Hayek 4: Freedom and responsibility

November 30, 2005

One of my favorite chapters in Hayek’s “The Constitution" is Chapter 5, “Freedom and Responsibility”. Below are 4 important points which I quote direct from the chapter.

“Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions and he will receive praise or blame for them. Liberty and responsibility are inseparable… Denial of responsibility is commonly due to a fear of responsibility, a fear that necessarily becomes also a fear of freedom.

“The aim of assigning responsibility is to make man different form what he is or might be… The knowledge that he will be held responsible will influence a person’s conduct in a desirable direction. Assigning of responsibility makes people observe certain rules. It teach people what they ought to consider in comparable future situations.

“Responsibility to be effective, must be individual responsibility. As everybody’s property in effect is nobody’s property, so everybody’s responsibility is nobody’s responsibility.

“To be constantly reminded of our “social” responsibilities to all the needy or unfortunate in our community, in our country, or in the world, must have the effect of attenuating our feelings until the distinction between those responsibilities which call for our action and those which do not disappear.”

These thoughts are very relevant in the discussion of state welfarism, and in current fiscal issues of many governments around the world, rich and poor alike. Is children’s education and health care government responsibility or parental responsibility? Is provision and financing of unemployment insurance and future pension government or personal responsibility?

If parents are freed from their responsibility of sending their children to school because government has assumed the responsibility by over-taxing other people, especially the unmarried or couples with no or few kids, then some parents will not work hard and yet have plenty of children since government is obliged to educate and give health care to their kids. Or the system will attract plenty of migrants from many countries, expecting that they too will enjoy said generous welfare, even if they are unprepared and unskilled to adjust to the demands of the new workplaces and neighborhoods.

If individuals are freed from their responsibility of setting aside a big portion of their monthly income for some undesirable event in the future where their current jobs will be gone, because government has assumed the responsibility by overtaxing other people, the entrepreneurs and hard-working ones in particular, then some individuals will deliberately not look for work and just wait for their monthly unemployment allowance.

If individuals are stripped of their freedom to save or spend a big portion of their income because of high and many taxes to finance the high costs of public education, public health care, public housing, unemployment allowance, other state welfare services, plus huge salary of the expanded bureaucracy, then some productive people will not work hard too because more income means more taxes. Some people may also opt to move out of the high-welfare, high-taxes economy, migrate and work elsewhere. If entrepreneurship is penalized by plenty of taxes on profits and income, then less entrepreneurship and job creation will happen in the economy.

This largely explains why many big welfare states are in perennial budget deficit (revenues lower than expenditures), and have large public debts (see discussion on “Debt reliever countries are themselves indebted”). Revenues are constrained by the self-preservation of taxpayers to get around with tax laws if they can, and some people will reduce work since more income means more taxes. Expenditures meanwhile are stretched to expansion by promises of welfare, of the state assuming more “government responsibilities” to otherwise were “personal and parental responsibilities”.

Finally, if individuals are forced to contribute to other needy people elsewhere without understanding the specific intricacies by which those needy people are faced, their appetite for voluntary support is reduced. People in rich countries pay lots of taxes, part of which go to foreign aid institutions and projects supposedly to help the poor in the developing world. Since a big portion of foreign aid money go to salaries and perks of the personnel and consultants of those foreign aid (both multilateral and bilateral) institutions, and the politicians and top bureaucrats of recipient poor countries in the form of wastes and robbery, then little money really reach the poor. The enthusiasm for voluntary support to the needy people elsewhere is reduced as high taxation partly for foreign aid has reduced citizens’ spending power for voluntary donations.