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This Week’s Applied Hayek: Nation Magazine Edition

The Nation magazine thinks it has hit a two-fer in a recent issue, calling attention to the supposed hypocrisy of Charles Koch (cue villainous musical fanfare here) and Friedrich Hayek, for taking advantage of Social Security benefits.  Hayek was reluctant to accept an invitation to make an extended visit to the U.S. in the mid-1970s in part because of health reasons, and he worried about his health care coverage if he came to the U.S.  But because he had paid into Social Security when he was a faculty member at the University of Chicago back in the 1950s, Koch’s staff advised him that he was eligible for Medicare coverage, thus making the visit possible after all.

This is hypocrisy, The Nation thinks, because “Hayek’s comparatively liberal attitude toward social insurance [in The Road to Serfdom] hardened considerably by the time he published his 1960 opus, The Constitution of Liberty. Despite privately spending the intervening years paying into Social Security, Hayek devoted an entire chapter—titled “Social Security”—to denouncing the modern welfare state as a gateway to tyranny and moral decay.”

Let’s go to the tape, as the saying goes, and we can see fairly quickly that The Nation has distorted or willfully ignored Hayek’s full views on social insurance.  Hayek did not object to social insurance programs; he objected to the politicized transformation of social insurance into open wealth redistribution, and he also worried about their long-run sustainability for reasons that were subsequently borne out entirely (i.e., Congress voting for higher and higher benefits, ultimately outstripping the tax base for it).  He also has some interesting observations about liberal resistance to means testing for social insurance programs, which are dead on accurate for today’s reform debates.

So, for example, here’s one thought on this from Hayek in an earlier chapter of The Constitution of Liberty on “The Decline of Socialism and the Rise of the Welfare State” that I referenced in my latest Hayek post last week:

Indeed, no government in modern times has ever confined itself to the “individualist minimum” which has occasionally been described, nor has such confinement of governmental activity been advocated by the “orthodox” classical economists.  All modern governments have made provision for the indigent, unfortunate, and disabled and have concerned themselves with questions of health and the dissemination of knowledge.  There is no reason why the volume of these pure service activities should not increase with the general growth of wealth.  There are common needs that can be satisfied only by collective action and which can be thus provided for without restricting individual liberty.  It can hardly be denied that, as we grow richer, that minimum of sustenance which the community has always provided for those not able to look after themselves, and which can be provided outside the market, will gradually rise, or that government may, usefully and without doing any harm, assist or even lead in such endeavors.  There is little reason why the government should not also play some role, or even take the initiative, in such areas as social insurance and education, or temporarily subsidize certain experimental developments.  Our problem here is not so much the aims as the methods of government action.

In other words, contrary to the claim of The Nation that Hayek’s views on social insurance “hardened considerably” by the time he wrote The Constitution of Liberty, in fact it remained quite reasonable and consistent.

  The specific chapter on Social Security The Nation referenced could be cited at length controverting The Nation’s claims.  There are some especially salient remarks on the central questions of the Obamacare debate of the present moment; I’ll have a look at these in future posts.  For the meantime, see if this extended passage doesn’t exactly describe the problem with our entitlement crisis today:

It is much more difficult to see how it will ever be possible to abandon a system of provision for the aged under which each generation, by paying for the needs of the preceding one, acquires a similar claim to support by the next.  It would almost seem as if such a system, once introduced, would have to be continued in perpetuity or allowed to collapse entirely.  The introduction of such a system therefore puts a strait jacket on evolution and places on society a steadily growing burden from which it will in all probability again and again attempt to extricate itself by inflation.  Neither this outlet, however, nor a deliberate default on obligation incurred can provide the basis for a decent society.  Before we can hope to solve these problems sensibly, democracy will have to learn that it must pay for its own follies and that it cannot draw unlimited checks on the future to solve its present problems

It has well been said that, while we used to suffer from social evils, we now suffer from the remedies for them.  The difference is that, while in former times the social evils were gradually disappearing with the growth of wealth, the remedies we have introduced are beginning to threaten the continuance of that growth of wealth on which all future improvement depends.

For The Nation, it is so much easier just to call names and heckle rather than grapple with the serious critique Hayek sets out.

(While I listen to NPR, I don’t catch The Nation regularly because I can’t do that in the car.  Hat tip here to Ron Radosh for flagging this for me.)

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