Philip Booth is Editorial and Programme Director at the Institute of Economic Affairs.
Hayek famously wrote that he was not a Conservative. But, 25 years after his death, that does not mean he has no lessons for Conservatives.
Hayek’s views are complex. And, since he wrote the famous postscript to The Constitution of Liberty, the Conservative Party has changed. Hayek referenced Burke frequently, and his last book focused on the importance of tradition as an important part of the process of the evolution of institutions and principles of behaviour.
Hayek taught us that socialism was not just undesirable, it was impossible. It relies on the ‘superstition’ (as Hayek called it) that we know more than we ever can. We are incapable of planning economic activity on a large scale. Households, firms and voluntary organisations can plan of course, but even then our plans are often thwarted. We can plan in these contexts because all can agree on a single objective and on both ends and means.
The process of competition will allow the efficient to thrive, allow good ideas to be copied, and ensure that those firms and institutions that fulfil useful social functions will prosper. This process of competition also helps us to discover the best forms of economic co-operation. The market is social!
Hayek rightly poured scorn on people who foolishly believed that an economy free from government intervention was somehow an economy of atomised individuals. As he wrote:
“This fact should by itself be sufficient to refute the silliest of the common misunderstandings: the belief that individualism postulates… the existence of isolated or self-contained individuals, instead of starting from men whose whole nature and character is determined by their existence in society”.
Clearly, these ideas explain the failure of central planning. They also justify a preference for decentralised institutions within society rather than having the state solve social and economic problems. Further, they are a warning against meddling in markets to try to improve them.
By all means, remove impediments to competition. But energy markets and financial services are prime examples of how intervention has brought about unforeseen consequences (including the erosion of competition) which this Government now wishes to address by yet more meddling.
Secondly, Hayek was a champion of the common law. We often hear Conservatives such as Dan Hannan praise the UK system of common law. Such praise is due. Unfortunately, the recent move away from common law principles has been so dramatic that reclaiming the ground may prove impossible – though it is still a battle worth fighting.
Especially since the 1980s (ironically under Mrs. Thatcher), there has been a replacement of both common law and primary statute law principles by the use of secondary legislation and statutory bodies producing regulation at will. These are exactly the sort of trends Hayek thought dangerous.
Common law involves judges applying established legal principles to new situations as they arise. The judge does not invent the law, of course, but applies accepted legal principles to new cases. This has been replaced by bodies of ‘experts’ who believe they know in advance, and in extraordinary detail, what rules and regulations will better our lives.
And Conservatives should be sceptical of experts in another context. Economists expend huge amounts of energy trying to forecast with apparent (or perhaps spurious) accuracy the economic future. If everything carries on according to the assumptions in their models, those forecasts may turn out to be a good prediction.
But, if nothing much is changing, we don’t really need to be told whether inflation is going to be 2.1 per cent or 2.2 per cent in three months’ time. What can mainstream economists tell us about the really important events that might hit the economy? How well did they predict the crash or the impact of the UK leaving the EU?
Hayek taught is that we can’t forecast the behaviour of seven billion people all with a will of their own. Instead a good understanding of theory can help us make what Hayek called ‘pattern predictions’: we can tell the kind of thing that will happen, but not predict it with accuracy. Traditional economic modelling pretends to predict with accuracy things that don’t matter and seems completely unable to tell us anything about important events outside the model.
Hayek can help Michael Gove understand when experts can be useful and when they can’t. On this topic, Hayek’s Nobel Laureate speech is worth a read for its warning about confusing things that are measurable with things that are important – a mistake common not just to politicians but to business and charity leaders too.
Finally, as many readers will know, I have a strong interest in Catholic social teaching. Christians are currently influential in the Conservative Party. But the default assumption of many prominent Christians (especially Anglican bishops) is that the state is there to pull levers to solve social problems.
A good starting point for a Christian is a humble acceptance of our imperfections. This includes imperfections in terms of our tendency towards evil (so we should be wary of giving individuals and institutions too much power to coerce). It also includes imperfections in terms of lack of human knowledge. Christians should be curious about a school of economics which takes as its starting point one of the fundamental characteristics of mankind that lies at the heart of Christian thinking: the absence of omniscience amongst human persons.
Christians, and others who want a better world, can learn from Hayek that, because of our human condition, pulling government policy levers may produce precisely the opposite of that intended, and we might do better to try to improve matters by working through institutions embedded in the community and society rather than the state.
There is much more that could be discussed. What would Hayek have thought of the ‘big society’? What would have been his attitude to Brexit? But each one of the above points is relevant to the future direction of the country. The implications of Hayek’s thought are rich, but the starting point is simple. As Hayek put it: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
Hayek taught us humility. We should continually remind politicians, church leaders, and economists that the one thing that we do know is how much we don’t know.