Lion Rock 7: Reading Club Salon 2013, Hong Kong

The Lion Rock Institute (LRI), Hong Kong's first and only free market think tank, will hold its second annual round table discussion on some theoretical concepts, billed as "Reading Club Salon 2013". The first event, "Reading Club Salon 2012" was held in early November 2012, two days before the Economic Freedom Network (EFN) Asia conference which was held in another hotel in Hong Kong. I attended both events. Below, our group photo at the conclusion of the 1 1/2 days LRI event. 

The Reading Salon is unique because (1) there are no primary or resource speakers, every participant is a speaker, and (2) all participants have to read some or all the e-books and short articles in the reading list, before they attend the discussion. A moderator introduces the topics and relevant reading materials then asks the participants to share their ideas and observations on those materials, in relation to some practical experiences and policies.

Last year, the foreign participants came from China, India, Thailand and Philippines (me). The rest of the participants are from Hong Kong, both native and expats.

The theme last year was "Dealing with Populism" and our reading list included books by Ludwig von Mises, Friedrich Hayek, Eric Hoffer, Allan Salinsky, Mao Tse Tung, Tom Hayden, plus short articles or chapters of books.

This year, the theme will be Democracy -- Past, Present and Future. The announcement says,

Democracy does not mean populism. Majority does not mean truth. Standing where we are today, how do we view democracy with its legacy from the past, and projection into the future?
 

The Lion Rock Institute is proud to present our Annual Reading Club Salon 2013. In this event, we will investigate the topic of democracy through four sessions: 

I. Athenian Democracy v. Roman Republic
II. Federalism
III. Subsidiarity
IV. A Way Out for the World – Can Democracy Survive?

The reading materials will be sent to us soon. For me, democracy can be liberating, or enslaving if the will and biases of the majority is forced upon the minority even if such programs or policies can cause harm to the minority. Especially if we keep in mind that the smallest minority, the smallest political unit in society, is the individual, not a village or a clan or a corporation.

We then must focus on the liberating aspects of democracy, and that is by providing check mechanisms that will prevent the majority to unfairly impose their will on the minority that can result in physical or economic harm on the latter. Government is force and coercion, and government almost always wave the "will and interest of the majority" mantra in justifying the use of various coercion (regulations, prohibitions, penalties, imprisonment, taxation) in society.

I like these words from Friedrich Hayek in Chapter 7, "Majority Rule" of his book, The Constitution of Liberty (1960):

Advance consists in the few convincing the many. New views must appear somewhere before they can become majority views. There is no experience of society which is not first the experience of a few individuals... It is because we normally do not know who knows best that we leave the decision to a process we do not control. But it is always from a minority acting in ways different from what the majority would describe that the majority in the end learns to do better... The imposition of the will of the majority's coercive, monopolistic, and exclusive character destroys the self-correcting forces which bring it about in a free society that mistaken efforts will be abandoned and the successful ones prevail…. 

If opinion is to advance, the theorist who offers guidance must not regard himself as bound by majority opinion. The task of the political philosopher is different from that of the expert servant who carries out the will of the majority... he will often serve democracy best by opposing the will of the majority…. 

The individual has little reason to fear any general laws which the majority may pass, but he has much reason to fear the rulers it may put over him to implement its directions. It is not the power which democratic assemblies can effectively wield but the powers which they hand over to the administrators charged with the achievement of particular goals that constitute the danger to individual freedom today... The most enthusiastic supporters of such unlimited powers of the majority are often those very administrators who know best that, once such powers are assumed, it will be they and not the majority who will in fact exercise them…. 

Democracy will remain effective only so long as government in its coercive actions confines itself to tasks that can be carried out democratically... Though democracy is probably the best form of limited government, it becomes an absurdity if it turns into unlimited government. Those who profess that democracyis all-competent and support all that the majority wants at any given moment are working for its fall.

There. Democracy can lead to limited or unlimited government. Limited government means limited coercion, like limiting and controlling the "right" to kill, stab, shoot, abduct, steal of people against other people, especially by big, organized and armed individuals and groups. 

Unlimited government and coercion is wrong and evil. It means totalitarianism. Democracy guided by the rule of law must work to prevent this from happening.
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See also 
Lion Rock 2: Populism and Anti-Capitalism, LRI Forum, HK, October 05, 2012
Lion Rock 3: The New Poor, Free Poor and Eric Hoffer, October 30, 2012
Lion Rock 4: Leftism and Populism by Intellectuals, November 05, 2012 
Lion Rock 5: Free Will vs. Power Over Others, December 26, 2012 
Lion Rock 6: Honoring Milton Friedman, July 31, 2013

Hayek 13: Friedrich Hayek's 113th Birthday

Yesterday, March 08, 2012, was the 113th birthday of Friedrich Hayek, the Austrian economist and legal/political philosopher known for his work in defending individual liberty, free market and the rule of law.

Below are some quotes I got from his book, The Constitution of Liberty.

The individual has little reason to fear any general laws which the majority may pass, but he has much reason to fear the rulers it may put over him to implement its directions. It is not the power which democratic assemblies can effectively wield but the powers which they hand over to the administrators charged with the achievement of particular goals that constitute the danger to individual freedom today... The most enthusiastic supporters of such unlimited powers of the majority are often those very administrators who know best that, once such powers are assumed, it will be they and not the majority who will in fact exercise them.

Law in its ideal form might be described as a ‘once-and-for-all’ command that is directed to unknown people and that is abstracted from all particular circumstances of time and place and refers only to such conditions as may occur anywhere and at any time…. “By ‘law’ we mean the general rules that apply equally to everybody… As a true law should not name any particulars, so it should especially not single out any specific persons or group of persons.

Even general, abstract rules, equally applicable to all, may possibly constitute restrictions on liberty. But this is unlikely. The chief safeguard is that the rules must apply to those who lay them down and those who apply—that is, to the government as well as the governed – and that nobody has the power to grant exceptions.

The ‘law’ that is a specific command, an order that is called a ‘law’ merely because it emanates from the legislative body, is the chief instrument of oppression. The confusion of these two conceptions of law (general rules vs. legislative law) and the loss of the belief that laws can rule, that men in laying down and enforcing laws in the former sense are not enforcing their will, are among the chief causes of the decline of liberty.

Not every enactment of the legislative authority is a law…only a very small proportion are substantive laws regulating the relations between private persons or between such persons and the state. The great majority of the so-called laws are rather instructions issued by the state to its servants.

That any law should apply equally to all. General and equal laws provide the most effective protection against infringement of individual liberty. It is this fact that all rules apply equally to all, including those who govern, which makes it improbable that any oppressive rules will be adopted.

Under the rule of law the private citizen and his property are not an object of administration by the government, not a means to be used for its purposes. It is only when the administration interferes with the private sphere of the citizen that the problem of discretion becomes relevant to us…. What distinguishes a free from an unfree society is that in the former each individual has a recognized private sphere clearly distinct from the public sphere, and the private individual cannot be ordered about but is expected to obey the rules which are equally applicable to all.

Below is a short article written by the President of Cato Institute, Mr. David Boaz.
http://www.cato-at-liberty.org/happy-birthday-f-a-hayek/

Happy Birthday, F. A. Hayek

Posted by David Boaz

Today is the 113th anniversary of the birth of F. A. Hayek, perhaps the most subtle social thinker of the 20th century.

He was awarded the Nobel Prize in Economics in 1974. He met with President Reagan at the White House, and Margaret Thatcher bangedThe Constitution of Liberty on the table at Conservative headquarters and declared “This is what we believe.” Milton Friedman described him as “the most important social thinker of the 20th century,” and Lawrence H. Summers called him the author of “the single most important thing to learn from an economics course today.”

He is the hero of The Commanding Heights, the book and PBS series by Daniel Yergin and Joseph Stanislaw. His most popular book, The Road to Serfdom, has never gone out of print and sold 125,000 copies last year. John Cassidy wrote in the New Yorker that “on the biggest issue of all, the vitality of capitalism, he was vindicated to such an extent that it is hardly an exaggeration to refer to the 20th century as the Hayek century.”

Last year the Cato Institute invited Bruce Caldwell, Richard Epstein, and George Soros to discuss the new edition of The Constitution of Liberty, edited by Ronald Hamowy. In a report on that session, I concluded:

Hayek was not just an economist. He also published impressive works on political theory and psychology.

He’s like Marx, only right.

Cato published two original interviews with Hayek, in 1983 and 1984.

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See also:
Hayek 12: Friedrich Hayek's 20th Death Anniversary, March 26, 2012
(has links to Hayek 1 to 11, discussion on some chapters of Hayek's book, "The Constitution of Liberty")
Hayek in Asia, September 20, 2010
Hayek in Asia 2: Shanghai Austrian Economics Summit 2012, April 15, 2012

Hayek 12: Friedrich Hayek's 20th Death Anniversary

After a long hiatus, I am resuming my discussion series on Friedrich Hayek. I used to have a separate blog called "Hayek Reader" to focus on the writings and discussions about him, but I could not sustain it, so I reposted those papers and moved them in this blog, and closed that blog.

Here are those papers, posted here last May 19, 2009:

Hayek 1: Liberty and liberties
Hayek 2: Freedom, spontaneity and accidents
Hayek 3: Inequality and progress
Hayek 4: Freedom and responsibility
Hayek 5: Merit vs. value
Hayek 6: Dangers of majority rule
Hayek 7: Rule of law means no exception
Hayek 8: Safeguards of individual liberty
Hayek 9: Hayek and Easterly
Hayek 10: Hayek and Keynes
Hayek 11: Rule of law and rule of the lawless

Three days ago was Hayek's 20th death anniversary. I am reposting here a paper from the Austrian Economics Conference, about a brief biography of Hayek. I know that he has written several dozen books plus several hundred scholarly articles, but I have read only two of them, The Road to Serfdom and The Constitution of Liberty. Most of the papers I wrote above were taken from several chapters of the latter.

I remain a fan of the man, definitely one of the brightest minds of the last century.
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FRIEDRICH A. von HAYEK (1899 -1992)
A Short Appreciation 20 Years after his Death
by
Kurt R. Leube*

“Before we explain why people commit mistakes, we must first explain why they should ever be right." F.A. von Hayek

I

It is 2012, and lest we forget one of the most seminal minds of our times, we should recall the important work of Friedrich A. von Hayek who died 20 years ago, on March 23, 1992.

F.A.von Hayek grew up in a typical Austrian family that could lay claim to an academic tradition of well over three generations. At the age of 18, to avoid his failing at several schools in Vienna he voluntarily joined the Austro-Hungarian Army and served as an artillery officer until the end of WW I. Immediately after his return from the Italian front, Hayek enrolled in the University of Vienna and, only three years later obtained his law degree (Dr. jur.). While Hayek studied for his second doctoral degree in Political Science (Dr. rer. pol.) which he earned in 1923, he began to work under Ludwig von Mises’ directorship in the “Abrechnungsamt”, a Vienna based office for the settlement of pre-war debts. As the most eminent scholar of the third generation of the Austrian School of Economics, Mises (1881-1973), soon became Hayek’s mentor and in 1927 they succeeded in founding the “Austrian Institute for Business Cycle Research” which soon gained high academic reputation under Hayek’s and later Oskar Morgenstern’s leadership.

II

The culturally vibrating climate of interwar Vienna provided the stimulating background for many scholarly circles and schools, such as the “Vienna Circle of Philosophy”, the “Vienna School of Psychoanalysis”, or the “Mises Private Seminar”. This famous “Seminar” which between 1921-1934 von Mises conducted off campus in his Chamber of Commerce office was the nucleus of the fourth generation of the Austrian School, the most important representative of which was Hayek. It is remarkable that far more than half of its participants later became world-famous in their respective academic fields. Yet, with the Nazi terror on the rise and almost no prospects of ever gaining access to an adequate academic position, all but a very few of these uniquely talented scholars left Austria for good. Schumpeter and Hayek were the first, many others were soon to follow. This “brain drain” lead to devastating consequences in the intellectual life in Austria and Germany which still can be felt.

Hayek’s first book Monetary Theory and the Trade Cycle (1929) at once set a standard in modern business cycle theory and is still valid. One of the most striking characteristics of the “Austrian” business cycle theory is Hayek’s insight that any shortage of capital immediately causes a crises. While classical economic theory never elucidated what causes such a shortage, Hayek made it clear that any overinvestment leads to “scarcity of capital”, unavoidably compelling a decline in investment and hence leading to the loss of a part of the real capital, produced because of the excessive investment rate.

Impressed by Hayek’s new business cycle theory, Lord Robbins invited him to lecture at the London School of Economics in the winter of 1931. The lectures where so successful that he was offered the position of “Tooke Professor of Economic Science” almost immediately thereafter and he accepted almost without hesitation. At this time, when J.M. Keynes’ new theories began to dominate academic and political life it was unavoidable for Hayek not to be immediately drawn into a fundamental debate with Keynes. Due to their inflationary character Hayek opposed these theories vigorously and thus became the leading intellectual force against Keynes and his followers. However, in view of a recession with huge unemployment rates it became politically obvious that Hayek’s approach of “waiting out the crisis“ was doomed to be overshadowed by the theoretically seriously flawed yet politically attractive “Keynesian Revolution” with easy “solutions” and massive government interventions. It is a regrettable but undeniable fact that economics much more than any other academic discipline is liable to the periodical reintroduction of popular fades and irrepressible superstitions.

While being deeply involved in these heated debates, Hayek at the same time opened yet another intellectual front and published the three famous essays which forever shattered the foundations of socialism. These essays were later collected in his Individualism and Economic Order (1948). The painful collapse of socialism as a viable political system in 1989 is the belated empirical proof of Mises’ as well as Hayek’s insights. Hayek’s interest in technical economics culminated in his The Pure Theory of Capital (1942) which must be rated as one of the most penetrating books ever published in this complex field.

Inequality 4: Why Inequality is Good

(This is my article yesterday in thelobbyist.biz)

Inequality is good because it respects and rewards hard work, efficiency and ambition. The self-driven, the self-reliant and highly ambitious among us will ultimately rise to the top because they are never complacent. They are always moving, constantly innovating and improving on old ways and technologies.

On the other side of the fence, there are people who have little or zero ambition in life. To drink and party everyday, to rely on some outside support – from parents, siblings, friends, government welfare, and so on – for their continued existence, these are their simple joys and complacency.

Between the two, and many others in the middle, inequality is sure to happen in the short term, and such inequality will widen over the long term.

Friedrich Hayek, the famous Austrian economist-philosopher, wrote in Chapter 3 of his book, The Constitution of Liberty (1960),

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.

The highly ambitious, the highly innovative and inventive among us, are the key risk-takers in society. They are the ones who first invented the cellular phones, the computers, the flat tv, the new rice and corn variety, the new disease-killer drugs and vaccines. We see only the more successful products, and that is where envious eyes and minds are watching. We do not see the unsuccessful products made by other inventors which failed to show up in the shops, malls and supermarkets.

All those government welfare and entitlement programs that are meant to reduce inequality and improve equality among the people are mostly unproductive, some are even counter-productive and destructive. When being poor is rewarded with lots of welfare programs like education for the poor, healthcare for the poor, housing for the poor, credit for the poor, agrarian reform for the poor, cash transfer for the poor, and probably soon, condoms and ligation for the poor, and such programs have no timetables, then there are incentives to remain poor.

Here is Hayek’s additional position on the matter:

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.

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 that government will have lots of money to redistribute to others is 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, subsidize there” programs.

When the poor and initially less ambitious see that there are less entitlements coming, when there are less taxes, regulations and bureaucracies if they become hard-working and entrepreneurial too, then they will become more self-driven and independent, less dependent on politicians and the state. And society can progress even faster.

Continued programs and policies that reallocate people’s talent away from more innovation towards more forced income redistribution, is among the scourge of modern human civilization.
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See also:
Inequality 1: Rich Getting Richer is Good, August 29, 2009
Inequality 2: To Each According to his Needs... September 01, 2010
Inequality 3: Freedom, Free Market and Inequality, February 14, 2011
Hayek 3: Inequality and Progress, May 19, 2009