April 21, 2008
(An accolade to the Atlas Economic Research Foundation on its 8th Liberty Forum, April 25-27, 2008, Atlanta, Georgia, USA)
Friedrich Hayek’s The Constitution of Liberty, Chap. 14, is entitled “The Safeguards of Individual Liberty”. After defining in earlier chapters the concepts of liberty, equality, rule of law and what constitutes them, it is apt to discuss what will safeguard them. Hence, the importance of this chapter.
Hayek wrote that the law of liberty possesses certain attributes:
“First, the rule of law means that government must never coerce an individual except the enforcement of a known rule. The rule of law is more than constitutionalism: it requires that all laws conform to certain principles… The rule of law restricts government only in its coercive activities.… The chief means of coercion at the disposal of government is punishment.”
To better understand this and the succeeding quotes from Hayek, let us review how the man defined the following concepts:
Liberty means absence of coercion.
Freedom is inseparable from responsibility; fear of responsibility is fear of freedom itself.
Equality before the law; equal treatment of the law to unequal people.
Rule of law means no exception.
Governments usually create thousands of rules, from laws against murder and stealing to laws against left-turn and U-turn on certain streets, laws on what days and hours one can drive his/her car, rules and guidelines how to repair one’s house or how to treat dogs and cats. Plus rules on how much taxes to pay for this and that income, taxes and fees for ownership of a house, lot and car; fees to get a business permit, marriage and birth/death certificate, police clearance, driver’s license, passport, and so on.
When there are 10,000 or 149,000 different rules and regulations, and if governments are to strictly follow a rule of law where there is not a single exception, where both governors and the governed should follow all those rules, society can be paralyzed, it can decay and only those who have the political and armed muscles will be free to do what they want.
It is to be assumed therefore, that when governments, through their multilateral, national and local legislative bodies, create 10,000 or 149,000 different rules, many of these laws are meant to be disregarded by those who have the power and authority to exempt themselves from many or all of those laws – the government officials, bureaucrats, their families and friends – and the laws are to be implemented only to those who do not belong to the former. This is because it is impossible for ordinary citizens to know and understand even five percent of those tens of thousands of laws and the corresponding fines and penalties for their violation.
This observation is consistent with Hayek’s definition of the limit of legislative action. He wrote,
“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.”
For rule of law to be safeguarded, based on Hayek’s first attribute of liberty mentioned above, one precondition is that the number of laws that governments through their respective legislative bodies should make and implement should be as few as possible, and for these very few rules to be known to as many people as possible. Because the state will be prohibited from coercing any individual in obeying certain rules that the individual does not even know exists. The state can only enforce laws that are so general and easily understandable to everyone to make the rule of law effective and individual liberty safely guarded.
The second chief attribute of true law, according to Hayek, is that the “the laws are known and certain… the certainty of the law must be judged by the disputes which do not lead to litigation because the outcome is practically certain as soon as the legal position is examined.”
When there is rule of law – the existence of very few laws that apply to everyone, no exception – citizen obedience is expected. When there is fear that punishment is certain once one is caught to be violating those very few rules – like laws against murder and stealing – people will feel safe, they become productive, and there will be little or no necessity to short-cut or break laws, say to improve one’s material and economic well-being.
There will be little need for lawyers too, and courts and judges. Society’s energy will be channeled from many unproductive activities and services, towards building and creating many things that people need or still being dreamed of as “futuristic” if not impossible.
The third requirement of true law, according to Hayek, is equality.
“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.”
Even the highest traffic or police officials of a country or city will not support rules on “no left turn” or “no U-turn” on certain streets if they know that the left-turn or U-turn slots ahead are always congested and they cannot take a short-cut and must endure the traffic congestion themselves. The solution to such congestion and the temptation to violate said traffic rules is the construction of elevated or underground left-turn and U-turn slots, or other engineering solutions, for smooth and seamless traffic flow.
One big and never-ending problem in many developing countries is corruption and large-scale robbery in government. The selective application of the law against stealing causes this malady. The probability of being caught and imprisoned for stealing is very low while the benefits of stealing and plunder is very high.
Corruption involves not only stealing and plunder of tax money. It also involves creating many laws and prohibitions that are meant to be broken in exchange for bribes. Hence, the more prohibitions to be enacted, the more bribes and special favors to be expected. There is no stealing of tax money in violation of laws against illegal drugs, prostitution and human trafficking. But these crimes continue both in poor and rich countries because the implementers look the other way once bribes and favors, material or non-material, are given. That is why the existence of too many laws and prohibitions makes a mockery of the rule of law and the perverse institutionalization of rule of men is hereby created. And these are the conditions by which abuse and disrespect of individual freedom is sown and grown.
Where now lies the protection of private property and citizen privacy and how should they be safeguarded? Hayek wrote,
“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.”
This would somehow explain why poverty remains widespread in many societies. Disrespect for social outcome where there is prosperity for the hard workers and misery for the lazy, by forcing social equality or attempting to “narrow the gap” between the rich and poor through various income redistribution schemes has often resulted in more personal irresponsibility. When there is irresponsibility, there is poverty.
One policy by some governments that discourage economic efficiency is land or agrarian reform, where some big and medium-sized landholdings are being forcibly taken by the state, then subdivided and distributed to farm workers. For societies with high entrepreneurial spirit among the people, this policy has worked well. For countries with weak entrepreneurial spirit among their people, the result is bad. Some efficient corporate farms with economies of scale and employ scientific and modern technologies in farming and post-harvest processes are either being discouraged to enter the agri-business sector, or already there but discouraged to pour in additional investments due to the constant threat of land parceling and redistribution by the state. And many farm workers who became beneficiaries of land redistribution were either too poor to invest in modern farming that drastically improves farm output and productivity, or sometimes too rich to splurge in big parties after selling the land that was just handed over to them.
The treatment by the state that all lands, even those privately-titled lands, are its own and it can interfere into the ownership and utilization of those lands, especially by landowners who are deemed “not friendly” to the politicians and officials of the incumbent government, shows the absence of freedom by some citizens. It betrays the exproprietory tendency or character of the state.
And speaking of expropriation, Hayek has this observation:
“The principle of ‘no expropriation without just compensation’ has always been recognized wherever the rule of law has prevailed. It is, however, not recognized that this is an integral and indispensable element of the principle of the supremacy of the law…. Compensation should be fixed as high as possible without opening the door to outright abuse. This means the public gain must clearly and substantially exceed the loss if an exception to the normal rule is to be allowed.”
Land expropriation practices by the state, whether for land reform or to build a new expressway or expand an existing one, or any other infrastructure or administrative projects should indeed be tempered by “compensation as high as possible” principle. This is because land valuation by the state is often very arbitrary and tend to undervalue the real price of the land, and on the premise that the landowner is open to selling the land to the state. Valuation by private buyers who are competing with each other on the other hand, tend to reflect the market value of the land.
The sphere of the individual should be as wide as possible, and the sphere of the state to intervene should be as limited and narrow as possible. The narrowness of the public sphere is clearly delineated by the rule of law principle: the state should enact and enforce only few and general rules that apply equally to everyone, state leaders and administrators included.
Tuesday, May 19, 2009
Hayek 7: Rule of law means no exception
October 15, 2007
Friedrich Hayek’s Chapter 10, “Law, Commands and Order”, in The Constitution of Liberty
Chapter’s opening quote:
“A sphere belonging to each individual is determined, not by the demarcation of a concrete boundary, but by the observation of a rule – a rule that is not known as such by the individual but that is honored in action.”
One of the key concepts when people discuss individual liberty, political democracy and economic freedom, is law. And too often, law is regarded as anything that comes out of the legislative mill, anything that is crafted by the law-creating body in specific milieu of a given society. Some laws complement, some contradict, previous laws. And some laws are created or enacted even if there are no accompanying mechanisms like budgetary appropriation (often called “unfunded laws”). Nonetheless, they are all called “laws”. Hayek says this is wrong. For him,
“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.”
This is a very straightforward and clear definition of “law” – that it applies equally to everybody, no particulars or group of persons ever targeted or mentioned. Thus, the law/s against killing any person and stealing any private property is true “law” in the Hayekian sense. While laws on income tax where people who work for foreign governments and multilateral or foreign institutions are exempted from paying income tax, is not. So that what we normally refer to as “laws”, are actually “commands”. According to Hayek,
“Difference between laws and commands… command determines uniquely the action to be performed and leaves those to whom it is addressed no chance to use their own knowledge or follow their own predilections. Law, on the other hand, provides merely additional information to be taken into account in the decision of the actor.”
One wonders sometimes and asks this question, “What do you call those thousands of rules we have, from traffic rules to laws enacted in the village, county, municipal, city, provincial, state, federal, national, international, levels?” The answer is that majority of them are commands, not laws. Because they specify the things that people should do, or not do, as well as the corresponding fines and penalties to be applied when caught violating those commands. In addition, by virtue of the strict “laws = no exception” rule, it follows that laws should be few, not numbering thousands, because it will be impossible for the “law enforcers” not only to remember all those thousands of laws, but also not to grant exceptions to some violators who also are not aware of the thousands of laws in existence, or willingly violate certain rules because they know that “law enforcers” are busy remembering and enforcing the laws elsewhere. Hayek added,
“When we obey laws, in the sense of general abstract rules laid down irrespective of their application to us, we are not subject to another man’s will and are therefore free… Because the rule is laid down in ignorance of the particular case and no man’s will decides the coercion use to enforce it, the law is not arbitrary.
“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.”
This, I guess, is the heart and soul of the rule of law – the law applies to the government and the governed, no one is exempted and no one has the power to grant exceptions. The abstractness and all-encompassing applicability of these general rules assures their liberating aspect, their capacity to protect the freedom of everyone that respects those rules, and their capacity to punish everyone that disobeys those rules. This is possible only because, as explained by Hayek, the laws were designed with no particular case, no particular time, and no particular group of persons, are targeted to be the object of restrictions. Any exception to the rules immediately become “rule of men”, by people who exempt themselves or “higher ups” from the law, and not rule of law.
Those hundreds of traffic rules, for instance, that say “no left turn”, “no U-turn”, “no counter-flow”, “no parking”, and so on, when the traffic enforcers perfectly know that there are people who will be exempted – from top politicians, top police and military officials, other economic and political leaders of society – are commands, not laws. Those traffic rules are not expected to be followed by everyone. Traffic congestion is a social and engineering problem which has social and engineering solutions. For instance, if building a U-turn slot on an existing road is dangerous for motorists, an elevated U-turn road is one solution. If allowing left-turn on a busy intersection will cause more traffic and more risks to crossing pedestrians, an elevated or underpass left-turn slot is one solution. If allowing parking on the shoulder of a road will still cause traffic, then facilitating and encouraging the construction (especially by private entities) of a sprawling or multi-level parking building nearby is one solution. The point is to build infrastructures that will create the minimum, if not zero, prohibitions and restrictions in traffic flow, so that no one, especially those in government, will be tempted to break and violate those prohibitions.
On the Legislature or Parliament, Hayek’s words on this are the following:
“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.
I find this statement controversial because Hayek called Legislative command as the “chief instrument of oppression.” I have always thought that the chief instrument of oppression are rules made by dictators, by gangs and political parties that rose to power and retain such power by armed means, who make no hesitation in arresting or killing those who want to disobey their rules. Maybe Hayek was referring here to a Legislature or Parliament that derive its mandate not from popular vote, but from appointment by dictators and/or armed gangs and political parties.
But like the above discussion on hundreds of traffic rules, even a Legislature that derives its mandate from popular vote or direct vote by the citizens, can indeed be a “chief instrument of oppression.” When such legislature creates thousands of laws after many years and generations of Legislators or Parliamentarians through the years, then the citizens will find themselves swamped with thousands of commands – whether as new restrictions or new subsidies and entitlements to certain groups of people -- that also require plenty of taxes, charges and fees so that those laws will be funded and implemented. Because the “rule of law” requires that the laws should be as few as possible, so that they can be easily appreciated, understood and respected, by all, from private citizens to government “law enforcers”.
This interpretation is supported by Hayek’s succeeding statements. He wrote,
“If ‘to rule’ means to make men obey another’s will, government has no such power to rule in a free society. The citizen as citizen cannot be ruled in this sense… He can be ruled, however, in the sense in which “to rule” means the enforcement of general rules, laid down irrespective of the particular case and equally applicable to all. For here no human decision will be required in the great majority of cases to which the rules apply; and even when a court has to determine how the general rules may be applied to a particular case, it is the implications of the whole system of accepted rules that decide, not the will of the court.”
This statement by Hayek has serious implication: that government can make “rules” that will make people subservient to someone else, only in unfree society. And since laws – whether enacted by popularly-elected or dictators-appointed legislators -- tend to be more of commands, not general rules, then it is imperative that any government, if it is serious in maximizing the freedom of the citizens, must make as few laws as possible. Aside from its philosophical and moral virtue, less laws (and less legislators) also has fiscal and financial wisdom in the face of “pork barrel” practices by many legislatures around the world.
In discussing commands and laws, Hayek has touched on what could be the essence of the “role of government” in society. He wrote,
“The main features of all somewhat more advanced legal orders are similar to appear as mere elaborations of what David Hume called the ‘three fundamental laws of nature, that of the stability of possession, of transference by consent, and of the performance of promises.’
Hume here is referring to (a) right to private property, (b) right to exchange or dispose such property, and (c) respect of contract. Many classical liberal thinkers also wrote along this line. And Hayek said that the legal infrastructure of more modern societies are derived from these “fundamental laws of nature”. We can extend the logic to say that a government’s right to exist is justified only if it can assure the citizens of their 3 fundamental rights. Plus the government’s duty to protect the citizen’s right to life from aggressors.
Hayek also wrote something similar to Adam Smith’s “invisible hand”. When people pursue their self-interest for self-preservation, if not to become rich and affluent, so long as they do not harm other people, they are guided by an “invisible hand” to produce goods and services that are needed by other people, so that human welfare is spontaneously assured and expanded. He wrote,
“One of the achievements of economic theory has been to explain how such a mutual adjustment of the spontaneous activities of individuals is brought about by the market, provided that there is a known delimitation of the sphere of control of each individual.”
And finally, Hayek believed that humanity is capable of “spontaneous order in society” even without the guiding hand of the state. This is similar to the above discussion. Here he quoted M. Polanyi:
“M. Polanyi has called the spontaneous formation of a ‘polycentric order: When order is achieved among human beings by allowing them to interact with each other on their own initiative – subject only to the laws which uniformly apply to all of them – we have a system of spontaneous order in society… The actions of such individuals are said to be free, for they are not determined by any specific command, whether of a superior or a public authority; the compulsion to which they are subject is impersonal and general. (M. Polanyi, The Logic of Liberty (London 1951, p. 159)”
It is indeed very ironic that humanity around the world has been guided – or misguided -- to believe that spontaneous order among people is impossible. That we need governments, local, national, and supra-national, to ensure social order. Farther from the truth. More often than not, governments are the chief cause of complaint and discontent by citizens around the world from many countries. The breakdown of the rule of law and subsequent dominance of commands, the failure of having few but general rules that apply to everyone, and the exemptions of many of those who are in government from the various commands that they themselves have enacted and implemented, are the chief causes of citizen discontent, the chief instruments of citizen oppression.
Friedrich Hayek’s Chapter 10, “Law, Commands and Order”, in The Constitution of Liberty
Chapter’s opening quote:
“A sphere belonging to each individual is determined, not by the demarcation of a concrete boundary, but by the observation of a rule – a rule that is not known as such by the individual but that is honored in action.”
One of the key concepts when people discuss individual liberty, political democracy and economic freedom, is law. And too often, law is regarded as anything that comes out of the legislative mill, anything that is crafted by the law-creating body in specific milieu of a given society. Some laws complement, some contradict, previous laws. And some laws are created or enacted even if there are no accompanying mechanisms like budgetary appropriation (often called “unfunded laws”). Nonetheless, they are all called “laws”. Hayek says this is wrong. For him,
“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.”
This is a very straightforward and clear definition of “law” – that it applies equally to everybody, no particulars or group of persons ever targeted or mentioned. Thus, the law/s against killing any person and stealing any private property is true “law” in the Hayekian sense. While laws on income tax where people who work for foreign governments and multilateral or foreign institutions are exempted from paying income tax, is not. So that what we normally refer to as “laws”, are actually “commands”. According to Hayek,
“Difference between laws and commands… command determines uniquely the action to be performed and leaves those to whom it is addressed no chance to use their own knowledge or follow their own predilections. Law, on the other hand, provides merely additional information to be taken into account in the decision of the actor.”
One wonders sometimes and asks this question, “What do you call those thousands of rules we have, from traffic rules to laws enacted in the village, county, municipal, city, provincial, state, federal, national, international, levels?” The answer is that majority of them are commands, not laws. Because they specify the things that people should do, or not do, as well as the corresponding fines and penalties to be applied when caught violating those commands. In addition, by virtue of the strict “laws = no exception” rule, it follows that laws should be few, not numbering thousands, because it will be impossible for the “law enforcers” not only to remember all those thousands of laws, but also not to grant exceptions to some violators who also are not aware of the thousands of laws in existence, or willingly violate certain rules because they know that “law enforcers” are busy remembering and enforcing the laws elsewhere. Hayek added,
“When we obey laws, in the sense of general abstract rules laid down irrespective of their application to us, we are not subject to another man’s will and are therefore free… Because the rule is laid down in ignorance of the particular case and no man’s will decides the coercion use to enforce it, the law is not arbitrary.
“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.”
This, I guess, is the heart and soul of the rule of law – the law applies to the government and the governed, no one is exempted and no one has the power to grant exceptions. The abstractness and all-encompassing applicability of these general rules assures their liberating aspect, their capacity to protect the freedom of everyone that respects those rules, and their capacity to punish everyone that disobeys those rules. This is possible only because, as explained by Hayek, the laws were designed with no particular case, no particular time, and no particular group of persons, are targeted to be the object of restrictions. Any exception to the rules immediately become “rule of men”, by people who exempt themselves or “higher ups” from the law, and not rule of law.
Those hundreds of traffic rules, for instance, that say “no left turn”, “no U-turn”, “no counter-flow”, “no parking”, and so on, when the traffic enforcers perfectly know that there are people who will be exempted – from top politicians, top police and military officials, other economic and political leaders of society – are commands, not laws. Those traffic rules are not expected to be followed by everyone. Traffic congestion is a social and engineering problem which has social and engineering solutions. For instance, if building a U-turn slot on an existing road is dangerous for motorists, an elevated U-turn road is one solution. If allowing left-turn on a busy intersection will cause more traffic and more risks to crossing pedestrians, an elevated or underpass left-turn slot is one solution. If allowing parking on the shoulder of a road will still cause traffic, then facilitating and encouraging the construction (especially by private entities) of a sprawling or multi-level parking building nearby is one solution. The point is to build infrastructures that will create the minimum, if not zero, prohibitions and restrictions in traffic flow, so that no one, especially those in government, will be tempted to break and violate those prohibitions.
On the Legislature or Parliament, Hayek’s words on this are the following:
“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.
I find this statement controversial because Hayek called Legislative command as the “chief instrument of oppression.” I have always thought that the chief instrument of oppression are rules made by dictators, by gangs and political parties that rose to power and retain such power by armed means, who make no hesitation in arresting or killing those who want to disobey their rules. Maybe Hayek was referring here to a Legislature or Parliament that derive its mandate not from popular vote, but from appointment by dictators and/or armed gangs and political parties.
But like the above discussion on hundreds of traffic rules, even a Legislature that derives its mandate from popular vote or direct vote by the citizens, can indeed be a “chief instrument of oppression.” When such legislature creates thousands of laws after many years and generations of Legislators or Parliamentarians through the years, then the citizens will find themselves swamped with thousands of commands – whether as new restrictions or new subsidies and entitlements to certain groups of people -- that also require plenty of taxes, charges and fees so that those laws will be funded and implemented. Because the “rule of law” requires that the laws should be as few as possible, so that they can be easily appreciated, understood and respected, by all, from private citizens to government “law enforcers”.
This interpretation is supported by Hayek’s succeeding statements. He wrote,
“If ‘to rule’ means to make men obey another’s will, government has no such power to rule in a free society. The citizen as citizen cannot be ruled in this sense… He can be ruled, however, in the sense in which “to rule” means the enforcement of general rules, laid down irrespective of the particular case and equally applicable to all. For here no human decision will be required in the great majority of cases to which the rules apply; and even when a court has to determine how the general rules may be applied to a particular case, it is the implications of the whole system of accepted rules that decide, not the will of the court.”
This statement by Hayek has serious implication: that government can make “rules” that will make people subservient to someone else, only in unfree society. And since laws – whether enacted by popularly-elected or dictators-appointed legislators -- tend to be more of commands, not general rules, then it is imperative that any government, if it is serious in maximizing the freedom of the citizens, must make as few laws as possible. Aside from its philosophical and moral virtue, less laws (and less legislators) also has fiscal and financial wisdom in the face of “pork barrel” practices by many legislatures around the world.
In discussing commands and laws, Hayek has touched on what could be the essence of the “role of government” in society. He wrote,
“The main features of all somewhat more advanced legal orders are similar to appear as mere elaborations of what David Hume called the ‘three fundamental laws of nature, that of the stability of possession, of transference by consent, and of the performance of promises.’
Hume here is referring to (a) right to private property, (b) right to exchange or dispose such property, and (c) respect of contract. Many classical liberal thinkers also wrote along this line. And Hayek said that the legal infrastructure of more modern societies are derived from these “fundamental laws of nature”. We can extend the logic to say that a government’s right to exist is justified only if it can assure the citizens of their 3 fundamental rights. Plus the government’s duty to protect the citizen’s right to life from aggressors.
Hayek also wrote something similar to Adam Smith’s “invisible hand”. When people pursue their self-interest for self-preservation, if not to become rich and affluent, so long as they do not harm other people, they are guided by an “invisible hand” to produce goods and services that are needed by other people, so that human welfare is spontaneously assured and expanded. He wrote,
“One of the achievements of economic theory has been to explain how such a mutual adjustment of the spontaneous activities of individuals is brought about by the market, provided that there is a known delimitation of the sphere of control of each individual.”
And finally, Hayek believed that humanity is capable of “spontaneous order in society” even without the guiding hand of the state. This is similar to the above discussion. Here he quoted M. Polanyi:
“M. Polanyi has called the spontaneous formation of a ‘polycentric order: When order is achieved among human beings by allowing them to interact with each other on their own initiative – subject only to the laws which uniformly apply to all of them – we have a system of spontaneous order in society… The actions of such individuals are said to be free, for they are not determined by any specific command, whether of a superior or a public authority; the compulsion to which they are subject is impersonal and general. (M. Polanyi, The Logic of Liberty (London 1951, p. 159)”
It is indeed very ironic that humanity around the world has been guided – or misguided -- to believe that spontaneous order among people is impossible. That we need governments, local, national, and supra-national, to ensure social order. Farther from the truth. More often than not, governments are the chief cause of complaint and discontent by citizens around the world from many countries. The breakdown of the rule of law and subsequent dominance of commands, the failure of having few but general rules that apply to everyone, and the exemptions of many of those who are in government from the various commands that they themselves have enacted and implemented, are the chief causes of citizen discontent, the chief instruments of citizen oppression.
Hayek 6: Dangers of majority rule
May 23, 2006
Isn't the "rule of the majority" a good thing? That democracy is good for society? Unfortunately, Dr. Hayek said "Not necessarily". In Chapter 7, "Majority Rule", he started with a discussion about the difference between liberalism and democracy. He wrote,
"Liberalism (in the European 19th century meaning of the word) is concerned mainly with limiting the coercive powers of all government, whether democratic or not, whereas the dogmatic democrat knows only one limit to government -- current majority opinion... Liberalism regards it as desirable that only what the majority accepts should in fact be law, but it does not believe that this is therefore necessarily good law.
"To him (doctrinaire democrat), majority rule is unlimited and unlimitable. The ideal of democracy, originally intended to prevent all arbitrary power, thus becomes the justification for a new arbitrary power... demagogues began to argue that since the power was now in the hands of the people, there was no longer any need for limiting that power."
For me, this is a very powerful warning. Not because the majority wants something, they are right and what they demand will be sustainable over the long-term. Consider a situation where the majority wants all forms of subsidies to make their lives "humane", so they want full education subsidy for their children, full nutrition subsidy, partial if not full subsidy in health care and hospitalization, housing, public transportation, communication, recreation and travel, and so on. Those wants for various subsidies are enacted into laws and implemented.
You will possibly have a society that encourages large families and irresponsible parents as almost everything that their families need have been transformed from "parental responsibility" to "social and government responsibility". And woe unto the productive and hard-working sectors of society who carry the full burden of high taxation to finance those subsidies. Pretty soon the ambitious and hard-working ones will either become lazy too, or migrate to other lands where personal responsibility is more treasured than "collective" responsibility.
Hayek also noted that "the conception that government should be guided by majority opinion makes sense only if that opinion is independent of government... the case for democracy and the case for freedom of speech and discussion are inseparable." This is to give allowance for various ideas and opinions, some of which may be dissenting to the majority opinion and government bureaucracy. To give allowance to spontaneous and independent views that run counter to the desires of the majority. Why is this leeway and allowance necessary?
Because, according to Hayek, "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."
So, what is now majority opinion was minority opinion in the past. Its evolution from being a "distant" idea many years ago to "contemporary" idea of the current decades should have been a tumultuous one. Or conversely, certain minority opinions in the past have not achieved the majority opinions of the present yet. Either way, the main and common reason/s for them are the various layers of dogmas and taboos in society -- political, philosophical, religious, cultural, sub-cultural -- that inhibit the early emergence of a superior idea. It is not easy to disregard those dogmas because there are stiff penalties, from minor to fatal ones, that correspond to non-obedience to those dogmas.
And why is it so? Because ideas are non-material, unlike chairs, houses, cars and other material things. Ideas are by nature, revolutionary and evolutionary, and they spread through the minds, the written words, and policies of various institutions, both voluntary and involuntary (ie, government).
Hayek continued with this explicit observation: "A phenomenon which is now familiar to us is that of governments which start out with the proud claim that they will deliberately control all affairs and soon find themselves beset at each step by the necessities created by their former actions."
Yes, the root of all government interventions is government intervention itself. A temporary lack of supply of a certain commodity due to various reasons (natural disaster, change in tastes and preferences of consumers, technological modernization, etc.) is declared as "market failure" by government, and it proceeded with creating a regulatory body that will intervene whenever supply substantially increases or decreases, or the same changes in the demand side. Such continued and endless intervention and regulation either slows down adjustment of supply and demand dynamism, or it creates an army of corrupt and theft administrators who know perfectly that their signatures and approval are needed by suppliers and consumers of said commodities.
Later on, government has to create various oversight and anti-corruption bodies and in the process, appropriate more funds (and create new taxes to finance these new expenditures) to hire more bureaucrats, maintain new offices, to find out how much money have been wasted or stolen already, to see how much distortions in the economy and society have been created already. One oversight body's findings (say from Congress) can be contradicted by another oversight body (say from the Executive branch or from a constitution-created body), and the spiral of confusion and interventions continue endlessly.
Intellectuals (academics, think tank and media leaders, among others) have the burden of dissociating themselves from the grinds of daily realities, according to Hayek. They need to step back and generalize, to gather those pieces of facts and form an abstraction out of those details and material realities. He wrote, "The influence of the abstract thinker on the masses operate only indirectly... The influence of the political philosopher may be negligible. But when his ideas have become common property, through the work of historians and publicists, teachers and writers, and intellectuals generally, they effectively guide developments... Changes in political and social beliefs filter slowly downward from the top of a pyramid, where the higher levels represent greater generality and abstraction and not necessarily greater wisdom. As ideas spread downward, they also change their character."
So, how should political philosophers and intellectuals respond to majority opinions? Again, Hayek made this rather discomforting advice: "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."
I would say that among political philosophers and intellectuals themselves, there are the majority and the minority. On the issue of whether governments should retain (if not increase) their current level of intervention, subsidies and taxation, or not, I think the majority of intellectuals are on the former. You can see many of them working as consultants and staff of various government (national and local) and foreign aid institutions, while you will hardly find them advocating drastic tax cuts and subsidy cuts.
Are the laws as embodiment of majority opinion, and administrators/implementors of those laws, one and the same? That is, the laws will apply to both the governed and administered, and governors and adminstrators? And the latter will not mess around with the laws entrusted to them by the majority to be implemented properly? Unfortunately, the answer is No. See Hayek's observation:
"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."
Finally, the man concluded the chapter with a definition of "limited government", as well as the limits of democracy. He wrote:
"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."
Isn't the "rule of the majority" a good thing? That democracy is good for society? Unfortunately, Dr. Hayek said "Not necessarily". In Chapter 7, "Majority Rule", he started with a discussion about the difference between liberalism and democracy. He wrote,
"Liberalism (in the European 19th century meaning of the word) is concerned mainly with limiting the coercive powers of all government, whether democratic or not, whereas the dogmatic democrat knows only one limit to government -- current majority opinion... Liberalism regards it as desirable that only what the majority accepts should in fact be law, but it does not believe that this is therefore necessarily good law.
"To him (doctrinaire democrat), majority rule is unlimited and unlimitable. The ideal of democracy, originally intended to prevent all arbitrary power, thus becomes the justification for a new arbitrary power... demagogues began to argue that since the power was now in the hands of the people, there was no longer any need for limiting that power."
For me, this is a very powerful warning. Not because the majority wants something, they are right and what they demand will be sustainable over the long-term. Consider a situation where the majority wants all forms of subsidies to make their lives "humane", so they want full education subsidy for their children, full nutrition subsidy, partial if not full subsidy in health care and hospitalization, housing, public transportation, communication, recreation and travel, and so on. Those wants for various subsidies are enacted into laws and implemented.
You will possibly have a society that encourages large families and irresponsible parents as almost everything that their families need have been transformed from "parental responsibility" to "social and government responsibility". And woe unto the productive and hard-working sectors of society who carry the full burden of high taxation to finance those subsidies. Pretty soon the ambitious and hard-working ones will either become lazy too, or migrate to other lands where personal responsibility is more treasured than "collective" responsibility.
Hayek also noted that "the conception that government should be guided by majority opinion makes sense only if that opinion is independent of government... the case for democracy and the case for freedom of speech and discussion are inseparable." This is to give allowance for various ideas and opinions, some of which may be dissenting to the majority opinion and government bureaucracy. To give allowance to spontaneous and independent views that run counter to the desires of the majority. Why is this leeway and allowance necessary?
Because, according to Hayek, "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."
So, what is now majority opinion was minority opinion in the past. Its evolution from being a "distant" idea many years ago to "contemporary" idea of the current decades should have been a tumultuous one. Or conversely, certain minority opinions in the past have not achieved the majority opinions of the present yet. Either way, the main and common reason/s for them are the various layers of dogmas and taboos in society -- political, philosophical, religious, cultural, sub-cultural -- that inhibit the early emergence of a superior idea. It is not easy to disregard those dogmas because there are stiff penalties, from minor to fatal ones, that correspond to non-obedience to those dogmas.
And why is it so? Because ideas are non-material, unlike chairs, houses, cars and other material things. Ideas are by nature, revolutionary and evolutionary, and they spread through the minds, the written words, and policies of various institutions, both voluntary and involuntary (ie, government).
Hayek continued with this explicit observation: "A phenomenon which is now familiar to us is that of governments which start out with the proud claim that they will deliberately control all affairs and soon find themselves beset at each step by the necessities created by their former actions."
Yes, the root of all government interventions is government intervention itself. A temporary lack of supply of a certain commodity due to various reasons (natural disaster, change in tastes and preferences of consumers, technological modernization, etc.) is declared as "market failure" by government, and it proceeded with creating a regulatory body that will intervene whenever supply substantially increases or decreases, or the same changes in the demand side. Such continued and endless intervention and regulation either slows down adjustment of supply and demand dynamism, or it creates an army of corrupt and theft administrators who know perfectly that their signatures and approval are needed by suppliers and consumers of said commodities.
Later on, government has to create various oversight and anti-corruption bodies and in the process, appropriate more funds (and create new taxes to finance these new expenditures) to hire more bureaucrats, maintain new offices, to find out how much money have been wasted or stolen already, to see how much distortions in the economy and society have been created already. One oversight body's findings (say from Congress) can be contradicted by another oversight body (say from the Executive branch or from a constitution-created body), and the spiral of confusion and interventions continue endlessly.
Intellectuals (academics, think tank and media leaders, among others) have the burden of dissociating themselves from the grinds of daily realities, according to Hayek. They need to step back and generalize, to gather those pieces of facts and form an abstraction out of those details and material realities. He wrote, "The influence of the abstract thinker on the masses operate only indirectly... The influence of the political philosopher may be negligible. But when his ideas have become common property, through the work of historians and publicists, teachers and writers, and intellectuals generally, they effectively guide developments... Changes in political and social beliefs filter slowly downward from the top of a pyramid, where the higher levels represent greater generality and abstraction and not necessarily greater wisdom. As ideas spread downward, they also change their character."
So, how should political philosophers and intellectuals respond to majority opinions? Again, Hayek made this rather discomforting advice: "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."
I would say that among political philosophers and intellectuals themselves, there are the majority and the minority. On the issue of whether governments should retain (if not increase) their current level of intervention, subsidies and taxation, or not, I think the majority of intellectuals are on the former. You can see many of them working as consultants and staff of various government (national and local) and foreign aid institutions, while you will hardly find them advocating drastic tax cuts and subsidy cuts.
Are the laws as embodiment of majority opinion, and administrators/implementors of those laws, one and the same? That is, the laws will apply to both the governed and administered, and governors and adminstrators? And the latter will not mess around with the laws entrusted to them by the majority to be implemented properly? Unfortunately, the answer is No. See Hayek's observation:
"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."
Finally, the man concluded the chapter with a definition of "limited government", as well as the limits of democracy. He wrote:
"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."
Hayek 5: Merit vs. value
May 22, 2006
In Chapter 6, “Equality, Value and Merit”, Hayek discussed these 3 topics one by one. On equality, the reference obviously is on “equality before the law”, the “equal treatment of the law to unequal people”, and not equality of situation and condition of people, not unequal application of the law to equalize people. The following paragraphs and sentences emphasize this point:
“The great aim of the struggle for liberty has been equality before the law… Equality of the general rules of law and conduct, however, is the only kind of equality conducive to liberty and the only equality which we can secure without destroying liberty… (which) is bound to produce inequality in many respects… If the result of individual liberty did not demonstrate that some manners of living are more successful than others, much of the case for it would vanish.
“Individual differences provide no justification for governments to treat them differently… It is of the essence of the demand for equality before the law that people should be treated alike in spite of the fact that they are different.
“People are different; if we treat them equally, the result must be inequality in their actual position, and the only way to place them in an equal position would be to treat them differently. Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either the one of the other, but not both at the same time. The equality before the law which freedom requires leads to material inequality.”
Here, I would reiterate my position that the so-called “progressive taxation”, of slapping the richer and hard-working people with higher tax rates than the poorer and less-performing people, is wrong. It is creating laws that penalize performance while rewarding underperformance with lower tax rates, if not outright tax exemption. This policy is further distorted by exempting from income taxes professionals an personnel employed by foreign aid and multilateral institutions, even when the latter are definitely earning much larger than ordinary employees in the private sector. “Equal treatment of the law to unequal people” means that whether rich or poor, whether personnel of private enterprises or government and foreign aid institutions, everyone should be taxed at one single rate. And if some sectors would insist on tax exemption and it is granted, then everyone should be exempted, implying the abolition of personal income tax.
Dr. Hayek extended his discussion of equality to the issues of (a) the danger when people would entrust their fate to other men, and of (b) inheritance and bequest by parents to their children. He wrote,
“Our two basic propositions: First, no man or group of men possesses the capacity to determine conclusively the potentialities of other human beings and that we should certainly never trust anyone invariably to exercise such a capacity. Second, the acquisition by member of the community additional capacities to do things which may be valuable must always be regarded as a gain for that community.
“Parents can do more to prepare their children for a satisfactory life than anyone else… Many people who agree that the family is desirable as an instrument for the transmission of morals, tastes and knowledge still question the desirability of the transmission of material property… If we wish to make the best use of the natural partiality of parents for their children, we ought not to preclude the transmission of property. Without this outlet of bequest of fortune, men would look for other ways of providing for their children, such as placing them in positions which might bring them the income and prestige that a fortune would have done; and this would cause waste of resources.”
Point (a) above is quite clear as this has been explained in earlier chapters and also discussed in this blog. Point (b) is related to the next paragraph, why bequests of material wealth and fortune from parents to children should be freely allowed and not taxed and hindered. Many parents work really hard and later on became rich, mainly because they are thinking of their children’s future. Hence, the very presence of their kids are enough inspiration for parents to produce useful goods and services to society, and society pay back in the form of accumulated profits and material wealth, which the parents would later pass on to their children. If such transfer of material wealth is heavily taxed if not outrightly hindered and prohibited, this will discourage many parents from being performance-oriented, and they will just wait for what the government will give to them and their children, money and wealth that government has confiscated from the pockets and pay cheques of other hard-working people.
On Value and Merit, Hayek wrote these things: "Merit... (are) the attributes of conduct that make it deserving of praise, that is, the moral character of the action and not the value of the achievement... The attempt to achieve a valuable result may be highly meritorious but a complete failure, and full success may be entirely the result of accident and thus without merit.
"It is because we want people to use knowledge which we do not possess that we let them decide for themselves. But in so far as we want them to be free to use capacities and knowldge of facts which we do not have, we are not in a position to judge the merit of their achievements.
"We do not wish people to earn a maximum of merit but to achieve a maximum of usefullness at a minimum of pain and sacrifice and therefore a minimum of merit. Not only would it be impossible for us to reward all merit justly, but it would not even be desirable that people should aim chiefly at earning a maximum of merit... the same prizes will go to all those who produce the same result, regardless of effort."
These discourses are another "eye-opener" for me. We've been raised and educated, both formally and informally, to earn merit for our actions. Interchanging usefullness or value, for merit, has negative implications, both philosophically and economically. If a person tried hard, very hard, to grow rice and vegetables in a desert-like environment because he wants to feed the hungry and help reduce the country's food imports, and yet harvested nothing later on, he deserves merit and praise for his effort, but he deserves no food or income, he deserves no subsidy from confiscated income (aka taxes) by the state, for the same effort.
Whereas a person who was plowing and digging lands in search of hidden treasures below, and unintentionally allowed high-value crops to grow well in his plowed and dugged soil, later on harvested and sold the crops at a good profit, such attitude may have little merit because planting those crops was never his original intention. The result was accidental but it was useful to society, and so such "accident" has value to society, though the person will earn little praise and merit.
Hayek elaborated further:
"A society in which the position of the individual was made to correspod to human ideas of moral merit would therefore be the exact opposite of a free society. It would be a society in which people were rewarded for duty performed instead of for success... In our individual conduct we generally act on the assumption that it is the value of a person's performance and not his merit that determines our obligation to him... we do not feel that, because a man has rendered us a service at a great sacrifice, our debt to him is determined by this, so long as we could have had the same service provided with ease by somebody else."
Consider yourself travelling from one point to another that is 10 kilometers away. Person A can take you there with his bicycle-drawn sidecar; person B can take you there with his cab. If we reward people based on merit, then you should take the bicycle-drawn sidecar because the man has taken great effort, great pain and sacrifice, to take you there; therfore, you pay him high. But if we reward people based on results, based on the value of their performance, then you take the cab and pay the cab driver high because he took you to your destination at a much shorter time and much comfortable ride.
Extending this logic to international trade, we shall realize that trade protectionism is an embodiment of society rewarding merit and not value. Local producers (from farmers to manufacturers to service providers) are rewarded with tariff protection so that cheaper foreign-produced goods and services become expensive when sold domestically, for the reason that the effort and pain of local producers should be rewarded regardless of the higher price, regardless of the inferior quality, of their output. Thus, the state makes local consumers pay the price of such protectionism in the form of (a) higher prices they pay to local producers, (b) higher taxes they surrender to the bureaucracy, and very often, (c) lower quality they endure from bearing the output of protected firms and industries.
In closing the chapter, Hayek discussed the issue of state welfare in relation to the discussion on equality. He wrote,
"In a wealthy community, the only justification its members can have for insisting on further advantages is that there is much private wealth that the government can confiscate and redistribute...
"Rather than admit people to the advantages that living in their country offers, a nation will prefer to keep them out altogether; for once admitted, they will soon claim as a right a particular share in its wealth. The conception that citizenship or even residence in a country confers a claim to a particular standard of living is becoming a serious source of international friction."
The debate on immigration (how liberal a country should admit new migrants and legalize illegal immigrants inside its border) is related to state welfarism. And the people who are most likely to oppose further liberalization of immigration laws are those who live off on welfare and taxes, who live off on protectionism and state-mandated high minimum wages. Why? Because the people from other countries who are coming in would care less about the welfare that they can get from the state; they would care more about the competitiveness of their labor and services that they can offer.
In short, more inequality in society can actually give more equality in opportunity to those below and those from the outside or foreign country, but are ambitious and self-driven enough to work their way up.
In Chapter 6, “Equality, Value and Merit”, Hayek discussed these 3 topics one by one. On equality, the reference obviously is on “equality before the law”, the “equal treatment of the law to unequal people”, and not equality of situation and condition of people, not unequal application of the law to equalize people. The following paragraphs and sentences emphasize this point:
“The great aim of the struggle for liberty has been equality before the law… Equality of the general rules of law and conduct, however, is the only kind of equality conducive to liberty and the only equality which we can secure without destroying liberty… (which) is bound to produce inequality in many respects… If the result of individual liberty did not demonstrate that some manners of living are more successful than others, much of the case for it would vanish.
“Individual differences provide no justification for governments to treat them differently… It is of the essence of the demand for equality before the law that people should be treated alike in spite of the fact that they are different.
“People are different; if we treat them equally, the result must be inequality in their actual position, and the only way to place them in an equal position would be to treat them differently. Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either the one of the other, but not both at the same time. The equality before the law which freedom requires leads to material inequality.”
Here, I would reiterate my position that the so-called “progressive taxation”, of slapping the richer and hard-working people with higher tax rates than the poorer and less-performing people, is wrong. It is creating laws that penalize performance while rewarding underperformance with lower tax rates, if not outright tax exemption. This policy is further distorted by exempting from income taxes professionals an personnel employed by foreign aid and multilateral institutions, even when the latter are definitely earning much larger than ordinary employees in the private sector. “Equal treatment of the law to unequal people” means that whether rich or poor, whether personnel of private enterprises or government and foreign aid institutions, everyone should be taxed at one single rate. And if some sectors would insist on tax exemption and it is granted, then everyone should be exempted, implying the abolition of personal income tax.
Dr. Hayek extended his discussion of equality to the issues of (a) the danger when people would entrust their fate to other men, and of (b) inheritance and bequest by parents to their children. He wrote,
“Our two basic propositions: First, no man or group of men possesses the capacity to determine conclusively the potentialities of other human beings and that we should certainly never trust anyone invariably to exercise such a capacity. Second, the acquisition by member of the community additional capacities to do things which may be valuable must always be regarded as a gain for that community.
“Parents can do more to prepare their children for a satisfactory life than anyone else… Many people who agree that the family is desirable as an instrument for the transmission of morals, tastes and knowledge still question the desirability of the transmission of material property… If we wish to make the best use of the natural partiality of parents for their children, we ought not to preclude the transmission of property. Without this outlet of bequest of fortune, men would look for other ways of providing for their children, such as placing them in positions which might bring them the income and prestige that a fortune would have done; and this would cause waste of resources.”
Point (a) above is quite clear as this has been explained in earlier chapters and also discussed in this blog. Point (b) is related to the next paragraph, why bequests of material wealth and fortune from parents to children should be freely allowed and not taxed and hindered. Many parents work really hard and later on became rich, mainly because they are thinking of their children’s future. Hence, the very presence of their kids are enough inspiration for parents to produce useful goods and services to society, and society pay back in the form of accumulated profits and material wealth, which the parents would later pass on to their children. If such transfer of material wealth is heavily taxed if not outrightly hindered and prohibited, this will discourage many parents from being performance-oriented, and they will just wait for what the government will give to them and their children, money and wealth that government has confiscated from the pockets and pay cheques of other hard-working people.
On Value and Merit, Hayek wrote these things: "Merit... (are) the attributes of conduct that make it deserving of praise, that is, the moral character of the action and not the value of the achievement... The attempt to achieve a valuable result may be highly meritorious but a complete failure, and full success may be entirely the result of accident and thus without merit.
"It is because we want people to use knowledge which we do not possess that we let them decide for themselves. But in so far as we want them to be free to use capacities and knowldge of facts which we do not have, we are not in a position to judge the merit of their achievements.
"We do not wish people to earn a maximum of merit but to achieve a maximum of usefullness at a minimum of pain and sacrifice and therefore a minimum of merit. Not only would it be impossible for us to reward all merit justly, but it would not even be desirable that people should aim chiefly at earning a maximum of merit... the same prizes will go to all those who produce the same result, regardless of effort."
These discourses are another "eye-opener" for me. We've been raised and educated, both formally and informally, to earn merit for our actions. Interchanging usefullness or value, for merit, has negative implications, both philosophically and economically. If a person tried hard, very hard, to grow rice and vegetables in a desert-like environment because he wants to feed the hungry and help reduce the country's food imports, and yet harvested nothing later on, he deserves merit and praise for his effort, but he deserves no food or income, he deserves no subsidy from confiscated income (aka taxes) by the state, for the same effort.
Whereas a person who was plowing and digging lands in search of hidden treasures below, and unintentionally allowed high-value crops to grow well in his plowed and dugged soil, later on harvested and sold the crops at a good profit, such attitude may have little merit because planting those crops was never his original intention. The result was accidental but it was useful to society, and so such "accident" has value to society, though the person will earn little praise and merit.
Hayek elaborated further:
"A society in which the position of the individual was made to correspod to human ideas of moral merit would therefore be the exact opposite of a free society. It would be a society in which people were rewarded for duty performed instead of for success... In our individual conduct we generally act on the assumption that it is the value of a person's performance and not his merit that determines our obligation to him... we do not feel that, because a man has rendered us a service at a great sacrifice, our debt to him is determined by this, so long as we could have had the same service provided with ease by somebody else."
Consider yourself travelling from one point to another that is 10 kilometers away. Person A can take you there with his bicycle-drawn sidecar; person B can take you there with his cab. If we reward people based on merit, then you should take the bicycle-drawn sidecar because the man has taken great effort, great pain and sacrifice, to take you there; therfore, you pay him high. But if we reward people based on results, based on the value of their performance, then you take the cab and pay the cab driver high because he took you to your destination at a much shorter time and much comfortable ride.
Extending this logic to international trade, we shall realize that trade protectionism is an embodiment of society rewarding merit and not value. Local producers (from farmers to manufacturers to service providers) are rewarded with tariff protection so that cheaper foreign-produced goods and services become expensive when sold domestically, for the reason that the effort and pain of local producers should be rewarded regardless of the higher price, regardless of the inferior quality, of their output. Thus, the state makes local consumers pay the price of such protectionism in the form of (a) higher prices they pay to local producers, (b) higher taxes they surrender to the bureaucracy, and very often, (c) lower quality they endure from bearing the output of protected firms and industries.
In closing the chapter, Hayek discussed the issue of state welfare in relation to the discussion on equality. He wrote,
"In a wealthy community, the only justification its members can have for insisting on further advantages is that there is much private wealth that the government can confiscate and redistribute...
"Rather than admit people to the advantages that living in their country offers, a nation will prefer to keep them out altogether; for once admitted, they will soon claim as a right a particular share in its wealth. The conception that citizenship or even residence in a country confers a claim to a particular standard of living is becoming a serious source of international friction."
The debate on immigration (how liberal a country should admit new migrants and legalize illegal immigrants inside its border) is related to state welfarism. And the people who are most likely to oppose further liberalization of immigration laws are those who live off on welfare and taxes, who live off on protectionism and state-mandated high minimum wages. Why? Because the people from other countries who are coming in would care less about the welfare that they can get from the state; they would care more about the competitiveness of their labor and services that they can offer.
In short, more inequality in society can actually give more equality in opportunity to those below and those from the outside or foreign country, but are ambitious and self-driven enough to work their way up.
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.
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.
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.
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.
Hayek 2: Freedom, spontaneity and accidents
November 6, 2005
Hayek's Chapter 2 in "The Constitution" is entitled "The creative powers of a free civilization". He wrote about the role of spontaneity, accidents and unpredictability of things and events, in the advancement of human civilization. Below are 4 good points from the chapter; my comments indicated by *.
(1) "The argument for liberty is not an argument against organization, but an argument against all exclusive, privileged, monopolistic organization, against the use of coercion to prevent others from trying to do better… Organization is likely to be beneficial and effective so long as it is voluntary. To turn the whole of society into a single organization built and directed according to a single plan would be to extinguish the very forces that shaped the individual human minds that planned it."
* The only monopolistic organization, a forced and non-voluntaryorganization where everyone is governed, is government. Voluntary organizations like private enterprises in a competitive environment are the chief engineers of innovation, of trial and error, of expansion and bankruptcy. The market system of exchange between suppliers and consumers (from hamburger to petroleum to labor) is the only system that encourages and thrives on voluntary exchange among people. Whereas governments have succeeded mainly in propagating a huge army of often unproductive politicians, bureaucrats and regulators, soldiers and armies (and created world wars, instigated civil wars), and developed an extensive system of welfarism and citizen dependence on government. Such welfarism of course, is not costless; the costs are born by voluntary organizations like private enterprises and productive citizens who pay lots of high taxes andfees, and/or stifled entrepreneurship for many others who were harrassed and intimidated by piles of bureaucratic regulations and permits that they must comply with.
(2) "Liberty is essential in order to leave room for the unforeseeableand unpredictable. Because every individual knows so little that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it."
* This is why the free-market system is superior compared to government-controlled and regulated system where politicians and planners, national and international, tend to think that they know everything that they cannot allow spontaneity and unpredictability, so they regulate many things to their liking and personal biases. The result is an extensive system of forced, not voluntary, collectivism; of forced equality.
(3) "Freedom means the renunciation of direct control of individualefforts that a free society can make use of so much more knowledgethan the mind of the wisest ruler could comprehend… Freedom grantedonly when it is known beforehand that its effects will be beneficial is not freedom. Freedom means that many things will be done which we do not like. Our faith in freedom rests on the belief that it will, on balance, release more forces for the good than for the bad."
* Not even the wisest of all politicians and lawyers, of all economists and businessmen, of all army generals and rebel commanders, would know the dreams and aspirations, whims and idiosyncracies of the people. We just have to respect spontaneity, opportunities and accidents, and that over the long-term, more beneficial results will outnumber the bad ones. That more innovations in cellphone, transporation and energy technologies will be initiated than innovations in firearms and nuclear weapons technology. That more research will be done in controlling malaria, HIV and bird flu, than research in poisonous and other destructive substances. So far, this is happening.
(4) "Man owes some of his greatest successes in the past to the factthat he has not been able to control social life. We are not far fromthe point where the deliberately organized forces of society may destroy those spontaneous forces which have made advance possible."
* Big, expansive, all-encompassing governments that regulate not only to whom we can buy or sell various products and services, what subjects can be taught in schools, but also regulate how much we can keep from our monthly income, how much we can give to our children as inheritance, are with us. There are just too many people around who think they got really bright ideas, so they confiscate other people's money (through government taxation) to fund their ideas. We just have to give them a good fight.
Hayek's Chapter 2 in "The Constitution" is entitled "The creative powers of a free civilization". He wrote about the role of spontaneity, accidents and unpredictability of things and events, in the advancement of human civilization. Below are 4 good points from the chapter; my comments indicated by *.
(1) "The argument for liberty is not an argument against organization, but an argument against all exclusive, privileged, monopolistic organization, against the use of coercion to prevent others from trying to do better… Organization is likely to be beneficial and effective so long as it is voluntary. To turn the whole of society into a single organization built and directed according to a single plan would be to extinguish the very forces that shaped the individual human minds that planned it."
* The only monopolistic organization, a forced and non-voluntaryorganization where everyone is governed, is government. Voluntary organizations like private enterprises in a competitive environment are the chief engineers of innovation, of trial and error, of expansion and bankruptcy. The market system of exchange between suppliers and consumers (from hamburger to petroleum to labor) is the only system that encourages and thrives on voluntary exchange among people. Whereas governments have succeeded mainly in propagating a huge army of often unproductive politicians, bureaucrats and regulators, soldiers and armies (and created world wars, instigated civil wars), and developed an extensive system of welfarism and citizen dependence on government. Such welfarism of course, is not costless; the costs are born by voluntary organizations like private enterprises and productive citizens who pay lots of high taxes andfees, and/or stifled entrepreneurship for many others who were harrassed and intimidated by piles of bureaucratic regulations and permits that they must comply with.
(2) "Liberty is essential in order to leave room for the unforeseeableand unpredictable. Because every individual knows so little that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it."
* This is why the free-market system is superior compared to government-controlled and regulated system where politicians and planners, national and international, tend to think that they know everything that they cannot allow spontaneity and unpredictability, so they regulate many things to their liking and personal biases. The result is an extensive system of forced, not voluntary, collectivism; of forced equality.
(3) "Freedom means the renunciation of direct control of individualefforts that a free society can make use of so much more knowledgethan the mind of the wisest ruler could comprehend… Freedom grantedonly when it is known beforehand that its effects will be beneficial is not freedom. Freedom means that many things will be done which we do not like. Our faith in freedom rests on the belief that it will, on balance, release more forces for the good than for the bad."
* Not even the wisest of all politicians and lawyers, of all economists and businessmen, of all army generals and rebel commanders, would know the dreams and aspirations, whims and idiosyncracies of the people. We just have to respect spontaneity, opportunities and accidents, and that over the long-term, more beneficial results will outnumber the bad ones. That more innovations in cellphone, transporation and energy technologies will be initiated than innovations in firearms and nuclear weapons technology. That more research will be done in controlling malaria, HIV and bird flu, than research in poisonous and other destructive substances. So far, this is happening.
(4) "Man owes some of his greatest successes in the past to the factthat he has not been able to control social life. We are not far fromthe point where the deliberately organized forces of society may destroy those spontaneous forces which have made advance possible."
* Big, expansive, all-encompassing governments that regulate not only to whom we can buy or sell various products and services, what subjects can be taught in schools, but also regulate how much we can keep from our monthly income, how much we can give to our children as inheritance, are with us. There are just too many people around who think they got really bright ideas, so they confiscate other people's money (through government taxation) to fund their ideas. We just have to give them a good fight.
Hayek 1: Liberty and liberties
November 6, 2005
Chapter 1 of Hayek's "The Constitution of Liberty" (1960, U. ofChicago Press) is entitled "LIberty and Liberties". A bit confusing title, but it's a good introductory chapterbecause Hayek immediately defined what "liberty" and "freedom" is -- absence of coercion; absence of external impediment.
Some important quotes from the chapter that I will discuss here.
(1) "We maybe free and yet miserable. To be free may mean freedom to starve, to make costly mistakes, or to run mortal risks."
(2) "While the uses of liberty are many, liberty is one. Liberties appear only when liberty is lacking. Difference between liberty and liberties -- that which exists between a condition in which all is permitted that is not prohibited by general rules and one in which all is prohibited that is not explicitly permitted."
(3) "The coercion that government uses is reduced to a minimum by restraining it through known general rules, so that the individual need never be coerced unless he has placed himself in a position where he knows he will be coerced."
On (1), this is a situation where the concept of "personal responsibility" will come in. One can be very very rich as a result of inheritance from rich parents, spend the money as he/she wishes. There is freedom in spending, but no responsibility in saving and investing, or at least maintaining the parents' enterprises which produced such inheritance.
On (2), liberty is absence of coercion of some by others; liberties refer to various uses of liberty (political liberty, inner liberty, liberty as power) that do not touch on personal or individual liberty. For instance, political freedom refers to freedom to vote, except minors, foreigners, others prohibited by law. National freedom may mean absence of foreigners' interference, but it does not mean individual freedom because local rulers or the majority can exercise coercive power over the minorities. In short, liberties can appear where there is individual oppression.
On (3), this is where the "rule of law" and not "rule of men" appears. Rule of law means that the rules are to be applicable to everyone, rulers and ruled, governors and governed, masters and slaves, so that the rulers and governors themselves will not attempt to make very restrictive and rigid laws that will also impinge on their own individual freedom. Rule of men means making laws that are supposedly applicable to everyone, but rulers and their allies are exempted.
Government's main function is to secure individual liberty. This is by being a bigger force that can control bullies among men. By setting simple and general rules that is applicable to everyone. In most cases, however, Government (of many if not all countries) becomes the single biggest source of coercion in people's lives. How?
One, government can tell the citizens how much they can keep from their income (personal income tax, corporate income tax, estate tax,...), and from their take-home pay, how much they can spend and save since there are various forms of consumption-based taxes (sales tax, value added tax, excise tax, petroleum tax,...) and various fees for various government-mandated or monopolized services like securing a driver's license.
Two, government can over-regulate business, tell entrepreneurs they should give a certain minimum wage even for the most unskilled people, that they cannot fire their employees without giving them over-generous benefits and even if said employees have committed serious mistakes.
Three, government can restrict people to whom they can buy and sell this and that commodity or service, by how much quantity, at what price, through trade protectionism and import restrictions.
These are just a few instances where government becomes one big source of coercion. When laws become too restrictive, "rule of men" prevails because the law enforcers (police, courts, other government agencies) intend to exempt themselves and their allies from such restrictions, apply the laws only to the rest of the citizens.
Chapter 1 of Hayek's "The Constitution of Liberty" (1960, U. ofChicago Press) is entitled "LIberty and Liberties". A bit confusing title, but it's a good introductory chapterbecause Hayek immediately defined what "liberty" and "freedom" is -- absence of coercion; absence of external impediment.
Some important quotes from the chapter that I will discuss here.
(1) "We maybe free and yet miserable. To be free may mean freedom to starve, to make costly mistakes, or to run mortal risks."
(2) "While the uses of liberty are many, liberty is one. Liberties appear only when liberty is lacking. Difference between liberty and liberties -- that which exists between a condition in which all is permitted that is not prohibited by general rules and one in which all is prohibited that is not explicitly permitted."
(3) "The coercion that government uses is reduced to a minimum by restraining it through known general rules, so that the individual need never be coerced unless he has placed himself in a position where he knows he will be coerced."
On (1), this is a situation where the concept of "personal responsibility" will come in. One can be very very rich as a result of inheritance from rich parents, spend the money as he/she wishes. There is freedom in spending, but no responsibility in saving and investing, or at least maintaining the parents' enterprises which produced such inheritance.
On (2), liberty is absence of coercion of some by others; liberties refer to various uses of liberty (political liberty, inner liberty, liberty as power) that do not touch on personal or individual liberty. For instance, political freedom refers to freedom to vote, except minors, foreigners, others prohibited by law. National freedom may mean absence of foreigners' interference, but it does not mean individual freedom because local rulers or the majority can exercise coercive power over the minorities. In short, liberties can appear where there is individual oppression.
On (3), this is where the "rule of law" and not "rule of men" appears. Rule of law means that the rules are to be applicable to everyone, rulers and ruled, governors and governed, masters and slaves, so that the rulers and governors themselves will not attempt to make very restrictive and rigid laws that will also impinge on their own individual freedom. Rule of men means making laws that are supposedly applicable to everyone, but rulers and their allies are exempted.
Government's main function is to secure individual liberty. This is by being a bigger force that can control bullies among men. By setting simple and general rules that is applicable to everyone. In most cases, however, Government (of many if not all countries) becomes the single biggest source of coercion in people's lives. How?
One, government can tell the citizens how much they can keep from their income (personal income tax, corporate income tax, estate tax,...), and from their take-home pay, how much they can spend and save since there are various forms of consumption-based taxes (sales tax, value added tax, excise tax, petroleum tax,...) and various fees for various government-mandated or monopolized services like securing a driver's license.
Two, government can over-regulate business, tell entrepreneurs they should give a certain minimum wage even for the most unskilled people, that they cannot fire their employees without giving them over-generous benefits and even if said employees have committed serious mistakes.
Three, government can restrict people to whom they can buy and sell this and that commodity or service, by how much quantity, at what price, through trade protectionism and import restrictions.
These are just a few instances where government becomes one big source of coercion. When laws become too restrictive, "rule of men" prevails because the law enforcers (police, courts, other government agencies) intend to exempt themselves and their allies from such restrictions, apply the laws only to the rest of the citizens.
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