Tyler Durden quotes Hayek at Zerohedge,  1/28/12, F.A. Hayek On “The Great Utopia”

To allay these suspicions and to harness to its cart the strongest of all political motives—the craving for freedom — socialists began increasingly to make use of the promise of a “new freedom.” Socialism was to bring “economic freedom,” without which political freedom was “not worth having.”

To make this argument sound plausible, the word “freedom” was subjected to a subtle change in meaning. The word had formerly meant freedom from coercion, from the arbitrary power of other men. Now it was made to mean freedom from necessity, release from the compulsion of the circumstances which inevitably limit the range of choice of all of us. Freedom in this sense is, of course, merely another name for power or wealth. The demand for the new freedom was thus only another name for the old demand for a redistribution of wealth.

The claim that a planned economy would produce a substantially larger output than the competitive system is being progressively abandoned by most students of the problem. Yet it is this false hope as much as anything which drives us along the road to planning.

HKO comment:

Hayek believed a planned economy inevitably led to tyranny.  His critics claimed that bureaucrats in Britain could not be compared to their counterparts in Germany, that there were other factors involved.  Yet while planning may not lead directly to the kind of tyranny that Hayek saw rise in Germany, it does often come at the expense of political freedom to some great degree and it is economically and philosophically grossly inefficient.  There are just too many choices in a modern economy to be effectively made by a handful of elites.  Rather than face their own responsibility as poor planners they are likely to resort to the force of government.

Paul Slovic

Paul Slovic probably knows more about the peculiarities of human judgment of risk than any other individual.  His work offers a picture of Mr. and Ms. Citizen that is far from flattering: guided by emotion rather than by reason, easily swayed by trivial details, and inadequately sensitive to differences between low and negligibly low probabilities.  Slovic has also studied experts, who are clearly superior in dealing with numbers and amounts.  Experts show many of the same biases as the rest of us in attenuated form, but often their judgments and preferences about risks diverge from those of other people.

Differences between experts and the public are explained in part by biases in lay judgments, but Slovic draws attention to situations in which the differences reflect a genuine conflict of values.  He points out that experts often measure risks by the number of lives (or life-years) lost, while the public draws finer distinctions, for example between “good deaths” and “bad deaths,” or between random accidental fatalities and deaths that occur in the course of voluntary activities such as skiing.  These legitimate distinctions are often ignored in statistics that merely count cases. Slovic argues from such observations that that the public has a richer conception of risks than the experts do.  Consequently, he strongly rejects the view that the experts should rule, and that their opinions should be accepted without question when they conflict with the opinions and wishes of other citizens.”

From Thinking, Fast and Slow by Daniel Kahneman

HKO comments

The problem with central planning is that decisions delivered from a central authority ignore the incremental values we all use in a market economy.  This invariably drives costs up and satisfaction down.  Besides the incremental values we may display in the purchase of goods and services there is also an incremental value we give to our moral decisions such as sex and birth control.

Yet Kahneman also notes that we as individuals do not exercise the rationality that much economic theory assumes we do.  He also suggests that rationality and intelligence are not synonymous.

When I hear what passes for political thought in the media I wonder who these people are talking to.  Do you really think that there is a war on women in this country?  Do you really think that racism is getting worse?

Do you really think that the Buffet Rule will have any meaningful impact on our financial problems? Do you really think that any company can be directed to provide any product or service for free and it will not cost somebody?

Do you really think that the argument is whether to have  fascist state controlled economy or economic anarchy?  Do you think the argument is between confiscatory taxes or no taxes?

Political conversation has degenerated into juvenile simplicity.  The dialogues defer to populism from either side.  There is a preference for demons rather than solutions, and saints rather than sacrifice.

There is not an inconsistency between the concept of unlimited opportunities and limited resources.  In fact refusal to recognize the limits of power and resources limits our opportunities.  Witness the European reckoning.

Our political institutions are critical to serving our economic institutions.  It is our understanding of this relationship that has is the reason our economy has grown so dynamically and so many others have not.

When we get this backward- when we pursue our economic institutions to serve our political institutions- as this administration proposes, then we risk pouring sugar into the fuel tank of our economic engine.

It has been our electoral process and our ability to remove from office those that abuse our institutions for their own gain and self interest that has kept us from going down the path pursued by less dynamic economies.  I hope the next election is up to the task.

Chris Berg writes an interesting perspective on the anniversary of the sinking of the Titanic in The Real Reason for the Tragedy of the Titanic, The Wall Street Journal, 4/12/12.

Excerpt:

In the Board of Trade’s post-accident inquiry, Carlisle was very clear as to why White Star declined to install extra lifeboats: The firm wanted to see whether regulators required it. As Carlisle told the inquiry, “I was authorized then to go ahead and get out full plans and designs, so that if the Board of Trade did call upon us to fit anything more we would have no extra trouble or extra expense.”

So the issue was not cost, per se, or aesthetics, but whether the regulator felt it necessary to increase the lifeboat requirements for White Star’s new, larger, class of ship.

This undercuts the convenient morality tale about safety being sacrificed for commercial success that sneaks into most accounts of the Titanic disaster.

The responsibility for lifeboats came “entirely practically under the Board of Trade,” as Carlisle described the industry’s thinking at the time. Nobody seriously thought to second-guess the board’s judgment.

This is a distressingly common problem. Governments find it easy to implement regulations but tedious to maintain existing ones—politicians gain little political benefit from updating old laws, only from introducing new laws.

And regulated entities tend to comply with the specifics of the regulations, not with the goal of the regulations themselves. All too often, once government takes over, what was private risk management becomes regulatory compliance.

It’s easy to weave the Titanic disaster into a seductive tale of hubris, social stratification and capitalist excess. But the Titanic’s chroniclers tend to put their moral narrative ahead of their historical one.

At the accident’s core is this reality: British regulators assumed responsibility for lifeboat numbers and then botched that responsibility. With a close reading of the evidence, it is hard not to see the Titanic disaster as a tragic example of government failure.

HKO comments:

There was a similar point made year back in a book called The Death of Common Sense. The more we depend on the government to regulate the less we use our own judgment.

This point stands in the shadows of the financial meltdown.  There was an alphabet soup of regulatory agencies supervising the financial sector but were unable to keep up with or understand newer financial products.  There is much more political glory issuing new regulations than in adapting and updating old regulations.

Compliance becomes the focus rather than the purpose of the regulations.  Judgment requires flexibility, regulations discourage flexibility.  Often the complexity of regulations adds to the complexity of the systems being regulated. Instead of avoiding problems it often fosters them.

Friedrich Hayek wrote, “Equality of the general rules of law and conduct… is the only kind of equality conducive to liberty and the only equality which we can secure without destroying liberty.  Not only has liberty nothing to do with any sort of equality, but it is even bound to produce inequality in many respects.  This is the necessary result and part of the justification of individual liberty: if the result of individual liberty did not demonstrate that some manners of living are more successful than others, much of the case for it would vanish.” Thus while radical egalitarianism encompasses economic equality, it more broadly involves prostrating the individual.

Equality, as understood by the American Founders, is the natural right of every individual to live freely under self-government, to acquire and retain the property he creates through his own labor, and to be treated impartially before a just law.  Moreover, equality should not be confused with perfection, for man is also imperfect, making his application of equality, even in the most just society, imperfect.

From From Ameritopia by Mark Levin

HKO comments:

Two points:

If the free markets are imperfect because they are run by humans, exactly who does one propose to run the central planning authorities to correct them?  Do we really think that political self interest serves us better than economic self interest?

“treated impartially before a just law”-  how can even the blindest sycophants support a health care bill passed in the most partisan, politically clumsy way, unread by any of the Representatives, and then requiring thousands of waivers distributed to the most politically connected?