The Essential Hayek: A Review

As noted earlier, Don Boudreaux and the Fraser Institute released a new book called The Essential Hayek.  The book is quite short (only about 70 pages), but contains a lot of good information.  But first, some background:

Friedrich August von Hayek is one of the major economic and philosophical thinkers of the 20th Century.  However, his works aren’t easily accessible; his writings can be difficult to understand (and not just because of the language, as a former professor of mine likes to say 🙂 ).  As such, his insights into economic and social organization can be lost.  Don attempts to organize and summarize his insights to make them accessible to the layman.

The fist thing to note about this book is it is a summary of Hayek’s insights.  Don offers very little commentary on the ideas, rather he tries to explain them.  If the reader wants context or commentary, he’ll be disappointed by this book (although there is a list of suggested readings if that is the reader’s goal).  But these are summaries.  There is little deep detail or long-winded explanations.  Essentially, this is an introduction to Hayek’s work; Don’s goal was to create an introduction, and he succeeded.

There is a lot of good information in this book, and it leaves the reader wanting more.  For those who wish to learn more about Hayek’s ideas, this is a good starting point.  But it is just that: a starting point.  Enjoy!

The Essential Hayek

The Fraser Institute and Don Boudreaux (friend of the blog) are working on a project to bring the works of FA Hayek into the modern world and make them easily accessible to folks.  Today, their new website, The Essential Hayek, goes live.  I am very excited about this.  Hayek is not an easy read.  His language is very flowery and can be difficult to understand.  By translating his ideas into simple English, Don is doing a great service to economics and philosophy students the world over.  I strongly urge you to check out the website as well as the book companion.

Pro-Market is Pro-Choice

Over at Cafe Hayek, Don Boudreaux writes about an interesting double-standard, namely that in politics, making one as appealing to many people as possible is a virtue, but in markets, it is decried as “crass.”  I urge you to go over and read Don’s whole piece, as there’s a lot of good stuff in there.  However, I don’t want to focus on that aspect of the post.  Rather, I want to discuss this part:

Those activities that regularly get labeled as “crass” are those that appeal to the masses.  Hollywood blockbusters are “crass”; indie movies are cool.  Pop music is “crass”; John Cage’s music is cool.  McDonald’s is “crass”; artisan cheesemakers are cool.  Wal-Mart is “crass”; a boutique merchant selling hand-knitted sweaters is cool.  Supermarkets are “crass”; farmers’ markets are cool.  Shopping malls are “crass”; small stores tucked into basements along Bleecker Street are cool.  Barnes & Noble and Amazon are “crass”; independent bookstores each specializing in only one genre of literature are cool.  Home Depot is “crass”; a mom’n’pop hardware store is cool.  DisneyWorld is “crass”; Iceland’s fjords are cool.  American football is “crass”; soccer (in America) is cool.  The suburbs are “crass”; Georgetown is cool.  Budweiser is “crass”; Sierra Nevada brews are cool.  White zinfandel from California is “crass”; rosés from Bandol are cool.

Don highlights (albeit incidentally) one of the great things about the market process: it’s not winner take all.  There is something for everyone, including the niche interests.  Budweiser makes a beer that’s designed to appeal to a large group, and as such they capture a large number of customers.  But what of those who don’t like Bud?  Or who want something different than flavored water?  For people like me, there are microbrews like Tuckerman or 603.  These guys likely won’t ever approach the numbers of Bud, but they make a living catering to those not served by Bud.  In markets, there is room for choice.  In markets, there is room for both artisan cheesemakers and Kraft, or white zin and rosé.

Unfortunately, this freedom of choice is not applicable to politics.  Politics is a winner-take-all system.  For example, if a politician gains a majority, it doesn’t matter if he won by 1 vote or 100 million; he still wins.  When government issues diktats regarding this or that, they must be obeyed under threat of force.  If government decides a good/service is necessary and mandates it (say, education or health insurance), those who may wish to consume less than the government diktat now no longer have that choice.  That is why I oppose the politicization of commerce (by that I mean government attempting to influence a market).  Despite how it’s sold, politicization of commerce is reduction of choice, not increase.

Are Costs Benefits? Looking and Medical and Education

A little while ago, I noted a strangeness in Sen Bernie Sander’s bill to make colleges free taxpayer-funded.  I noted a similar strangeness the other day talking about medical care.

The question is: why is higher spending per capita on education a good thing while higher spending per capita on health care a bad thing?  Many on both sides of the aisle bemoan America’s educational system, and say the solution is to spend more on education (while simultaneously complain the cost of college is too high, which is a head-scratcher, but we’ll talk about that at some other time).  Many on both sides of the aisle bemoan America’s health care system, and say the solution is to spend less.  But both views are wrong.

Costs are not benefits.  Costs are what one has to give up in order to achieve benefits.  You cannot judge the value of a thing based upon its costs, but rather by its benefits.  America may have the highest health care spending per capita in the developed world, but does that mean our health care system is worse?  Not necessarily.  One would have to look at the benefits thereof to make a proper call.  And same thing with education: the fact that a country spends more/less per student on education doesn’t matter if there benefits aren’t there.  By focusing entirely on costs (and either not recognizing they are costs, as in the case of education, or not looking at the benefits, as in the case with health care), it can lead to wrong-headed policy recommendations (for example, price controls.  Sure, they’ll lead to lower spending, but also create shortages).

The Simpsons and Living Standards

The following is a letter I sent to Don Boudreaux:

Hi Don,

FXX has been doing a marathon of every Simpsons episode ever (a 12 day affair).  I’ve been watching it off and on and just thought I’d share with you an observation:

According to the Simpsons, there sure isn’t any stagnation.  The Simpsons, as you know, are a lower middle-class family (they often describe how much they are paycheck to paycheck, sometimes avoiding foods like steak because they can’t afford it).  So, much of what the family owns would be placed in that category.  As I am watching, it is amazing how much the family’s standard of living rises.  In the early 90’s, for example, there is just one car, a big ol’ TV set, etc.  By 2000, the family has 2 cars, and a “regular” TV.  By 2013, they now have a big-screen flat panel TV.  Homer still has the same job (mostly).  Marge is a housewife.  Bart and Lisa and Maggie are still kids, but the Simpsons’ lives are so much better.

But that’s not the only observation:

In one episode that takes place in the late 1990’s (or perhaps early 2000’s.  Not totally sure), Bart gets a girlfriend who is the daughter of a movie star.  She invites him over to watch TV because “You have never seen Itchy and Scratchy until you’ve seen it on DVD!”  Not 14 years ago, DVDs were the exclusive domain of the rich, and yet now they are ubiquitous!

Of course, this is hardly scientific and all kinds of legitimate arguments can be made against these observations, but I just thought I’d share that a family that represents “the average American” sure as shoot aren’t stagnating.


Why Do We Do It?

One of the questions I get asked a lot (and I know other free-marketers do, too) is “why do you focus so much on minimum wage, especially when its effects are so small?”  It’s a good question, especially considering time is a scarce resource.  The reason is simple: somebody needs to stand up for liberty and to hinder the proliferation of these bad ideas.

What attracted me to economics in general, and free markets in particular, is its ability to do good in the world.  I fight for free markets and liberty in general not for their own sake (“liberty for liberty’s sake” is an empty phrase), but because no system in the history of mankind has delivered more people out of poverty, ended/prevented more wars, reduced violence, bigotry, hatred, and sexism more than free markets and trade.  The record of history is crystal clear on this matter. In market-based economies, people of all income levels live better and more peacefully than those of the supposedly “peace and love” socialist economies like Venezuela, Argentina, and the old USSR. In the past 30 years, as markets globally have become more liberalized, hundreds of millions of people have been lifted out of poverty.  It is truly amazing.

But it is a long and ongoing struggle.  When Adam Smith first wrote Wealth of Nations back in 1776, even he doubted his ideas of free markets would ever become popular.  Slowly but surely they did, and in 1846, Britain took its first steps toward this by repealing the Corn Laws.  His ideas then dominated much of the economic world for a century, until John Maynard Keynes came into the picture.  Keynes ideas took a while to get off the ground, too.

The point of all this is I spend my time fighting these battles so these poor ideas, such as minimum wage, do not become entrenched again.  It is an uphill fight.  I may not see it come to fruition, but if I, and others like me who fight this good fight, who seek to make the world a better place through human cooperation and mutual trust, then the light of hope remains.  There have been times when the light of freedom has been dim and times when it has been bright, but no matter what, its keepers have kept the flame alit.  The torch has been handed down from generation to generation, and soon it’ll be my turn to bear it.  It won’t be easy, but nothing worth doing ever is.

Keep up the good fight, friends.

Freedom for Me, Not For Thee

L.A. recently passed a minimum wage increase to $15/hr.  One of the biggest supporters of this legislation was organized labor.  Now that it’s passed, they seek to repeal it (but just for them).

Before I get into the meat of this post, let me first say I have no philosophical problems with labor.  It’s blatant hypocrisy I despise.

Anyhoo, back on track.  Now that the wage hike is increased, labor leaders are asking that unionized firms be exempt from it.  Here’s why:

But Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” Hicks said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

Source: LA Times

I agree with Hicks position 100%, but his logic applies not just to labor unions, but to all laborers, union or otherwise.  As he rightly notes, minimum wage prevents parties from negotiating an agreement that works for both parties and allows each to prioritize what is important to them.  The individual, just like the union, may face a situation where working for a wage below the minimum is preferable to other options (say, for example, s/he cannot jet a job for the minimum).  Minimum wage, as Hicks rightly notes, eliminates that freedom.  There is nothing special about labor unions that mean they deserve more freedoms than the individual.

I am glad Hicks is doing the right thing for his membership to get them exempt from minimum wage legislation, but I just wish he wasn’t doing it at the expense of non-unionized workers.