Individualism and Economic Order Quotes

“We must face the fact that the preservation of individual freedom is incompatible with a full satisfaction of our views of distributive justice.”

“The part of our social order which can or ought to be made a conscious product of human reason is only a small part of all the forces of society.”

“We can either have a free Parliament or a free people. Personal freedom requires that all authority is restrained by long-run principles which the opinion of the people approves.”

“This is not a dispute about whether planning is to be done or not. It is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals.”

“There is all the difference in the world between treating people equally and attempting to make them equal. While the first is the condition of a free society, the second means as De Tocqueville describes it, 'a new form of servitude.'”

“Fundamentally, in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to co-ordinate the separate actions of different people in the same way as subjective values help the individual to co-ordinate the parts of his plan.”

“It would clearly not be an improvement to build all houses exactly alike in order to create a perfect market for houses, and the same is true of most other fields where differences between the individual products prevent competition from ever being perfect.”

“Many economists have professed to analyze information; relatively few have considered carefully the problems of knowledge. Among those who have, Hayek is pre-eminent, and he has emphasized the value of a market system in providing encouragement to individuals to find and make use of knowledge, while simultaneously affording checks on its misuse.”

“Hayek’s great contribution is this: Competitive markets without externalities populated by well-informed self-regarding rational individuals generate highly productive outcomes because the market has powerful emergent properties that make it an extremely powerful and incentive-compatible societal mechanism for eliciting the revelation, aggregation, and transmission of information about resources, capabilities, needs and desires.”

“If one writing contributed more than any other to the framework in which this work [Sowell's "Knowledge and Decisions"] developed, it would be an essay entitled 'The Use of Knowledge in Society,' published in the American Economic Review of September 1945, and written by F. A. Hayek … In this plain and apparently simple essay was a deeply penetrating insight into the way societies function and malfunction, and clues as to why they are so often and so profoundly misunderstood.”

“Hayek’s point in his famous essay of 1945, “The Uses of Knowledge in Society”, is that central planning cannot work because it is trying to substitute an individual all-knowing intelligence for a distributed and fragmented system of localised but connected knowledge, much of which is tacit. It is the essence of anti-elitism, of – dare I say it – populism, the prescient harbinger of what is sometimes called “dot communism” – the flattening of human society as a result of the internet.”

“In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement.”

“My concerns are two-fold: First, because Hayek (and his followers) failed to develop formal models of the market process, it is not possible to assess claims concerning the efficiency of that process, and second (and relatedly), in the absence of such modeling, it is not possible to address the central issues of concern here, the mix and design of public and private activities, including alternative forms of regulations (alternative "rules of the game" that the government might establish) and the advantages of alternative policies toward decentralization-centralization.”

“The problem is thus in no way solved if we can show that all the facts, if they were known to a single mind (as we hypothetically assume them to be given to the observing economist), would uniquely determine the solution; instead we must show how a solution is produced by the interactions of people each of whom possesses only partial knowledge. To assume all the knowledge to be given to a single mind in the same manner in which we assume it to be given to us as the explaining economists is to assume the problem away and to disregard everything that is important and significant in the real world.”

“While in graduate school I encountered the writings of Friedrich Hayek and Ludwig von Mises, which shook me out of my then socialist beliefs. There was Hayek's book of essays, Individualism and Economic Order, and Mises's wide-ranging and unsettling Socialism, which showed me I had not thought through any details — economic, social or cultural — of how socialism would work. One of their arguments in particular, about the impossibility of rational economic calculation under socialism, dumbfounded me. Whether or not the argument was ultimately judged to be correct, it was amazing, something I never would have thought of in a million years.”

“Professor Mises' denial of the possibility of economic calculation in a socialist system must be rejected. However, Professor Mises' argument has been taken up recently in a more refined form by Professor Hayek and Professor Robbins. They do not deny the theoretical possibility of a rational allocation of resources in a socialist economy, they only doubt the possibility of a satisfactory practical solution of the problem. […] The position taken by Professor Hayek and by Professor Robbins is a significant step forward in the discussion of the problem. It promises a much more fruitful approach than Professor Mises' wholesale denial of the possibility of economic accounting under socialism.”

“Since I shall be indicating my disagreement with some of the points made by Professor Israel Kirzner, let me stress that I am in complete sympathy with his point of departure, namely, the emphasis on the dispersion of information among economic decision-making units (called by him, "Hayek's knowledge problem") and the consequent problem of transmission of information among those units.
Much of my own research work since the 1950s has been focused on issues in welfare economics viewed from an informational perspective. The ideas of Hayek (whose classes at the London School of Economics I attended during the academic year 1938-39) have played a major role in influencing my thinking and have been so acknowledged.”

“At the core of the failure of the socialist experiment is not just the lack of property rights. Equally important were the problems arising from lack of incentives and competition, not only in the sphere of economics but also in politics. Even more important perhaps were problems of information. Hayek was right, of course, in emphasizing that the information problems facing a central planner were overwhelming. I am not sure that Hayek fully appreciated the range of information problems. If they were limited to the kinds of information problems that are at the center of the Arrow-Debreu model consumers conveying their preferences to firms, and scarcity values being communicated both to firms and consumers then market socialism would have worked. Lange would have been correct that by using prices, the socialist economy could "solve" the information problem just as well as the market could. But problems of information are broader.”

“The Austrian School of Economics traditionally underestimates, if not neglects macroeconomics (or at least its importance), and Hayek understood that he was not going to win the debate accepting the Keynesian macro economic playground. He decided to attack the interventionist doctrine of Keynes by moving to microeconomics, to the defence of the irreplaceable role of markets and prices in the economy, and to demonstrating that interventionism makes the efficient functioning of markets impossible. His seminal articles “Economics and Knowledge,” and especially “The Use of Knowledge in Society,” are among the most important contributions to the field of economic science in the whole of the twentieth century. Hayek devoted his analysis to explaining the coordination of human action in a world in which knowledge is inevitably dispersed and he was able to prove that the solution is in the price system, not in central planning.”

“I am certain that there are many who regard with impatience and distrust the whole tendency, which is inherent in all modern equilibrium analysis, to turn economics into a branch of pure logic, … are subject to no other test but internal consistency. But it seems that, if only this process is carried far enough, it carries its own remedy with it. In distilling from our reasoning about the facts of economic life those parts which are truly a priori, we not only isolate one element of our reasoning as a sort of Pure Logic of Choice in all its purity but we also isolate, and emphasize the importance of, another element which has been too much neglected. My criticism of the recent tendencies to make economic theory more and more formal is not that they have gone too far but that they have not yet been carried far enough to complete the isolation of this branch of logic and to restore to its rightful place the investigation of causal processes, using formal economic theory as a tool in the same way as mathematics.”