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From The Road to Serfdom, how and why does F.A. Hayek denounce all forms of planning or collectivism? What is so superior to laissez faire or capitalism and why?

Do you agree with HayekÐŽ¦s thesis? If so, yes; if not, why not?

CollectivismÐŽ¦s main argument is that society should not be controlled by people who are irresponsible. Hayek counters that point by stating that collectivism is nothing more than totalitarian in which individual freedoms are lost. He also states that the welfare and happiness of the society cannot be satisfied by a single plan (Hayek 63-64). This is especially true in countries that are very diverse in their peopleÐŽ¦s education and culture. Collectivism also has the dilemma of ÐŽ§who plans whom, who directs and dominates whom, who assigns to other people their station in life, and who is to have his due allotted by others? These become necessarily the central issues to be decided solely by the supreme power.ЎЁ (Hayek 119). Typically, it is the bottom of society that makes up this supreme power. HayekÐŽ¦s believes that since the bottom of society typically has low values and moral standards, they can reach out to the greatest number of people for their message. Another way that this group can get power is the belief that the gullible people will follow any message they convey and that people will follow a message of hate rather than any positive message (152-153). A perfect example of this would be the Nazis in Germany where Hitler relied upon his message of nationalism and his hatred of Jews.

Hayek properly lays out the foundation to support his reasoning for supporting capitalism. He points out that capitalism cannot succeed without a proper legal framework. With legal laws and enforcement in force, classical liberalism believes that capitalism and its forces of competition will coordinate human efforts best rather than relying on a total laissez fare policy (Hayek 41). Other factors needed for capitalism to succeed are the organization of ÐŽ§money, markets, and channels of informationЎЁ (43). Those three factors are the basis for competition which is most effective in determining allocation of resources and generating the maximum amount of marginal utility. When prices and/or output are controlled, the central planners are interfering with free markets which distort the true view of the marketplace.

In addition, Hayek believes that combining capitalism and central planning is a recipe for disaster. ÐŽ§A mixture of the two means that neither will really work and that the result will be worse than if either system has been consistently relied uponÐŽKplanning and competition can be combined only by planning for competition but not by planning against competition.ЎЁ (Hayek 48). The planning that Hayek refers to goes back to an enforceable legal system in addition to the tools needed for a free marketplace. Hayek states that even with a capitalistic society, there should be a safety net. He points out that new technology often displaces workers from their jobs. Part of this safety net would include unemployment benefits which would provide a basic standard of living. Hayek believes in this type of security for the people since the economy can oscillate greatly. ÐŽ§ÐŽKthe very necessary efforts to secure protection against these fluctuations do not lead to the kind of planning which constitutes such a threat to our freedom.ЎЁ (Hayek 135).

If we were to rely only on central planning, Hayek points out that ÐŽ§ÐŽKthe growth of our industrial systemÐŽKwould never have reached the degree of differentiation, complexity, and flexibility it has attained.ЎЁ (Hayek 56). The key to capitalism is that it allows the existence of division of labor, which would effectively be able to convey all of the relevant facts (Hayek 55). This type of decentralization will allow all individuals needs and wants to be considered which would not occur if there is central planning involved (55).

Hayek states that progress in technology will ultimately lead to monopolies, which destroys competition and then will result in central planning. However, he believes that it is government planning and collusion that results in monopolies, and not in economies of scale. He believes that once public policy has been corrected, and collusion has been eliminated, competition can flourish once again (Hayek 51). A perfect example of collusion to create a monopoly is Standard Oil. RockefellerÐŽ¦s collusion with the railroads enabled it to compete with the smaller players on price and not based on economies of scale resulting in their failures and thus, removing StandardÐŽ¦s competition.

Finally, Hayek main argument against economic socialism is that it not possible without socialism in all other policies. This would result in totalitarianism as has been evidenced by Hitler and Mussolini. Hayek states that individualism is not as evil as the socialists make it out to be. He believes that ÐŽ§ÐŽKindividuals should be allowed, within defined limits, to follow their won values and preferences rather than somebody elseÐŽ¦s;ÐŽKIt is this recognition of the individual as the ultimate judge of his ends, the belief that as far as possible his own views ought to govern his actions, that forms the essence of the individualist position. (Hayek 66). The freedoms that individuals enjoy in a capitalistic society can not be obtained when totalitarians control the economy as Hayek points out (110). Central planning would control all aspects of life since every part of oneÐŽ¦s life is the livelihood of someone elseÐŽ¦s economic life. This means that totalitarians would control every part of life including pleasures and free time (110). Hayek even states that Karl Marx recognized that ÐŽ§the evolution of private capitalism with its free market had been a precondition for the evolution of all our democratic freedoms.ЎЁ (116). Without the free market, these freedoms would disappear as a result of central planners trying to run the country. Given how Hayek does stipulate his views on laissez faire policy, I tend to agree with his thesis since it can be shown that the social benefits outweigh the costs of such policies. Also, since all forms of planning have practically vanished from the world, it shows how HayekÐŽ¦s thesis has stood the test of time 60 years later and that I am a firm believer as well.

Question Two

From The Fatal Conceit, what are HayekÐŽ¦s objections to Socialist thought? How and why does he Socialist thought is inaccurate and flawed about history, human nature etc. Do you agree with HayekÐŽ¦s thesis? If so, yes; if not, why not?

HayekÐŽ¦s views on Socialist thought



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