Speaking of The Road to Serfdom, here is a handy link to the Mises Institute’s reprint of the “cartoon” guide to the Hayek classic.
Over the past four terms, we have focused on books that focus on the dynamics of the capitalist system. We started with Schumpeter’s biography and followed that up with Capitalism, Socialism, and Democracy. These really gave us a 10,000-foot view of where Schumpeter thought the system might head coming out of World War II. Schumpter seems sanguine about the “inevitability” of socialism, while Hayek gives us a much different, quite chilling vision of the meshing of politics and the economic system. Certainly, I would attribute part of this to Schumpeter and Hayek’s respective views of the importance of the price system — Schumpeter asserting that it is overplayed, whereas Hayek underscores its importance.
Next term, we will continue to sponsor an economics read, though our focus will likely shift to the future of the system coming out of the current crisis. I will be posting those books shortly in the event that you want to get a head start over break.
The latest issue of The Economist looks at technocrats in charge:
EVEN before Plato conceived the philosopher-king, people yearned for clever, dispassionate and principled government. When the usual run of rulers proves cowardly, indecisive or discredited, turning to the wisdom and expertise of a technocrat, as both Italy and Greece have done in recent days, is particularly tempting.
Those of us who just finished reading The Road to Serfdom read those words and sense the cozy comfort of an argument close to our hearts. When the article goes on to say: “Crankishness aside, technocracy and autocracy have long been natural bedfellows,” we expect HAYEK to jump off the page any moment—he is lurking between the lines no more. But, curiously, this venerable British weekly ran an article on technocracy and autocracy without mentioning that most famous economist to stroll the halls of the London School of Economics.
Their conclusion? “History suggests that technocrats do best when blitzing the mess made by incompetent and squabbling politicians.” Perhaps the reason for the omission of Mr. Hayek was not so much a conscious decision as unfamiliarity. If a few others throw in a buck, I’m happy to do my part in sending The Economist a copy of TRtS. The Reader’s Digest version.
As we continue On the Road with Hayek this term, we are faced with questions such as “what is capitalism?” and “what does it mean to have economic freedom?” These are questions that we tend not to get at when we are teaching the nuts and bolts of supply & demand or getting to the bottom of a subgame perfect equilibrium. But a nice piece in the New York Times argues that maybe we should pay more attention to the former than the latter. It is on the role of economists and economics in the face of radical economic and social change:
Perhaps the protesters occupying Wall Street are not so misguided after all. The questions they raise — how do we deal with the local costs of global downturns? Is it fair that those who suffer the most from such downturns have their safety net cut, while those who generate the volatility are bailed out by the government? — are the same ones that a big-picture economic vision should address. If economists want to help create a better world, they first have to ask, and try to answer, the hard questions that can shape a new vision of capitalism’s potential.
The whole article is well worth the read and also worth thinking about as we continue our lifelong quest in developing an economics ciricullum.
Also fundamental seems to be this piece by Luigi Zingales on meritocracy and democracy.
[M]eritocracy is a difficult principle to sustain in a democracy. Any system that allocates rewards on the basis of merit inevitably gives higher compensation to the few, leaving the majority potentially envious. In a democracy, the majority generally rules. Why should that majority agree to grant a minority disproportionate power and rewards?
… Even the most meritocratic people, then, can vote against meritocracy when it damages their own prospects. No wonder meritocracy is so politically fragile.
However, two factors help sustain a meritocratic system in the face of this challenge: a culture that considers it legitimate to reward effort with higher compensation; and benefits large enough, and spread widely enough through the system, to counter popular discontent with inequality.
Certainly, we can see rather vocal and enthusiastic segments of our population questioning both of these assumptions. What are the implications for American-style capitalism?
Those of you interested in signing up for the group read of The Road to Serfdom need to turn in your registration forms and get your schedules to Professor Galambos or me so we can coordinate a meeting time. We will likely have our first meeting during the first week in October and cover the first 50 or 60 pages of the book at that time.
If you have any questions, stop by Briggs 2nd for some answers.
Here is our previous post on the group, including some auxiliary and supplementary materials.
This fall, Professor Galambos and I will be leading a group read of F.A. Hayek’s The Road to Serfdom. The course will be offered for one unit as DS 391 — On the Road with Hayek, and we will have a sign up and coordinate times at the beginning of fall term. I expect with this book we will probably meet eight of the ten weeks.
If you are the type that lets one-unit courses slide, you might consider picking up the book and giving it a once over this summer in preparation for fall term. I suggest you get the edition edited by historian of economic thought, Bruce Caldwell.
For those of you looking to kill an hour with a podcast, here’s Caldwell at EconTalk, talking about Hayek.
Here’s Hayek’s classic American Economic Review piece, “The Use of Knowledge in Society.” And here. And here’s Hayek’s Nobel lecture, “The Pretence of Knowledge.”
See you this fall.
UPDATE: You can get an add course sheet outside of our offices.
Speaking of Hayek, late last week the libertarian Cato Institute hosted a blockbuster panel on The Constitution of Liberty, which was just re-released. The curiosity of the day was the appearance of Hungarian financier, George Soros, certainly no libertarian, but someone who was around when Hayek and Popper were mixing it up. The panel also contained rock star law professor Richard Epstein, and preeminent historian of economic thought, Bruce Caldwell.
Good review of the panel here, and the video is here.