from remote factories by ships, trains, and trucks over vast distances, often from other countries. Where once hundreds of companies helped to produce American cars, now tens of thousands from all over the globe help to produce far more vehicles of higher quality and with features unimaginable just a few decades ago.

With this explosion of companies comes an explosion of complexity. Those contributing to an end product’s manufacture may have no idea what that product is, where it will be built, or who will use it. Logistics is now key—ensuring that molded plastic parts, tires, paint, fasteners, adhesives, and countless other components from all over the world arrive at assembly lines in just the right number and at just the right time. All this complexity is managed by millions of people with local knowledge who quickly adapt to changes in everything from costs to the weather. None of this could be centrally directed by boards of bureaucrats incapable of even cataloging all the people, tasks, parts, and services involved before the list became outdated.

Managing the Unmanageable

As Hayek pointed out in his essay “The Use of Knowledge in Society,” the term “planned economy” is misleading. All economic activity is planned. The question is whether the planning is done by people on the scene with local knowledge and a stake in the outcome, or by remote bureaucrats with insufficient, outdated information and nothing to lose—bureaucrats ignorant enough to believe that people can be ordered like pieces on a chessboard and arrogant enough to try. Will planning be done by businesspeople who either replace faulty paradigms or fail, or by politicians holding fast to broken ideologies for fear of losing office?

Complex systems—from rainforests to economies—are less predictable than simpler ones. They are also harder to control because everything within them is interconnected. A tweak here or a prod there can have unintended and undesirable consequences. No one can anticipate how creative, entrepreneurial individuals will adjust their behavior to regulatory obstacles or stimulative measures. While a bad decision made at the local level can cause a manageable problem, that same decision made at the national level can create a nationwide or worldwide disaster.

The presidency has indeed grown beyond the capacity of any single individual. That is because government has ventured into areas where it has no business intruding. The answer is not to redistribute the government’s vast power but to radically reduce its power so that private individuals are free to control their own lives and property.

An example of this idea is “sex” versus “gender.”  Sex in this view refers to the biological characteristics of men and women, which are given to us by nature.  By contrast, “gender” refers to social characteristics we associate with males and females — what we call “masculinity” and “femininity.”  The argument is that these characteristics are “socially constructed” in the sense that there is no universal essence for either; instead, over time we have constructed those terms to mean certain things. For example, to be masculine is to be rational and aggressive while to be feminine is to be more emotional and passive.

As a libertarian who thinks Mises and Hayek have much to teach us about the world, I see nothing objectionable about the idea that many institutions are socially constructed.  In fact, I would argue it’s not only correct but that Mises and Hayek would have agreed.  Mises argued in the 1920s that our very thought processes are constrained by the language we speak, and Hayek’s work on how institutions, norms, and practices are unintended orders resulting from social evolutionary processes is completely consistent with the idea that many of our categories are “socially constructed.”

Beware Connotations

From a Mises-Hayek perspective the problem with that phrase is that the word “constructed” has connotations that can lead to intellectual confusion.  Normally that word suggests intentional planning.  When we construct a building, we don’t imagine it coming together without a master plan involving architects and engineers.  In the social world, by contrast, institutions emerge as the unplanned outcome of human action.  Or in Hayek’s phrase taken from the eighteen-century thinker Adam  Ferguson, they are the “products of human action, but not human design.”

The danger here is that once one sees social institutions as “constructed,” even “socially,” it’s easy to take the next two steps: thinking one can deconstruct and then reconstruct them. One of the great intellectual pastimes in the humanities and social sciences is to deconstruct social institutions by pointing out how they serve the interests of a specific group or enable one group to dominate another.  Again, this by itself is no problem as long as one understands that the process which created those institutions was not the result of human design.

Take the western family, a classic example of a socially constructed institution.  Yes, biology matters, but the particular ways in which we organize the family — the roles of “mother,” “father,” and “child” — are most certainly the product of a long social evolutionary process, which has varied across cultures.  In the West this process has benefited men more than women, which is often one of the major points made by those who want to deconstruct the family.  In fact, some will then argue that men must have controlled the construction process to benefit themselves.

No Conscious Design

And here is where a good dose of Mises and Hayek would help.  Once we recognize that institutions were never really constructed — in the sense of being the intentional product of human design — we can see that the family is not the result of planning and that even though it has perhaps disproportionately benefited men, it need not be because men, or anyone else, consciously designed it that way.  The Mises-Hayek perspective also shows that reconstructing the institution to address those supposed problems is simply not possible thanks to the limits to our knowledge and the way in which unplanned social processes make better use of that knowledge.

That is not to say we are helpless to change social institutions.  As Hayek argued, we can make changes at the margin or adjust one rule at a time, but we cannot redesign or reconstruct them from whole cloth.  Thinking we can do so is a mark of what Hayek called “constructivist rationalism”: the incorrect belief that we can design the social world as we please.  The common etymology is no coincidence, because another way of putting Hayek’s point is that what was never constructed by human design cannot be reconstructed by human design.  This is a lesson that more scholars using the language of social construction need to learn.

(I thank Aeon Skoble for comments on an earlier draft.)