Hayek's Constitution of Liberty PDF

Hayek’s The Constitution of Liberty
ayek’s The Constitution

H
of Liberty
An Account of Its Argument
EUGENE F. MILLER
The Institute of Economic Affairs

contents
The author 11
First published in Great Britain in 2010 by
Foreword by Steven D. Ealy 12
The Institute of Economic Affairs
2 Lord North Street Summary 17
Westminster Editorial note 22
London sw1p 3lb Author’s preface 23
in association with Profile Books Ltd
The mission of the Institute of Economic Affairs is to improve public 1 Hayek’s Introduction 29
understanding of the fundamental institutions of a free society, by analysing
and expounding the role of markets in solving economic and social problems.
Civilisation 31
Political philosophy 32
Copyright © The Institute of Economic Affairs 2010
The ideal 34
The moral right of the author has been asserted.
All rights reserved. Without limiting the rights under copyright reserved above,
no part of this publication may be reproduced, stored or introduced into a
retrieval system, or transmitted, in any form or by any means (electronic,
PART I: THE VALUE OF FREEDOM 37
mechanical, photocopying, recording or otherwise), without the prior written
permission of both the copyright owner and the publisher of this book. 2 Individual freedom, coercion and progress
A CIP catalogue record for this book is available from the British Library. (Chapters 1–5 and 9) 39
isbn 978 0 255 36637 3 Individual freedom and responsibility 39
Many IEA publications are translated into languages other than English or

The individual and society 42
are reprinted. Permission to translate or to reprint should be sought from the Limiting state coercion 44
Director General at the address above. Freedom of action 46
Typeset in Stone by MacGuru Ltd Freedom and progress 48
[email protected] Progress as radical change 51
Printed and bound in Great Britain by Hobbs the Printers
3 The use and limits of knowledge A meta-legal principle 103
(Chapters 2, 3, 4) 54 Detractors of the Rule of Law 107
Using inherited knowledge: rules and traditions 55
Using contemporaneous knowledge: imitation, prices 7 Origins and development of the Rule of Law
and esteem 57 (Chapters 11, 12, 13) 110
Knowledge and social order 59 English origins 110
Reason, mind and civilisation 63 America’s contribution 113
Values 67 Culmination in Germany 117
Moral rules 71
8 Requirements of the Rule of Law
4 Equality, freedom and just distribution (Chapter 14) 122
(Chapters 4, 6 and 8) 76 True law promotes freedom by safeguarding the private
Are individuals equal? 77 sphere 122
Inequality, law and freedom 80 True law is known and certain 123
Benefits of inequality 82 True law is both general and equal 124
Merit and value 85 The Rule of Law requires an independent judiciary 125
The executive, in coercing private citizens, is subject to
5 Majority rule and limited government legislative rules and to judicial review 127
(Chapters 7 and 10) 89 The Rule of Law safeguards fundamental rights and civil
Majority rule and the community 89 liberties 128
Limited and arbitrary government 92 Emergency powers, just compensation and the public
Democracy versus elite rule 93 interest 130
Democracy is a procedure only 95
9 Economic policy and the Rule of Law
(Chapter 15) 134
PART II: FREEDOM AND THE LAW 99 What is policy? 134
Tests of policy 135
6 The Rule of Law and its detractors Excluded policies 137
(Chapters 14 and 16) 101 Policies measured by expediency 138
Importance of the ideal 102 The community’s interest 139
PART III: FREEDOM IN THE WELFARE STATE 143 15 Why I am not a conservative (Postscript) 181
10 Socialism in a new guise: social justice and Bibliography 186

the welfare state (Chapter 17) 145
Advent of the welfare state 145 About the IEA 190
Hayek and the welfare state 146
11 Social security, taxation and the redistribution

of wealth (Chapters 19 and 20) 149
Social security 149
Proportional versus progressive taxation 154
12 Stopping coercion in employment

(Chapter 18) 159
Coercive unionism 159
Economic and political dangers 162
13 Preventing inflation (Chapter 21) 165

Inflation and the welfare state 165
Misguided monetary policy 166
The denationalisation of money 168
14 Safeguarding progress (Chapters 22, 23, 24)170

Urban policy 171
Agricultural policy 173
Natural resource policy 175
Education and research policy 176
T HE AUTHOR
Dr Eugene F. Miller (1935–2010) was a professor of political

science at the University of Georgia from 1967 until his retire-
ment in 2003. He was a student in the University of Chicago’s
Committee on Social Thought (PhD, 1965), where he wrote a
dissertation on David Hume. F. A. Hayek chaired Miller’s disser-
tation committee, whose other members were Leo Strauss and
Joseph Cropsey. Miller edited David Hume’s Essays Moral, Polit-
ical and Literary (Liberty Fund, 1985), and published articles on
Hume, Strauss and Hayek. He also published on the American
Founding, the nature of liberal education, the relationship
between technology and politics, and the intellectual foundations
of philanthropy.
11
foreword
pragmatic middle way. According to John Ranelagh in Thatcher’s

People, ‘Before he had finished speaking … the new Party Leader
foreword reached into her briefcase and took out a book. It was Friedrich
von Hayek’s The Constitution of Liberty. Interrupting, she held the
book up for all of us to see. “This,” she said sternly, “is what we
believe,” and banged Hayek down on the table.’
But The Constitution of Liberty is not a narrowly conceived
F. A. Hayek was awarded the Nobel Prize in Economics in party tract. It favours no party, except perhaps for ‘the party of
1974. The press release announcing this award recognised that life, the party that favors free growth and spontaneous evolution’,
‘Hayek’s contributions in the field of economic theory are both which Hayek evokes in his postscript. Rather, The Constitution
profound and original’, but concluded with an apparent slap of Liberty is the culmination of four decades of reflection on the
at his best-known work: ‘For him it is not a matter of a simple nature of economic, political and social life and the possibility of
defence of a liberal system of society as may sometimes appear a free society. As Professor Miller cogently argues and illustrates,
from the popularised versions of his thinking.’ its three parts comprise ‘a careful argument that runs through
What the Nobel Prize announcement did not make clear was the book from beginning to end’. Part I, ‘The Value of Freedom’,
that these ‘popularised versions of his thinking’ were written, not provides the philosophical foundation and justification of a free
by some journalistic hack as one might assume, but by Hayek society and defence against the major contemporary opponents of
himself, and that these too were profound and original. The Road such a society. In Part II, ‘Freedom and the Law’, Hayek provides
to Serfdom (1944) and The Constitution of Liberty (1960) each had an account of the development of the Rule of Law as the central
an impact far beyond that of the standard academic treatise on institution of a free society. In Part III, ‘Freedom in the Welfare
economics. Historian Alan Brinkley, in The End of Reform: New State’, Hayek examines many areas of contemporary policy
Deal Liberalism in Recession and War, argues that Hayek ‘forced concern – social security, taxation, healthcare, housing, urban
into public discourse the question of the compatibility of democ- planning, natural resources and education – in light of the prin
racy and statism’. ciples developed in the earlier parts of his study.
The influence of Hayek on Prime Minister Margaret Thatcher In a footnote in his introduction, Hayek tells the reader that
is legendary. In both The Path to Power and The Downing Street ‘David Hume … will be our constant companion and sage guide
Years Lady Thatcher acknowledged the influence of Hayek on her throughout’ The Constitution of Liberty. Hayek holds up Hume,
view of the world. There is also evidence of his influence on her along with Adam Smith, Adam Ferguson and Edmund Burke,
policy decisions. Once during a party policy meeting a speaker as exemplars of the ‘British tradition’ of liberty. More than the
started to argue that the Conservative Party should adopt a others whom Hayek mentions, Hume emphasised the importance
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y foreword
of opinion as the foundation of government. In his essay ‘Of the studied both with Hayek and Leo Strauss, the latter of whom was
First Principles of Government’, Hume wrote, ‘It is therefore, on well known for arguing that there are crucial differences between
opinion only that government is founded; and this maxim extends ancient and modern thought. Hayek denies the importance of this
to the most despotic and most military governments, as well as to division and traces the origins of liberalism to ancient Greece.
the most free and most popular.’ The importance of opinion, and Miller raises the questions of whether Hayek’s approach does
the wisdom of opinion collected over time in the form of cultural violence to the historical record or hides potential tensions within
traditions, is crucial to Hayek’s argument for spontaneous order the heart of liberal thought; but rather than answering these ques-
and the free society. tions himself Miller leaves their resolution to his readers.
Professor Miller does not offer his account of The Constitution Eugene Miller passed away shortly after revising this text.
of Liberty as a substitute for reading Hayek; rather, it is designed With the publication of this study Miller has left his readers with
to be a guide to the central argument of Hayek’s work and there- two gifts. The first is intellectual: this volume offers a finely crafted
fore belongs on the bookshelf alongside Hayek. It is written at restatement of the argument of F. A. Hayek’s most comprehensive
a level accessible to the novice and simultaneously substantial work.
enough to be of value to the specialist. Miller both provides an Miller’s second gift is more elusive but in the long run perhaps
overview of the argument of The Constitution of Liberty and situates of greater importance. To use appropriately an overworked and
that argument within the broader context of Hayek’s intellec- often misapplied characterisation, Miller here provides a model of
tual career, so that he touches both on antecedents and later what it means to be a gentleman and a scholar. In a world in which
developments. academic reputations are made by being constantly on the attack,
Miller made two crucial decisions about the focus of this study Miller offers an example of modesty, generosity and moderation:
that are worthy of note. First, he ignores the vast secondary litera- a serious scholar taking another’s argument seriously. Miller’s
ture on Hayek in order to concentrate on Hayek himself. Second, study of The Constitution of Liberty sets before the reader the same
Miller decided to provide as accurate and fair a reading of Hayek’s challenge that Hayek does – the challenge of engaging the text,
text as he could and therefore largely sets aside his own evalu weighing the evidence for oneself, and participating at the highest
ation of Hayek. At a number of points in his study Miller points to level in true self-government.
tensions within Hayek’s argument and notes potential problems I strongly commend this careful and thought-provoking study
that Hayek may or may not have seen, but he does not diverge to students, teachers, academics and others who are interested in
from his primary objective of providing as clear a statement of understanding The Constitution of Liberty.
Hayek’s views as he can. s t e v e n d . e a ly
Here is but one example of Miller’s decision to explicate Senior Fellow, Liberty Fund, Inc.
Hayek clearly and to avoid excessive criticism. Miller notes that he July 2010
14 15
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y
The views expressed in this monograph are, as in all IEA publica-

tions, those of the authors and not those of the Institute (which
has no corporate view), its managing trustees, Academic Advisory Summary
Council members or senior staff.
• The core argument that runs throughout The Constitution of

Liberty concerns freedom and its value to the individual, to
society and to civilisation at large. Without freedom of action
in particular, progress in these areas would be impossible.
• Modern civilisation is in crisis because the West has lost faith
in the principles of liberty or freedom (interchangeable terms
for Hayek). Opinion ultimately governs our actions, and
Hayek will seek to reshape it through a political philosophy
that restates basic principles, vindicates fundamental values,
articulates a guiding ‘ideal’ (the Rule of Law), and clarifies
standards that ought to determine policy.
• Freedom requires that the coercion of some by others in
society be reduced as much as possible. One function of
government is to prevent individuals from coercing other
individuals, but then government itself must be prevented
from using coercion improperly. In a free society, the
exercise of government’s coercive power is constrained and
made predictable by general rules that apply equally to all
individuals, including to those who make and enforce the laws.
A free society is one that empowers individuals to develop and
follow their own life plans. Attempts to manipulate the
environment of individuals, e.g. by withholding vital
information, are insidious forms of coercion.
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y s u m m a ry
• Freedom and responsibility cannot be separated. between men. At the same time, he insists that individuals
Responsibility means that each individual must bear the have a ‘dignity’ that we must respect. Hayek promises ‘an
consequences of his actions. Hayek’s ‘individuals’ are ultimate justification’ for freedom, which must be connected
thoroughly enmeshed in social relations. somehow to this idea of individual dignity: but he leaves the
• Forgetting that man’s knowledge is severely limited, modern matter quite unclear. He does insist strongly that the Rule of
rationalism is constantly tempted to plan and fashion the Law permits social inequalities, whose beneficial results are
future comprehensively. Modern rationalism dates back generally overlooked by the misguided advocates of ‘social
to seventeenth-century philosophy, but later is exhibited justice’.
most powerfully by socialism in its various forms. It gives • Hayek regards democracy as the best practicable form of
rise to a destructive quest for perfection, in which inherited government, so long as a majority of the community is
rules, traditions and moral values – invaluable gifts from the committed to individual liberty, the Rule of Law and limited
past – are thoughtlessly discarded. Ignorance is inevitable, government. Democracy is not a primarily a way of life, but a
unavoidable and the reality of all men, including those who set of procedures for organising and operating government.
occupy positions of power. Hayek is a strong critic of modern There are no inherent substantive ends or core beliefs that are
bureaucracy. essential to democratic rule. By conceding that the majority
• Social order develops through spontaneous growth as of a community may embrace any set of core beliefs that it
well as through some measure of deliberate construction. chooses, Hayek is left with no basis for opposing totalitarian
Spontaneous growth occurs when individuals and groups democracies on democratic grounds.
with limited knowledge interact with other individuals • Hayek applies his understanding of the evolutionary
and groups, giving rise to unplanned patterns of behaviour development of society in general to the growth of legal
and institutional forms. Hayek applauds the Scottish and institutions and the Rule of Law. He traces this growth to
other British philosophers of the late eighteenth and early England, America and Germany, but largely excludes French
nineteenth centuries for recognising the importance of legal thought, which has favoured a rationalistic approach to
spontaneous growth; and he builds on their ideas to develop the law which runs counter to a free society.
the theory of social evolution that underpins his philosophy • The ‘ideal’ of the Rule of Law requires that existing laws
of freedom. By turning to the Scots, Hayek emphatically share certain characteristics. Law must be general; it must be
rejects the earlier liberal theories of John Locke and his known and certain and apply equally to all; it must provide
followers, which started from natural rights and from an for an independent judiciary; it must limit the executive
original contract. by legislative and judicial rules; and it must safeguard
• Hayek rejects the idea of a ‘natural’ or ‘factual’ equality fundamental rights and civil liberties.
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y s u m m a ry
• Hayek does not favour passive government, but rather one previous readings of the text. There are plenty of loose ends
that seeks many benefits for the community. Although he and undeveloped lines of reasoning in The Constitution of
shares the ‘strong presumption against governments actively Liberty. A crucial concept that Hayek depends on but leaves
participating in economic efforts’, he nonetheless states that undeveloped is that of ‘the community’. Very much along
the ‘old formulae of laissez faire or non-intervention do not Lockean lines, Hayek holds that the majority of a community,
provide us with an adequate criterion for distinguishing for its own protection, can authorise government to suspend
between what is and what is not admissible in a free system’. civil liberties in emergency situations. But that is not all. The
As he explains, ‘it is the character rather than the volume majority can authorise government to coerce citizens even
of government activity that is important’. In economic when they have not violated the law. Leading examples are
matters, for example, an active government that assists the the military draft and the imposition of taxes. The implication
spontaneous forces of the market is preferable to a less active here is that the community’s interest is the highest end that
one that does the wrong things. In this regard he sees himself government must seek, overriding the strict Rule of Law or in
as following the best of the classical liberals, such as Adam furtherance of it. Expedient policies are measured finally by
Smith. the interest of the community. Another challenge in reading
• In cases where coercion might be involved, the policy actions Hayek’s text is to penetrate his theory of knowledge – one that
of government are limited by the Rule of Law. In other cases, views man’s mind as ‘a product of the civilization in which it
Hayek recommends that government’s policies be judged has grown up’. Can Hayek avoid a thoroughgoing relativism
by the principle of expediency, or what best serves the and make room for universal or transcendent standards?
community’s interest.
• In the final part of The Constitution of Liberty Hayek examines
many areas of contemporary policy concern – social security,
taxation, healthcare, housing, urban planning, natural
resources and education – in light of the principles developed
in the earlier parts of his study. Two features stand out: Hayek
is willing for government to provide a broad range of social
services, in line with principles enunciated above; and he
steadfastly opposes policies that aim at wealth redistribution
or ‘social justice’.
• In approaching The Constitution of Liberty, the reader
must above all be prepared for surprises, regardless of his
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E ditorial Note A uthor’s Preface
Some brief editorial points should be noted regarding this I take great pleasure in joining with the IEA to celebrate the
monograph. First, UK spelling conventions have been used in fiftieth anniversary of the publication of F. A. Hayek’s The Consti-
the general text. The quotations from The Constitution of Liberty, tution of Liberty. Hayek had published important books and essay
however, are taken from the original US version. As such, collections prior to this work and others would follow it; but The
American-English conventions are used in these quotations. Constitution of Liberty continues to stand as the leading effort by
Second, where The Constitution of Liberty is referred to, the relevant any author, over the past century, to restate the principles of clas-
page numbers are put in brackets after the reference. Where other sical liberalism. Typically people read selected chapters from this
works of F. A. Hayek are referred to, the author simply refers to grand work, especially its controversial Postscript; and the usual
the date of the work, followed by page numbers if appropriate. scholarly practice is to draw from it selectively to see how Hayek
The relevant works by F. A. Hayek are then listed at the back of treats a particular problem over several of his writings or to trace
the monograph. the development of his thought. In fact, The Constitution of Liberty
advances a careful argument that runs through the book from
beginning to end: selective reading is likely to miss it.
Hayek’s core argument is essentially about freedom and its
value to the individual, to society and to civilisation at large. His
approach requires him to define a condition of freedom and,
in particular, to say what freedom is not. In order to show that
freedom is something valuable, Hayek must consider both its
intrinsic worth and its consequences, whether foreseen or unfore-
seen. Also, he must explain how a free society is different from
an unfree one and, more broadly, how freedom contributes to
human progress. In line with his desire to treat the question of
freedom comprehensively, Hayek investigates the philosophical
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y au t h o r ’s p r e fac e
foundations of freedom and seeks to show how freedom can be chapters, Hayek interweaves observations about freedom with
established and preserved through the Rule of Law. Finally, he observations about knowledge. I treat freedom and knowledge
assesses a wide range of governmental policies in terms of their thematically, in different sections, but with a view to their connec-
compatibility with freedom and their expediency. tion. Hayek takes up the problem of inequality at several points in
Hayek’s argument unfolds gradually; and the reader is some- his book, but I consolidate much of this in discussing Chapter 6.
times caught by surprise when important new lines of thought I consolidate several chapters in Part II on the origin and growth
are introduced without much notice. Also, there are unresolved of the Rule of Law; and in covering what Hayek says in Part III on
tensions and loose ends in Hayek’s argument that present inter- issues of policy, I look for common themes. To see how the order
pretive difficulties. Hayek sometimes explores ideas that are of my exposition compares with Hayek’s, the reader will find it
not yet fully formed in his own mind, but which he will seek to helpful to refer to Hayek’s own table of contents, which can be
clarify in later writings. For example, he will later present much found at the end of the book.1
more clearly the distinction among kinds of social order; the The interpretive literature on Hayek is voluminous, and much
nature of rules; the meaning of justice; the character of evolu- of it is quite valuable; but if I should attempt to address it, a quite
tion; and the shape of democratic governance. Undoubtedly there different book from the one intended would surely emerge. Thus
are important differences between The Constitution of Liberty and I stick closely to the text of The Constitution of Liberty and to some
Hayek’s later writings, but one should not assume that these are related works by Hayek. Modern search engines, along with
differences of principle. The later writings may simply clarify, printed bibliographies, make it fairly easy to identify and often
expand or refine the argument of The Constitution of Liberty access the pertinent secondary literature on Hayek. For conveni
without abandoning its core principles. To decide this issue, one ence I follow Hayek’s practice of referring to humanity as ‘man’
must obviously begin from The Constitution of Liberty itself and and to the individual as ‘he,’ rather than switching to gender-
understand its basic argument. neutral terminology.
Insofar as I know, no writer has yet followed carefully the I owe a debt of gratitude to many persons as well as to several
central argument of The Constitution of Liberty and shown how it is institutions. I am grateful first of all to Hayek, who was one of
developed in the various chapters of the book. My aim is to give a my teachers in the University of Chicago’s Committee on Social
fresh account of this argument – one that will be fully accessible to Thought. He also chaired my dissertation committee, whose
the general reader and also useful to the Hayek scholar. other members were Leo Strauss and Joseph Cropsey. I first met
My original intention was to proceed chapter by chapter, but Hayek at about the time that he was preparing The Constitution
this proved to be impracticable. Some consolidation was required of Liberty for publication. Through the years I have received vital
not only to hold my manuscript to a manageable length, but also
to bring out the structure of Hayek’s argument. In his opening 1 This is not available in the online version.
24 25
instruction, wise guidance and welcome support from many

friends. Chief among these are my colleagues in political science at
the University of Georgia as well as the countless associates whom Hayek’s The Constitution of Liberty
I have met and worked with through the activities of Liberty
Fund, including the staff of that estimable foundation. There
are special friends who, over the past year, provided generous
encouragement as well as helpful advice as I worked on this manu-
script. Above all I am grateful to my wife, Eva Miller, a cherished
companion, who for more than five decades and sometimes at
considerable sacrifice has made it possible for me to engage in a
scholarly life.
26
1 HAYEK’S INTRODUCTION
The Constitution of Liberty begins with a ‘Preface’ and ‘Intro-

duction,’ but the first thing to strike one’s eye is the title itself.
One might infer from it that Hayek intends to depict an institu-
tional arrangement or framework of government that promotes
liberty; but in fact the book says little about government’s internal
structure and operations. Later Hayek would clarify the meaning
of his title: ‘I then used the term “constitution” in the wide sense
in which we use it also to describe the state of fitness of a person’
(1973: 3). Hayek is concerned with liberty’s present shape or condi-
tion – whether it is fit or unhealthy. Believing that liberty is in
dire straits, he will diagnose the causes of its ill constitution and
prescribe a remedy that might restore its fitness.
Hayek identifies liberty closely with Western civilisation. The
principles of liberty or freedom – he uses these terms interchange-
ably (see 421) – grew out of the Western experience, and the West
flourished by adhering to them. By the mid-nineteenth century,
however, the West began to lose faith in the principles of liberty;
and now it lacks firm beliefs on which to oppose threatening
ideologies. In various writings Hayek emphasises one or another
proximate danger to Western liberty – central planning, demands
for social justice, excesses of majority rule – but the ultimate
danger is this loss of faith and self-confidence. Hayek is especially
harsh in his indictment of Western intellectuals, who have long
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y h ay e k ’ s i n t r o d u c t i o n
been disillusioned with their own civilisation, disparaging of its than might appear to be the case at first. I will say a bit about three
achievements and drawn to utopianism. They turned away from of these: ‘civilisation,’ ‘political philosophy,’ and ‘the ideal.’
Western principles just as other people of the world were looking
to the West for guidance, leading the others to draw the wrong
Civilisation
conclusions about liberty (1–2).
If the West is to continue on a path of progress, it must renew Hayek sometimes refers to civilisations, in the plural, and he
its understanding of liberty and liberty’s value both to society and often speaks of the accomplishments of Western civilisation
to individuals. To this end Hayek will identify the basic principles and the dangers it currently faces. More broadly, however, he
of liberty and restate them in words suited for today’s climate understands civilisation as the most recent phase of man’s social
of opinion. Hayek recognises that the task he has in mind must evolution. It began when men left ‘primitive society’ to adopt an
go beyond economics and historical inquiry. The contemporary urban way of life (340–41). The ceaseless and unguided process
situation requires attention to principles that claim ‘universal of social evolution, of which civilisation is a part, seems to be the
validity.’ It calls for an ‘ultimate justification’ or vindication basic reality for Hayek. Some thinkers in the liberal tradition, to
of fundamental values. Economics and historical inquiry can say nothing of liberalism’s German critics in the nineteenth and
certainly illuminate questions of liberty, but no single discipline twentieth centuries, have distinguished sharply between ancient
has the comprehensiveness and normative force required to and modern civilisation, identifying modernity with the rise and
put liberty on a sound footing. This task is properly the work of flourishing of liberalism. Hayek rejects this bifurcation, since he
‘political philosophy.’ The Constitution of Liberty will undertake ‘a wants to trace liberalism’s core principles – individual freedom
comprehensive restatement of the basic principles of a philosophy and the Rule of Law – to ancient traditions. Also, he appeals to
of freedom’ (3). older traditions in order to combat the most destructive features
Hayek’s discussion of freedom or liberty is divided into three of modernity, which are associated in some measure with the rise
main parts: The Value of Freedom; Freedom and the Law; and of liberalism in the seventeenth century.
Freedom in the Welfare State. He explains that Part I ‘endeavors Hayek’s approach raises several questions. Can the oft-
to show why we want liberty and what it does.’ Part II examines discussed conflict between ancients and moderns be smoothed
‘the institutions that Western man has developed to secure indi- over in this way? Does Hayek’s concept of a free and open society
vidual liberty.’ Part III tests this ideal of liberty by applying its and its way of life retain what is vital to ancient thought – its eleva-
principles ‘to some of today’s critical economic and social issues’ tion of noble virtues over useful ones? Does Hayek, in the final
(5). analysis, come down strongly on the side of modernity? Finally,
Hayek introduces several concepts in his Introduction that how does Hayek relate what is particular in civilisations to what
turn out to be much more important, as his argument unfolds, is universal? Can he praise the accomplishments of Western
30 31
civilisation and tie civilisation’s long-term prospects to its fate majority or by an intellectual elite; instead, it grows out of a spon-
without adopting a parochial mentality? taneous and continuous process that elevates a minority view to
a dominant position and then supplants it through the rise of
another minority view (109–10). Discussion is essential finally to
Political philosophy
the emergence of the dominant view, but first people must learn
By the 1930s, Hayek’s broad interests were taking him beyond about the alternatives by seeing individuals act them out.
technical questions in economics, but in a direction that his But how do new ideas originate? The practical politician
discoveries in economics were pointing to. Hayek’s early work on is necessarily ‘unoriginal’ in his beliefs. His task is to find the
the use of dispersed knowledge and the emergence of undesigned opinions held by the majority, and he moves within this frame-
order (see Hayek, 1937) begins a transformation in Hayek’s schol- work. New ideas come from those few who professionally handle
arly interests that reaches fruition in The Constitution of Liberty, abstract ideas, and eventually their ideas shape majority opinion.
where basic questions of political philosophy, especially moral Here Hayek quotes approvingly some well-known passages from
questions, are forthrightly addressed. In the early 1940s, Hayek J. S. Mill and J. M. Keynes to the effect that ‘speculative philos-
had understood his work as social science in the fashion of Max ophy’ (Mill) or ‘the ideas of economists and political philosophers’
Weber (cf. Hayek, 1952b [1979]: 61–9; cf. 41–4). He had mentioned (Keynes) are, in the long run, far more powerful than interests in
political philosophy from time to time, and by 1945 was moving shaping thought and action. When judged only by his direct influ-
in that direction (see Hayek, 1948: 2). Hayek’s post-war writings, ence on current affairs, ‘the influence of the political philosopher
addresses and organisational efforts reflect a growing anxiety over may be negligible,’ but ‘when his ideas have become common
the viability of Western civilisation and the fate of liberty, fore- property, through the work of historians and publicists, teachers
shadowing his deeper commitment to philosophical inquiry (see and writers, and intellectuals generally, they effectively guide
Hayek, 1992). developments’ (112–13).
Political philosophy, as Hayek describes it in The Constitution Hayek greatly elevates the philosopher’s historical role by
of Liberty, has a practical as well as a theoretical side. A theoretical insisting that evolution is governed, in the long run, by ‘ideas and
determination of basic principles is not enough. The philosopher therefore the men who give currency to new ideas.’ He assigns
must explain those principles to the general public, recommend importance not only to the innovators, but also to those thinkers
them, make them attractive by showing their loveliness as well who, along the way, provide ‘a set of coherent conceptions’ to
as their utility, and fight courageously against their enemies. govern the evolutionary process. Hayek’s own objectives have to
Hayek justifies this practical undertaking by reference to the way be understood in this light. He does not claim to be a great inno-
opinion is formed in a free society and the way society progresses. vator, but rather one who restates old truths coherently. The
Prevailing opinion is not the result of a deliberate decision by a political philosopher must address the question of what ought to
32 33
be, deciding among conflicting values and defending those which Hayek’s understanding of ‘the ideal’ raises a host of ques-
seem right to him. The political philosopher should not seek popu- tions. How do ideals originate? Do we discover them or construct
larity, but readily oppose the majority will when necessary by them? Are they grounded in what is real? In what sense, if at all,
expressing ‘inconvenient and irksome’ truths. Indeed, he should are ideals to be understood as transcendent? Can an ideal that is
‘suspect himself of failing in his task … when he finds that his distilled from one culture or civilisation be binding for all? These
opinions are very popular’ (115; cf. vii, 114–15). These characteris- questions will be explored in the course of our inquiry.
tics – eyes focused on the long term, avidly defending sound values,
unwilling to court popularity, insisting on unfashionable truths,
persevering in the face of rejection, holding to the belief that the
right ideas will eventually prevail – apply not only to the political
philosopher, as Hayek describes him, but also to Hayek himself.
The ideal
Hayek refers time and again to the ideal. Recovering basic prin-
ciples will help him to ‘picture an ideal.’ Hayek’s emphasis on
the ideal serves two purposes: it shows that liberty is something
of high value; and it allows him to appeal to something above
existing or possible arrangements that offers a criterion by which
to judge them. As we shall see, Hayek’s ‘ideal’ is the Rule of Law.
Generally Hayek’s writings bring out the quixotic or dangerous
side of idealism. In this very Introduction he reproaches Western
intellectuals for their ‘exclusive concern with the creation of
“better worlds.”’ To forestall an immoderate pursuit of liberty,
Hayek ends his Introduction by warning strongly against ‘perfec-
tionism.’ Liberalism, properly understood, is far removed from
‘the hurry and impatience of the passionate reformer.’ It is ‘a
modest and even humble creed’ with ‘a low opinion of men’s
wisdom and capacities,’ aware that even the best society we can
plan for ‘will not satisfy all our desires’ (vii, 1–2, 6, 8).
34 35
PART I
T HE VALUE OF FREEDOM
37
2 INDIVIDUAL FREEDOM, COERCION AND
PROGRESS (Chapters 1–5 and 9)
Hayek starts by defining a state of liberty or freedom: ‘We

are concerned in this book with that condition of men in which
coercion of some by others is reduced as much as is possible in
society’ (11). Who are the ‘some’ who must be protected from
coercion, and who are the ‘others’ who must be restrained? By
what means can coercion in society be reduced, and how much of
it will necessarily remain? These are questions that Hayek wrestles
with throughout The Constitution of Liberty.
Individual freedom and responsibility

Freedom, for Hayek, belongs to individual human beings. There
are several reasons why he begins from ‘the individual.’
First, the human individual is the being that chooses, thinks
and acts; and it is primarily to such an agent that the concept
of freedom properly applies. Hayek acknowledges that human
agency raises perplexing questions about the individual’s capacity
to choose or to will freely; but in defining a condition of freedom,
it suffices to consider only external impediments to action as they
might arise not from nature, but from other human beings.
Second, freedom must be defined by reference to individuals.
Hayek believes that he is recovering the earliest understanding of
freedom when he defines it as ‘[t]he state in which a man is not
39
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y i n d i v i d ua l f r e e d o m , c o e r c i o n a n d p r o g r e s s
subject to coercion by the arbitrary will of another or others’ separated. Liberty requires that the individual ‘must bear the
(11). This definition goes back to the earliest distinction between consequences of his actions’ (71). Without responsibility in this
slaves and free men; and it has been affirmed by the best modern sense, individuals would be unable to learn from their experiences
proponents of liberty, who insist on a free private sphere, defined and to enjoy personal growth. Moreover, a free society ‘will not
by clear rules and protected from arbitrary coercion, in which the function or maintain itself unless its members regard it as right
individual may pursue his own aims, so long as his actions do not that each individual occupy the position that results from his
violate the freedom of others. Hayek concedes that he is advancing action and accept it as due to his own action’ (71). Scientific deter-
a ‘negative’ view of freedom (the absence of coercion), but he also minism teaches, however, that actions result not from one’s own
insists that such freedom takes on a ‘positive’ character through free choice, but from circumstances beyond one’s control; and
the use that individuals make of it (19). many believe that this scientific teaching has destroyed the basis
Third, a free society cannot exist without free individuals and, for individual responsibility.
as Hayek will go on to argue, this requires freedom for all. Some Hayek does not reject determinism altogether. The conception
collectivist teachings have posited a social or political freedom of responsibility ‘rests, in fact, on a determinist view’ – the view
that excludes individual freedom, but Hayek strongly rejects any that actions follow from such ‘internal’ causes as emotion and
effort to divorce the two. habit (73). This raises the question of ‘inner freedom,’ or whether
Hayek acknowledges that freedom has acquired meanings that internal causes deprive actions of their voluntary character. Hayek
are quite different from the one he prefers. Individual freedom does not pursue this question, since he is concerned with a deter-
should not be confused with ‘political freedom,’ understood as a minist teaching that looks to external rather than internal causes
people’s consenting to a government, participating in legislation, of action. This form of determinism is an offshoot of nineteenth-
or controlling administration. Popular consent and participation century physics. It holds that our actions and mental operations
won’t necessarily secure individual freedom and may work against are necessarily determined by material circumstances ‘external’ to
it (13–15). the actor.
Again, individual freedom is not to be understood as exer- In refuting scientific determinism, Hayek does not try to show
cising free will or choosing one’s course of action and sticking that it is false, but only that it is wrong pragmatically. It conflicts
to it. In defining a condition of freedom, the question is whether with what we believe to be the case when we urge people to observe
others can impose their will on me, not whether I can follow my certain rules. Experience leads me to believe that my admoni-
own will. Hayek recognises, however, that the problem of free will tions will make a difference in a person’s conduct, and I want that
is an important one; and he returns to it in Chapter 5, where he person to believe that he should choose the responsible path; but
discusses responsibility. the truth is that neither of us knows whether free choice is possible
Hayek insists that liberty and responsibility cannot be or whether praise and blame can make a difference (72–6).
40 41
Finally, individual freedom is not to be identified with the interpreted by Locke’s followers in England, France and America,
power to overcome obstacles or to satisfy one’s wishes. The idea and aspects of Bentham’s utilitarianism. The rationalists start
of ‘liberty as power’ translates easily into a demand for power or from the idea of natural liberty, insisting that freedom is each
wealth, as opposed to freedom from coercion (see 13–18). individual’s birthright. Moreover, man enjoyed the gift of reason
from the beginning. Man was ‘originally endowed with both the
intellectual and the moral attributes that enabled him to fashion
The individual and society
civilization deliberately’ (59). Morals, language and law were
Hayek’s opening approach may suggest that he holds a radi- inventions of ‘an independently and antecedently existing human
cally individualistic view of man, but this judgement would be reason’ (57). Living freely in the ‘state of nature’ and employing
premature and mistaken. As we shall discover, Hayek goes very their reason, men proceeded to design their civil institutions,
far in emphasising our dependence on society and the need to perhaps by entrusting the task to a wise legislator or by entering
understand individual actions in light of social relationships. We into a social contract. All useful institutions, including the state,
experience other persons in their concreteness and individuality, are ‘deliberate contrivances.’ The rationalists ‘cannot conceive of
but never apart from their qualities as social beings. anything serving a human purpose that has not been consciously
Hayek’s ‘individual’ is thus a deliberate abstraction from social designed’ (61).
man and the social context of human life. Hayek begins this way In Hayek’s estimation, these teachings are both erroneous
in order to establish that freedom is the individual’s enjoyment and dangerous. They fail to recognise the limits of reason and the
of an assured private sphere, safe from interference by others and social dimensions of liberty. To frame his own account of liberal
especially from arbitrary coercion by government. It will turn out principles, Hayek draws on an ‘anti-rationalist’ or ‘empiricist
that the human being’s involvement in society and his member- evolutionary tradition’ that grew out of English common law,
ship in a particular community also raise vital issues of coercion; Scottish moral philosophy and the reflections of parliamentar-
but in defining freedom, Hayek wants to defer consideration of ians such as Edmund Burke. This exposition gives Hayek an
these issues, and he achieves this by abstracting from man’s social opportunity to bring out the social side of human life.
and communal relations. The anti-rationalists rejected the idea that man is born free,
Hayek’s insistence on the social character of human life shapes or that freedom is man’s original or natural condition. Human
his understanding of the liberal tradition and his own place in it. beings lived from the beginning in societies that were built around
Hayek emphatically rejects the ‘rationalist’ understanding of the the family. Civilisation was not the product of rational design,
individual and society, which many have identified as the original but ‘the accumulated hard-earned result of trial and error’ (60).
and primary form of liberalism. Rationalist theory, as character- Freedom could develop only after civilisation had tamed and
ised by Hayek, is some blend of John Locke’s ideas, especially as checked ‘man’s more primitive and ferocious instincts’ (60).
42 43
Moreover, civilisation was necessary to man’s development as a without coercive government, Hayek insists that state coercion
rational being, for ‘human reason has grown and can successfully is required to prevent private persons from coercing each other
operate’ only with and within the framework of morals, language (21). This does not mean that all private coercion can be elimin
and law. It follows that free institutions were not constructed to ated. Hayek grants, for example, that coercion of a subtle kind –
fit some rational conception of freedom. Free institutions evolved psychological pressures to give in to another’s moods or demands
first, and conceptions of liberty came later as these institutions – often occurs in private relationships that individuals enter into
were studied (57–60). voluntarily, but for the state to regulate or restrict such choices
When Hayek refers to ‘classical liberalism,’ he means the form would involve even greater coercion: ‘if people are to be free to
it took in the nineteenth century, after the anti-rationalism of choose their associates and intimates, the coercion that arises
thinkers such as Hume, Adam Smith and Burke became widely from voluntary association cannot be the concern of government’
influential. His broad aim is to recover and restate classical (138).
liberalism as thus understood. Besides emphasising the social The state monopolises coercion under all forms of govern-
dimension of human life, classical liberalism developed ideas ment; but in a free society, the exercise of government’s coercive
about markets that Adam Smith and other evolutionists had put power is constrained and made predictable by general rules that
forward. It did not envision unbridled individualism or complete apply equally to all individuals, including those who make and
laissez-faire – a doctrine that belongs to the French rationalist enforce the laws. Conformity to law is the primary safeguard
tradition and was never defended by any of the English classical against arbitrary government – a point that Hayek will develop at
economists. The evolutionists’ argument was ‘never antistate as length in discussing the Rule of Law. We note that while the law is
such, or anarchistic.’ It ‘accounted both for the proper functions constraining, it is not in itself coercive.
of the state and for the limits of state action’ (60; cf. 1973: 61–2; Coercion by the state is indispensable to freedom, but Hayek
1976: 54). wants to reduce the need for it to a minimum. This is possible only
where individuals can be expected to conform voluntarily to tradi-
tional rules of conduct and, in particular, to common moral rules.
Limiting state coercion
Evolved moral rules, as distinct from synthetically constructed
Hayek acknowledges that his definition of freedom is incomplete ones, should thus be regarded with reverence and held as a matter
so long as coercion remains undefined. He thus examines various of sincere belief. Hayek follows ‘all the great apostles of freedom
ways of defining coercion, but the deeper question is why it is outside the rationalistic school’ in emphasising that ‘freedom has
desirable for the individual to have a sphere of freedom in which never worked without deeply ingrained moral beliefs’ (62).
coercion is reduced to a minimum. Is our conformity to moral rules truly voluntary, or is it
Unlike romantics who imagine that society can flourish simply produced by a different kind of coercion or compulsion
44 45
to that imposed by the state? As Hayek explains it, we conform protect individuals and their property from physical harm, but
to moral rules mostly from habit, but social pressure to do so his primary emphasis is on assuring the individual’s freedom of
is often intense. J. S. Mill had regarded such conformity as the action. Inflicting physical harm, or threatening it, is a form of
most pressing contemporary threat to freedom, greater even coercion, but so is interference with free action. Freedom of action
than the threat of state coercion (Mill, 1975: 57–69). Hayek is less includes economic liberty, but it is wider than this. For Hayek, it
concerned than Mill with protecting private conduct ‘from the encompasses the individual’s freedom to plan his own life and to
pressure of opinion or disapproval.’ Mill, in strongly attacking carry out that plan. Recognising that this requires extensive infor-
this so-called moral coercion, ‘probably overstated the case for mation, Hayek defines coercion broadly to include the manipu-
liberty’ (146; cf. 435, n. 32). In Hayek’s view, it is better ‘not to lation of a person’s environment by such means as deception
represent as coercion the pressure that public approval or disap- or withholding vital facts. Coercion, in this wider sense, is ‘the
proval exerts to secure obedience to moral rules and conventions’ control of the essential data of an individual’s action by another’
(146). (139).
Hayek thinks that ‘a free society will function successfully only In extending this freedom to every individual, Hayek implicitly
if the individuals are in some measure guided by common values;’ follows the principle, famously articulated by Kant, that human
and this is why he is willing for society to exert pressure on indi- individuals are to be regarded as ends and not as a means only. A
viduals to conform to moral rules. Nonetheless, he doesn’t want person who is coerced no longer pursues his own ends or plan of
this pressure to interfere with the individual’s freedom of choice. life, but must act according to ends or goals that are imposed by
We must recognise that ‘each person has his own scale of values someone else. In so acting I become merely a means to another’s
which we ought to respect, even if we do not approve of it.’ If we end. I still exercise choice, but ‘my mind is made someone else’s
believe in freedom, we will not ‘regard ourselves as the ultimate tool, because the alternatives before me have been so manipulated
judges of another person’s values’ or ‘feel entitled to prevent him that the conduct that the coercer wants me to choose becomes
from pursuing ends which we disapprove of so long as he does not for me the least painful one’ (133). I have been deprived of the use
infringe the equally protected sphere of others.’ A society that fails of my intelligence and knowledge in the pursuit of my own aims
to recognise these principles ‘can have no respect for the dignity of (134).
the individual and cannot really know freedom’ (79). But why is it beneficial that the individual should be free to
pursue his own ends or life plan? Hayek is somewhat vague about
the benefit that the individual himself gains from such freedom.
Freedom of action
He does not justify it as a path to success in amassing property,
What is to count as coercion, especially the arbitrary kind that winning acclaim, cultivating virtue, or attaining happiness: ‘we
encroaches on individual freedom? Hayek certainly wishes to must recognize that we may be free and yet miserable’ (18). Hayek
46 47
requires a justification that upholds freedom even if the individual even a few individuals can be of immense value to their contem
is unsuccessful in attaining his ends or, should he succeed, finds poraries. Indeed, the freedom ‘that will be used by only one man
their attainment unappealing. His solution is to emphasise the in a million may be more important to society and more beneficial
value of striving and learning: to the majority than any freedom that we all use’ (31). This result
What matters is the successful striving for what at each does not require disinterested or benevolent actions, although it
moment seems attainable. It is not the fruits of past may proceed from such motives. Typically the actor, in seeking to
success but the living in and for the future in which benefit himself, also benefits unknown persons without intending
human intelligence proves itself. Progress is movement for to do so or foreseeing this result.
movement’s sake, for it is in the process of learning, and Hayek continues this argument by calling attention, as he
in the effects of having learned something new, that man
often does, to our fundamental ignorance. I can never know which
enjoys the gift of his intelligence. (41)
particular individuals will use their freedom so as to benefit me
This principle – that progress is continuous striving and and the rest of society. Certainly I cannot identify in advance
learning – applies both to the individual and to humanity at large. that ‘one man in a million’ whose contribution will be immense.
Hayek describes freedom as ‘opportunity for the unknown few’
(533). Only by extending freedom as broadly as possible can we
Freedom and progress
provide an opportunity for these unknown benefactors to use
Individuals cherish freedom of action and benefit personally their freedom effectively. Since no one has sufficient knowledge
from it, but Hayek’s case for individual freedom rests on broader to pick and choose such individuals, freedom must be given to all.
considerations: ‘It is not because we like to be able to do particular From here Hayek proceeds to show that individual freedom is
things, not because we regard any particular freedom as essential essential to the long-term growth of civilisation and the advance
to our happiness, that we have a claim to freedom’ (32). Hayek’s of humanity at large. The progress of civilisation depends on
broader argument for individual freedom comes to light particu- man’s freedom to experiment with new ways of doing things. Here
larly in Chapters 2 and 3, where he emphasises its contribution to again, no one can predict in advance which ‘experiment in living’
society at large and to the progress of civilisation. will move civilisation ahead. Progress cannot be designed: ‘it is
Hayek prepares the ground for this broader argument by not achieved by human reason striving by known means toward
insisting that I may benefit much more from the way other indi- a fixed aim.’ Progress ‘always leads into the unknown.’ At most
viduals use their freedom than from how I use my own. In fact, we can only expect ‘to gain an understanding of the kind of forces’
the benefits which I derive from freedom are ‘largely the result of that bring about undesigned growth and try to create conditions
the uses of freedom by others, and mostly of those uses of freedom that are favourable to it (40).
that I could never avail myself of ’ (32). The useful contributions of Earlier we took note of Hayek’s insistence that a free society is
48 49
a traditional society – one whose members regard their evolved be planned in advance, since they ‘often spring from the unfore-
traditions with respect and even reverence. Yet if a society is to seen and undesigned.’ What they are apt to overlook is that new
survive and grow, it must adapt to changing conditions; and this ideas depend on innovative actions and thus on ‘the freedom of
requires freedom to experiment and innovate. Some individuals doing things.’ In Hayek’s view, the intellectual process ‘is in effect
or groups must deviate from or go beyond established rules and only a process of elaboration, selection, and elimination of ideas
try something new. Civilisation grows through a process of trial already formed’ in our daily conduct of practical affairs. The flow
and error, and innovators are indispensable to this process. of new ideas ‘to a great extent, springs from the sphere in which
Innovation begins as a response to changes in a society’s action, often non-rational action, and material events impinge
material environment. Some of these changes can be dealt with upon each other.’ It would ‘dry up if freedom were confined to the
by temporarily adjusting practices and resource use, while others intellectual sphere.’ Since thinking depends on doing, ‘[f]reedom
will require lasting modifications in tools and institutions (32–3). of action, even in humble things, is as important as freedom of
When Hayek speaks of adaptation (a central concept in his thought’ (33–5).
account of social evolution), he has these latter cases primarily in
mind. Without innovation, our adaptation to changing circum-
Progress as radical change
stances would be impossible. Innovation introduces new ways of
doing things. These new ways compete with old ones and with The Constitution of Liberty might leave the impression that progress
each other. If a new way proves to be effective, others may imitate is mostly gradual, smooth and cumulative. Does Hayek recognise
it. As Hayek explains, ‘the selection by imitation of successful that progress often involves sharp discontinuities, destructive
institutions and habits’ is decisive for social evolution (59). Soci negations and radical transformations?
ety’s growth in the past has depended on an unconscious process Hegel’s dialectical account of history offers one such view of
of trying new things, learning, imitation, selection and adaptation; progress. Hayek emphatically rejects the Hegelian dialectic, espe-
and this remains largely true even with the emergence of reason. cially as it is restated by Marx, but without specifically criticising
Hayek explains intellectual progress in terms of this broader the idea that progress occurs through negation and sublation. His
process of social evolution. Advances in thought depend funda- attack centres instead on Hegel’s rationalism and determinism,
mentally on man’s unconscious adaptation to changed material i.e. the insistence that historical progress is governed by a fixed
conditions and thus on freedom of action. Intellectual liberty – law that is both necessary in its operations and intelligible to
freedom of thought, research and communication – is ‘significant reason. The main features of Hayek’s own evolutionary theory –
only in the last stage of the process in which new truths are discov- no determining law, the indispensability of free action, no known
ered.’ Scientists understand that intellectual progress results from goal of progress, the impossibility of understanding fully how
new ideas; and most realise that advances in knowledge cannot progress works or making specific predictions about its direction
50 51
– are intended to counter Hegelian and Marxist dialectics (Hayek, captives of progress’? Why does ‘the peace of the world and, with
1952b [1979]: 367–400). it civilization itself … depend on continued progress at a fast rate’?
Another challenge to the idea that progress flows smoothly Hayek concludes Chapter 4 by warning that advanced technology,
– one that avoids Hegelian assumptions about a fixed law of vital to the West’s prosperity, can be turned against it in the form
progress – can be found in some influential depictions of modern of destructive weaponry. Hayek is not proposing an arms race, but
technology. These hold that social change is driven by the relent- rather making a demonstration of technology’s promise. A great
less advance of innovative technologies that inevitably under- proportion of the world’s people, dissatisfied with their own lot,
mine obsolete customs and institutions. Joseph Schumpeter, who think they can prosper by redistributing Western wealth – a belief
developed an early version of this view, famously spoke of tech- that reflects the influence of Western ideas. Moreover, the spread
nological advance as ‘creative destruction,’ thereby incorporating of technology has given these disgruntled peoples a new power
both Marx’s theory of revolution and Nietzsche’s insistence that to destroy Western nations; and ‘[a]s their strength grows, they
the creative individual – the innovator – must also be a destroyer will become able to extort such redistribution’ unless the West
(see Schumpeter, 1950: 31–2, 41–3, 81–6; Nietzsche, 1954: 170–72). can show that the best way to increase overall wealth is through
Modern technology, thus understood, would seem to be at odds peaceful progress (52–3).
with traditional society of the kind Hayek favours.
Hayek grants that modern progress depends on the rapid
advance of technology, which inevitably leaves destruction in its
wake, thus producing losers as well as winners. He had noted this
earlier in describing the Industrial Revolution and the social alter-
ations it produced in England. While benefiting the great majority
of workers, the Industrial Revolution ‘destroyed’ the privileged
position and power of the upper classes and endangered ‘certain
aesthetic and moral values’ to which these classes attached great
importance (1954: 25–7). Hayek grants that most people are likely
to be averse to progress, since while ‘bringing them much they
strive for,’ progress also ‘forces on them many changes they do not
want at all.’ The point, however, is that the spread of technology
has ‘largely deprived us of the choice as to whether or not we want
continued rapid progress’ (51–2).
Why are Westerners today ‘not only the creatures but the
52 53
the use and limi ts of knowledge
knowledge possessed by others. Our using others’ knowledge

is possible because individuals participate in an order that they
3 THE USE AND LIMITS OF KNOWLEDGE did not create and whose ultimate workings they cannot under-
(CHAPTERS 2, 3, 4) stand. Thus in the third section I examine Hayek’s discussion of
order – how it originates and works to our advantage. The fourth
section explores Hayek’s account of reason and shows how it rests
on his evolutionary conception of mind. The concluding sections
Hayek’s teaching on human knowledge provides the foun- consider how knowledge is embodied in traditions, values and
dation for his political philosophy. His key concepts are defined moral rules.
substantially by reference to knowing. Liberty is having access
to the information needed to design and follow one’s plan of life.
Using inherited knowledge: rules and traditions
Tradition is knowledge in the form of accumulated experience.
Progress is the advance of knowledge. For Hayek, determining What specific mechanisms make it possible for us to use the
what we cannot know – the limits to human knowledge – is as knowledge of others? Hayek makes a start on identifying these
important as discovering what is knowable. Time and again he mechanisms near the beginning of Chapter 2, where he distin-
calls attention to our fundamental ignorance and builds argu- guishes between 1) ‘the transmission in time of our accumulated
ments around our lack of knowledge. In fact, he insists that the stock of knowledge,’ and 2) ‘the communication among contem-
‘case for individual freedom rests chiefly on the recognition of poraries of information on which they base their action’ (27).
the inevitable ignorance of all of us concerning a great many of The difference, viewed from the actor’s standpoint, is this: past
the factors on which the achievement of our ends and welfare knowledge becomes available for use largely by our conforming to
depends’ (29). rules, while we make use of contemporaneous knowledge largely
Reflections on knowledge appear throughout Chapters 2, by responding to signs.
3 and 4 of The Constitution of Liberty, interwoven with themes In the West particularly, the advance of science is a
that we considered in the previous chapter. The task now is to conspicuous and vital way in which knowledge is transmitted
reconstruct Hayek’s teaching on knowledge and explore its key through time; but from the standpoint of man’s evolution, the
elements. Hayek had long argued that the individual possesses transmission of various tools, customs and institutions has been
only a small amount of the knowledge required for success in much more important. All these examples involve a compli-
daily life and thus must ‘make use of more knowledge than he has ance with rules. Hayek insists that rule-governed behaviour long
himself acquired’ (22). In the first two sections of this chapter, I preceded the use of reason and language, so it need not be delib-
consider the mechanisms that make available for our use the erate or even something of which one is conscious. For a very long
54 55
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y the use and limi ts of knowledge
time rules were no more than behavioural dispositions. Their acquired the rule by imitating particular actions that exemplified
articulation in speech and in writing came very late in the process it) and were enforced by social pressures. The verbal articulation
of human evolution; and even now, our compliance with rules has of learnt rules began about eight thousand years ago, and written
mostly a subconscious and habitual character. codes of morality and law are much more recent. Even after these
Hayek frames the story of human evolution in terms of the developments, subconscious abstraction would continue to exert
genesis, diffusion and transmission of rules. Elements of this a dominant influence on human action (see 61–7, 148–9, 151–2;
story appear in The Constitution of Liberty, but it is presented much Hayek, 1973: 17–21, 74–6; Hayek, 1979: 159–61).
more clearly in later writings. In his most detailed account of the Our present stock of knowledge consists in large degree of
matter, Hayek identifies three stages of evolution, each of which rules that we have acquired through habit, custom and tradition.
involves rule-governed behaviour, but with great variation in both Social evolution tends to be cumulative, so that traces of earlier
the character of the rules and the behaviour itself. This account is rules are brought forward into the present, where they exist in a
necessarily conjectural, since it looks back at least a million years, layered or stratified form.
long before the beginnings of recorded history.
Hayek speculates that primitive society consisted of small
Using contemporaneous knowledge: imitation, prices
bands of 15 to 40 persons, who lived by hunting and gathering.
and esteem
Its rules were nothing more than instinctive dispositions to act
in ways that favoured group solidarity and survival. How did Transmission in time is one of the ways by which knowledge
general rules emerge? Hayek attaches great importance to the becomes available for our use. The other way is through commu-
mind’s facility of treating particulars as members of a class – what nication among contemporaries, three examples of which are: a)
he calls ‘abstraction.’ Verbal statements are a clear example, but ‘individuals imitating those who have been more successful;’ b)
so are our behavioural responses. Abstraction ‘manifests itself individuals being guided by ‘prices offered for their products;’ and
also in the way in which we respond similarly to any one of a c) individuals responding to ‘expressions of moral or aesthetic
class of events which in most respects may be very different from esteem for their having observed standards of conduct’ (28–9).
one another, and the feelings which are evoked by those events All three processes are vital to civilisation. Imitation is essential
and which guide our action, be it a sense of justice or of moral or to society’s adaptive evolution, where ‘the decisive factor is not the
aesthetic approval or disapproval’ (40, 452, n. 4; cf. Hayek, 1952a: selection of the physical and inheritable properties of the individ-
142–6; and Hayek, 1978a: 35–49). This subconscious, responsive uals but the selection by imitation of successful institutions and
form of abstraction developed as human beings moved through habits’ (59). Prices convey vital information about the economic
different social structures; and the most efficient of these abstract behaviour of dispersed individuals. Signs of approval or disap-
behavioural rules were spread through imitation (observers proval promote conformity to rules.
56 57
Hayek had long been interested in the way prices convey infor- salience of moral approval and disapproval than about the price
mation. In writings dating back to the 1930s, he had emphasised mechanism.
the indispensability of prices to economic life (see 1948: 33–56). In the 1945 essay, and sometimes also in The Constitution of
The most influential of these writings is his 1945 essay ‘The Use Liberty, Hayek employs this interesting formulation: the price
of Knowledge in Society.’ This essay takes up ‘the economic system allows the individual to use knowledge that he does not
problem of society’ and argues that it ‘can be solved, and in fact possess; prices signal what countless individuals know of their
is being solved, by the price system’ (ibid.: 77, 85). Hayek points own local situations; and I can use them in my own calculations
out that rapid adaptation to social change requires knowledge without actually possessing the dispersed knowledge that they
of the particular circumstances of time and place; but this know reflect. Whether this formulation would also cover our use of
ledge, which is dispersed among countless individuals, cannot be traditional rules as well as instances of communication other than
concentrated in a single mind or planning board. The problem the price system (imitation, responding to signs of approval and
then is to find a way to put dispersed knowledge to use for every- disapproval) is uncertain. In conforming to tradition, arguably
one’s advantage. In a free society, the price system solves this we would possess the rule either as a subconscious habit or as a
problem by ensuring ‘that the knowledge of the particular circum- conscious precept, although the reasons for the rule – the experi-
stances of time and place will be promptly utilized.’ Moreover, it ences from which it originated and through which it survived a
communicates to the individual ‘such further information as he long process of cultural selection – are unknown to us and there-
needs to fit his decisions into the whole pattern of changes of the fore not in our possession. For the most part rules are followed
larger economic system’ (83–4). Hayek concludes by observing blindly, without consideration of the reasons for them. The same
that the economic problem is but part of a broader one, i.e. the may be largely true of our responses to approval and disapproval.
need for processes to overcome ‘the unavoidable imperfection of Hayek does indicate, however, that as social evolution advances,
man’s knowledge’ (91). Indeed, this broader problem ‘arises in imitation may come to have an element of deliberation and choice.
connection with nearly all truly social phenomena, with language
and most of our cultural inheritance, and constitutes really the
Knowledge and social order
central theoretical problem of all social science’ (88).
Hayek here anticipates the more comprehensive treatment of In daily life we rely on rules and signs and take for granted the
the use of knowledge that he offers in The Constitution of Liberty knowledge they make available for our use. By acting on such
(see 4). As it turns out, attentiveness to prices is one way, but not knowledge, we are able to carry out our own plans and to antici-
the only way, that we overcome the imperfection of our know pate what to expect from others. All of this is to assume that the
ledge by making use of what others know. In fact, The Constitu- social world is orderly, but where does this order come from and
tion of Liberty has much more to say about imitation and about the what is its character?
58 59
Accounting for order is a central aim of Hayek’s political have proven themselves superior (60). This insight was central to
philosophy, but his discussion of it in The Constitution of Liberty the British case for freedom, which held that the value of freedom
is quite diffuse as compared with later presentations, where he ‘consists mainly in the opportunity it provides for the growth of
distinguishes quite clearly between the order that men deliber- the undesigned’ (61).
ately make (‘organisation’) and order that forms itself (‘sponta- It must be emphasised that in embracing the idea of evolu-
neous order’). Both kinds of order are essential to civilisation (see tion, Hayek has in mind social or cultural evolution as antici-
1964). pated in the teachings of eighteenth-century thinkers, particularly
Hayek is widely known for his advocacy of the idea of sponta- the Scots, and not physical evolution as taught later by Charles
neous order. He briefly discusses the concept itself at two points Darwin and others. What is crucial to cultural evolution is not the
in The Constitution of Liberty, although the idea of spontaneous selection and transmission of physical characteristics, but rather
growth is present in his discussions of tradition, liberty and the selection and transmission of values or rules of conduct.
progress. Hayek’s comments about organisation as a source of Cultural evolution takes place through a process of ‘winnowing
order are scattered elsewhere in the book, so the relationship of and sifting,’ and where it will lead is unknowable and thus
spontaneous and constructed order is not developed thematically. unpredictable. Certainly it does not exhibit an intelligible law.
Hayek’s first description of spontaneous order, though not by Its tendency, however, is to produce orders or structures that
that name, comes in Chapter 4, where he examines the contribu- reflect ‘the differential advantages gained by groups from prac-
tion of eighteenth-century British thinkers to our understanding tices adopted for some unknown and perhaps purely accidental
of progress. These thinkers, especially David Hume, Adam Smith reasons’ (1979: 155; cf. 153–9, 196–200).
and Adam Ferguson, addressed the following question: how can Hayek returns to spontaneous order at the very end of Chapter
social order emerge, if not from a designing human intelligence or 10, where he draws a parallel between natural and social order.
that of a superior being? In addressing it, they Often in the physical world we must ‘rely on the spontaneous
adjustments of individual elements to produce a physical order.’
showed how, in the relations among men, complex and For example, we ‘could never produce a crystal or a complex
orderly and, in a very definite sense, purposive institutions
organic compound if we had to place each individual molecule
might grow up which owed little to design, which were not
invented but arose from the separate actions of many men or atom in the appropriate place in relation to the others;’ yet
who did not know what they were doing. (58–9) because the individual molecules or atoms obey a law of nature,
they will in certain conditions ‘arrange themselves in a structure
The Scots in particular saw that the orderly growth of institu- possessing certain characteristics’ (160). Hayek reasons that spon-
tions takes place through ‘adaptive evolution’ or ‘the survival of taneous forces can likewise produce human society when indi-
the successful’ (59, 57). Those tools and institutions survive which viduals act in accordance with general rules or laws. Lawmakers
60 61
can promote social order by establishing the conditions for it, but that is, in the highest degree of interference by public power’ (55).
cannot do so by trying to arrange individuals in an orderly way. So long as the growth of organisations ‘does not produce a situ-
Thus the lawmaker’s task ‘is not to set up a particular order but ation in which a single comprehensive scale of merit is imposed
merely to create conditions in which an orderly arrangement can upon the whole society, so long as a multiplicity of organizations
establish and ever renew itself ’ (161). compete with one another in offering different prospects, this
Hayek draws support here from Michael Polanyi, who speaks is not merely compatible with freedom but extends the range of
of ‘the spontaneous formation of a “polycentric order.”’ Polanyi choice open to the individual’ (99).
explains that such order ‘is achieved among human beings by The wide availability of useful knowledge, as transmitted
allowing them to interact with each other on their own initiative through rules and communicated though signs, attests to an order
– subject only to the laws which uniformly apply to all of them.’ that, while not intelligible itself, is the source of intelligibility in our
Their individual efforts are coordinated ‘by exercising their indi- daily lives. This order, speaking broadly, is what Hayek means by
vidual initiative;’ and ‘this self-coordination justifies this liberty ‘civilisation,’ understood as the direction of man’s social evolution
on public grounds’ (160). since the advent of cities, about eight thousand years ago. Civilisa-
As for deliberate organisation, Hayek acknowledges that a free tion is an artificial order, generated spontaneously by countless indi-
society ‘produces institutions in which, for those who prefer it, a vidual actions but not designed or instituted by anyone. It requires
man’s advancement depends on the judgment of some superior adaptations to material conditions that nature imposes, but is not a
or of the majority of his fellows.’ Business firms and government product of natural growth. Organisations play an indispensable role
agencies would be leading examples of such institutions. Here within this undesigned order, but can never hope to replace it.
individuals are subject to the orders of their superiors, and their
place in the organisation depends on someone else’s judgement of
Reason, mind and civilisation
their contribution or their merit (99).
Hayek emphasises that his argument for liberty ‘is not an Hayek seeks to defend reason, properly understood, against
argument against organization, which is one of the most powerful rationalism: ‘Reason undoubtedly is man’s most precious posses-
means that human reason can employ.’ What he principally sion,’ but it has been abused by persons who greatly exaggerate
objects to are, first, monopolistic organisations that are exclusive, its powers (69). In The Constitution of Liberty, Hayek uses the term
privileged and coercive, and second, any attempt to impose on ‘anti-rationalist’ to identify his preferred position (see 57, 61, 63,
society at large the organisational pattern, with individuals being 69, 437), but as he came to recognise, this usage obscures his true
assigned to positions according to a single comprehensive scale of intention. After all, Britain’s so-called anti-rationalists were not
merit. He faults the French rationalist tradition in particular for opposed to reason, but wanted to make reason more effective by
seeking ‘the highest degree of political civilization in organization, establishing its proper limits. Thus in later writings he drops this
62 63
term, declaring it to be a dangerous and misleading expression that Hayek aims to discredit rationalist theories of this sort
ought to be avoided. The rationalist/anti-rationalist distinction is through his evolutionary account of mind. By his account, the
replaced by one between two kinds of rationalism, which Hayek human mind evolved slowly for a million years or more before
calls ‘constructivist’ and ‘critical.’ His own position, and that of the reason finally emerged. Even now, our actions depend much more
evolutionary tradition from which he draws, is renamed ‘critical on habit and unthinking responses to signs than on the kind of
rationalism’ – a term borrowed from Karl Popper (1967: 94). knowledge that an individual mind ‘consciously manipulates’
In order to bring out reason’s limits, Hayek offers a critique (24). Man’s mind is thus ‘a product of the civilization in which
of reason. This critique moves at two levels, one of which is much he has grown up and … he is unaware of much of the experience
more radical than the other. At the less radical level, Hayek insists which has shaped it – experience that assists it by being embodied
on the pervasiveness of human ignorance and shows that reason in the habits, conventions, language, and moral beliefs which are
can neither supply the knowledge required for daily life nor part of its makeup’ (24). What mind has and will become depend
explain the processes that make such knowledge available for our on the process of civilisation. Civilisation preserves and transmits
use. At a second and more damaging level, he depreciates reason general rules and beliefs, and the individual mind is a collection
itself, first by subordinating reason to the subconscious mind and of them. This is not to say that the mind is merely passive. Besides
then by submerging mind into the process of civilisation. classifying sense data, it has ‘the capacity to restrain instincts.’
Hayek knew that rationalism, both ancient and modern, Without such restraints, civilisation could never develop (1988:
had taken its bearings by a natural order whose principles are 22; cf. 1979: 160).
constant and intelligible to the human mind. In one way or Hayek was greatly influenced by the historicisation of the
another, it had taught that reason can transcend the here and mind that occurred in German thought in the late nineteenth
now, the opinions of the time, to apprehend the unchanging century – a development that would, over the next century,
truth of things, including the good and beautiful. Ancient and transform the way scholars understood human knowing and
medieval rationalists in particular had taught that essential quali- reasoning. This was a time when historians and anthropologists
ties of the world itself are captured by the concepts employed in were able to argue, from abundant data, that beliefs and world-
reasoning. Knowledge of nature, especially human nature, would views vary greatly from one society or civilisation to another. Such
provide a timeless standard by reference to which human affairs data alone was insufficient, however, to support the claim that the
could be ordered. Hayek regards these rationalist views as both mind itself changes. For this a theory of knowledge was required.
wrong theoretically and dangerous from a practical standpoint. This new theory began from Kant’s principle that ultimate
He wants to foreclose any appeal to nature that might call tradi- being is unknowable to reason, because we perceive it only as
tion into question, or undercut the existing order, or fuel reckless filtered through the mind’s categories. Nature, as known to us,
change by stimulating a taste for ‘perfectionism.’ is already a product of a mental transformation and not a true
64 65
picture of ultimate being. Hayek himself presents such a view the teaching of language.’ Much more than we are yet aware of,
in The Sensory Order. The individual mind is here described as a language probably ‘determines our whole manner of thinking and
complex of relations in the central nervous system that classifies our view and interpretation of the world.’ Our language furnishes
sense perceptions according to some interpretive framework. This us with a ‘picture of the world’ or framework of thought, which
means that sense data are never perceived by us in a raw or direct presumably includes the mind’s basic concepts or categories
form. What we perceive are things with distinct qualities; and (1967: 86–7). Given the plurality of languages, there must be many
such perceptions have already been formed by the mind’s clas- world pictures or frameworks for understanding reality; and
sificatory and interpretive operations. The mind’s perceptions of these must be changeable, since language is part of a culture, and
reality are necessarily interpretations in line with some classifica- culture changes.
tory scheme (see 1952a; also Miller, 1972: 250–64). Hayek leaves very much in doubt the possibility that reason,
Radical historicism, however, took a second and more far- linked as it is to the evolution of mind and civilisation, can ever
reaching step. If the mind is essentially historical, this means achieve a view of reality that has a justifiable claim to finality. Such
that the categories of thought also change, so that reality itself is a view would seem to be impossible from within the historical
understood differently according to time and place. Moreover, process; and if history has no end, there would appear to be no
there is no final or privileged epoch of the kind Hegel posits, in final or privileged standpoint that would permit reason to grasp
which reason reaches perfection by understanding the historical timeless principles. One must wonder, however, if such a teaching
process as a whole. Human thought necessarily understands can accommodate Hayek’s own ambitious programme, which
reality from some point of view. There are many such viewpoints, puts forward a synoptic view of mind, civilization, order and
and no particular one has a justifiable claim to finality. liberty with a considerable degree of finality.
In his writings from the 1940s and early 1950s, Hayek strongly
opposes the historicist claim that ‘the human mind is itself
Values
variable’ and holds instead that ‘all mind must run in terms
of certain universal categories of thought’ (1952b [1979]: 133, The concept of ‘values’ is pivotal to Hayek’s overall account of
136). In The Constitution of Liberty, however, Hayek appears to knowledge and to his defence of freedom. Later we will see that
change course, declaring that man’s mind ‘is itself a system that Hayek’s ‘ideal’ embodies a very specific set of values. In this
constantly changes as a result of his endeavor to adapt himself to section I want to make three points. First, Hayek rejected the
his surroundings’ (23). A few years later, he explains that ‘man’s fact–value dichotomy, even when it was widely accepted by social
capacity to think is not a natural endowment of the individual but scientists. Second, Hayek understands values in terms of rules to
a cultural heritage, something transmitted not biologically but be followed rather than as particular ends to be pursued by the
through example and teaching – mainly through, and implicit in, rational will. Third, Hayek would become increasingly concerned
66 67
with the sources of values and would look to his theory of social ‘the concrete ends which determine [the individual’s] actions at
evolution to identify these sources. particular moments.’ Projecting into the future and drawing on its
(1) As for the fact–value dichotomy, Hayek denies that sense presumed knowledge of cause and effect, the rational will suppos-
data, particularly as defined by natural science, constitute mean- edly deduces the best means of achieving the desired end.
ingful facts. In the 1940s, he had undertaken to show that the Hayek, by contrast, denies the will’s autonomy and subor-
social sciences cannot possibly succeed in their task of under- dinates it to habit. Values are not particular concrete ends, but
standing social reality if they limit themselves to facts as defined general rules that are embodied in tradition and opinion. These
by natural science: ‘our data must be man and the physical world rules, derived from countless centuries of human experience,
as they appear to men whose actions we try to explain’ (1952b tell us what is permissible or impermissible insofar as action is
[1979]: 60). Hayek here emphasises that the facts of the social concerned. They ‘confine our actions to the limited range within
sciences are merely ‘beliefs or opinions held by particular people which we are able to foresee relevant consequences’ and also
… irrespective of whether they are true or false’ (ibid.: 47). prevent us ‘from overstepping these limits.’ In fact, it is because
The important point to note here is that people’s ordinary of such boundaries that our causal knowledge about the likely
beliefs and opinions about the world – the starting point for social consequences of a particular course of action can serve us effect
science – are suffused with values. The facts of the social sciences ively. These rules enable the individual actor, when caught up in
are inseparable from values, and social inquiry cannot abstract the emotions of the moment, ‘to avoid actions of a kind whose
from them, as natural science attempts to do. In The Constitu- foreseeable results seemed desirable, but which were likely to lead
tion of Liberty, as in these earlier writings, Hayek emphasises the to the destruction of the order on which the achievements of the
centrality of values to all social life. He would continue decades human race rested’ (see 1978a: 82–8).
later to insist that values are ‘the indispensable foundation of all (3) As we see, values are indispensable to action, but where
our civilization,’ including all our efforts at rational construction do they come from? Hayek insists on the ‘givenness of the value
and science (1973: 6–7). framework,’ by which he means that each of us is born into some
(2) Hayek’s reservations about theories of action that centre system of values – one that ‘supplies the end which our reason
on the exercise of will and on means/ends calculation are more must serve.’ When Hayek declares that we ‘must always work
or less implicit in The Constitution of Liberty, but they are devel- inside a framework of both values and institutions which is not
oped elsewhere. In sum, he associates such theories with construc- of our own making,’ he is referring to an evolving framework
tivist rationalism, inasmuch as they ‘attempt to assess an action and not to one that reflects absolute eternal values (63). So long
by its foreseeable results in the particular case,’ based on what as reason remains within this given framework, it can provide
is presumed to be an ‘incontrovertible knowledge of cause and useful clarifications and also formulate rules or laws that imple-
effect.’ From the rationalist standpoint, values are understood as ment sound values, but it cannot be the originating source of
68 69
values. Rationalism’s hope of replacing tradition with a ‘deliber- familiar complaints against industrialism, capitalism, or overre-
ately constructed, synthetic system of morals’ is destined to fail finement’ (40).
(65). Hayek wants to underscore the indispensability of habitual
Even though some particular value framework is ‘given’ for or customary rules for the kind of civilisation that we now enjoy.
each society, Hayek, in his theory of social evolution, does look Strictly speaking, the term ‘tradition’ refers to rules of this kind.
behind this ‘givenness’ for the primary sources of all values. Hayek acknowledges, of course, that deliberately articulated rules
Values are general rules, and these may arise from man’s biolog- are indispensable to the progress of modern civilisation – the
ical instincts, from cumulative experience and from conscious Rule of Law attests to that – but these are not to be understood as
articulation. Instinctive values predominate in the earliest soci novel constructions. Their continuity with rules that have evolved
eties, while the conscious articulation of values comes about only through trial and error over a long period of time is crucial to their
with the advent of civilisation. Traditions in the strict sense – effectiveness.
those rules that arise from cumulative experience and are followed Hayek’s distinction between three kinds of values (instinctive,
habitually and unconsciously – develop in society from the begin- traditional, articulated) ties in closely with his critique of
ning and cannot be replaced by rules or laws that people frame socialism. A free society rests on tradition-based values, but
deliberately (see Hayek’s 1978 Hobhouse Lecture, ‘The Three these are jeopardised both by our instinctual promptings and
Sources of Human Values,’ which appears as an epilogue to the by rationalist ambitions. Socialism, in Hayek’s view, exemplifies
third volume of Law, Legislation and Liberty [1979]). both dangers. On the one hand, socialists cast tradition aside and
Hayek employs this framework to explain the modern discon- prefer constructed rules to ones that have evolved. On the other
tent with civilisation and to criticise socialism. Instinctive values, hand, socialism is ‘an atavism,’ i.e. it wants to re-establish society
which emphasised sharing, care for one’s neighbours, and sacri- on instinct-based values such as solidarity and social justice.
fice for the common good, were suited for sustaining very small Socialism is a form of primitivism. It is fundamentally at odds
communities. With the advent of urban life and civilisation, with those values that make possible large societies, civilisation
traditions and rules evolved that favoured a large and impersonal and human freedom (1976: 143–50; 1978a: 57–68; 1979: 165–76;
extended order, or commercial society. The problem is that ‘in 1988: 11–37). It is an enemy of the extended, rule-governed, open
some respects man’s biological equipment has not kept pace with society, or what Hayek, in Law, Legislation and Liberty, calls ‘the
that rapid change, that the adaptation of his non-rational part has Great Society’ (1973: 2; 1976: 107–13; 1988: 19–21, 104).
lagged somewhat, and that many of his instincts and emotions are
still more adapted to the life of a hunter than to life in civilization.’
Moral rules
This maladaptation has given rise to an instinctive dissatisfaction
with civilised life – the sense that it is ‘unnatural’ – and to all ‘the The most important values, for Hayek, are the general rules
70 71
embodied in a society’s traditions and beliefs as well as in man’s to the “wrong” beliefs’ (35–6). Social actors, however, perceive
own unconscious habits. Within the totality of such rules or moral rules as ‘a value in itself ’ and do not require instrumentalist
values, Hayek distinguishes moral values from the rest. Moral or expedient reasons for obeying them.
values are rules of social conduct; and Hayek insists that we have Another way to legitimise traditional rules would be to seek
‘no choice but to submit’ to such rules, even though we might support from religion, but Hayek, as a scientist, had refused
not know the rationale for them or see ‘that anything important throughout his career to take this path. He rejects all causal expla-
depends on their being observed in the particular instance.’ Moral nations that appeal to invisible essences or hidden spiritual forces,
rules address us as unconditional demands and not as expedient since these amount to superstition. Nevertheless, he concedes that
options: ‘At any one stage of our evolution, the system of values there are ‘good reasons why any person who wants to live and act
into which we are born supplies the ends which our reason must successfully in society must accept many common beliefs, though
serve.’ Moral rules thus resemble Kant’s categorical imperative, the value of these reasons may have little to do with their demon-
but of course they are products of social evolution and not formu- strative truth.’ This requirement ‘applies to all our values,’ but ‘it
lations of the rational will. Even Kantian ethics is derivative from a is most important in the case of moral rules of conduct’ (64–5).
prior tradition, i.e. it is an extension of ‘the basic idea underlying In this guarded and even cryptic statement, Hayek is silent
the rule of law’ (62–6; 196–7). as to whether these ‘common beliefs’ have a religious character
Insofar as possible, Hayek wants to make tradition and moral and whether they might serve to legitimise the moral rules to
rules self-legitimising. The alternative – to have their legitimacy which they are attached. Much later, in The Fatal Conceit, Hayek
dependent on something else – is both unattractive to him and addresses these issues directly. He wonders whether he has
contrary to his understanding of moral experience. He could, for underestimated the role of religious belief in sustaining benefi-
example, argue that we ought to obey traditional rules because in cial customs: ‘even an agnostic ought to concede that we owe our
doing so we promote a larger end. This would, however, require morals, and the tradition that has provided not only our civiliza-
the everyday actor to think like a social theorist. As Hayek writes tion but our very lives, to the acceptance of’ claims that are scientif-
later, ‘acting individuals usually do not understand’ the ‘functions’ ically unacceptable, such as those advanced by religion’ (1988: 137).
of cultural rules that emerge spontaneously (1979: 155). A social In an appendix, he cites favourably Sir James Frazer’s argument
theorist such as Hayek does take an instrumentalist view, because that superstition rendered humanity a great service by protecting
he sees that obedience to moral rules produces spontaneous order marriage and private property (ibid.: 157). Of course, traditional
and also determines whether an evolving society will survive and rules cannot be self-legitimising if they must depend on the
prosper in the long run. The theorist recognises that ‘the ultimate authority of religion (or superstition) to uphold their authority.
decision about what is good or bad will be made not by individual Hayek seeks not only to describe the role that values play
human wisdom but by the decline of the groups that have adhered in social life, but above all to justify a particular set of values, as
72 73
portrayed in his ‘ideal.’ Later I will consider Hayek’s ideal and its theory. Individuals cannot possibly be under an imperative to
foundations, but now we must sum up what we learn about moral follow moral rules that will, in the long run, ensure society’s
obligation from his discussion of values. survival or success, since the future is unpredictable. Only rarely
Ordinary morality is based on an unquestioned imperative to can we know what the eventual results of our actions will be. Even
obey established rules, but this is not Hayek’s last word on moral when a group or nation follows the teachings of what it regards as
obligation as such. First of all, it leaves no room for novelty, which its best men, it may ‘destroy itself by the moral beliefs to which it
is essential to the progress of civilisation. Often it is desirable that adheres.’ When it comes to the values that preserve society, these
the individual should be able to transgress established moral rules are selected by an impersonal evolutionary process and not by
– voluntary ones and not those imposed coercively by the state – far-sighted individuals. Imagining that we can foresee or plan the
‘when it seems to him worthwhile to incur the odium which this future is a rationalistic illusion. The best we can do is to maintain
will cause.’ Furthermore, the social pressure enforcing these rules a free society, where individuals can choose among competing
should be variable, so as to ‘allow for gradual and experimental ideals, and to cultivate diverse human capacities. In such a society,
change’ (63). Where individuals and groups simultaneously destructive tendencies are ‘self-corrective,’ since ‘groups guided
observe partially different rules, there is a greater opportunity by “impractical” ideals would decline, and others, less moral by
‘for the selection of the more effective ones’ (63). Such flexibility current standards, would take their place’ (67).
makes gradual evolution and spontaneous growth possible and I close on a cautionary note. Hayek provides two separate and
permits modification and improvements in light of new experi- somewhat different accounts of value in The Constitution of Liberty.
ence (63). Clearly civilised life is marked by a tension between the The first account – the one that we have just now explored – is
traditional and the novel. A question left open here is the source developed chiefly in Chapter 4, in connection with the discussion
of the innovator’s values. of tradition, moral rules and opinion. Here Hayek emphasises that
Taking the long view, Hayek insists that a process of selection moral rules typically demand unconditional obedience from the
is at work in society’s evolution, winnowing out moral rules that individual and that social pressure to conform to moral rules is
might be destructive to society and preserving those that favour its both potent and beneficial. The second discussion of value comes
survival or persistence. Sometimes he speaks of broader achieve- in Chapter 6, in connection with a discussion of justice and its
ments, such as ‘success,’ but he stops well short of Nietzsche’s relation to economics. Here Hayek insists that society values the
idea that every people creates and honours those values that make ‘results’ of the individual’s actions more than his moral merit,
them ‘rule and triumph and shine, to the awe and envy of their implying some relaxation in conformist pressures. The two discus-
neighbors’ (Nietzsche, 1954: 170). For Hayek, the will to survive, sions differ in tone, if not in substance, although both strongly
and not the will to power, drives the evolutionary process. defend freedom of action. Whether their discussions of values and
Hayek’s moral principles are no derivative from evolutionary moral rules can be reconciled remains to be seen.
74 75
e q ua l i t y, f r e e d o m a n d j u s t d i s t r i b u t i o n
Are individuals equal?

Hayek’s critique of egalitarianism begins by affirming a kind
4 EQUALITY, FREEDOM AND JUST of equality: ‘The great aim of the struggle for liberty has been
DISTRIBUTION (Chapters 4, 6 and 8) equality before the law.’ Law is here understood to include two
kinds of general rules: those enforced by the state and those
bearing on moral and social conduct that we obey voluntarily.
Liberty requires the equal application of both kinds of rules.
Chapter 6, ‘Equality, Value, and Merit,’ is essentially about The equality of state-enforced rules is discussed later in connec-
justice, even though the chapter’s title and organisation fail to tion with the Rule of Law. As for equal rules of moral and social
make this clear. To understand the chapter’s central argument, conduct, Hayek has in mind what Tocqueville called the manners
it helps to distinguish, as Hayek himself does, between distribu- or mores of democratic society, as distinguished from those of an
tive and commutative justice (440–41, n. 10 and n. 11; cf. 232). As aristocracy (see Tocqueville, 2000: 45–53, 535–41). Democratic
Hayek notes, this distinction among kinds of justice goes back manners require that individuals relate to each other as equals
to Aristotle and the Greeks. Commutative justice is concerned and not in terms of social rank or status.
principally with agreements or contracts among private individ- This equality of the general rules of law and conduct is, in
uals and their proper enforcement. Distributive justice involves Hayek’s estimation, ‘the only kind of equality conducive to liberty
the distribution of the community’s goods by those who have and the only equality which we can secure without destroying
authority over those goods. liberty’ (85). One might think that equality before the law presup-
Chapter 6 is concerned with distributive justice, and Hayek’s poses an underlying equality of some sort among individuals to
aim is to discredit the idea that it should be the organising principle whom the law applies, but Hayek seems to deny that this is the
of society. Hayek will argue that neither human equality nor human case: if we are to understand the meaning of equality before the
merit is a proper basis for distributing the community’s goods. In law, ‘the first requirement is that we free ourselves from the belief
fact, government has no business deciding how wealth should be in factual equality’ (87). ‘[T]he factual equality of all men’ is obvi-
distributed among individuals. Of course, wealth does somehow get ously an ‘untrue … assumption’ (86). What Hayek means by
distributed, and Hayek must provide an alternative to distribution ‘factual equality’ is unclear, but at least it includes the belief that
by government. His solution is to rely on economic freedom and the ‘all men are born equal’ (87). In dismissing this tenet as factually
market. The market distributes goods according to the ‘value’ of indi- untrue, Hayek rejects a key principle of early liberalism, whose
viduals and not according to principles of equality and merit. This case for equality before the law was grounded in natural rights
argument requires, however, that Hayek define value in such a way that individuals are born with and possess equally as human
that it does not mean moral merit, in the sense discussed in Chapter 4. beings.
76 77
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y e q ua l i t y, f r e e d o m a n d j u s t d i s t r i b u t i o n
The relevant fact about human beings is not equality but individual and cannot really know freedom’ (79). Where does
difference: ‘It is of the essence of the demand for equality before this individual entitlement to one’s own values come from, and
the law that people should be treated alike in spite of the fact that why is it true that individuals as such have a ‘dignity’ that we must
they are different’ (86). By ‘difference,’ Hayek means primarily respect? We are touching here on Hayek’s ultimate justification
the inequalities among people that arise from both ‘nature’ and for freedom. He is mostly silent on the matter, apparently because
‘nurture.’ Nature does not make individuals equal, but it does of a reluctance to acknowledge that human beings are in some
make them unequal in capacities, talents and such. As for nurture, fundamental ways inherently equal.
social life, especially the family, produces inequalities that give While some aspects of democratic society are disturbing to
some individuals an advantage over others. Hayek, he speaks favourably of egalitarian manners: The ‘exten-
We must pause to wonder whether Hayek’s case for freedom sion of the principle of equality to the rules of moral and social
doesn’t require a natural or inherent equality among individuals conduct is the chief expression of what is commonly called the
and whether, in repudiating this idea, he jeopardises his own democratic spirit – and probably that aspect of it that does
position. most to make inoffensive the inequalities that liberty necessarily
First, the very idea of ‘the individual’ – the human being shorn produces’ (85). By the same token, Hayek opposes social arrange-
of all qualities that make him different from others – is an egali- ments based on class privilege and extreme differences in wealth:
tarian concept, especially when it is interpreted to mean that each One may well feel attracted to a community in which there
individual should enjoy equal freedom in his own private sphere. are no extreme contrasts between rich and poor and may
Second, Hayek builds his case for freedom on the principle that welcome the fact that the general increase in wealth seems
each individual should be free to pursue his own aims or plan of gradually to reduce these differences. I fully share these
life. If another forces me to submit to his will, he is using me as a feelings and certainly regard the degree of social equality
that the United States has achieved as wholly admirable.
means to his end and thus is violating my freedom: ‘Coercion is
(87–8)
evil precisely because it thus eliminates an individual as a thinking
and valuing person and makes him a bare tool in the achievement One might favour ‘more even or more just distribution’
of the ends of another’ (21). while rejecting coercive means to bring this about. Indeed, social
This argument requires a moral imperative of the kind that equality can be a valid policy consideration: ‘Wherever there is
Kant articulated – namely, that human beings must always be a legitimate need for government action and we have to choose
treated as an end and not merely as a means to someone else’s between different methods of satisfying such a need, those that
purposes. At one point Hayek writes: ‘A society that does not incidentally also reduce inequality may well be preferable.’ For
recognize that each individual has values of his own which he example, the law of intestate succession might be so framed as to
is entitled to follow can have no respect for the dignity of the favour equality. Lest he be misunderstood, Hayek concludes these
78 79
remarks by emphasising once again that coercion should not to be the law which freedom requires leads to material inequality.’
used to bring about substantive equality (87–8). Again, liberty is ‘bound to produce inequality in many respects’
Hayek clearly prefers what Tocqueville called a democratic (87, 85).
social condition to an aristocratic one, although like Tocqueville Hayek recognises that a defence of liberty requires some justi-
he would insist that this condition exhibit the principle of free fication for the advantages that it permits some people to enjoy.
competition rather than the spirit of envy. Clearly he wants to One approach would be to show that liberty serves the good of
avoid a society polarised between the wealthy and the poor. This individuals by allowing those who are talented and enterprising
means encouraging a broad middle class, which has sufficient to get ahead. Hayek does make such an argument in The Constitu-
wealth to look out for itself and avoid dependency on government. tion of Liberty, but here he emphasises how society itself benefits
One basis for his opposition to inflationary policies is that they from this inequality. He argues, for example, that the inequality
devalue savings and tend to destroy the middle class (see 338). resulting from individual liberty provides society with valuable
information. It demonstrates ‘that some manners of living are
more successful than others’ (85). Another point is that ‘the acqui-
Inequality, law and freedom
sition by any member of the community of additional capacities
Individuals differ from each other because of inherent and to do things which may be valuable must always be regarded as
acquired qualities that make them unequal. These inequalities, a gain for that community’ (88). Indeed, ‘society is likely to get
and the advantages they convey, should be protected by legal a better elite’ if some fortunate individuals are able to acquire
and customary rules. Hayek opposes efforts to neutralise them valuable qualities through family nurture and inheritance (90).
by coercive means, whether to provide ‘equality of opportunity’ From Hayek’s standpoint, any coercive action by the state to
or to assure substantively equal outcomes. Such actions violate assure equality of outcomes is a violation of individual liberty. The
‘the basic postulate of a free society, namely, the limitation of all same is true of coercive efforts to secure ‘equality of opportunity.’
coercion by equal law.’ Moreover, they would require a weighing Hayek defends several institutions – the family, rules of inherit-
of human potentialities; but no man or group of men has such ance, education – against egalitarian demands to reform them for
a capacity, and certainly no one should be trusted invariably to the sake of equal opportunity. In each case he argues that society
exercise it (88). In a free society, ‘economic inequality is not one of benefits when each member starts with as many advantages as
the evils which justify our resorting to discriminatory coercion or possible.
privilege as a remedy’ (87–8). It is important to note that Hayek is not opposed to equal
Equality before the law not only protects inequality, but – by opportunity as such, but only to certain egalitarian applications of
freeing individuals to use their talents and industry to gain their this principle. He points out that classical liberalism, at its height,
own ends – increases it. As Hayek observes, the ‘equality before had demanded ‘that all man-made obstacles to the rise of some
80 81
should be removed, that all privileges of individuals should be in discovering useful knowledge. Here, however, he defends the
abolished, and that what the state contributed to the chance of position of the rich, whose way of life contributes a kind of unin-
improving one’s conditions should be the same for all.’ Liberals tended knowledge that is indispensable to progress. Their contri-
had held that ‘all should be allowed to try,’ but recognised that bution is to experiment ‘with a style of living that will eventually
individual differences will give some an advantage over others. be available to many.’ Hayek avoids any distinction here between
The more recent view – the one that Hayek opposes – insists that legitimate and illegitimate wealth, regardless of its source, amount
‘all must be assured an equal start and the same prospects.’ This or use. The rich teach the rest, but inadvertently and by example
approach requires governmental intervention and adjustments rather than by purposeful instruction.
that curb individual freedom (92–3). Hayek strongly defends the To defend inequalities of wealth, Hayek contends that ‘[t]here
older understanding of opportunity: is no way of making generally accessible new and still expensive
Let us by all means endeavor to increase opportunities ways of living except by their being initially practiced by some.’
for all. But we ought to do so in the full knowledge that Thus ‘in any phase of progress the rich, by experimenting with
to increase opportunities for all is likely to favor those new styles of living not yet accessible to the poor, perform a neces-
better able to take advantage of them and may often at sary service without which the advance of the poor would be very
first increase inequalities. Where the demand for ‘equality much slower.’ As the poor seek to imitate the lifestyle of the rich,
of opportunity’ leads to attempts to eliminate such ‘unfair
the cost of producing new goods comes down, so that eventu-
advantages,’ it is only likely to do harm. All human
differences, whether they are differences in natural gifts ally they become affordable to many. Indeed, ‘[e]ven the poorest
or in opportunities, create unfair advantages. But, since today owe their relative material well-being to the results of past
the chief contribution of any individual is to make the best inequality.’ Meanwhile, the rich are beginning to enjoy new goods
use of the accidents he encounters, success must to a great that will be sought by the masses some decades hence. Hayek
extent be a matter of chance. (388) insists that his is a valid argument and not some ‘far-fetched and
cynical apologetics.’ Even so, he concedes that it will not assuage
those who fail to achieve the desired results or feel ‘the pain of
Benefits of inequality
unfulfilled desire aroused by the example of others’ (44–5). This
Hayek offers a justification for inequality in several places in The of course gives rise to problems of justice and envy in democratic
Constitution of Liberty. In Chapter 3, he provides a spirited defence societies.
of inequality as indispensable to civilisation’s progress. Since a Hayek goes on to apply this argument to the international
rising standard of life depends more on an increase in knowledge scene, holding that the poor nations learn much from the rich
than on the accumulation of capital, one might expect Hayek to ones and, by aspiring to imitate them, contribute both to their
defend primarily the scientists or inventors who lead the way own progress and to that of civilisation. His key point here is
82 83
that the advantage of the West is due mainly to its ‘more effec- (123). They are attracted to the idea that the state, in taxing and
tive utilization of knowledge’ and not to ‘a greater accumulation in providing services, should aim for social justice. They come to
of capital.’ This knowledge has cost the leading nations much to regard persons who make their living by employing capital as a
obtain, but it is a ‘free gift’ to those who follow, enabling them ‘to privileged class or special interest ‘which can justly be discriminated
reach the same level at a much smaller cost’ (46–7). against’ (123). Little do they realise that their own opportunities for
In Chapter 8, Hayek makes a case for ‘the man of independent employment ultimately depend on ‘the existence of independent
means’ and for entrepreneurs in particular. He points out that individuals who can take the initiative in the continuous process of
in modern democratic society, ‘most of us work as employed re-forming and redirecting organizations’ (124).
members of large organizations, using resources we do not own Men of independent means are essential to preserving
and acting largely on the instructions given by others’ (118). The competitive enterprise, but their most important contribution to
principles of freedom were developed, however, in a society where a free society is the leadership they provide, especially ‘in the field
most people, and particularly the influential ones, ‘were inde- of cultural amenities, in the fine arts, in education and research,
pendent in the activities that gave them their livelihood.’ The in the preservation of natural beauty and historic treasures, and
question is whether the interests and outlook of employed persons above all, in the propagation of new ideas in politics, morals,
are supportive of a free society. Hayek thinks that the fact of being and religion’ (125). From this standpoint Hayek defends not only
employed not only affects a person’s ‘initiative and inventiveness,’ entrepreneurs, but also a leisured class, whose members likely will
but also greatly limits his knowledge ‘of the responsibilities of have grown up to appreciate non-material goods and also to feel
those who control resources,’ including the allocation of capital an obligation to take the lead in intellectual, moral and artistic
(122). Moreover, people tend to choose employment, rather affairs. In most of the USA, this class has almost completely disap-
than independence, because they ‘want the relative security and peared, so that businessmen now lack intellectual leadership and
absence of risk, and responsibility that an employed position have no ‘coherent and defensible philosophy of life.’ A progres-
brings,’ or because they expect that employment will offer a larger sive society requires ‘a cultural elite within the propertied class’
income and a more satisfying activity (120). The employee is likely (128–9).
to think that his income should depend on his merit, not on the
results of his initiatives.
Merit and value
These developments have had a great impact on modern
politics. Not surprisingly, the employed prefer a paternalistic Hayek’s underlying concern in Chapter 6 is the problem of distrib-
government, a ‘higher tutelary power’ that will provide a broad utive justice. Already he has shown that government must not,
range of social services and oversee ‘the directing activities which as a matter of law, distribute goods to persons according to the
they do not understand but on which their livelihood depends’ principle of equality. This leaves open, however, the possibility
84 85
that unequal distributions may be warranted. Hayek knew of the Merit, as Hayek describes it, rests on two conditions: the
important tradition in moral philosophy which holds that unequal actor must do ‘what some accepted rule of conduct’ demands of
distributions are just if they are based on the relative merit of the him; and the action must have ‘cost him some pain and effort.’
recipients. To complete his case against state-sponsored distribu- By making merit relative to variable rules of conduct, Hayek turns
tive justice, Hayek must now rule out the option of distributing away from traditional moral philosophy, which typically had
material goods according to personal merit. This leads him to sought a single standard of merit by referring to human nature.
draw a crucial distinction between ‘merit’ and ‘value.’ Hayek’s second condition – that meritorious action requires some
In Chapter 4, Hayek had described the meritorious person pain and effort – implies such a standard, but unlike traditional
as one who complies with established moral rules. Society pres- thinkers, he takes this requirement as a reason to belittle striving
sures individuals to behave morally and it praises or blames them, for merit: ‘The fact is, of course, that we do not wish people to earn
depending on whether or not they do so. Hayek writes: ‘How we a maximum of merit but to achieve a maximum of usefulness at a
value another person will necessarily depend on what his values minimum of pain and sacrifice and therefore a minimum of merit’
are’ (79). In Chapter 6, however, he argues that we mostly leave (96). Hayek illustrates this point with the example of an accom-
morality aside in valuing other persons and look primarily at the plished surgeon who is able to achieve a good result with ease,
results of their actions. Looking at both chapters together, we see because of many years of arduous practice: ‘we feel that we are
that Hayek uses the term ‘value’ in a generic sense to include both doing justice if we recompense value rendered with equal value,
value as merit and value as results: ‘Though moral value or merit without inquiring what it might have cost the particular indi-
is a species of value, not all value is moral value, and most of our vidual to supply us with these services’ (97). By separating value
judgments of value are not moral judgments’ (98). from merit, Hayek implies that one should follow the convenient
Hayek’s distinction between merit and value can be illustrated path, which is usefulness to others at little cost to oneself, and not
by an example. Suppose that someone has acted with a view to the arduous path of moral virtue (see 81–3).
achieving a result. Value is to be found in the action’s results, as Making material rewards conform to merit might be feasible
assessed by others. Merit, by contrast, is an attribute of the actor’s for an organisation, but this is both impracticable and undesir-
conduct – namely, the moral attribute that makes the conduct able for society at large. Basing rewards on merit would require
worthy of praise. Merit is disconnected from whether or not an a determination of each individual’s ‘subjective effort,’ including
action achieves its intended result. It lies in the actor’s ‘subjec- the use made of opportunities and the degree of effort and self-
tive effort’ and not in the action’s ‘objective outcome.’ Conduct denial. Even in the unlikely event that such determinations were
can thus be meritorious even if unsuccessful and thus lacking in successful, the results would be incompatible with a free society.
value. By the same token, successful conduct can be valuable, even Everyone’s success would require that others approve their moral
though it lacks merit (94–5). conduct, thus injuring disfavoured groups and reducing the
86 87
incentive for individuals to pursue the outcomes that they think

best. Moreover, some authority would have to assign rewards for
merit. 5 MAJORITY RULE AND LIMITED
Value is assigned not by central authority but by the market: GOVERNMENT (Chapters 7 and 10)
‘The market will generally offer for services of any kind the value
they will have for those who benefit from them’ (96). Market-
based rewards stimulate individual efforts and extend economic
freedom to productive groups that might lack general approval The problem of reconciling liberalism with democracy is
for their conduct. Judgements of individual merit are subjective, one of Hayek’s chief concerns in The Constitution of Liberty. The
but value is an ‘objective outcome,’ based on the results of one’s problem is this: liberalism is a doctrine about human liberty or
actions and dispersed assessments of their benefits. Since the freedom and how to protect and extend it by setting limits to
market generally assures that value is rewarded, government’s government. Democracy, as understood by many theorists and as
role is primarily to facilitate market distributions by maintaining often practised, subordinates liberty to the quest for equality. Can
the rule of law. Certainly it has no business pursuing social justice liberty flourish where the people are sovereign and the will of the
(96–100; cf. 80–83). majority prevails? Hayek turns now to the question of majority
rule and its limits.
Majority rule and the community

Democratic government can be structured in different ways,
and Hayek is quite vague here as to the kind of arrangement that
he chiefly has in mind. The idea of majority rule presupposes
some collectivity within which this rule takes place. Any group,
of course, can entrust decision-making authority to a majority
of its members; but not every group or collectivity is decisive for
political life. Hayek has different ways of identifying the politically
relevant group – state, country, society – but the one he settles on is
‘the community.’ As we get deeper into The Constitution of Liberty,
it becomes clear that Hayek assigns vast powers to the community
and gives it a surprisingly important role in political life.
88 89
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y majori ty rule and limi ted government
Hayek explains that ‘the authority of democratic decision rests Laws for the Community from time to time, and Executing those
on its being made by the majority of a community which is held Laws by Officers of their own appointing.’ In this case, ‘the Form
together by certain beliefs common to most members.’ Indeed, ‘it of the Government is a perfect Democracy.’ The majority may,
is the acceptance of such common principles that makes a collec- however, choose from other forms: an oligarchy, consisting of ‘a
tion of people a community.’ Hayek goes on to insist that majority few select Men, and their Heirs or Successors;’ a monarchy, either
rule must be consistent with the community’s common beliefs hereditary or elected; or some mixed form of government that is
or principles and cannot override them: ‘it is necessary that the compounded from these (no. 132). The point is that majority rule
majority submit to these common principles even when it may may occur at either of two levels: the majority’s decision as to the
be in its immediate interest to violate them.’ The key point is that form of government (which need not be a democracy); and the
‘the power of the majority is limited by those commonly held prin- majority’s exercise of political power (if it decides to institute a
ciples and that there is no legitimate power beyond them’ (106–7). democratic form).
This formulation raises two problems that we must consider. Rousseau’s innovation is to insist that the community must
First, in what sense does ‘the majority of a community’ make the retain the lawmaking power and not delegate it to others. What
authoritative decisions in a democracy? Second, does it make a can be delegated is only the power of government or the executive
difference what opinions or beliefs a community holds? power (see On the Social Contract, II: 1–6). Like Rousseau, Hayek
Various seventeenth-century doctrines of community lie in the distinguishes sharply between lawmaking and governing. He
background of Hayek’s political thought, especially those deriving also commends Rousseau for understanding that the laws must
from Locke and from Rousseau. For Locke, individuals form a always be general in form (194; also Hayek, 1992: 251–2). Hayek is
particular commonwealth when they leave the state of nature, to highly critical, however, of other teachings of Rousseau, including
be governed ‘by such Rules as the Community, or those author- his insistence that law is an act of will by the community (Hayek,
ized by them to that purpose, shall agree on’ (Second Treatise, no. 1973: 25; cf. 1976: 147).
127). The community, by the consent of the majority, entrusts More recent majoritarian conceptions of democracy offer still
power to a government, which provides for ‘establish’d standing another way to understand majority rule. Unlike Rousseau, these
Laws, promulgated and known to the People;’ for ‘indifferent and conceptions assign legislative power to a representative legisla-
upright Judges,’ who will decide controversies by those laws; and ture, but hold that the elected representatives should enact the
for a power that will execute those laws at home and secure the specific policies favoured by a majority of the community. The
community against foreign invasion (no. 131). The majority of people’s representatives make the law (presumably by a majority
the community, which has ‘the whole power of the Community, vote), but the law’s direction is determined by majority opinion in
naturally in them,’ may choose among several forms of govern- the community.
ment. It may decide to itself ‘imploy all that power in making In Hayek’s case, one must decide whether he is speaking
90 91
of majority rule by the community or by a legislative body. The classifies governments mainly according to whether they are
liberal and the democratic traditions agree that ‘whenever state limited or arbitrary, so the form of rule becomes a secondary
action is required, and particularly whenever coercive rules have consideration: ‘It is not who governs but what government is
to be laid down, the decision ought to be made by the majority’ entitled to do that seems to me to be the essential problem’ (403).
(106). Hayek accepts this requirement, but it does not specify the By limited government, Hayek understands one in which the use
level or levels at which majority rule should occur. In the present of coercive power is constrained by general rules that are well
chapter, Hayek seems mostly to have in mind the formation of established and effective. By arbitrary government, he under-
majority opinion within community itself, which will then ‘guide’ stands political rule that is not constrained by law. Arbitrary
or ‘direct’ the actions of government (109). Implicitly he takes the government, in all of its forms, endangers liberty.
view that community opinion, as determined by the majority, is
binding on government.
Democracy versus elite rule
Insofar as the various forms of rule are concerned, Hayek distin-
Limited and arbitrary government
guishes mainly between government by the few, or elite rule, and
The liberal tradition, following ancient writers, had identified government by the many, or majority rule. He subsumes both
several alternative forms of government. The ancients taught alternatives – elite rule and majority rule – under his primary
that these forms differ fundamentally from each other, since they distinction between ‘limited’ and ‘arbitrary.’ This means that
empower different types of human beings; and their primary there can be limited governments of either an elite or a demo-
concern was to decide which form is best in itself as well as best cratic form. Alternatively there can be arbitrary governments of
under given conditions. With the advent of liberalism, attention either form. Thus, for example, elite rule can be a limited govern-
shifted from essential or qualitative differences among the forms ment, while democratic rule can be of the arbitrary type. The key
of rule to what all governments chiefly have in common, namely a question is whether the ruling body subordinates itself to the law.
quantity of power and a tendency to abuse it. The urgent problem The desirability of elite rule obviously depends on the quali-
became one of making government safe by limiting its power; and ties of this select group. In line with the liberal tradition, Hayek
the key distinction came to be one between ‘limited’ and ‘arbi- rejects claims to power based merely on an advantageous birth or
trary’ government. The alternative forms of rule were now seen in on superior wealth. The only kind of elite rule worthy of consid-
this light. Since all governments, if unchecked, endanger freedom, eration is that of ‘the wisest and best informed.’ Hayek grants the
liberals were inclined to think in terms of the least bad form of possibility that ‘in any given state of affairs, government by some
government rather than the best form. educated elite would be a more efficient and perhaps even more
Hayek follows the liberal tradition in these respects. He just government than one chosen by majority vote’ (108). Even
92 93
Democracy is a procedure only

so, he concludes that ‘democracy is probably the best form of
limited government’ or, stated more cautiously, that majority rule Limiting the popular majority is a pressing concern for Hayek;
is perhaps ‘the least evil of those forms of government from which and his solution is tied up with his insistence that democracy
we have to choose’ (116, 403). is only a method or procedure for reaching decisions, with no
Hayek identifies ‘three chief arguments by which democ- fixed aims of its own. As we have seen, Hayek regards majority
racy can be justified, each of which may be regarded as conclu- rule as the safest and most successful way for the community to
sive.’ First, counting numbers is less wasteful than fighting in reach important decisions, and he defends democracy on this
determining which among conflicting opinions has the stronger basis alone. Democracy is a means and not an end in itself. It is
support: ‘Democracy is the only method of peaceful change that a method or procedure for deciding on common ends, but it has
man has yet discovered.’ A second argument – very important no ends of its own (106; cf. 109). Democracy as such ‘indicates
historically though perhaps not always valid now – is that ‘the nothing about the aims of government’ (104). This means that
prospects of individual liberty are better in a democracy than liberals and democrats are both wrong in connecting democracy
under other forms of government.’ This is because democracy to a substantive end: i.e. to freedom or to equality.
fosters certain qualities, such as courage and industry, which What Hayek says about majority rule in the community
inspire and safeguard individual liberty. Also, ‘since coercive must be seen in this light. Hayek requires that majority rule be
power must in fact always be exercised by a few,’ its abuse is less consistent with the community’s common beliefs or principles,
likely if it can be revoked by the many who must submit to it. but initially at least he leaves open the content of those beliefs or
A third argument – in Hayek’s view the most powerful one – is principles. From this standpoint, it would seem that democracy is
that democratic institutions improve ‘the general level of under- consistent with fascism or with what J. L. Talmon has called ‘total-
standing of public affairs.’ What Hayek has chiefly in mind here itarian democracy’ (56), if this is what the community believes in.
is the way majority opinion is formed through debate among Certainly it is consistent with socialism: ‘when the opinion of the
contending views. Democratic opinion is not static, but grows community decides what different people shall receive, the same
out of a dynamic process that favours the progress of knowledge. authority must also decide what they shall do’ (232).
Hayek can thus agree with Tocqueville that ‘democracy is the only Detaching democracy from fixed ends or principles opens
effective method of educating the majority.’ Also, when know the door to oppression; and Hayek offers two ways around this
ledge is diffused broadly, a wide range of persons is available from problem. One solution is to require that majority decisions take
which to select those who will govern (107–9). the form of general rules: ‘So long as democracy constrains the
individual only by general rules of its own making, it controls
the power of coercion’ (116). It is dangerous for democracy to go
beyond this and specify ends to be achieved, since this will extend
94 95
the discretionary power of the administrators. Thus the individual 98–104). This leads him to develop institutional means of limiting
‘has little reason to fear any general laws which the majority majority rule, which he incorporates into a model constitution
may pass, but he has much reason to fear the rulers it may put (ibid.: 105–27).
over him to implement its direction’ (116). Under this solution,
constraining government by general rules or laws is sufficient to
protect freedom, regardless of the opinions or beliefs that are held
by the community and voiced by the majority.
Hayek does, however, offer an alternative solution, which is to
instil beliefs or opinions that are favourable to liberty. One may
profoundly respect the convention that the majority view should
prevail in collective action, ‘but this does not in the least mean
that one should not make every effort to alter it’ (109). Hayek
follows this with a very long discussion (considered earlier) of how
opinion comes to be formed in democratic communities and espe-
cially how the ideas of theorists or political philosophers influence
public opinion in the long run. Making democracy safe for liberty
is primarily an educational task: ‘democracy has yet to learn that,
in order to be just, it must be guided in its action by general prin-
ciples’ (314). Hayek undertakes to supply these principles through
his teaching on the Rule of Law and limited government. The
Constitution of Liberty is an educational enterprise, designed to
shape belief and opinion in a democratic age.
Hayek is much more favourable to democracy in The Constitu-
tion of Liberty than in Law, Legislation and Liberty. In the former, he
attributes democracy’s excesses mostly to a lack of understanding,
the solution to which is education or enlightenment. Later Hayek
came to believe that democracy had devolved into unlimited or
arbitrary government and had become something of a game in
which government tries to maintain a majority coalition by ‘satis-
fying the demands of a multitude of special interests’ (1979: 99; cf.
96 97
PART II
F REEDOM AND THE LAW
99
6 THE RULE OF LAW AND ITS
DETRACTORS (Chapters 14 and 16)
Hayek’s primary aim in The Constitution of Liberty is to explain

the meaning and practical significance of the Rule of Law. Part II,
where this ideal is portrayed, is the book’s centre, both literally
and substantively.
Hayek had often spoken of the Rule of Law in earlier writings
(see 1944b [2007b]: 112–23), but his fullest account, prior to The
Constitution of Liberty, appears in a set of four lectures, delivered
in 1955 at the invitation of the Bank of Egypt, entitled The Political
Ideal of the Rule of Law (1955). Later, Hayek explains that while en
route to Egypt, he and his wife spent several months in Europe,
retracing a journey that J. S. Mill had once made to Italy and
Greece. The trip rekindled Hayek’s interest in Mill’s On Liberty
and its case for freedom. The Cairo Lectures, together with his
‘constant preoccupation with Mill’s thinking,’ brought it about
that after Hayek returned to Chicago in the autumn of 1955, ‘the
plan for The Constitution of Liberty suddenly stood clearly before
my mind … I had before me a clear plan for a book on liberty
arranged round the Cairo lectures’ (1994: 129–30). In this light, we
see that Part I of The Constitution of Liberty takes up questions of
individual freedom that Mill wrestled with, but failed to resolve
satisfactorily. Part II restates and expands the Cairo Lectures. Part
III applies the Rule of Law to issues of government policy. Hayek
drew heavily from the Cairo Lectures in preparing The Constitution
101
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y t h e r u l e o f l aw a n d i t s d e t r a c t o r s
of Liberty; and taking them into account will be helpful in under- of liberty. What remains uncertain, however, is how an ideal as
standing his later exposition. such, as distinct from some particular ideal, is to be understood.
What is its cognitive status? Is it grounded in what we can know
or experience of reality?
Importance of the ideal
Deciding what Hayek means by the Rule of Law is a more complex
A meta-legal principle
problem than might first appear. ‘Rule’ here is not to be under-
stood as an activity. Hayek does not mean that the law rules, in In the Cairo Lectures, Hayek describes the Rule of Law as ‘an
the sense of exerting authority over a political community. He is extra-legal rule’ or ‘a Meta-Legal principle’ (1955: 26, 32–3). Hayek
thinking instead of ‘rule’ as a precept or, more accurately, as an opens Chapter 14 of The Constitution of Liberty with a section
ideal. The Rule of Law depicts what the law should be in a free entitled ‘The rule of law [as] a meta-legal doctrine,’ and here he
society. It is a definitive principle or ideal – the ideal of freedom quotes the third lecture almost verbatim:
under the law – that stands above and measures the laws of a The rule of law is … not a rule of the law, but a rule
community. Existing laws, including constitutional provisions concerning what the law ought to be, a meta-legal doctrine
as well as ordinary legislation, may approach this ideal, but can or a political ideal. It will be effective only so far as the
never embody it perfectly. legislator feels bound by it. In a democracy this means
Hayek says this about the importance of having an ideal of that it will not prevail unless it forms part of the moral
tradition of the community, a common ideal shared and
liberty:
unquestioningly accepted by the majority. (206)
Not only is liberty a system under which all government
action is guided by principles, but it is an ideal that will Hayek intends to draw a sharp line between laws and the Rule
not be preserved unless it is itself accepted as an overriding of Law: ‘From the fact that the rule of law is a limitation upon
principle governing all particular acts of legislation. Where all legislation, it follows that it cannot itself be a law in the same
no such fundamental rule is stubbornly adhered to as an sense as the laws passed by the legislator’ (205). Systems of laws
ultimate ideal about which there must be no compromise
or rules are products of the evolutionary process, where man
for the sake of material advantages – as an ideal which, even
though it may have to be temporarily infringed during a interacts constantly with his environment. The Rule of Law as an
passing emergency, must form the basis of all permanent ideal or meta-legal principle, while derivative from this process,
arrangements – freedom is almost certain to be destroyed somehow stands above it as a constant or universal. It provides a
by piecemeal encroachments. (68) standard to which the laws should conform, if they are to remain
within bounds. The ideal’s political effectiveness will depend on
The ideal of the Rule of Law is designed to preserve a system whether a community believes in it, and this depends in turn
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on that community’s moral traditions; but the ideal itself is not boundless facts of experience, from which he must select those
reducible to the opinions of a particular community. that will give focus to his research. This selection is achieved by
Hayek is dealing here with the problem of transcendence, constructing ‘ideal types,’ which are very different from ideals of a
and he had several alternative ways to address it. First, he might moral or aesthetic character. Ideal types, such as ‘capitalism,’ are
have presented the Rule of Law as a ‘higher law’ or natural law, indispensable to social science. While they are designed to study
something timeless that we discover by reasoning on the nature of people’s values, they rigorously avoid any value judgements of
things. Hayek’s Rule of Law can be seen as an up-to-date version their own or any claim as to what ought to be. Moral and aesthetic
of the higher law doctrine, but he rejects natural law. The idea of ideals have no place in social science, since they have no rational
a constant nature with moral meaning is ruled out by his absorp- or empirical basis whatever. A scholar may decide to become the
tion of reason into civilisation or his understanding of being advocate for an ideal, but in doing so he leaves science behind and
as process. The Rule of Law does function like the older law of enters the ceaseless conflict that ‘rages between different gods.’
nature, standing above and limiting government; but unlike Weber’s ‘war of the gods’ is his characterisation of the conflict
natural law, it is neutral as regards the ends of human action. between ideals. The choice among them is ultimately a matter of
A second alternative was made available by post-Hegelian faith or the individual’s subjective decision (Weber, 2004: 17–31;
German historicism. Historicism ‘was a school that claimed to Weber, 1949: 17–19, 22–6, 50–59, 89–101).
recognize necessary laws of historical development and to be able Hayek greatly admired Weber, especially for denying that
to derive from such insight knowledge of what institutions were history exhibits discoverable laws and for advocating methodolog-
appropriate to the existing situation.’ It assumed that the mind, ical individualism in social inquiry. He could not, however, accept
by transcending limitations of time and place, can ‘explicitly Weber’s conclusion, with its deep Nietzschean overtones, that
recognize how our present views are determined by circumstances ideals lack a foundation, that there is no rational basis for judging
and use this knowledge to remake our institutions in a manner one to be superior to another, and that the decision among them
appropriate to our time.’ Hayek objects to historicism on two is ultimately an arbitrary one, based on an act of faith or sheer
grounds: it leads to an ‘extreme relativism,’ inasmuch as it posits a will – like choosing between God and the Devil. To be sure, the
separate ideal for each epoch and not a universal ideal for civilisa- political philosopher, by Hayek’s reckoning, must not be ‘afraid
tion; and it is ‘constructivist,’ since it rejects ‘all rules that cannot of deciding between conflicting values.’ He recognises ‘that he
be rationally justified or have not been deliberately designed to must choose which he should accept and which reject’ (114–15).
achieve a specific purpose’ (235–6). Nevertheless, Hayek looks for some foundation for this choice and
A third alternative was laid out by Max Weber. Weber refuses to see it as only a matter of faith or subjective will.
rejected the historicist claim that there are discoverable laws of Hayek’s alternative is to put forward his ideal, the Rule of
history, holding instead that the social scientist is confronted with Law, as a meta-legal principle. He does not tell us much about the
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status of this principle, but clearly it must be understood in light recognise that adherence to the Rule of Law has promoted such
of his foundational teachings in Part I. Hayek has emphasised that social ends as survival, success or flourishing; but since the future
‘we can never synthetically construct a new body of moral rules’ is open and uncertain, Hayek seldom justifies his ideal in terms of
(63). We must accept much of ‘the undirected and spontane- its likely consequences. The Rule of Law is strictly about freedom.
ously grown’ (69). Human civilisation ‘has a life of its own,’ and It is constructed from evolved moral rules that safeguard liberty.
‘all our efforts to improve things must operate within a working Its aim is to protect individual freedom here and now and to open
whole which we cannot entirely control.’ Hayek’s ideal or meta- up the possibility of human development.
legal principle must be viewed in these terms: its purpose is not The Rule of Law is an outgrowth of Western civilisation, but
to construct a new body of moral rules, but to identify those rules Hayek puts it forward as a universal ideal and not one just for
that have favoured the progress of civilisation; and in this respect Western nations. He provides no clear explanation as to how a
it has a foundation or ground. particular ideal becomes a standard for all, but he does suggest
Progress is favoured chiefly by freedom. Progress cannot be two possibilities: the Rule of Law offers a pattern for nations
designed, and its direction cannot be anticipated. Our best hope that aspire to match the creative achievements of the West; or
of improving things is to protect individual freedom. The Rule of since modernity has produced a universal civilisation, shaped by
Law is strictly about freedom. It says nothing about the ends that Western ideas and institutions, the West’s guiding ideal is now
individuals should pursue or about the long-term consequences of the standard for civilisation as such.
human action.
According to Hayek, the evolutionary process selects out
Detractors of the Rule of Law
moral rules that favour a society’s survival or flourishing. In the
second Cairo Lecture, he portrays the ideal of the Rule of Law, as it Chapter 16 examines ‘The Decline of the Law.’ This decline began
developed in nineteenth-century Germany, in such terms: in Germany soon after institutions designed to secure the Rule
Like most of the governing ideas of any age, it was held of Law were completed. Political and theoretical views emerged
not because its rationale was fully understood, but rather that strongly opposed limiting authority by rules of law. They
because the success of the groups and civilizations who had sought ‘to give the organized forces of government greater power
held it had brought it [the Rule of Law] to dominance. It to shape social relations deliberately according to some ideal of
had become part of that sense of justice which a process of social justice’ (235). Opinion soon turned against free institutions,
natural selection among societies produces by making those
making them incapable of serving their intended aims.
flourish which have evolved beliefs most conductive to the
best use of the capacities of their members. (1955: 26) Chapter 16 is mostly about legal theories that rejected or
redefined the Rule of Law. They originated in Germany, but soon
The point to be underscored is this: with hindsight we came to have wide influence in other Western countries, such as
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Russia, the UK and the USA. We need only consider what Hayek mean nothing more than ‘the demand for legality, the require-
says about legal positivism. ment of a legal foundation for any act of the state.’ It thereby
Legal positivism developed in direct opposition to the natural ‘ceased to have any significance as a guarantee of individual
law tradition. Hayek, of course, has his own objections to natural freedom, since any oppression, however arbitrary or discrimina-
law theory, but shares its view that a community’s laws must tory, could be legalized by a law authorizing an authority to act
be measured by a higher standard – one that is ‘found’ and not in such a manner’ (1955: 27). Hayek does detect some signs of a
simply created or willed. For legal positivism, ‘law by definition reaction against legal positivism and similar doctrines (247–9),
consists exclusively of deliberate commands of a human will;’ and but there remains an urgent need to clarify and restore the Rule
no higher standard exists by which to measure these commands. of Law.
The implication is that there can be no limits to the legislator’s
will. Such rules as the state authority enacts must be accepted
as legal, so that the distinction between ‘legal’ enactments and
‘illegal’ ones ceases to be valid.
Legal positivism came to be widely accepted after World
War I. Its most consistent and influential formulation is to be
found in Hans Kelsen’s ‘pure theory of law.’ Kelsen embraced and
articulated legal positivism’s far-reaching implications: what the
legislator wills or commands is law; this will is unlimited; there are
no fundamental liberties that the legislator is bound to respect;
and a despotic state can have the character of a legal order. By the
end of the 1920s, legal positivism had conquered German opinion
and was ‘spreading rapidly to the rest of the world,’ helping to
justify the rise of despotism in Hitler’s Germany, Fascist Italy and
Soviet Russia (238–9; 1955: 22).
From the outset legal positivism opposed ‘those meta-legal
principles which underlie the ideal of the rule of law’ – principles
that it dismissed as ‘metaphysical superstition.’ More fundamen-
tally, it redefined the concept, so that any state ‘whose whole
activity takes place on the basis of laws and in legal form’ is in
conformity with the Rule of Law (238). The Rule of Law came to
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o r i g i n s a n d d e v e l o p m e n t o f t h e r u l e o f l aw
to the ancients, particularly in Athens at the time of its greatness

and in late republican Rome. In fact, what classical authors said
7 ORIGINS AND DEVELOPMENT OF THE about individual freedom and its legal protections would greatly
RULE OF LAW (Chapters 11, 12, 13) influence modern thought (164–7). Hayek’s interest, however, is
not in the ancient world, but in the modern origins of individual
freedom, understood both as the general condition of a people
and as an ideal.
Hayek devotes three chapters to the origins of the Rule of The modern evolution of the Rule of Law began in seven-
Law and to its institutional and conceptual development. These teenth-century England. This evolution, as traced by Hayek,
chapters focus in turn on England during the seventeenth and involves both events and ideas, with events and their unforeseen
eighteenth centuries, on America during its founding period, consequences taking priority. Thus he observes that English
and on Germany between 1800 and the 1870s. Hayek’s emphasis liberty ‘appeared first, as it probably always does, as a by-product
throughout is on the growth of institutions that embody aspects of a struggle for power rather than as the result of deliberate aim’
of the Rule of Law and on ideas that convey its basic principles. (162). Hayek refers here to the great struggle between king and
This fits with his intention to show that the Rule of Law, as an Parliament that began soon after Elizabeth’s death in 1603 and
ideal, is not simply a rational construction, but the result of an convulsed seventeenth-century England; the liberty of the indi-
evolutionary process, where emerging beliefs and unintended vidual ‘emerged [from it] as a by-product’ (167). The conflict
consequences made possible an articulation of the principles of with Parliament was provoked by the economic policies of Eliza-
individual freedom. The contributions of England, America and beth’s successors, particularly their attempts to establish indus-
Germany are presented as parts of a single process of growth or trial monopolies and to impose severe regulations on economic
as ‘stages in a continuous development’ (202). Each nation added activity. These policies led to demands for ‘equal laws for all
something distinctive during its shining moment. There is no citizens’ and for adherence to ‘the certain rule of law,’ as distin-
chapter on France, since Hayek judges that political and intellec- guished from uncertain and arbitrary government. Ways to limit
tual developments there, after the Revolution, were largely unfa- royal discretion and bring the king under the law were discussed
vourable to his ideal (194–6). extensively and continuously throughout the Civil War. From
this discussion there gradually emerged all the political ideals
‘which were thenceforth to govern English political evolution’
English origins
(168).
When and where did individual freedom originate? Contrary to The evolutionary process that Hayek is describing was highly
some interpretations, Hayek insists that such freedom was known compressed. By 1660, when the Stuart monarchy was restored,
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y o r i g i n s a n d d e v e l o p m e n t o f t h e r u l e o f l aw
the ideas of liberty advanced in preceding decades ‘had become Smith and William Blackstone, took these ideals for granted, but
part of an established tradition.’ Hayek’s account of seventeenth- largely refrained from stating them explicitly (172–4).
century England details a massive and rapid shift in opinion England’s major contribution to the evolution of the prin
regarding the kind of government that could legitimately claim ciples of freedom ended with the close of the eighteenth century.
the people’s obedience. This is significant, because ‘power is Its achievements were mostly preserved beyond the nineteenth
ultimately not a physical fact but a state of opinion which makes century, but there was little further development of underlying
people obey’ (181). Hayek further observes that ‘a group of men ideals, even in the writings of historians such as T. B. Macaulay
can form a society capable of making laws because they already and of economists in the Smithian tradition. There emerged a
share common beliefs which make discussion and persuasion new, constructivist liberalism, often guided by the ideals of the
possible and to which the articulated rules must conform in French Revolution, which scorned Britain’s received constitution
order to be accepted as legitimate’ (181). The prevalence of such and proposed ‘to remake the whole of her law and institutions on
common beliefs explains how Parliament, in the Glorious Revo- rational principles.’ Here Hayek mentions Bentham and the Utili-
lution of 1688, could with little bloodshed depose the ruling tarians as well as the moralist and radical pamphleteer Richard
monarch and install a new one. The emergent ideas of liberty Price. From this point forward the English ideal of individual
subsequently became part of the doctrine of the victorious Whig liberty was progressively displaced, even in Great Britain, by ‘the
party. John Locke’s major achievement was to codify Whig essentially French concept of political liberty’ (174–5).
doctrine, thereby setting forth the practical principles that should,
by common agreement, thereafter control government’s powers
America’s contribution
(169–71). While Hayek is largely critical of Locke’s speculations on
the foundations of government, he applauds his ‘codification’ of The colonists who settled America brought with them the prin-
the accepted political doctrine. ciples of individual freedom that had developed in England,
The first half of the eighteenth century was the main period including ‘the conception that no power should be arbitrary and
of consolidation, during which time the ideal of the Rule of Law that all power should be limited by higher law’ (177). What Amer-
‘progressively penetrated everyday practice.’ Most of the prin- icans added was an insistence on a fixed constitution, a written
ciples for which Englishmen of the previous century had fought document that recognises fundamental principles and organises
were slowly but steadily extended. Indeed, ‘the principles them- government around them. This conviction – that the protec-
selves ceased to be a matter of [partisan] dispute;’ and the Tories tion of freedom requires a written constitution – was rooted in
came fully to accept them (171–2). Later in the century, ‘coherent America’s early experience with compacts and charters. It found
expositions’ of English ideals were put forward, chiefly by Hume, expression in the various state constitutions that were established
Burke and William Paley. Other leading writers, including Adam during and after the Revolution, and it stimulated efforts to draft
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a constitution for the USA. Hayek calls this belief and practice both among the branches of the federal government and between
‘constitutionalism;’ and he regards constitutionalism as America’s government and the states, the insistence on the inviolable rights
distinctive contribution to the growth of the Rule of Law. of individuals, and the practice of judicial review. A thread running
American constitutionalism presents something of a challenge through the entire discussion is the problem of how, in popular
to Hayek’s outlook. The federal Constitution, like the various state government, majorities can be kept within safe limits.
constitutions that were formed after the Revolution, arose from The Americans were much more concerned than the English
an effort deliberately to construct a basic framework of laws and had been with limiting the power of representative legislatures.
also to achieve something unprecedented in the annals of govern- Partly this was because the colonists, in the decade leading up to
ment. In this respect it can be viewed as both constructivist and the Revolution, had been forced to resist Parliament’s claim to
anti-traditional. Hayek acknowledges that the American founders power over them; but more fundamentally it reflected awareness
were, in a sense, ‘guided by a spirit of rationalism, a desire for that, in a democratic society, majority rule could endanger liberty.
deliberate construction and pragmatic procedure closer to what The newly formed state legislatures were frequently criticised at
we have called the “French tradition” than to the “British.” ’ the time for exceeding their proper powers.
Furthermore, they exhibited ‘a general suspicion of tradition and Americans embraced the long-standing view that ordinary
an exuberant pride in the fact that the new structure was entirely legislation must conform to a ‘higher law;’ and they insisted on
of their own making.’ codifying higher law principles in a written document, so as to
Hayek insists, however, that the American founders were make them explicit and enforceable. This means that particular
‘essentially mistaken’ as to what they were achieving. The govern- laws enacted by the legislature are just only if they conform to
mental framework that ultimately emerged from the federal principles embodied in the Constitution. Requiring conformity to
Constitution was different ‘from any clearly foreseen structure,’ general principles deters the legislature from sacrificing long-term
and ‘much of the outcome was due to historical accident or advantages to immediate aims and from conferring privileges or
the application of inherited principles to a new situation.’ The imposing penalties on individuals (179–80).
vaunted ‘new discoveries’ of the Constitution either ‘resulted from Hayek’s view of higher law differs substantially from the way
the application of traditional principles to particular problems’ the Americans themselves understood it. By his interpretation,
or else ‘emerged as only dimly perceived consequences of general higher law is not rooted in divine will, or nature, or reason, as
ideas’ (183–4). Americans had generally believed. Hayek reminds us that reason
American constitutionalism, besides requiring a fixed and always ‘moves within a non-rational framework of beliefs and
written document, incorporated numerous ways of limiting govern- institutions.’ Higher law, for any society, consists of principles
ment and making it conform to general rules. In this connection implicit in prevailing beliefs and opinions. The decisive considera-
Hayek discusses the appeal to higher law, the division of powers tion is whether a people, regardless of how they understand the
114 115
source of higher principles, resolves to follow them long-term. By The issue of majority rule is central to Hayek’s discussion of
doing so, a people gains ‘more control over the general nature of American constitutionalism. Mainly he relies on a distinction that
the political order than they would possess if its character were to the American founders had employed, one between the majority’s
be determined solely by successive decisions of a particular char- often ill-considered short-term will and its more deliberate long-
acter’ (181–2). term will. The Constitution’s democratically minded critics fault
American constitutionalism was centrally concerned with it for structuring government so as to thwart the majority will.
limiting representative legislatures. To this end, the federal Hayek replies that ‘a constitutional system does not involve an
Constitution divided power among three branches of govern- absolute limitation of the will of the people but merely a subordi-
ment, enumerated legislative powers, and opened the door for nation of immediate objectives to long-term ones.’ Thus the people
the judiciary to invalidate laws that conflict with the Constitution. agree ‘to submit to the will of the temporary majority on particular
Hayek is silent about some crucial checks on the US Congress – issues’ on ‘the understanding that this majority will abide by more
its division into two ‘Houses’ which must agree with each other to general principles laid down beforehand by a more comprehensive
enact laws, and the presidential veto. body,’ such as a constitutional convention (179–80).
As for the executive, Hayek is critical of constitutional provi-
sions that ‘led to the formation of a presidential republic.’ Under
Culmination in Germany
this arrangement, ‘the chief executive derives his power directly
from the people and, in consequence, may belong to a different Each of the nations that contributed to the growth of the Rule
party from that which controls the legislature.’ Hayek objects that of Law responded to a particular threat to individual freedom:
this arrangement erects an ‘obstacle to the efficiency of the execu- England to arbitrary monarchical power; America to representa-
tive;’ but later he suggests a deeper reason for avoiding a presi- tive legislatures and majorities fixed on short-term goals; and
dential republic – the prospect that the executive, in the name Germany to the administrative state.
of the people, will undertake measures that endanger freedom. The ‘German people’ had a complex political history during
Thus Franklin D. Roosevelt, convinced that he knew best how to the period of Hayek’s review, and it is sometimes difficult to tell
deal with the Great Depression, ‘conceived it as the function of just which phase of that history or which German states he has in
democracy in times of crisis to give unlimited powers to the man mind. The German Confederation was formed in 1815, following
it trusted.’ Among other measures, Roosevelt attempted in 1937 the defeats of Napoleon. It was comprised of 39 states, with
to gain control of the Supreme Court by increasing its size and Prussia and Austria being the dominant members. In 1866, with
packing it with judges who supported his policies. This effort was the victory of Prussia and its German allies in the Austro-Prussian
defeated in the US Senate – a case where the legislature acted to War, the German Confederation was dissolved; and that year the
curb unwarranted executive power (186, 190–91). North German Confederation was established by Prussia and
116 117
north German states. Prussia’s growing dominance and its 1870 the people’ (193). Initially liberals saw their choice as one between
victory in the Franco-Prussian War led to the formation in 1871 either depending on the ordinary courts to decide whether admin-
of the German Empire as a constitutional monarchy, with King istrative acts were lawful and consistent with private rights or,
Wilhelm of Prussia as German Emperor and Otto von Bismarck in line with French practice, establishing ‘quasi-judicial bodies
as Chancellor. inside the administrative machinery’ to decide on the lawfulness
Hayek gives a mixed verdict on Prussian influence. Looking of administrative acts (196, 199–201). For a long time the liberal
back to the eighteenth century, he credits Frederick II’s civil code supporters of the Rechtsstaat advocated the first approach, which
of 1751 with initiating a rapidly spreading movement ‘for the codi- would depend on the ordinary courts to limit the administration.
fication of all the laws.’ Hayek regards this movement ‘as one of This approach came to be known as ‘justicialism.’ By the 1860s
the most important aspects of the endeavor on the Continent to liberals had turned to a different conception, which in effect
establish the rule of law’ (197). In this atmosphere Immanuel Kant modified the first approach so as to avoid placing judicial respon-
and later the young Wilhelm von Humboldt wrote highly influen- sibility inside the administration.
tial treatises on moral and educational freedom; and liberal move- Rudolf von Gneist was the main architect of the new system.
ments emerged with the broad aim of limiting government by a Von Gneist and his supporters called for the creation of a
constitution and general laws. Yet by the 1860s and 1870s, Prussia separate system of courts, alongside the regular ones, to hear
had become a ‘police state,’ defeating efforts to bring Prussia itself cases involving administrative actions. These ‘were meant to be
and the broader political entities it dominated under the Rule of completely independent courts,’ not judicial bodies inside the
Law (199–200). administrative apparatus; and it was hoped that they would,
The liberal movement in Germany had two main goals: estab- in the course of time, ‘assume a strictly judicial control over all
lishing the Rechtsstaat (or law state) and achieving the ideal of administrative action.’ To defend these special courts, advocates
constitutionalism. In the Cairo Lectures, Hayek gives considerable reasoned that ‘the ordinary judge, trained mainly in private
attention to writers, especially in southern Germany, who helped or criminal law,’ cannot be expected to possess the specialised
develop the theoretical conception of the Rechtsstaat after 1800; knowledge required to settle disputes over administrative actions.
but he omits this review in Chapter 13 of The Constitution of Liberty This argument won over liberal supporters of the Rule of Law.
(cf. 1955: 21–3). Thereafter the Rechtsstaat came to mean a system of independent
The Rechtsstaat was designed primarily to curb the arbi- administrative courts rather than a reliance on the ordinary
trary exercise of power by the expanding bureaucracy. In all of courts. Indeed, this new approach was seen as the Rechtsstaat’s
continental Europe, and especially in Prussia, there developed ‘a crowning achievement. Most German administrative lawyers
powerful centralized administrative machinery’ with ‘a body of backed it; and a system along these lines was introduced in the
professional administrators who had become the main rulers of German states in the 1860s and 1870s (200–202).
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Liberal hopes of imposing independent judicial control over the independent administrative courts that were central to the
an entrenched bureaucracy would be disappointed: ‘Just as the idea and practice of the Rechtsstaat. In this way Dicey contributed
new device was introduced, there commenced a major reversal of much ‘to prevent or delay the growth of institutions which could
intellectual trends’ – a reversal that was occasioned by the ‘new subject the new bureaucratic machinery to effective control.’ His
movement toward state socialism and the welfare state.’ This new influence ‘blocked the development which would have offered the
movement began to gather force in the 1870s and 1880s, just as best chance of preserving’ the Rule of Law (203–4).
the system of administrative courts received its final shape in the
German states. The new movement favoured widening admin-
istrative discretion rather than confining it by judicial review.
Consequently the liberal conception of the Rule of Law, whose
centrepiece had been the Rechtsstaat, was abandoned as a prac-
tical measure. The Germans were thus ‘the last people that the
liberal tide reached before it began to recede’ (202).
Hayek warns us not to underrate the theoretical achievement
of German liberals. Despite their lack of political success, they
were the ones who applied the old ideal of the Rule of Law to the
problem of restraining the modern administrative state: ‘they
represent in some respects the last stage in a continuous develop-
ment and are perhaps better adapted to the problems of our time
than many of the older institutions.’ The rise of the administrative
state began in continental Europe; but in the twentieth century,
it ascended in Britain and the USA as well. Thus the ‘power of
the professional administrator … is now the main threat to indi-
vidual liberty;’ and the ‘institutions developed in Germany for the
purpose of keeping him in check deserve more careful examina-
tion than they have been given’ (202).
In this context Hayek criticises A. V. Dicey, whose study of
the English constitution he generally praises, for making ‘the
possibility of a review of administrative acts by the ordinary
courts’ the chief test of the Rule of Law. Dicey here overlooked
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r e q u i r e m e n t s o f t h e r u l e o f l aw
private sphere only as punishment for breaking an announced

general rule’ (206). Here and elsewhere, Hayek distinguishes
8 REQUIREMENTS OF THE RULE OF LAW sharply between general laws that the ordinary citizen must
(Chapter 14) observe and those acts of legislative authority, which amount to
orders, that instruct servants of the state ‘concerning the manner
in which they are to direct the apparatus of government and the
means which are at their disposal’ (207). Government has broad
The Rule of Law defines the attributes of ‘true law’ and also discretion to command how its particular resources will be used,
identifies the institutions that are required to safeguard indi- but it cannot order about the private individual as if he were a
vidual liberty. Hayek enumerates these attributes and safeguards mere governmental resource.
in both the Cairo Lectures and The Constitution of Liberty (Chapter
14), but with some important variations. This enumeration is
True law is known and certain
not presented as a rational system, but rather as ‘a complex of
doctrines which have been formulated at different times and The laws must be made known or promulgated, since they shape
which are connected only by serving the same end’ (1955: 34). This the environment in which we plan our actions. If individuals
view fits Hayek’s claim that his ‘ideal’ is a product of undirected know what rules they can count on, they are better able to predict
growth rather than logical construction. the outcome of their actions, determine their responsibilities, and
use their knowledge effectively. Known and certain laws are vital
to economic life; and they promote the spontaneous growth of
True law promotes freedom by safeguarding the private
social order. They enable people to ‘foresee with a high degree of
sphere
confidence what collaboration they can expect from others,’ thus
The end served by the Rule of Law, broadly stated, is to promote facilitating the ‘mutual adjustment of individuals’ that produces
liberty by making individuals secure against governmental order spontaneously. Hayek emphasises that the law’s relative
encroachments on the private sphere. More specifically, it ‘is to certainty makes court decisions predictable, thus reducing litiga-
limit coercion by the power of the state to instances where it is tion and enabling a free society to run more smoothly and effi-
explicitly required by general abstract rules which have been ciently. These considerations lead him to conclude that ‘the task
announced beforehand and which [are] applied equally to all of the lawgiver is not to set up a particular order but merely to
people, and refer to circumstances known to them’ (ibid.: 34; cf. create conditions in which an orderly arrangement can establish
1960: 208). Government coerces individuals chiefly by punishing and ever renew itself’ (208–9; cf. 159–61).
them. Under the Rule of Law, it can ‘infringe a person’s protected
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True law is both general and equal regulating the relations between different persons and does not
Generality or abstractness is a necessary feature of law. Hayek interfere with the purely private concerns of an individual,’ we
had made this clear particularly by distinguishing in Chapter 10 have no test for its compatibility with a reign of freedom ‘other
between laws and commands. A command is an order to someone than its generality and equality’ (210). Here, as in Chapter 6,
to take a particular action or refrain from it; and it presupposes Hayek interprets the principle of equality to mean that the law
someone who has issued the command. A law, by contrast, ‘is should treat people alike in spite of inequalities that arise from
directed to unknown people,’ and it speaks in an impersonal nature and from nurture. Equality before the law increases the
voice. It abstracts ‘from all particular circumstances of time and de facto inequalities among individuals, but these are advanta-
place’ and ‘refers only to such conditions as may occur anywhere geous to a free society. Also, the Rule of Law is at odds with the
and at any time.’ Hayek grants that these distinctions are not quest for distributive justice. Those who pursue it ‘will in practice
hard and fast, since laws ‘shade gradually into commands as their find themselves obstructed at every move by the rule of law.’
content becomes more specific’ (149–50). Distributive justice requires government to decide what different
The principle of generality does not, however, encompass individuals will receive or reward them according to someone’s
the requirement that ‘any law should apply equally to all.’ A law conception of their merit. The Rule of Law demands, however,
might be general and yet make different provisions for different that individuals be treated equally under general laws, without
classes of persons and, where classes are defined narrowly, implic- regard to their particular qualities or circumstances (232).
itly favour specific individuals. Complete equality before the law The laws consist of ‘general rules that apply equally to every-
means ‘that no attribute belonging to some individuals but not to body.’ It follows that those persons who enact and apply the laws
others should alter their position under the law’ (1955: 36). Hayek must also be subject to them. This requirement – that the laws
insists that we should strive towards this goal, but grants that it ‘is apply equally to those who govern as well as to any private person
probably both unattainable and undesirable’ (ibid.: 36). He does – reduces the risk that the state and its agents will act oppressively
not object in principle to laws that single out a particular group, (210).
e.g. women, or the blind, or people above a certain age, so long as
the legitimacy of the distinction is acknowledged by those inside
The Rule of Law requires an independent judiciary
the group as well as those outside it. Yet ideally, equality of the
law aims to equally improve ‘the chances of yet unknown persons’ Hayek hesitates to make the ‘separation of powers’ a blanket
and is ‘incompatible with benefiting or harming known persons requirement of the Rule of Law, since this doctrine has a variety
in a predictable manner’ (209–10, 153–5). of meanings, some of which Hayek disapproves of. He does insist,
Hayek denies that justice is an attribute of law, independent however, that the judiciary should constitute ‘a separate power’
of its generality, certainty and equality. If a law ‘confines itself to from the legislature. The Rule of Law means that ‘the laying-down
124 125
of new general rules’ must be separate from ‘their application such as provincial assemblies or municipal councils’ or even in
to particular cases.’ These two functions ‘must be performed some instances to ‘some non-elective authority,’ so long as this
separately by two co-ordinated bodies before it can be determined authority announces these rules prior to their application and
whether coercion is to be used in a particular case.’ In practice, is made to adhere to them. What Hayek objects to in modern
this requires ‘independent judges who are not concerned with any practice is not delegating legislation, but giving authorities ‘power
temporary ends of government’ (210–11). These judges ‘are bound to wield coercion without rule’ and expecting the courts to accept
by nothing but the law and secured against all pressure by irre- the exercise of such power unquestioningly (1960: 211–12; 1955:
movability and similar safeguards’ (1955: 37). This arrangement 38–9).
helps to ensure that rules are made because of their general signifi-
cance and not to fit particular instances.
The executive, in coercing private citizens, is subject to
Judicial decision-making, as Hayek understands it, looks
legislative rules and to judicial review
beyond particular statutes and their intent. In fact, the judge
has no concern with ‘the hidden intentions of the maker of the The primary function of the government or executive is to protect
rules’ (ibid.: 37). The judge’s task is ‘to discover the implications the individual against coercion by others and thus to safeguard for
contained in the spirit of the whole system of valid rules of law.’ each individual a secure private sphere. To this end the executive
When necessary, he expresses as a general rule ‘what was not enjoys a monopoly of coercive power. This function is to be distin-
explicitly stated previously in a court of law or by the legislator’ guished from the executive’s administrative or policy function,
(212). Clearly a great deal of discernment is required to grasp which is not inherently coercive, but may become so under a
the spirit of the laws, to determine its implications for the case regime of central planning. Hayek insists that with the rise of
at hand, and to express this as a general rule. The judge makes the modern bureaucratic state, individual liberty is now mainly
explicit much that the law itself leaves unstated; and inevitably threatened by administrative power (see 202). Thus it is hardly
‘certain general conceptions’ will enter into the judge’s interpreta- surprising that The Constitution of Liberty devotes far more atten-
tion of the law. Even so, Hayek measures judicial interpretation by tion to administration than to lawmaking or judging.
an objective standard, namely ‘what the rules as they have been Deciding where the executive stands, in relation to the legis-
promulgated must mean to an impartial observer’ (1955: 37). lature and to the courts, is, for Hayek, a major problem that is
The separation-of-powers doctrine, in some formulations, addressed throughout Parts II and III, especially when matters of
prohibits the general legislature from delegating the rule-making ‘discretion’ and ‘policy’ are discussed. Hayek regards the legisla-
function to other bodies; but Hayek rejects this limitation. From ture and the courts as distinct and separate powers, but he denies
the standpoint of the Rule of Law, he sees nothing wrong with that this is the case with the executive. The decisive consideration
delegating the power of making rules ‘to local legislative bodies, here is not the executive’s monopoly of coercion, which arguably
126 127
makes it more powerful than the legislature and the courts, but and have found expression in various constitutional provisions.
its dependence on the other powers. The legislature and the judi- What can statements of rights add to the general argument for
ciary are independent of each other in that one formulates rules freedom? After all, under ‘a reign of freedom the free sphere of the
and the other interprets them. The executive, however, is bound individual includes all action not explicitly restricted by a general
in its coercive actions ‘by rules which prescribe not only when law’ (216). If the individual enjoys the freedom (or right) to do
and where it may use coercion but also in what manner it may do whatever a general law does not restrict, then what is gained by
so.’ Moreover, all of its actions of this kind are subject to judicial enumerating specific rights? And since any enumeration is neces-
review. Hayek’s aim here is to hem in the executive, insofar as its sarily incomplete, isn’t there a danger of depreciating rights that
use of coercion is concerned, by subordinating it to legislative aren’t explicitly recognised? Hayek acknowledges this danger,
rules, on the one hand, and judicial review, on the other. In this but concludes that bills of rights have in the past afforded ‘an
respect it is not ‘independent’ and therefore not a separate power important protection for certain rights known to be easily endan-
(211). gered’ (216).
Hayek grants that administrators, like judges, must interpret In the Cairo Lectures, Hayek identifies the rights associated
legislative rules in order to apply them, but the substance of their with ‘life, liberty, and property,’ along with liberty of speech,
interpretation must be subject to review by an independent court. religion, the press and assembly, as essential ones; and he stresses
In such a review, the court will impose a very strict test, deciding the right to private property in particular, since rules of property
whether the administrative decision is ‘deducible from the rules determine ‘the boundaries of individual private spheres in the
of law and from those circumstances to which the law refers and material world, and ways of voluntarily changing these bounda-
which can be known to the private parties affected’ (1955: 41; 1960: ries’ (1955: 44). Hayek’s emphasis in The Constitution of Liberty is
213–14). When it comes to protecting the individual from coercion on how rights are endangered by advancing technologies (216).
and securing impartial justice, independent courts must have the He acknowledges the importance of procedural safeguards, but
last word. does not expect that they will remain effective if belief in the Rule
of Law is weakened (218–19).
How do bills of rights serve to protect individual freedom?
The Rule of Law safeguards fundamental rights and civil
Hayek grants that neither legal guarantees of fundamental rights
liberties
nor constitutional provisions can, in themselves, ‘prevent any
Hayek’s case for freedom is not built around the idea of indi- suppression of rights by the deliberate action of the ultimate legis-
vidual rights, but, nonetheless, rights are vital to his account of lator’ (217). We recall that the ultimate legislator, in democracies,
the Rule of Law. These are not to be understood as natural rights, is the people, or, more precisely, public opinion or the prevailing
in the Lockean sense, but as rights that have evolved historically sense of justice (1955: 33; 1960: 217). Constitutional formulations
128 129
of individual rights serve to ‘impress upon the public mind’ the domain.1 Hayek goes on to insist that such cases should conform
value of these rights. They become ‘part of a political creed which to a rule, so that they can be reviewed by an independent court,
the people will defend even when they do not fully understand its and that individuals who are affected should receive full compen-
significance’ (217). sation, both as a matter of justice and as a deterrent to govern-
ment arbitrariness (217–18).
Hayek’s third Cairo Lecture makes roughly the same points,
Emergency powers, just compensation and the public
but with this important difference: it offers a much more detailed
interest
rationale for emergency powers. As Hayek reminds us, the Rule of
After listing the attributes of true law, Hayek discusses govern- Law establishes a sphere ‘in which the individual can follow his own
ment’s emergency powers. Here he addresses, in a somewhat will’ and also know clearly ‘the conditions and the manner in which
indirect way, the vital question of how and when the Rule of Law he can be coerced.’ Nevertheless, the individual’s private sphere is
is to be applied. Hayek assumes that applications of the Rule of not sacrosanct under all conditions. Exceptional circumstances will
Law must be governed by the public interest. This implies that arise ‘in which it would be in the highest interest of the Community
protection for individual rights can be suspended where the that particular individuals should be made to do things as a result of
interest of the community requires it. events which they do not know and in a manner for which no rule
In The Constitution of Liberty, Hayek argues as follows: legal provides.’ These exceptional circumstances include ‘natural catas-
guarantees of individual freedom are basic to ‘the normal running trophes’ and ‘war or other sudden dangers.’ Such events call for
of society,’ but they are not ‘absolute rights’ that can never be swift and concerted action, so that even the private citizen may be
infringed: ‘Even the most fundamental principles of a free society required to ‘place himself under the command of authority.’
… may have to be temporarily sacrificed when, but only when, it is Emergency powers must be exercised by ‘guardians of the
a question of preserving liberty in the long run.’ Such a sacrifice of public interest.’ These guardians must be kept in check, however,
individual liberties might be necessary in a time of war, requiring by an independent court, which will ‘decide on general abstract
a suspension of habeas corpus protections and even the imposi- principles not only about the legitimacy of the interference but
tion of ‘a state of siege.’ also about the appropriate compensation.’ The community, which
Having made these points, Hayek turns quickly from broad benefited from the exercise of emergency powers, must bear the
emergency powers to narrower ways in which government, acting cost of compensating the individual fully for every infringement
in ‘the public interest,’ might justifiably infringe particular liber- of his right of private property or of ‘other legally acquired rights’
ties. Two such cases, which ‘can hardly be disputed,’ are curtailing (1955: 44–5).
freedom of speech in a situation of ‘clear and present danger’ and 1 ‘Eminent domain’ is the phrase often used in the USA to describe what is gener-
compulsory land purchase through government’s right of eminent ally known simply as ‘compulsory purchase’ in the UK.
130 131
Hayek does not here identify the well-informed ‘guardians of French Revolution, as it eventually unfolded, and of the line of
the common interest’ who will exercise emergency powers. One modern political thought that it inspired. At the same time he
might assume that he has in mind the executive, or some portion applauds conservative writers who not only opposed the French
of it, or perhaps the judges who review the executive’s actions. Revolution, but identified progress with undirected growth and
When Hayek returns to this topic much later, he assigns these respect for tradition (see 55–6, 174–5, 194–5 and 400).
powers to ‘an emergency committee of the Legislative Assembly,’ To summarise, the Rule of Law aims to secure individual
which would be ‘entitled to grant limited emergency powers until freedom, partly by identifying rights that government must
the Assembly as a whole could be convened.’ The full Assembly protect. This ideal is constant, but its application depends on what
would then ‘determine both the extent and duration of the emer- best serves the community’s interest under prevailing conditions.
gency powers granted to government’ (1979: 125). Suspending individual rights is justified if the community’s safety
Hayek seems to count on the executive’s acquiescence to the is at stake. When it comes to the use of emergency powers, Hayek
courts and to the legislature when its use of emergency powers reasons that a short-term sacrifice of liberty may be required for
is called into question. Accordingly he is silent here about the its long-term preservation. There remains, however, the question
possible need to curb an obdurate or despotic government. Liber- of what limits on freedom are permissible in ‘normal’ times, as
alism in its classical or Lockean form had assigned this responsi- measured by the public interest. In the absence of an emergency,
bility ultimately to the community or to the people. It taught that can government, acting for the community’s benefit, justifiably
the community, which is the source of political power, may resist curb the liberty of individuals and coerce them, even if they have
and depose a government that consistently abuses its power (see not disobeyed the law or violated anyone’s private sphere? Hayek
Second Treatise, nos 222–30 and 240–43). The American Declara- opens this door by referring to government’s right of compulsory
tion of Independence puts it this way: if government persists in purchase. Are there other, more essential examples? We will find
violating the ends for which it was formed, then ‘it is the right of an answer to this question shortly.
the people to alter or to abolish it’ and to institute new govern-
ment of such principles and form as shall seem to them ‘most
likely to effect their safety and happiness.’
This is not Hayek’s kind of liberalism. He grants that commu-
nity opinion is the ultimate authority in policy matters, but gives
no hint that the community might forcibly change an abusive
government. Generally speaking, Hayek opposes violent ruptures
with the past: ‘Perhaps no violent revolution is likely to increase
the respect for the law’ (194). He is critical in particular of the
132 133
e c o n o m i c p o l i c y a n d t h e r u l e o f l aw
general rules of conduct, within which government must act to

achieve its ends. Legislation must not itself specify those ends.
9 ECONOMIC POLICY AND THE RULE OF Policy, by contrast, ‘means the pursuit by government of the
LAW (Chapter 15) concrete, ever changing aims of the day.’ Executing policy in this
sense is largely the work of administration: ‘Its task is the direc-
tion and allocation of resources put at the disposal of government
in the service of the constantly changing needs of the community’
Hayek is primarily concerned in Chapter 15 with the problem (214–15; cf. Hayek, 1955: 42–3).
of shaping and limiting government’s economic policies. Most These statements bring out two key points about policy.
of his examples show how economic life is affected, for better or First, government’s broad objective in policy matters is to serve
worse, by administrative measures. Hayek thus needs criteria the community’s needs. Hayek mentions particular services that
by which to measure and judge economic policies; but to articu- governments provide to citizens, ranging ‘from national defense
late them, he must look broadly at government’s policy role to upkeep of roads, from sanitary safeguards to the policing of
and consider what government may and may not do, under the the streets,’ but all such policies must serve the needs or inter-
Rule of Law, in executing its policies. His observations about ests of the community. Second, government has ‘resources’ at its
economics are framed by these more general reflections on policy. disposal, to be used in pursuing its policies. Faced with urgent
In discussing these matters, Hayek presupposes or restates much tasks, it must direct and allocate these resources, which include
of what he has said earlier about law and coercion and about both its material means and its paid servants. Since professional
the relation of the executive or administration to the lawmaking administrators inevitably grasp for more, Hayek stresses that
body. This chapter is vital for the rest of his book, since it lays the agencies entrusted with special tasks ‘must confine themselves to
foundation for Hayek’s extended treatment, in Part III, of specific the means specially granted to them’ (215). A crucial question, left
policy areas. unanswered at this point, is how government obtains its material
resources.
What is policy?
Hayek’s most illuminating definition of policy appears in Chapter Tests of policy
14, in a brief section entitled ‘Legislation and Policy.’ He begins The Rule of Law governs all government’s policy actions, but
by dispelling the idea that legislation itself is a policy matter, or does not necessarily limit or restrict them. The essential question
that the law is the chief instrument for carrying out some prede- is whether a specific policy involves coercion: ‘It is … important
termined long-term policy. The work of legislation is to establish to remember that the rule of law restricts government only in
134 135
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y e c o n o m i c p o l i c y a n d t h e r u l e o f l aw
Excluded policies
its coercive activities’ (206; cf. 1955: 22). If a government policy
is coercive, it must conform to the principles of the Rule of Law. Some policies are excluded in principle from a free society because
Hayek distinguishes between coercive measures and ‘those pure they cannot possibly be reconciled with the Rule of Law. These
service activities where coercion does not enter or does so only are ones that ‘cannot be achieved by merely enforcing general
because of the need of financing them by taxation’ (222). The rules but, of necessity, involve arbitrary discrimination between
taxation issue aside, these ‘pure service activities’ would not be persons’ (227; cf. 231). Hayek considers three types of excluded
restricted by the Rule of Law, unless they were to become coercive. policies, the first of which is giving specific individuals the right to
Assuming that a specific policy is compatible with the Rule of engage in different occupations or to provide services or commod-
Law, it must then be judged according to its expediency or effi- ities. Forbidding favouritism of this kind does not, in Hayek’s
ciency. The question here is whether the policy will succeed or fail view, preclude setting job qualifications or requiring a licence to
and whether its advantages will outweigh its costs (221). practise certain trades, so long as these measures follow a general
Hayek introduces the expediency test to judge how adminis- rule that applies to any qualified person and gives each one the
trative discretion is used. In order to pursue policy objectives in right, if passed over, to ‘have his claim examined and enforced by
concrete situations, amid ever-changing circumstances, admin- an independent court’ (227).
istrators must act according to their judgement of what is best: Price controls, whether imposed directly by authority or
‘Nobody disputes the fact that, in order to make efficient use of the indirectly by specifying the quantities that particular persons or
means at its disposal, the government must exercise a great deal firms can buy or sell, are incompatible with a free system for two
of discretion’ (213). Expediency is a test of whether discretionary reasons. First, such controls have to be administered arbitrarily
actions are efficient in reaching their objectives; and economic and not according to a rule. More broadly, free markets will work
analysis, especially the weighing of costs and benefits, is crucial only if individual decisions are guided by price movements. In the
in making such judgements. Having discretion allows administra- absence of prices, governments will try unsuccessfully to achieve
tors to choose from a range of legitimate options in deciding on similar results by direct orders (227–9).
the best course of action. A policy measure can be inexpedient but Finally, a government bound by the Rule of Law cannot under-
still in conformity with the Rule of Law. Moreover, an expedient take to reward people according to their supposed merit. Hayek
action that harms many is permissible, if the outcome is beneficial repeats here his oft-stated objection to government pursuing
overall (224–5). distributive justice: it requires ‘an allocation of all resources by
The ultimate objective of policy – that it must serve the needs a central authority’ and also ‘that people be told what to do and
or interests of the community – is vital for determining both a what ends to serve.’ The administrative pursuit of distributive
policy’s compatibility with the Rule of Law and its expediency, as justice is incompatible with treating individuals according to
we shall see. general rules (231–3).
136 137
Policies measured by expediency must be available to all. No citizen can be excluded arbitrarily
For policies that are compatible with the Rule of Law and the from their enjoyment. Second, government must not forcibly
requirements of a free society, the question is whether their monopolise the provision of these services or enjoy any special
benefits are worth their cost. A wide range of activities, univer- advantage in offering them. If possible private suppliers must be
sally undertaken by governments, fall into this category. Some allowed to compete with government enterprise, or at least the
of these furnish information that individuals need to plan their door must not be shut to them. Both arbitrary exclusion and shel-
lives. Government’s most important function here is providing tered monopoly make state coercion impermissible.
‘a reliable and efficient monetary system,’ but scarcely less
important ‘are the setting of standards of weights and measures;
The community’s interest
the providing of information gathered from surveying, land regis-
tration, statistics, etc; and the support, if not also the organiza- The highest standard for judging policy is neither the Rule of
tion, of some kind of education.’ Other policies aim to provide Law nor expediency, but the interest of the community. As noted
more material services. These include sanitary and health services, earlier, government can in emergencies suspend individual rights
road construction and maintenance, urban amenities, and ‘public if the community’s interest requires it. In ‘normal’ times, govern-
works’ generally (223). ment, acting within the Rule of Law, pursues an expedient course;
Hayek does not favour passive government, but rather one but expedient actions must aim towards an end, which ultimately
that seeks many benefits for the community. While he shares is the community’s interest.
the ‘strong presumption against government’s actively partici- What policy measures can be justified by expediency, espe-
pating in economic efforts,’ he nonetheless states that the ‘old cially when it comes to coercing individuals? Some of Hayek’s
formulae of laissez faire or non-intervention do not provide us formulations suggest that governmental coercion must be limited
with an adequate criterion for distinguishing between what is to cases where individuals have violated the law, especially by
and what is not admissible in a free system’ (221, 231; cf. 257–8). harming others: ‘Under the rule of law, government can infringe
As he explains, ‘it is the character rather than the volume of a person’s protected private sphere only as punishment for
government activity that is important.’ In economic matters, for breaking an announced general rule’ (206). This statement would
example, an active government that assists the spontaneous forces indicate that only lawbreakers need fear government’s coercive
of the market is preferable to a less active one that does the wrong hand. As Hayek proceeds, however, it becomes clear that govern-
things. In this regard he sees himself as following the best of the mental coercion need not be a form of punishment. Govern-
classical liberals, such as Adam Smith (220–22). ment can coerce even law-abiding individuals if the community’s
While Hayek does not object to government providing many interest requires it, so long as it does so in conformity to a general
services, he does insist strongly on two points. First, these services rule and allows for review by independent courts (225).
138 139
Taxation and compulsory military service are prime examples could and ought to have made provision themselves, and
of justifiable coercion where no rules have been broken. Hayek particularly once help is assured to such an extent that
grants that government’s resources come from taxation and that it is apt to reduce individual efforts, it seems an obvious
corollary to compel them to insure (or otherwise provide)
taxes are coercive (see 144, 222). Taxpayers are coerced, even
against those common hazards of life.
though they have not violated the law. Coercive taxation is justi-
fied by the community’s interest in supplying government with Hayek goes on to explain that the ‘justification in this case is
needed resources. As for military service, the community must be not that people should be coerced to do what is in their individual
protected against its enemies, and protection requires a military interest but that, by neglecting to make provision, they would
force. How can government legitimately compel a draftee to become a charge to the public’ (285–6). Also, government has
submit to a kind of servitude, kill perhaps innocent people, and the right to expropriate property at fair market value to provide
even face death himself? Coercing draftees, like taxation, is justifi- such amenities as parks and recreation, ‘so long as the commu-
able on the grounds that it serves the interest of the community. nity approves this’ in full awareness of the costs and alternatives
Generally speaking, the law aims to make state coercion (375). Education up to a minimum standard can be made compul-
both predictable and avoidable. If I can predict what actions will sory. The justification, aside from the contribution to democratic
result in my punishment, I can try to avoid those actions. In the governance, is that ‘all of us will be exposed to less risks and
absence of law, state coercion is arbitrary; it is neither predictable will receive more benefits from our fellows if they share with us
nor avoidable. Taxation and compulsory military service occupy certain basic knowledge and beliefs’ (377). Higher education is not
something of a middle ground between strict adherence to the compulsory, but the case for subsidising it ‘must rest not on the
Rule of Law and arbitrariness. Taxation and compulsory military benefit it confers on the recipient but on the resulting advantages
service are not to be avoided, but to the extent that they follow for the community at large’ (382–3).
some rule, they are at least predictable forms of coercion and
therefore are not arbitrary. This consideration largely deprives
such policies ‘of the evil nature of coercion’ (143).
There are other policy measures where Hayek appeals to the
community’s interest in order to justify coercion. He will follow
this path, for example, in arguing that government may force indi-
viduals to insure themselves against risk:
Once it becomes the recognized duty of the public to
provide for the extreme needs of old age, unemployment,
sickness, etc., irrespective of whether the individuals
140 141
PART III
F REEDOM IN THE WELFARE STATE
143
10 SOCIALISM IN a NEW GUISE: SOCIAL
JUSTICE AND THE WELFARE STATE
(Chapter 17)
Part III of The Constitution of Liberty is devoted to policy.

Hayek’s aim, as he explains in his Introduction, ‘will not be
to provide a detailed program of policy but rather to state the
criteria by which particular measures must be judged if they are
to fit into a regime of freedom.’ This he will do by applying prin-
ciples of freedom ‘to some of today’s critical economic and social
issues’ (5). Hayek proceeds to develop chapters on ‘Labor Unions
and Employment,’ ‘Social Security,’ ‘Taxation and Redistribution,’
‘The Monetary Framework,’ Housing and Town Planning,’ ‘Agri-
culture and Natural Resources,’ and ‘Education and Research.’
These seven chapters on specific areas of policy are introduced by
a chapter entitled ‘The Decline of Socialism and the Rise of the
Welfare State.’
Advent of the welfare state

Hayek begins by calling attention to a great change that has taken
place in the post-war period – one that makes it more difficult
to identify and combat freedom’s opponents. For a century up
to the 1940s, efforts at social reform were inspired primarily by
socialism. Reformers shared a conviction that society was moving
inevitably towards socialism as its necessary and final goal.
Their task, as they saw it, was to gain control of the economy by
145
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y s o c i a l i s m i n a n e w g u i s e : s o c i a l j u s t i c e a n d t h e w e l fa r e s tat e
nationalising the means of production, distribution and exchange. out once more, as in Part II, that the Rule of Law limits only the
Socialism’s ascent to power in Britain after the war added to the coercive measures of government, leaving ‘a wide field’ for its non-
sense of its inevitability. In 1944 Hayek had published The Road to coercive or pure service activities, which will clearly need to be
Serfdom, identifying doctrinaire socialism as a pressing danger to financed through taxation (257–8).
liberty. How then does Hayek’s position differ from the socialists’
Looking back, Hayek concludes that the 1940s ‘seems to have understanding of the welfare state? Hayek explains this differ-
marked the high tide’ of the advance of this ‘European’ form of ence partly by contrasting two conceptions of security, one of
socialism. It was discredited by the manifest failure of nationalisa- which (the socialist conception) is at odds with individual liberty.
tion, which turned out to be less productive than private enter- Hayek thinks it proper that government should try to reduce risks
prise, favourable to ‘a new arbitrary and more inescapable order common to all, help people provide against them, and assure ‘a
of rank,’ and dangerous to individual liberty. Hayek would thus given minimum of sustenance for all;’ but it must not attempt to
be ‘tilting at windmills’ if he were to now direct his argument secure to individuals the income that they are thought to deserve
against it. This does not mean, however, that socialism no longer in comparison with other persons. Such a conception of security
threatens freedom. Hoping to recover their influence, socialists leads inevitably to arbitrary and coercive measures, since it
stopped referring to themselves as such. They abandoned the wants to use government’s administrative powers to ensure that
programme of nationalisation and instead promoted the idea of particular people get the particular things that they supposedly
wealth redistribution, which all along had been their true aim. deserve. As the epigraph to Part III, Hayek uses a passage from
The new, nameless socialism resembles the old in its advocacy Tocqueville1 to illustrate how a society that seeks security through
of central planning and economic control, and its guiding ideal – increasing dependence on the state can drift into despotism and
achieving social justice – remains the same. What has changed is end up losing its liberty (258–62, 251).
its method. The path to social justice will be wealth distribution
1 ‘Above this race of men stands an immense and tutelary power, which takes upon
instead of nationalisation (253–5). itself alone to secure their gratifications and to watch over their fate. That power
is absolute, minute, regular, provident, and mild. It would be like the authority
of a parent if, like that authority, its object was to prepare men for manhood; but
Hayek and the welfare state it seeks, on the contrary, to keep them in perpetual childhood: it is well content
that the people should rejoice, provided they think of nothing but rejoicing. For
One can say that the new socialism aims at ‘the welfare state,’ but their happiness such a government willingly labors, but it chooses to be the sole
agent and the only arbiter of that happiness; it provides for their security, foresees
this concept is imprecise; and Hayek must make some distinc- and supplies their necessities, facilitates their pleasures, manages their principal
tions before proceeding to criticise it. In fact, Hayek’s rhetorical concerns, directs their industry, regulates the descent of property, and subdivides
their inheritances; what remains, but to spare them all care of thinking and all
task is complicated by his own embrace of what some libertar- the trouble of living?’ Alexis de Tocqueville, Democracy in America, trans. Henry
ians in particular would regard as welfare state policies. He points Reeve, edited by Phillips Bradley (New York: Alfred A. Knopf, 1945): v. II, 318.
146 147
Hayek’s sharpest criticism of the socialistic welfare state

centres on its use of wealth redistribution to achieve social justice.
There is a deep conflict between ‘the ideal of freedom and the 11 SOCIAL SECURITY, TAXATION AND
desire to “correct” the distribution of incomes so as to make it THE REDISTRIBUTION OF WEALTH
more “just.”’ The pursuit of distributive justice cannot follow (Chapters 19 and 20)
general rules. It requires that all resources be centrally allocated
according to ‘the particular aims and knowledge of the planning
authority.’ Eventually it leads to ‘the command economy.’ The Hayek follows up his general critique of the welfare state
Rule of Law checks this pursuit at every turn. It serves freedom by with chapters on ‘Social Security’ and ‘Taxation and Redistribu-
precluding ‘all those measures which would be necessary to insure tion.’ Both chapters address the issue of wealth redistribution.
that individuals will be rewarded according to another’s concep- The first considers alternative ways of designing social security
tion of merit or desert rather than according to the value that their programmes, while the second considers alternative plans of
services have for their fellows’ (232). taxation.
In examining Hayek’s critique of welfare state policies, I will
focus on the dangers that he chiefly warns against and the specific
Social security
alternatives that he offers. I begin with what Hayek regards as the
most objectionable feature of the welfare state – its use of social In discussing social security, Hayek considers ways of protecting
security programmes and progressive taxation to redistribute individuals against risks associated with old age or permanent
wealth. To secure freedom, the state must avoid coercing citizens disability, sickness and unemployment. He lays out his preferred
unnecessarily and also prevent them from coercing each other. approach to insuring against need and providing for the needy,
The welfare state fails on both counts. Its social security and contrasts it to existing systems of social security, and speculates
taxation policies are inherently coercive, and it fails to prevent about the prospects for replacing or changing the current ones.
labour unions from coercing workers. Moreover, the welfare Hayek insists that the best and cheapest arrangements for
state’s monetary policy is highly inflationary, and its policies on social security are ones that evolve gradually through ‘the constant
natural resource use, education and scientific research tend to re-evaluation of available resources,’ as distinguished from
inhibit progress. unitary systems that are set up according to some advance design.
Unitary systems, once established, are hard to change; and like
‘all sheltered monopolies’ they ‘become inefficient in the course
of time’ (287). Looking back, Hayek finds that suitable provision
for social insurance and relief was emerging in the nineteenth
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y s o c i a l s e c u r i t y, t a x at i o n a n d t h e r e d i s t r i b u t i o n o f w e a lt h
century, when the imposition of centralised government systems 303). The assured minimum level of assistance should be uniform
blocked this path. In England, social services had developed out and should be extended only in cases of ‘proved need.’ Hayek
of the idea that local communities had a duty to provide relief for endorses means tests for welfare eligibility, despite their reliance
the poor. With the growth of large cities, special agencies were on discretion, and rejects the widespread notion that such tests
organised nationally, often by workers themselves, to provide are degrading (301, 303–4). Defining need is particularly difficult
these services and to insure against risk. Hayek acknowledges that in the area of healthcare, where medical advances have made it
industrial society needs arrangements of this sort and that govern- ‘more and more clear that there is no limit to the amount that
ment should assist in their development (286). He is confident might profitably be spent in order to do all that is objectively
that suitable provision for risk and need will continue to emerge, possible’ (298). Here the benefits to the individual of additional
if not thwarted by governmental policies, and that these emergent treatment must be weighed against the costs, but the individual
arrangements, unlike governmental ones, will be consistent with himself should ‘have a say’ in this decision ‘and be able, by an
a free society (291–2). additional sacrifice, to get more attention’ (299).
Hayek favours a government-assisted but decentralised plan On the question of helping the unemployed, Hayek is
that encourages – and even compels – individuals to provide unwilling to extend relief beyond the uniform minimum that is
for themselves while also making relief available to the needy. assured to all, except perhaps in a major depression. He opposes
It requires that individuals insure themselves against such risks such additional relief partly because it distorts the labour market
as sickness, permanent disability and perhaps unemployment. and partly because it subsidises the extravagant wage demands of
Saving for future needs, especially those of old age, obviously labour unions. Hayek does welcome genuine insurance against
fits with personal responsibility; but Hayek says little here about unemployment wherever this is practicable (300–302).
saving, except to point out that governments everywhere are Because public assistance is extended to all, insuring against
pursuing inflationary policies that rob the thrifty of much that risk must be compulsory. Hayek reasons that if public relief is
they have put aside for the future (294–5; cf. 328–9). available even to needy individuals who neglect to help them-
As a safety net, Hayek would provide public assistance, in selves, some will fail to make provision against emergencies and
an amount consistent with a society’s wealth, to persons in many may do so inadequately. The obvious solution is ‘to compel’
great need. He concedes that such a programme involves ‘some individuals ‘to insure (or otherwise provide) against’ the hazards
redistribution of income.’ Nevertheless, preventing destitution associated with old age, unemployment, sickness and so on. As
and providing a minimum level of welfare are now generally noted earlier, Hayek justifies such coercion on the same principle
accepted as a public duty – one rooted at least partly in the self- that he had used earlier in justifying taxation and compulsory
interested ‘desire of individuals to protect themselves against military service. Although ‘the community’ may not force a person
the consequences of the extreme misery of their fellows’ (285–6, to act in his own interest, it may nonetheless compel him to do
150 151
what is in the community’s interest, which is preventing harm to another, as might seem desirable. These compulsory monopolies
its members. Compulsion is justifiable in this case because people were represented to the public as ‘social insurance,’ but this claim
who neglect to make provision ‘would become a charge to the was deceptive.
public’ (286). Insurance, properly speaking, grants protection only to those
Hayek’s proposals, as summarised above, are embedded who can claim it through their contributions. Monopolistic social
in a scathing critique of unitary, government-controlled social security programmes, by contrast, enrol those who have not
security systems, the original of which was the ‘social insurance’ yet had time to establish a claim. People receive ‘as a matter of
arrangement that Otto von Bismarck’s government enacted in right what they have only to a small extent paid for.’ Benefits are
Germany in the 1880s. Although Bismarck did not ban the private not limited to a contractual amount, or even to some necessary
relief agencies that then existed, he decreed that the state would minimum, but reflect a political judgement as to an amount that
henceforth be the sole provider of such social services through a would be adequate, regardless of a person’s need or contribution.
unified organisation to which everyone protected had to belong. Unlike genuine insurance, government plans can transfer income
The German plan went beyond compulsory insurance to require from one group to another. Pension claims, for example, are paid
‘compulsory membership in a unitary organization controlled by out of the taxes of those currently working, and not from income
the state’ (287). on capital set aside to honour these claims. Wealth is thus trans-
The German model spread because it was presumed to be the ferred from the young and productive members of society to the
most efficient and economical way to provide universal coverage. elderly, a result which leads Hayek to speculate that the burden on
Hayek grants that this might be true when centralised plans are the young may in the future become greater than they are willing
first introduced, but holds that relying ‘on the gradual evolution to bear (288–9, 292 and 295–7).
of suitable institutions’ is a better solution in the long run, even if Hayek gives several reasons why unitary state systems of social
for a time some needs receive inadequate attention. A centralised security, as they have developed everywhere, pose a critical threat
design for social services shuts off ‘the constant re-evaluation of to freedom. First, these programmes are necessarily coercive.
available resources’ and leads to long-term inefficiencies (287; cf. They designate government as the monopoly provider of certain
232). services and give administrators broad discretion to distribute
Hayek goes on to argue that compulsory social service benefits to individuals according to what they are thought to
monopolies were mainly attractive to socialists not because of deserve. Systems of state medicine transform doctors into paid
their presumed efficiency, but because they provided a means of servants of the state, subject to instruction by authority as to
egalitarian redistribution. The socialists recognised that a monop the provision of medical services (288–90, 300). Second, these
olistic government service could distribute benefits according to programmes are at odds with a healthy democracy. This is partly
perceived need and also redistribute income from one group to because their very complexity defeats democratic deliberation
152 153
about them. Neither ordinary citizens nor their elected represent- to freedom than the welfare state’s social security policies.
atives can understand these complex programmes, so they must Progressive taxation redistributes wealth more efficiently than
depend on the judgement of a few experts who strongly favour the such policies; without it, the scope of redistribution ‘would be
principles underlying the programme in question and are disin- very limited.’ Moreover, its appeal is broader: ‘Redistribution by
clined to question its core principles (288–91). Also, since govern- progressive taxation has come to be almost universally accepted
ment programmes are expected to provide ‘adequate’ benefits, as just.’ Whether joined to the welfare state or not, progres-
as determined politically, they are easily exploited by demagogic sive taxation is now ‘the chief means of redistributing incomes.’
politicians and self-interested voters (296). Finally, the central Moreover, it is the main source of democratic irresponsibility and
bureaucracy that administers social security programmes also governmental arbitrariness (306–8).
controls the flow of information about them. Its power to engage Hayek advocates proportional taxation, which applies a
in ‘subsidized propaganda’ confers on it ‘a power over minds’ that constant rate to everyone. With a progressive system, by contrast,
is akin to that of a totalitarian state (293; cf. 291–4). the rate of taxation increases as the amount being taxed increases.
Hayek points out that these unitary state systems are facing The wealthy pay more under both systems, but at an escalating
difficulties everywhere. They have placed on society ‘a steadily rate under a progressive one. Hayek uses historical evidence to
growing burden from which it will in all probability again and illustrate his claim that there is no limit, in principle, to how high
again attempt to extricate itself by inflation.’ Even so, these a progressive rate can go. When a progressive income tax was
systems, once established, are very difficult to get rid of. Conceiv- introduced in Prussia in 1891, the upper rate was 4 per cent. In
ably sickness and unemployment allowances could be trans- 1910 Great Britain followed suit, as did the USA in 1913, setting
formed gradually into systems of true insurance; but in the case the upper rate at ‘8¼ and 7 percent, respectively. Yet within
of pensions for the aged, the rising generation, having paid for the thirty years these figures had risen to 97½ and 91 percent’ (310).
needs of the preceding one, can always make a claim to support by This outcome is not surprising to Hayek, since ‘all arguments
the next. Any long-term changes will require the public to recon- in support of progression can be used to justify any degree of
sider these programmes: ‘… democracy will have to learn that it progression’ (313).
must pay for its own follies and that it cannot draw unlimited The case for progressive taxation, as Hayek presents it, rests
checks on the future to solve its present problems’ (304–5). mainly on four claims, which we may call scientific, political, expe-
dient and moral; and his aim is chiefly to refute these particular
claims.
Proportional versus progressive taxation
The advocates of progressive taxation hoped to give it scien-
When it comes to governmental efforts to redistribute wealth, tific respectability by appealing to utility analysis, specifically
Hayek sees the progressive income tax as an even greater threat to the principle that income has a diminishing marginal utility.
154 155
Their argument can be put this way: a rising income is satisfying, much less revenue than is generally recognised. Hayek estimates
especially to poor people; but beyond a certain level of need, the that British expenditures on subsidies and services are ‘financed
satisfaction derived from income diminishes with the addition of mainly by the contributions of the middle and upper ranges of the
each new increment. This means that taxing the wealthy at a high middle class’ (313; cf. 311–13, 315).
marginal rate will have little effect on their wellbeing, whereas Progressive taxation is put forward as an expedient or advan-
a transfer of wealth will greatly enhance the wellbeing of the tageous policy, but Hayek contests this claim on economic
poor. Hayek replies only briefly to this argument, since he thinks grounds. One of his objections to high marginal tax rates is that
that the field of utility analysis has abandoned interpersonal they impede capital formation, thus slowing economic growth.
comparisons of utilities, and since he doubts that the principle of Potential savers and investors are the ones hit hardest by high
decreasing marginal utility properly applies to income, broadly marginal tax rates, especially those persons who expend efforts
understood as ‘all the advantages a person derives from the use of over time or take risks that might yield large gains in a single
his resources’ (309). year. Moreover, high marginal rates reduce the incentive for
The political case rests on the idea that progressive taxation individuals to increase their earnings within a given tax year and,
is democratic or, more precisely, that it reflects the will of the what is even more harmful, they misdirect resources by diverting
majority in communities where it has been enacted. Hayek does people’s energies to less useful activities (316–18). To build up a
not object in principle to the majority determining tax policy, new business or succeed in a new enterprise, individuals must
so long as it doesn’t ‘impose a discriminatory tax burden on a control considerable resources; and acquiring a fortune in a
minority’ or try to determine what an ‘appropriate’ income would short time period should be seen as ‘a legitimate form of remu-
be (322). The problem, in practice, is that groups with the greatest neration’ for this kind of activity. Discouraging individual capital
voting strength have used progressive taxation to shift the tax formation restricts competition, inasmuch as it strengthens ‘the
burden to the wealthier classes. The majority, perhaps to gratify position of the established corporations against newcomers.’
its envy, can push tax rates to confiscatory levels. From Hayek’s In effect, ‘the tax collector’ shelters old firms from competition.
standpoint, this self-interested strategy is both wrong and short Also, by preventing ‘the dangerous newcomer from accumulating
sighted. The strategy is wrong, because the majority, instead of any capital,’ progressive taxation ‘checks economic progress and
applying a general rule, exempts itself from a policy that it applies makes for rigidity’ (320–21; cf. 318–20).
to others: ‘the majority which determines what the total amount Progressive taxation has sometimes been justified on the basis
of taxation should be must also bear it at the maximum rate’ (322). of capacity to pay, but this argument was superseded by the claim
The strategy is short sighted, because inflation gradually brings that such a system produces ‘a more just distribution of income’
the middle classes under the higher rates, without raising their (311). Hayek grants that justice is an appropriate standard for
real income. Moreover, taxing the rich at a high rate produces weighing tax systems, but argues that steeply progressive ones are
156 157
themselves unjust. A just system of taxation, as Hayek conceives

it, is one that is limited by a principle or rule that applies to
everyone. Progressive taxation is not constrained by any such 12 STOPPING COERCION IN EMPLOYMENT
limiting principle. It applies different rules to different people, (Chapter 18)
depending on their degree of wealth; and it has no principled
way of deciding who should be taxed and how much. Progres-
sive systems permit a majority ‘to impose a discriminatory tax
burden on a minority.’ By making actual income relative to one’s Hayek points out in an earlier chapter that most people today
tax rate, they violate ‘what is probably the only universally recog- work as employees of large organisations. Some employees are
nized principle of economic justice, that of “equal pay for equal unionised workers; and it is with reference to them that Hayek
work.”’ A whole class of persons is practically deprived of the takes up the problem of coercion in employment. Hayek acknow
normal incentives because their income is not in line with the rest. ledges at one point that coercion should ‘be treated as equally
None of these progressive measures can be defended on grounds illegitimate whether employed for or against organization, by
of justice (313–17, 322). the employer or by the employees;’ but he is mostly silent about
Proportional taxation meets Hayek’s standard of justice. It preventing employer coercion, except to recommend contrac-
applies the same general rule to everyone, prevents discrimina- tual arrangements that provide for a grievance procedure and
tion against the wealthy and, by requiring that political majori- some degree of employee self-government. Generally speaking,
ties abide by the rules they enact, deters high rates of taxation. Hayek takes the view that workers’ interests are best served by
Since the principle of proportionality, like that of progressivity, encouraging competition among many employers; and it is likely
does not itself specify appropriate rates of taxation, Hayek specu- that he would argue that the need to compete for workers is the
lates that the maximum admissible rate of direct taxation might most effective check on employer coercion. He acknowledges
reasonably be set ‘at that percentage of the total national income that workers have the right to voluntary agreement among them-
which the government takes in taxation.’ It should be noted that selves and also the right to ‘withhold their services in concert,’
Hayek does not object to a majority granting ‘to an economically but thinks that there are certain employments where the right to
weak minority some relief in the form of a proportionately lower strike should be renounced contractually (278, 276–7, 269).
taxation.’ Also, to compensate for the effects of indirect taxation,
he grants that ‘some progression in personal income taxation is
Coercive unionism
probably justified’ (332–3).
Unions employ coercion to gain benefits for their own members,
especially higher wages. In fact, ‘raising wages by the use of
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y stopping coercion in employment
coercion is today the main aim of unions’ (275). Having a increase the real wages of their own members and perhaps even
monopoly of labour is crucial to this aim, for if unions effectively those of all the employed; but as a result some workers will be
control all the potential workers, employers must bargain with unable to find jobs. As Hayek explains, ‘the real wages of all the
them. Unions thus use coercive means ‘to force unwilling workers employed can be raised by union action only at the price of unem-
into membership and to keep non-members out of employment’ ployment.’ Taking unemployed workers into account, unions
(268). If governments followed the Rule of Law, they would prevent ‘cannot in the long run increase real wages for all wishing to work
coercive labour monopolies; but instead they have sanctioned or above the level that would establish itself in a free market.’ Besides
tolerated hostile picketing in large numbers, closed or union shop distorting the wage structure, the practice of excluding workers
contracts, and secondary strikes and boycotts – all techniques from highly paid occupations produces inequalities among
that Hayek would prohibit (274–5, 278–9). Unions get away with workers and amounts to ‘the exploitation of the relatively poor
coercive techniques partly because they wield great political influ- by the better-off.’ Also, while union activities can increase the real
ence and partly because the public mistakenly thinks that union wages of employed workers, empirical evidence shows that real
activities benefit the entire working class. Economists can render a wages ‘have often risen much faster when unions were weak than
public service by correcting this misconception (273–4). when they were strong.’ Hayek concludes that coercive unionism,
Unions claim to benefit all workers by raising the general despite its claim to benefit all workers, serves the interest of a
level of wages. To refute this claim, Hayek builds on a distinc- particular group. It increases real wages for organised workers,
tion between real wages and money wages – a distinction that but pits them against others who ‘will find employment only in
had been important to his business cycle theory and his critique the less highly paid jobs’ or else ‘will not be employed at all’ (270;
of Keynesian economics. In a 1942 essay he notes that ‘real wages’ cf. 270–71).
commonly refers to ‘the relation between wages as received by An argument heard frequently today is that real wages have
the worker and the prices of the commodities on which he spends steadily lagged behind society’s overall productivity gains, so that
those wages.’ By this definition, which centres on the worker’s for workers to receive their just share of the fruits of economic
purchasing power, real wages can increase if the prices of desired growth, the power of unions to bargain on their behalf must be
commodities go down or decrease if their prices go up. Inflation strengthened. This argument assumes that union practices raise
pushes up money wages but not real wages, since the price of the productivity. Hayek undercuts it by insisting that union practices
goods purchased by workers also rises (1948: 252). lower productivity, rather than enhancing it. In most European
Hayek has no doubt that unions can increase workers’ money countries, unions employ ‘restrictive policies of a “make-work”
wages, but can they increase real wages for all? Hayek’s answer character’ that ‘necessarily reduce the productivity of labor all
turns on a distinction between ‘all the employed’ and ‘all wishing around and therefore also the general level of real wages’ (271; cf.
to work.’ By limiting the supply of labour, unions might be able to 272–3).
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y stopping coercion in employment
Economic and political dangers ensure full employment (see 337). Hayek attributes this ruinous
Hayek’s principled objection to coercive unionism is that it governmental policy to Keynesian economics. Keynes recognised
violates the Rule of Law. But he also argues that union wage that excessively high wages cause extensive unemployment, but
policy is ‘economically very harmful and politically exceedingly at the same time he saw that any direct attempt to lower wages
dangerous’ (272). Some of these economically harmful conse- would require ‘a struggle so painful and prolonged that it could
quences – distortion of the wage structure, unjustified inequalities not be contemplated.’ Keynes’s solution was to lower real wages
among workers, diminished productivity – we have mentioned. by lowering the value of money: ‘If labor insists on a level of
Union activities also restrict the mobility of labour, disadvantage money wages too high to allow of full employment, the supply of
some industries more than others, and (often in collusion with money must be so increased as to raise prices to a level where the
enterprise) produce monopolies that limit competition (280–81). real value of the prevailing money wages is no longer greater than
But why, besides causing economic harm, are union policies the productivity of the workers seeking employment’ (280).
‘exceedingly dangerous’ politically? Hayek fears that these policies A full employment policy requires the monetary authori-
will lead to a ‘system of over-all socialist planning’ (273) or ‘the ties to ‘provide enough money to secure full employment at any
transformation of the whole of society into a centrally planned given wage level.’ Such a monetary policy creates expectations of
and administered system’ (282). rising inflation. If the money supply is tightened to stop inflation,
Hayek identifies two distinct but related causes that can substantial unemployment will quickly result, bringing about ‘a
produce this dangerous result: the crippling of market alloca- renewed and irresistible pressure for more inflation’ (281). Eventu-
tions; and runaway inflation. The first point is that unions, by ally the public, alarmed by spiralling inflation, will demand the
establishing monopolies in the supply of labour, ‘prevent compe- drastic actions mentioned above – wage-fixing by government
tition from acting as an effective regulator of the allocation of all and even the abolition of unions. While opposing the goal of full
resources.’ Yet the only alternative to the market as a means of employment, Hayek does hold that it is possible to secure ‘a high
such regulation is ‘direction by authority,’ which in practice would and stable level of employment’ while aiming at the stability of
mean central planning by the state (272–3). Hayek’s second point some comprehensive price level (337).
is that steep and prolonged inflation, resulting from an uncontrol- Hayek is no fatalist. He holds out hope that the dangers he
lable wage–price spiral, will eventually cause serious public alarm foresees from coercive unionism can be averted. This would
and provoke demands ‘either for the fixing of wages by govern- require that unions conform to the Rule of Law, which in practice
ment or for the complete abolition of the unions’ (282). means that government would prevent unions from using
Union wage policies cannot alone cause inflation to grow. coercion to attain their goals. Hayek does not wish to eliminate
Excessively high wages would simply produce job losses, if govern- unions, for this would violate their freedom of association. In fact,
ment did not expand the supply of money and credit in order to he emphasises that unions would continue to have ‘a useful and
162 163
important role,’ even with the elimination of their power to coerce

individuals. Unions could take part in collective negotiations to
settle compensation issues, such as choosing among alternative 13 PREVENTING INFLATION (Chapter 21)
benefits, setting differences in remuneration for different jobs,
and deciding on rules of promotion. Unions could help to deter-
mine rules governing the conditions of work, including griev-
ance procedures and some degree of employee self-government.
Finally, unions could return to the original model of ‘friendly soci- In the mid-1970s, looking back on a long career, Hayek would
eties,’ helping members to protect themselves against the risks write that ‘the task of preventing inflation has always seemed to
of their trade. Unions would be excluded, however, from partici- me to be of the greatest importance’ (2009: 128). Certainly this
pating in the conduct of business (276–7). Hayek rests his hopes concern is evident in The Constitution of Liberty, which warns
for reform on the possibility that the public, along with ‘farsighted repeatedly of inflation’s grave consequences. Chapter 21, entitled
union leaders,’ will recognise the dangers inherent in coercive ‘The Monetary Framework’, addresses the problem of inflation
unionism and agree to re-establish the Rule of Law in the work- in three ways: it summarises the inflationary effects of welfare
place (284). state policies; it demonstrates that monetary policy is central to
the problem at hand; and it considers how best to arrange the
monetary system so as to prevent inflation. In reading this present
chapter, one should keep in mind that Hayek will later reject
the monetary arrangement proposed here and embrace a quite
different one.
Inflation and the welfare state

Hayek has identified several reasons why welfare state policies
are inflationary. Inflation helps to extricate governments from
the heavy financial burden of social security programmes, espe-
cially old-age pensions. Inflation expands government revenues,
under systems of progressive taxation, by moving taxpayers into
higher tax brackets, so that their taxable income goes up without
a proportional increase in their disposable income. Government’s
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y p r e v e n t i n g i n f l at i o n
full employment policies, combined with coercive wage pres- of the weakness or ignorance of those in charge of monetary policy
sures by unions, lead to spiralling inflation. Hayek points out that – though the division of responsibility may be spread so wide that
welfare state policies and inflation have a reciprocal relationship, nobody is to blame’ (295). Much of the present chapter is devoted
inasmuch as inflation’s effects have ‘strengthened the demand for to ways of maintaining a stable monetary system – one that can
welfare measures’ (328). reasonably expect to achieve ‘a high and stable level of employ-
Hayek regards inflation as ‘infinitely more dangerous’ in the ment’ as well as ‘the stability of some comprehensive price level’
long term than deflation, so the primary goal of monetary policy (337).
must be to prevent it. His position runs counter to ‘the existing One option would be to deprive governments of their control
inflationary bias,’ which rests on the erroneous belief that defla- over monetary policy and rely on spontaneous market forces to
tion is the greater danger (330). Technically speaking, inflation correct inflation and deflation. The market-only option, while
is much easier to prevent than deflation, but psychological and perhaps feasible at one time, is no longer practicable or even
political factors make it difficult to adopt the proper measures. desirable, and this is for three reasons: first, the need for a central
This is because inflation is more pleasant in its immediate effects agency to control rapid and disruptive changes in the relative
and deflation more painful. Inflation seems to offer governments supply of money or the demand for it (money is ‘a kind of loose
an easy way out of deflation, but this is to disregard its long- joint in the otherwise self-steering mechanism of the market,’
term disadvantages – a myopic outlook that Keynes sanctioned hindering any direct return to a new equilibrium); second, the
by the ‘fundamentally antiliberal aphorism, “in the long run we need to deal with spontaneous fluctuations in the supply of money
are all dead.”’ To maintain its stimulative effects, even mild infla- resulting from ‘the interacting money and credit systems;’ and
tion must be ‘progressively accelerated.’ This disrupts business third, the need to take account of government’s financial policy,
planning, making it more difficult to determine real costs, profits which necessarily dominates monetary policy in an era of massive
or income. Inflation deters investments by taxing profits more expenditures. It is thus inevitable, under modern conditions, that
heavily and also erodes savings. Hayek warns again, as he had control of monetary arrangements ‘should be largely exercised by
earlier, that severe inflation can eventually undermine a free governments’ (325; cf. 324–7; see Hayek, 1941 [2007a]: 367).
society (337–9). For these reasons, ‘the economist should always Having argued that the money supply should be controlled
stress the dangers of inflation’ (333). by some government agency, Hayek must now decide how much
discretion to allow it. One possibility is to impose some mechan-
ical rule that aims for long-term monetary stability but ties the
Misguided monetary policy
agency’s hands in the short term and insulates it from political
Besides continually warning against inflation, Hayek pins respon- pressures. Some economists have advocated restrictive rules of
sibility for it directly on government: inflation ‘is always the result this kind. Others would require that currency be convertible into
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h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y p r e v e n t i n g i n f l at i o n
gold or other commodities. Hayek doubts, however, that any of one of the chief causes of its constant expansion.’ While severely
these mechanical solutions were practicable at that time (333–5). limiting government’s discretion in matters of monetary policy,
Discretion here can be limited, but never eliminated. In fact, Hayek does see a need for considerable discretion in its manage-
central banks require ‘much discretion’ to fulfil their task of fore- ment of financial policy. As ‘the biggest spender and investor,’
stalling or counteracting ‘developments in the realm of credit, government should, insofar as practicable, ‘distribute its expendi-
for which no simple rules can provide sufficient guidance.’ Addi- ture over time in such a manner that it will step in when private
tionally, when it comes to preventing great fluctuations in prices investment flags, and thereby employ resources for public invest-
and employment, a central bank cannot always wait ‘until rule or ment at the least cost and with the greatest benefit to society’
mechanism forced it to take action’ (336). (1979: 59; cf. 57–8).
In view of Hayek’s later position, it should be mentioned
that in The Constitution of Liberty he does question, in a lengthy
The denationalisation of money
footnote, whether central banks should monopolise the issue of
By the mid-1970s, Hayek had concluded that any central bank that all kinds of money: ‘there seems to be no reason whatever why
monopolises the issuance of all kinds of money would succumb the state should ever prohibit the use of other kinds of media of
to political pressures and eventually inflate the currency to exchange, be it some commodity or money issued by another
dangerous levels. Thus he came to advocate ‘the denationalisa- agency, domestic or foreign’ (520–21). The footnote does not
tion of money,’ which deprives government of its monopoly of the consider whether competition from private banks might be suffi-
issue of money and permits banks to offer competing currencies, cient to restrain government’s monetary institutions.
though not the official one (Hayek, 1978b [2009]). In The Consti-
tution of Liberty, Hayek wrestles with the problem of achieving
monetary stability even while leaving governmental institutions
in control of the money supply. His later strategy, by ending
this government monopoly or ‘denationalising’ money, offers a
market-based solution to the problem. Having to compete with
other currencies would ‘impose a very necessary discipline upon
the governmental issue of currency through the threat of its being
displaced by a more reliable one.’ With citizens free to choose
the most trustworthy currency, government would ‘be deprived
not only of one of the main means of damaging the economy and
subjecting individuals to restrictions of their freedom but also of
168 169
s a f e g ua r d i n g p r o g r e s s
of what such a system would have to accomplish, even to equal the

market in effectiveness’ (342; cf. 358–9, 363, 366, 525, n. 8).
14 SAFEGUARDING PROGRESS (Chapters Hayek relies chiefly on markets to ameliorate problems of
22, 23, 24) land use, population imbalances and possible resource depletion.
Central planning cannot solve these problems, and it is likely to
make them worse. Good policies will facilitate adaptation and
help markets work effectively.
Hayek concludes his discussion of freedom in the welfare state Besides considering where progress has brought us, Hayek
with chapters on housing and town planning, agriculture and looks ahead to the requirements for its continuation. Progress
natural resources, and education and research. These policy areas, is driven above all by new knowledge. Indeed, the emergence
like the ones we examined earlier, involve issues of wealth redis- and spread of knowledge is a large part of what Hayek means by
tribution, but more broadly they raise questions about progress progress. As we will see, this forward-looking stance is particularly
– what it means, why it is threatened by current policies, and how evident in his concluding discussion of education and research
best to ensure its continuation. policy.
The complex problems of rural and city life and of dwindling
natural resources have a common origin in the advance of modern
Urban policy
technology. Hayek points out that the Industrial Revolution
was preceded and made possible by a revolution in agriculture, Hayek traces human progress to the growth of cities. Urban
which made it possible for a smaller number of farmers to feed life was responsible not only for enormous increases in indus-
the populace. Many rural inhabitants then moved to the cities and trial production and material comforts, but also for advances
took up industrial pursuits, which themselves were highly produc- in science and art. The advantages of civilization over primitive
tive and greatly beneficial to both urban and rural consumers. The society are due to the city; and since its products can be enjoyed
decline in the size of the farming population is often lamented in the country, a leisured life in the country has come to be seen as
on economic and aesthetic grounds; but Hayek sees this decline ‘the ideal of a cultured life’ in advanced civilisations. Yet despite
as a necessary and beneficial adaptation to technological change. its indispensable contribution to civilisation and to progress, the
As for cities, their growth was determined mostly by undirected city ‘is at the same time responsible for the darkest blotches on
market forces and not by advance planning. In Hayek’s view, ‘the this civilization.’ City life produces a level of poverty and outward
market has, on the whole, guided the evolution of cities more signs of squalor that fellow men find shocking and scarcely toler-
successfully, though imperfectly, than is commonly realized;’ and able (340–41).
proposals for a system of central direction ‘show little awareness Hayek has no objection to planning as a way to deal with
170 171
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y s a f e g ua r d i n g p r o g r e s s
problems of urban life, so long as it is voluntary. The important they impose on the rest of the city. The slums would probably
consideration is whether planning aims ‘to supplement and assist disappear and be replaced by commercial or industrial buildings.
the market or to suspend it and put central direction in its place.’ Slum clearance is hard to justify, however, in terms of what is good
By relying on markets, voluntary planning can make ‘full use of for the slum dwellers. The poor find it economically advantageous
the dispersed knowledge of the prospects and possibilities of to live in centrally located slums; and public housing is not a desir-
development.’ To be sure, the price mechanism is sometimes an able option. Subsidising people to remain in the city has the effect
imperfect guide, as in determining whether an urban property of stimulating ‘the growth of cities beyond the point where it is
owner’s actions have benefited or harmed his neighbours; but economically justifiable.’ Moreover, it deliberately creates ‘a class
generally it conveys information that is indispensable to voluntary dependent on the community for the provision of what they are
planning (341, 349–50, 352). presumed to need.’ A logical next step for planners, in addressing
Hayek objects to some urban planning measures (rent restric- urban problems, would be to control who will be allowed to move
tions, public housing and subsidised housing) because they into a city. Their inclination, in any event, is to subject the whole
subject segments of the population to arbitrary decisions and economy to ‘administrative despotism’ (347–8, 351, 354).
make them dependent on authority for direction in their lives
(344). He regards some other measures, such as building regula-
Agricultural policy
tions and permits, as necessary and desirable, but warns that
they are frequently used ‘to impose harmful or wholly irrational Agricultural policy in Western countries must face up to the
restrictions on development’ and also to ‘strengthen the quasi- fact that a population’s food requirements, even if growing, can
monopolistic positions of local producers’ (355). Controlling land be met by fewer farmers than ever before, owing to enormous
use is one of the principal ways in which urban planners try to gains in agricultural productivity. Having too many agricultural
channel economic growth. Planners might, for example, specify workers depresses average farm income and produces rural
where industry and commerce can be located or clear away slum poverty. Although agriculture is ‘peculiarly sluggish in its adap-
housing in the city’s centre so as to promote some alternative use tation to change,’ rural workers themselves have gradually dealt
of the land. with their plight by moving to other jobs, particularly in urban
Hayek does not reject land use planning as such, but recog- industries. Governments should encourage and facilitate this
nises that it can make matters worse by preventing evolutionary redistribution of workers by allowing the marginal land and
solutions and by depriving individual owners of an interest farms to be eliminated. With fewer workers supplying agricultural
in putting their land to better use. In no case should planners products, average farm income would rise and might keep up with
expropriate land below fair market value. As for clearing slums, a the general increase in incomes. In fact, however, governments
market solution would be to charge slum properties for the costs have delayed the necessary adjustment by trying to maintain a
172 173
Natural resource policy

much larger agricultural workforce than markets alone would
require. The primary tools of this misguided policy are subsidies The latter half of Chapter 23 addresses indirectly this enduring
and controls. Price supports and other farm subsidies amount to question: how is humankind to regard ‘a free gift of nature’?
‘compulsory transfers of income from the urban to the agricul- With some exceptions, Hayek views nature’s gifts as an available
tural population.’ More dangerous, in terms of direct coercion, supply or ‘resource’ to be used in fostering economic progress.
are efforts to control prices and production. Current agricultural Much government policy, by contrast, is premised on the idea
policy, to be successful, requires authoritative decisions as to ‘who that natural resources have a special standing, such that they must
is to produce, how much, and what.’ Such a policy leaves little be preserved and protected from exploitation by private enter-
room for individual freedom and leads towards ‘a totalitarian prise, even with far-reaching controls that greatly limit individual
control of all economic activity’ (362; cf. 360, 361–2). freedom. Hayek replies that a natural resource should be treated
How might government properly address the genuine and the same way as other resources, such as ‘man-made equipment
important problems faced by agricultural workers? In Hayek’s or human capacities,’ that might be invested in productive activity
view, no planning is needed in this area. Generally economic (367, 373–4).
markets should be allowed to take their course. Only the pressure Hayek points out that some natural resources are diminished
of prices, by producing ‘the necessary reduction in the agricul- by use and are eventually used up, while others can be so managed
tural population’ and encouraging the adoption of new agricul- as to yield a durable stream of benefits. In either case, however, he
tural techniques, can ‘lower cost and make the survival of the has no objection to exhausting a natural resource, if that appears
suitable units possible.’ Beyond this, there are two specific func- to be the best strategy to maximise income. The market offers
tions that government ought to perform. First, it should gradually better foresight in these matters than government planning; and
improve legal institutions with a view to making markets work one lesson of advancing technology has been that new and unan-
more effectively. Here Hayek takes note of the benefits derived ticipated resources will emerge to replace existing ones (368–70,
in medieval Europe from the consolidation of dispersed holdings 374).
and in England from enclosures of the commons. His point is that Most of the arguments for ‘government control of private
legal changes might still be required to bring ‘appropriate units activity in the interest of conservation of natural resources’ are, in
of enterprise under single control’ and to foster ‘group collabora- Hayek’s view, invalid. He recognises an exception, however, where
tion.’ Achieving this result might require ‘compulsory expropria- the aim is not income maximisation, but providing recreational
tion,’ but with proper safeguards. Second, government ought to opportunities and preserving natural beauty or sites of historical
provide a variety of services to agricultural workers, especially or scientific interest. Such amenities render a service to the public
informing them about the benefits of technological innovations at large, providing advantages for which the individual beneficiary
(see 360, 364–5). cannot be charged a price. Also, they usually require large tracts
174 175
of land. These considerations make the provision of such ameni- ought to be guided by definite values.’ A general education can
ties ‘an appropriate field for collective effort.’ Voluntary efforts in be an effective way to spread common values and thereby ensure
this field are desirable, but Hayek does not object to government ‘a peaceful common existence.’ Hayek warns, however, that the
using its compulsory powers to acquire the land needed for such attempt to inculcate values is ‘the source of real dangers in any
amenities, ‘so long as the community approves this, in full aware- system of public education.’ A government policy of providing
ness of the cost, and realizes that this is one aim competing with a common cultural background for all citizens ‘can lead to fric-
others and not a unique objective overriding all other needs’ (375; tions in multinational states.’ Even in ethnically homogeneous
cf. 374–5). states, there is a danger that government will exert ‘a high degree
of control of the contents of education’ or impose some particular
theory of education that claims to be scientific.
Education and research policy
General education aims more at preserving civilisation than
Hayek’s discussion of education is divided roughly into two at novelty. It advances material wealth, but within an established
parts. The first considers education as it might be typified by order whose traditions and values it affirms. General education
the elementary school. The second part discusses education as must be compulsory up to a point and government must fund
typically provided by the research university, whose aim is not it. This does not mean, however, that general education must
only to disseminate knowledge by instruction, but also to advance be provided in state-run schools. Here the danger of imposing a
knowledge by path-breaking research. The community has an single set of values or a single theory of education would be great.
interest in supporting both kinds of education, but for different While the community has an interest in maintaining common
reasons. Also, both kinds are relevant to progress and to freedom, values, its overriding interest lies in preserving freedom; and
but in different ways. it best achieves this by sponsoring a wide variety of educational
While parents have the primary responsibility for the educa- arrangements. Hayek points to voucher systems as a way for
tion of their children, the ‘other members of the community have government to defray the costs of general education without
a genuine stake’ in their welfare. First, the community benefits monopolising instruction (378–81).
when knowledge is disseminated widely and used effectively. The University education, by contrast, is not intended to conserve
spread of useful knowledge increases material opportunities for established ways or to be immediately useful. The community’s
large numbers of people. Second, if a community is governed by interest in supporting university education lies chiefly in the long-
democratic institutions, these are not likely to work well if there term contribution it makes to overall progress or to ‘the growth
is widespread illiteracy. Finally, the community has a stake in of civilization.’ Universities spur progress mainly through the
‘maintaining certain standards of values,’ especially when immi- advancement of new knowledge or ‘the conception and pursuit of
grant populations must be assimilated: ‘all education must be and new ideas,’ and this ‘will always be the work of the relatively few.’
176 177
Hayek urges ‘that there should be as many independent centers of to them, even though these opportunities are limited to a few and
work as possible,’ providing capable and devoted researchers with inequality is the inevitable outcome (382, 385–6).
the freedom to reach and expound their own conclusions, regard- Political philosophers traditionally have taught that each
less of whether these conclusions ‘are palatable to their employer political regime aims to produce the type of citizen that accords
or the public at large’ (389–90). with that regime; and Hayek agrees that this has been the case.
Academic freedom is granted to universities to protect them He insists, however, that moulding citizens of a particular type is
against outside pressures to affirm the prevailing conventions not the proper business of government. To do so is to presume
and values. While approving the doctrine of academic freedom, to know what type of human being the future will prefer; but we
Hayek warns that conformist pressures often come from within cannot know how the future will assess man’s moral and aesthetic
the university. In particular, he opposes ‘the ideal of a unified and qualities. The solution is to encourage a variety of types. Freedom
centralized direction of scientific efforts,’ whether directed by means that ‘no superior must be allowed to enforce one set of
outside authorities or by some committee of distinguished scien- views of what is right or good’ and that ‘only further experience
tists (391). The planning of science must inevitably fail to reach can decide what should prevail.’ Each generation must endeavour
its objectives, because the outcome of scientific research is unpre- to add its share ‘in the growth of knowledge and the gradual
dictable. It depends in large degree on accident and on unfore- advance of moral and aesthetic beliefs’ (394; cf. 380).
seeable events. No one can say in advance what line of inquiry or Hayek cautions against expecting too much from general
what particular researcher will be successful. Hayek expects that enlightenment. Rationalist liberalism set out to ‘conquer ignor
individual scientists, making the best use of their opportunities, ance,’ but Hayek doubts that such a goal is feasible or that society
will more likely succeed in making important discoveries than can be improved this way: ‘There is not much reason to believe
research teams (392–93; cf. 388–94). that, if at any one time the best knowledge which some possess
By contrast to elementary schools, research universities can were made available to all, the result would be a much better
support only a few students at public expense. The community’s society’ (376–80).
interest here is not to help particular students, but to advance civil Education, properly understood, views man as a being in
isation. Even so, the recipients of aid have opportunities that are progress or as one who ‘reaches beyond his present self.’ Educa-
not available to others; and as a result of their superior education, tion thus goes hand in hand with human freedom, whose ultimate
they are likely to enjoy greater wealth and social esteem. Are these aim ‘is the enlargement of those capacities in which man surpasses
state-fostered inequalities justifiable? Here, as in earlier chapters his ancestors.’ Freedom does have a purpose or aim, although its
of The Constitution of Liberty, Hayek opposes efforts to equalise consequences are unforeseeable. Hayek concludes in this vein by
opportunities, arguing that the public’s interest is best served by quoting a well-known passage from Humboldt to the effect that
allowing individuals to make full use of the opportunities available liberty’s overriding aim is ‘human development in its richest
178 179
diversity’ (394). Education is vital to human development, thus

understood. This is why a free society’s education policy cannot
be merely utilitarian. 15 WHY I AM NOT A CONSERVATIVE
(POSTSCRIPT)
When Hayek, in the body of his text, attacks rival views, his
targets are mainly rationalist liberalism and socialism in one
form or another. To be sure, he sometimes criticises conserva-
tive thought and practice; but given his insistence on the limits
of reason, the force of tradition and the need to recover old prin
ciples, the reader might well conclude that the term ‘conserva-
tive’ applies aptly to Hayek. This notion is exploded by Hayek’s
Postscript, which repudiates conservatism in no uncertain terms.
The Postscript summarises some leading points made in the
body of the work, so framed as to highlight Hayek’s fundamental
disagreement with conservatism. Yet if the Postscript were merely
a summary, it would not have become – as it has become – the
most widely read and discussed part of The Constitution of Liberty.
By framing the Postscript as a hard-nosed critique of conserva-
tism, Hayek guaranteed that it would be controversial and would
gain a wide audience.
Why did Hayek wish to distance himself from conservatism?
By his account, the Conservative Party of Britain and their equiva-
lents in European nations had long resisted free market ideas
and favoured expansive government, especially one that would
maintain established privileges. The conservative parties, rather
than resisting the collectivist tide, had accommodated it: ‘It has
been regularly the conservatives who have compromised with
180 181
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y w h y i a m n o t a c o n s e rvat i v e
socialism and stolen its thunder’ (398–9). Hayek thus perceived sources of knowledge’ when reason fails (406); it assigns special
‘true conservatism’ to be liberty’s adversary rather than its ally. As privileges to persons whom authority recognises as superior and
a defender of liberty, he wanted to draw an indelible line between uses the state to preserve social hierarchy; it distrusts democracy
his position and that of the conservatives. and blames it for present evils; it lacks sufficient knowledge of
In the USA there was neither a long-standing conservative economics to see that spontaneous forces of adjustment can be
party nor a major socialist party. Americans who cherished the counted on to produce beneficial order and growth in the future
original Constitution were not conservatives in Hayek’s sense, as they have in the past; and it is stridently nationalistic, even
because they appealed finally to the ideal of liberty that the Consti- to the point of endorsing imperialistic missions to civilise other
tution embodies. The term ‘conservative’ came into wide use in peoples.
the USA after World War II to indicate opposition to ‘liberalism,’ True liberalism, by contrast, is guided by principles and
which in the American context meant chiefly the statist principles by a theory of social order; it welcomes change and the genera-
and policies of Franklin D. Roosevelt’s New Deal. A burgeoning tion of new ideas; it invests authority in the law and, because
conservative movement emerged in the 1950s, drawing inspira- power corrupts, favours the Rule of Law over the rule of men;
tion from diverse thinkers and writers who in one way or another it is tolerant of moral and cultural diversity and thus makes it
defended individual freedom and limited government. This possible for persons with different values to coexist peacefully;
movement was an uneasy coalition of ‘traditionalists’ and ‘liber- it acknowledges our inescapable ignorance and avoids explana-
tarians,’ or of humanists who worried about moral or religious tions that invoke the supernatural; it denies that anyone can
decline and proponents of free market economics who wished to say, absent competition, who the superior persons are, and also
curb government’s power. Hayek’s writings greatly influenced the rejects the notion that such persons should live by different rules,
latter group, and he came to be classified as a libertarian conserva- be guaranteed a special position in society, or be sheltered from
tive. Hayek did not wish to be identified as a conservative, even in forces of economic change; it regards democracy as the least evil
this loose American sense, or as a libertarian. (and therefore the best practicable) form of government; it is
In the body of the Postscript, Hayek raises specific objections willing to let the market work, since it assumes that in economic
to historical conservatism and shows how it differs from true matters particularly, ‘the self-regulating forces of the market will
liberalism. Conservatism lacks principles or goals of its own and somehow bring about the required adjustments to new condi-
thus is unable to offer an alternative to current developments; it tions’ (400); and its outlook is cosmopolitan rather than nation-
seeks to prevent or limit innovation, since it fears change and the alistic (399–407).
impact of new ideas; it is fond of authority and willingly uses it to Hayek identifies himself with what he calls ‘the party of
make individuals conform to acceptable values, goals and moral liberty’ or ‘the party of life.’ The party of liberty goes back to the
and religious beliefs; it invokes ‘the authority of supernatural eighteenth century, and it does not coincide with any political
182 183
h ay e k’s t h e c o n s t i t u t i o n o f l i b e r t y w h y i a m n o t a c o n s e rvat i v e
party or partisan coalition of Hayek’s day. Its aim is to promote of its true meaning. ‘Libertarian’ is ‘singularly unattractive’ to
freedom by influencing opinion, and this it does mainly by Hayek and for his taste ‘carries too much the flavor of a manu-
formulating ideas that will govern society in the long run. Hayek factured term and of a substitute’ (407–8). Hayek leaves open the
had worked tirelessly in the 1940s and 1950s for the rebirth of a question of whether he objects to libertarian thinking as well as
liberal movement in Europe. In appealing to like-minded scholars, to the term itself. This reticence did not deter Hayek’s libertarian
he advised them to stand for ‘the highest ideals and keep free critics from attacking The Constitution of Liberty, both for inad-
from the political disputes of the day.’ Devotion to liberal ideals equately limiting state coercion and for condoning expansive
should protect them from the risk ‘of becoming involved in party government services.
passions.’ Hayek has racked his brain unsuccessfully to find ‘a word
The party of liberty was the only kind of party that Hayek, which describes the party of life, the party that favors free growth
as a political philosopher, could embrace. The political philoso- and spontaneous evolution’ (408). Taking a cue from the English
pher seeks to shape opinion by defending general principles in an Whigs, whose ideals inspired liberal movements in the whole of
uncompromising way. Party leaders, by contrast, ‘organize people Europe and in the American colonies, he finally concludes that
for action’ – a task that requires them to downplay differences of ‘Whiggism is historically the correct name for the ideas in which
principle among their followers and to aim for what seems polit I believe.’ By the mid-nineteenth century, Whig parties in both
ically possible at the moment (411). The politician lets sleeping Britain and the USA had been discredited. Nevertheless, Hayek’s
dogs lie; the political philosopher stirs controversy. The politician studies in the evolution of ideas have made him increasingly aware
seeks short-term results; the political philosopher understands ‘that I am simply an unrepentant Old Whig – with the stress on
that far-reaching alterations in institutions or policies are possible the “old.”’ Whiggism ‘has been the name for the only set of ideals
only through a change in public opinion. By taking the long view that has consistently opposed all arbitrary power.’ Hayek does not
in the 1950s and 1960s and sticking mainly to the philosopher’s know if reviving this name ‘is practical politics,’ but this is not his
task of stating or clarifying basic principles, Hayek and like- main concern as a political philosopher. The ‘party of liberty’ or
minded persons would contribute decisively to key developments ‘party of life’ that he wants to revive is a broad movement of ideas
in the 1970s – the transformation of British conservatism into the that may, in the long term, affect political affairs. Making it into
party of free enterprise and the ascendancy of a market-oriented a political party would give it an altogether different character
conservative movement in the USA. (408–10).
Hayek is perplexed as to what to call ‘the party of liberty.’ He
has ruled out the name ‘conservative.’ ‘Liberal’ is accurate histor
ically, but the term no longer means what it did in England at the
turn of the nineteenth century, and its US meaning is the opposite
184 185
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188
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translated/reprinted. Dr Jerry Jordan Professor Roland Vaubel
Since 1974 the IEA has helped to create a worldwide network of 100 Dr Lynne Kiesling Dr Cento Veljanovski
Professor Daniel B Klein Professor Lawrence H White
similar institutions in over 70 countries. They are all independent but share the Professor Chandran Kukathas Professor Walter E Williams
IEA’s mission. Professor Stephen C Littlechild Professor Geoffrey E Wood

Views expressed in the IEA’s publications are those of the authors, not
Honorary Fellows
those of the Institute (which has no corporate view), its Managing Trustees,
Academic Advisory Council members or senior staff. Professor Armen A Alchian Professor Sir Alan Peacock
Professor Michael Beenstock Professor Ben Roberts
Members of the Institute’s Academic Advisory Council, Honorary Fellows, Sir Samuel Brittan Professor Anna J Schwartz
Trustees and Staff are listed on the following page. Professor James M Buchanan Professor Vernon L Smith
Professor Ronald H Coase Professor Gordon Tullock
Professor David Laidler Professor Basil S Yamey
The Institute gratefully acknowledges financial support for its publications Professor Chiaki Nishiyama
programme and other work from a generous benefaction by the late Alec and
Beryl Warren.
190 191
Other papers recently published by the IEA include:
A Market in Airport Slots
Keith Boyfield (editor), David Starkie, Tom Bass & Barry Humphreys
Readings 56; ISBN 0 255 36505 5; £10.00
Money, Inflation and the Constitutional Position of the

Central Bank
Milton Friedman & Charles A. E. Goodhart
Readings 57; ISBN 0 255 36538 1; £10.00
railway.com
Parallels between the Early British Railways and the ICT Revolution
Robert C. B. Miller
Research Monograph 57; ISBN 0 255 36534 9; £12.50
The Regulation of Financial Markets
Edited by Philip Booth & David Currie
Readings 58; ISBN 0 255 36551 9; £12.50
Climate Alarmism Reconsidered
Robert L. Bradley Jr
Hobart Paper 146; ISBN 0 255 36541 1; £12.50
Government Failure: E. G. West on Education
Edited by James Tooley & James Stanfield
Occasional Paper 130; ISBN 0 255 36552 7; £12.50
Corporate Governance: Accountability in the Marketplace
Elaine Sternberg
Second edition
Hobart Paper 147; ISBN 0 255 36542 x; £12.50
The Land Use Planning System
Evaluating Options for Reform
John Corkindale
Economy and Virtue Towards a Liberal Utopia?
Essays on the Theme of Markets and Morality Edited by Philip Booth
Edited by Dennis O’Keeffe Hobart Paperback 32; ISBN 0 255 36563 2; £15.00
Readings 59; ISBN 0 255 36504 7; £12.50
The Way Out of the Pensions Quagmire
Free Markets Under Siege Philip Booth & Deborah Cooper
Cartels, Politics and Social Welfare Research Monograph 60; ISBN 0 255 36517 9; £12.50
Richard A. Epstein
Black Wednesday
A Re-examination of Britain’s Experience in the Exchange Rate Mechanism
Unshackling Accountants Alan Budd
D. R. Myddelton Occasional Paper 135; ISBN 0 255 36566 7; £7.50
Crime: Economic Incentives and Social Networks
The Euro as Politics Paul Ormerod
Pedro Schwartz Hobart Paper 151; ISBN 0 255 36554 3; £10.00
The Road to Serfdom with The Intellectuals and Socialism
Pricing Our Roads Friedrich A. Hayek
Vision and Reality Occasional Paper 136; ISBN 0 255 36576 4; £10.00
Stephen Glaister & Daniel J. Graham
Money and Asset Prices in Boom and Bust
Tim Congdon
The Role of Business in the Modern World Hobart Paper 152; ISBN 0 255 36570 5; £10.00
Progress, Pressures, and Prospects for the Market Economy
The Dangers of Bus Re-regulation
David Henderson
and Other Perspectives on Markets in Transport
John Hibbs et al.
Public Service Broadcasting Without the BBC? Occasional Paper 137; ISBN 0 255 36572 1; £10.00
Alan Peacock
The New Rural Economy
Change, Dynamism and Government Policy
The ECB and the Euro: the First Five Years Berkeley Hill et al.
Otmar Issing Occasional Paper 138; ISBN 0 255 36546 2; £15.00
The Benefits of Tax Competition
Richard Teather
Wheels of Fortune Living with Leviathan
Self-funding Infrastructure and the Free Market Case for a Land Tax Public Spending, Taxes and Economic Performance
Fred Harrison David B. Smith
Hobart Paper 154; ISBN 0 255 36589 6; £12.50 Hobart Paper 158; ISBN 978 0 255 36579 6; £12.50
Were 364 Economists All Wrong? The Vote Motive
Edited by Philip Booth Gordon Tullock
Readings 60; ISBN 978 0 255 36588 8; £10.00 New edition
Hobart Paperback 33; ISBN 978 0 255 36577 2; £10.00
Europe After the ‘No’ Votes
Mapping a New Economic Path Waging the War of Ideas
Patrick A. Messerlin John Blundell
Occasional Paper 139; ISBN 978 0 255 36580 2; £10.00 Third edition
Occasional Paper 131; ISBN 978 0 255 36606 9; £12.50
The Railways, the Market and the Government
John Hibbs et al. The War Between the State and the Family
Readings 61; ISBN 978 0 255 36567 3; £12.50 How Government Divides and Impoverishes
Patricia Morgan
Corruption: The World’s Big C
Hobart Paper 159; ISBN 978 0 255 36596 3; £10.00
Cases, Causes, Consequences, Cures
Ian Senior Capitalism – A Condensed Version
Research Monograph 61; ISBN 978 0 255 36571 0; £12.50 Arthur Seldon
Occasional Paper 140; ISBN 978 0 255 36598 7; £7.50
Choice and the End of Social Housing
Peter King Catholic Social Teaching and the Market Economy
Hobart Paper 155; ISBN 978 0 255 36568 0; £10.00 Edited by Philip Booth
Sir Humphrey’s Legacy
Facing Up to the Cost of Public Sector Pensions Adam Smith – A Primer
Neil Record Eamonn Butler
Hobart Paper 156; ISBN 978 0 255 36578 9; £10.00 Occasional Paper 141; ISBN 978 0 255 36608 3; £7.50
The Economics of Law Happiness, Economics and Public Policy
Cento Veljanovski Helen Johns & Paul Ormerod
Second edition Research Monograph 62; ISBN 978 0 255 36600 7; £10.00
They Meant Well Climate Change Policy: Challenging the Activists
Government Project Disasters Edited by Colin Robinson
D. R. Myddelton Readings 62; ISBN 978 0 255 36595 6; £10.00
Should We Mind the Gap?
Rescuing Social Capital from Social Democracy Gender Pay Differentials and Public Policy
John Meadowcroft & Mark Pennington J. R. Shackleton
Hobart Paper 161; ISBN 978 0 255 36592 5; £10.00 Hobart Paper 164; ISBN 978 0 255 36604 5; £10.00
Paths to Property Pension Provision: Government Failure Around the World
Approaches to Institutional Change in International Development Edited by Philip Booth et al.
Karol Boudreaux & Paul Dragos Aligica Readings 63; ISBN 978 0 255 36602 1; £15.00
Hobart Paper 162; ISBN 978 0 255 36582 6; £10.00 New Europe’s Old Regions
Prohibitions
Piotr Zientara
Edited by John Meadowcroft Hobart Paper 165; ISBN 978 0 255 36617 5; £12.50
Hobart Paperback 35; ISBN 978 0 255 36585 7; £15.00 Central Banking in a Free Society
Tim Congdon
Trade Policy, New Century
The WTO, FTAs and Asia Rising
Razeen Sally Verdict on the Crash: Causes and Policy Implications
Hobart Paper 163; ISBN 978 0 255 36544 4; £12.50 Edited by Philip Booth
Sixty Years On – Who Cares for the NHS?
Helen Evans The European Institutions as an Interest Group
Research Monograph 63; ISBN 978 0 255 36611 3; £10.00 The Dynamics of Ever-Closer Union
Roland Vaubel
Taming Leviathan Hobart Paper 167; ISBN 978 0 255 36634 2; £10.00
Waging the War of Ideas Around the World
An Adult Approach to Education
Edited by Colleen Dyble
Occasional Paper 142; ISBN 978 0 255 36607 6; £12.50 Alison Wolf
The Legal Foundations of Free Markets
Taxation and Red Tape
Edited by Stephen F. Copp
The Cost to British Business of Complying with the UK Tax System
Francis Chittenden, Hilary Foster & Brian Sloan
Research Monograph 64; ISBN 978 0 255 36612 0; £12.50
Ludwig von Mises – A Primer Other IEA publications
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Hayek’s The Constitution of Liberty

 ayek’s The Constitution

The Institute of Economic Affairs

Many IEA publications are translated into languages other than English or

10 Socialism in a new guise: social justice and Bibliography 186

11 Social security, taxation and the redistribution

12 Stopping coercion in employment

13 Preventing inflation (Chapter 21) 165

14 Safeguarding progress (Chapters 22, 23, 24)170

Dr Eugene F. Miller (1935–2010) was a professor of political

pragmatic middle way. According to John Ranelagh in Thatcher’s

The views expressed in this monograph are, as in all IEA publica-

• The core argument that runs throughout The Constitution of

instruction, wise guidance and welcome support from many

The Constitution of Liberty begins with a ‘Preface’ and ‘Intro-

Hayek starts by defining a state of liberty or freedom: ‘We

Individual freedom and responsibility

knowledge possessed by others. Our using others’ knowledge

Are individuals equal?

incentive for individuals to pursue the outcomes that they think

Majority rule and the community

Democracy is a procedure only

Hayek’s primary aim in The Constitution of Liberty is to explain

to the ancients, particularly in Athens at the time of its greatness

private sphere only as punishment for breaking an announced

general rules of conduct, within which government must act to

Part III of The Constitution of Liberty is devoted to policy.

Advent of the welfare state

Hayek’s sharpest criticism of the socialistic welfare state

themselves unjust. A just system of taxation, as Hayek conceives

important role,’ even with the elimination of their power to coerce

Inflation and the welfare state

of what such a system would have to accomplish, even to equal the

Natural resource policy

diversity’ (394). Education is vital to human development, thus

1964 ‘Kinds of order in society’, New Individualist Review, 3(2)

• a high-quality publishing programme Chairman: Professor D R Myddelton

Money, Inflation and the Constitutional Position of the

You might also like

ayek’s The Constitution

10 Socialism in a new guise: social justice and Bibliography 186

13 Preventing inflation (Chapter 21) 165

14 Safeguarding progress (Chapters 22, 23, 24)170