This Week’s Applied Hayek: NPR Slip-Up Edition

Well, it’s happened again: NPR slipped up and ran a mostly positive story on Hayek, today on Morning Sedition Edition.

Yes, I was in my car again, driving to the Columbus airport after last night’s Ashland University political economy class, where our reading for the week was chapter 19 of The Constitution of Liberty, entitled “Social Security,” though the chapter applies to Obamacare—and the general fiscal outlook brought about by runaway entitlements—perfectly.

Don’t assume that Hayek necessarily rules out an individual mandate.  In fact, try out this passage:

There is little doubt that the growth of health insurance is a desirable development.  And perhaps there is also a case for making it compulsory since many who could thus provide for themselves might otherwise become a public charge.

Yikes!  That’s the exact logic of the Obamacare individual mandate.  But Hayek quickly corrects this deviation:

But there are strong arguments against a single scheme of state insurance; and there seems to be an overwhelming case against a free health service for all.  From what we have seen of such schemes, it is probable that their inexpediency will become evident in the countries that have adopted them, although political circumstances make it unlikely that they can ever be abandoned, now that they have been adopted. . .

Hayek returns to this theme on a broader canvas at the end of the chapter (remember: this chapter was written before Medicare and Medicaid were enacted):

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 is will in all probability again and again attempt to extricate itself by inflation.  Neither this outlet, however, nor a deliberate default on the obligation already 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 been well 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.

These last passages could have been written with the present Euro crisis, and America’s entitlement funding crisis, in mind.  The late economist Herbert Stein famously said, something that can’t go on forever, won’t.  My AEI colleague Alex Pollock (author of a fine short book on this whole matter, Boom & Bust) offers his own close corollary: Loans that can’t be paid back, won’t.  (See: Greece.)  To which I offer the Hayward Welfare State Codicil: Entitlement promises that can’t be kept, won’t.


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