FA Hayek


The average 56-year-old couple pays about $140,000 into the Medicare system over a lifetime and receives about $430,000 in benefits back. The program is also completely unaffordable. Medicare has unfinanced liabilities of more than $30 trillion. The Medicare trustees say the program is about a decade from insolvency.

Here.

David Brooks, thinks Republicans are channelling Friedrich August Hayek. If only. For an illuminating discussion of decentralized decision-making see this video. Click on the cc on the menu bar to the right of the volume icon.

Here.

Why?  Are the busybodies there afraid someone, somewhere is making money?  As long as the parties consent to the transactions, it’s not the SEC’s business.

Are they afraid of fraud?  Valuing the shares of the firms being traded is a judgment call.  It is implicit that either the buyer or the seller knows more than the other.  At the least, one side views the information differently that was used to make the decision.  That is always present for any transaction.

Here.

Matthew Continetti provides a good Hayekian understanding of the dispersed information and complexity of an economy.

Fighting a recession is not the same thing as fighting a war. The U.S. military is a hierarchical organization in which orders are dispersed through a top-down command structure. Every soldier has an assignment, with every assignment comes orders, and if a soldier does not follow his orders, he’s in a lot of trouble.

The economy is different. It is not a closed system like an armored cavalry regiment, where everything (and everyone) has a place. The economy is open and dynamic, the agglomeration of billions of individual consumers and producers and investors. An army belongs to a particular nation, but today’s economy is global: The high price of Japanese money lowers the cost of German exports, which depresses American manufacturing, which increases demand for Chinese imports, and so on. An army has officers who process and analyze the available information, then plot strategy accordingly. It is impossible to do this in an economy. There is too much information for a single mind, or a group of minds, to comprehend. And there is no way to know for sure which strategies work and which do not—or whether a strategy had any effect in the first place. An army fights and destroys an enemy. But who is the economic enemy and how does one “defeat” them? When Obama said “our troops are the steel in our ship of state,” he rightly implied that he, as commander in chief, is the ship’s pilot. But the economy is not a ship. The economy has no captain.

The equivalence between recession and war is what’s gotten Obama and the Democrats into so much trouble. Liberals like the president and the congressional leadership honestly believe that they can command the economy to recover. By pushing and pulling the correct monetary and fiscal policy levers, the Democrats say, government can manipulate aggregate demand and bring back jobs. By redistributing wealth and regulating the insurance market, the Democrats promise, Americans can achieve universal health care while reducing health spending. By delegating authority to unelected bodies and issuing hundreds of new rules, the Democrats believe, regulators can eliminate credit bubbles and financial crises.

But it’s not that simple. The economy and society are too complex. Expert knowledge is too limited. The science of economics is too primitive. Ordinary human beings do not respond like soldiers to government’s commands. Nor should they respond to government this way.

The economy is more like nested hierarchies but getting flatter all the time. Most corporations, from small to large, have hierarchies but they are dynamic. They adjust to the world around them.

Economic policy seems like a patchwork to satisfy special interests.  I understand trade-offs must be made but if the goal is efficiency, then minimal interference from government is needed.    Examples: instead of an income tax and payroll tax, how about one tax that is low and broad?  Eliminate all trade protection and subsidies.

He’s on the right track, though there is lots of room for debate on the details. Here.

The Ryan roadmap looks better and better. Beep beep.

Peter J. Boettke of George Mason University leading an Austrian revival and Spreading Hayek, Spurning Keynes.

The many branches of the tea party movement have created a virtual marketplace for new ideas, effective innovations and creative tactics. Best practices come from the ground up, around kitchen tables, from Facebook friends, at weekly book clubs, or on Twitter feeds. This is beautiful chaos—or, as the Nobel Prize-winning economist F.A. Hayek put it, “spontaneous order.”

Decentralization, not top-down hierarchy, is the best way to maximize the contributions of people and their personal knowledge. Let the leaders be the activists who have the best knowledge of local personalities and issues. In the real world, this is common sense. In Washington, D.C., this is considered radical.

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Decentralization, I suspect, will be an important building block for economic growth, jobs, and wealth creation. What must be decentralized is money, power, and control away from the central planners in Washington and the state capitals.

The debate of what is actually the primary economic problem continues. This op-ed focuses on fiscal and monetary policy, not other economic activities such as trade.

First, our lingering crisis and economic weakness was brought on not by a Keynesian failure of effective demand, but by a Hayekian asset boom and bust. Second, the textbook case for low interest rates treats the policy as one of benefits without costs. No such policy exists.
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The solution lies in restoring balance sheets. For financial firms, that means raising capital. For consumers and businesses alike, that means saving more of their reduced incomes.

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What does that mean in practical terms? What should businesses and consumers do with their increased savings? It has to be put somewhere such as checking accounts or savings accounts, money market accounts, buying bonds or stocks, paying down debt.

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