Tuesday, May 19, 2009

Hayek 3: Inequality and progress

November 30, 2005

Chapter 3 is entitled “The Common Sense of Progress”. Hayek talked about the virtue of inequality, the value of having some people get ahead of the majority to experiment certain things, paving the way for the rest to follow without going through the long process of experimentation, of trial and error. Herewith are the relevant paragraphs from the chapter:

“The rapid economic advance that we have come to expect seems in a large measure to be the result of this inequality and to be impossible without it. Progress at such a fast rate cannot proceed on a uniform front but must take place in echelon fashion, with some far ahead of the rest.

“In the long run, the existence of groups ahead of the rest is clearly an advantage of those who are behind, in the same way that, if we could suddenly draw on the more advanced knowledge which some other men on a previously unknown continent or on another planet had gained under more favorable conditions, we would all profit greatly.

“So long as somebody else provides most of the new knowledge and does most of the experimenting, it may even be possible to apply all this knowledge deliberately in such a manner as to benefit most of the members of a given group. But though an egalitarian society could advance in this sense, its progress would be essentially parasitical, borrowed from those who have paid the cost.

“The over-all speed of advance will be increased by those who move fastest. Even if many fall behind at first, the cumulative effect of the preparation of the path will, before long, sufficiently facilitate their advance that they will be able to keep their place in the march.

“Improving the position of the poorest by giving them what we took from the wealthy, would temporarily quicken the closing-up of the ranks, it would, before long, slow down the movement of the whole and in the long-run hold back those in the rear. All obstacles to the rise of some are, in the long run, obstacles to the rise of all… To prevent progress at the top would soon prevent it all the way down.”

Given differences among people – their hereditary traits, their physical environment, their social and cultural environment, their individual dreams and ambitions – it is indeed impossible to have uniform pace of advancement for all people. The more ambitious and self-driven people will naturally surge faster and farther than the less-ambitious and less-driven ones. And there is perfectly nothing wrong with this.

A group of young people who dream of someday owning a fleet of expensive cars, huge houses, a chopper or private plane, and other personal properties, may yet be the group of people who will do miraculous things to invent things most needed by mankind. For instance, these guys will pursue sophisticated scientific courses because they want to possibly make some farm animals’ urine (whether cow, carabao or water buffalo, goat, sheep, etc.) as medicines to treat malaria or polio or bird flu or AIDS. The scientific and financial advances of these ambitious young guys will definitely help mankind, especially the poor most susceptible to these deadly diseases.

The implication of this is that government policies of institutionalizing forced equality, of confiscating a big portion of the incomes of the rich and self-driven people so government will have the money to give to the poor (welfarist programs and policies), is wrong and dangerous. The mistake rests not only in penalizing hard work, performance and being ambitious, but also in rewarding people who are in the “confiscate here, give there” policies and programs. This reallocation of people’s talent away from more innovation towards more forced income redistribution, is among the scourge of modern human civilization.

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