The Chicago School

The Chicago School Hayek & Friedman

Hayek (1899-1992) • “When the course of civilization takes an unexpected turn, when instead of the continuous progress which we have come to expect, we find ourselves threatened by evils associated by us with past ages of barbarism, we blame naturally anything but ourselves.” (825)

Modernity ≈ Release of individual energies • “During the whole of this modern period of European history the general direction of social development was one of freeing the individual from the ties which had bound him to the customary or prescribed ways in the pursuit of his ordinary activities.” (827)  Progress “…by the beginning of the twentieth century the working man in the western world had reached a degree of material comfort, security, and personal independence which a hundred years before had seemed scarcely possible.”(828)

Socialism = A Threat to Freedom • Socialism was “early recognized as the gravest threat to freedom” and “quite openly began as a reaction against the liberalism of the French Revolution,” (?) and from its inception was “frankly authoritarian” (828)

Socialism ≠ Democracy • “Nobody saw more clearly than de Tocqueville that democracy as an essentially individualist institution stood in an irreconciliable conflict with socialism” (828)

Freedom, a Socialist Disguise • “…to harness to its cart the strongest of all political motives, the craving for freedom, socialism began increasingly to make use of the promise of a ‘new freedom’.” (828) • (Socialism) “…was to bring ‘economic freedom’, without which the political freedom already gained was ‘not worth having’.” (828) But, how did Socialists understand Freedom?

Freedom as “freedom from coercion, freedom from the arbitrary power of other men…” Freedom as “freedom from necessity” (which is but “another name for the old demand for an equal distribution of wealth”) Two Understandings of Freedom But “…what was promised to us as the Road of Freedom was in fact the High Road to Servitude.” (829)

The Welfare State • “Unlike socialism, the conception of the welfare state has no precise meaning.” (832) “We shall see that some of the aims of the welfare state can be realized without detriment of individual liberty… others… cannot be realized in a society that wants to preserve personal freedom.” (833) Legitimate goals: provision of collective goods (i.e. museums) and security

Against Progressive Taxation • Insignificant increase in tax collection • Disincentives for the most productive people: “severe limitation of the incomes that could be earned by the most successful and thereby gratification of the envy of the less-well-off.”(834)

Socialism is a Mistake: • “…our civilization depends, not only for its origin but also for its preservation, on what can be precisely described only as the extended order of human cooperation, an order more commonly, if somewhat misleadingly, known as capitalism.”(838) • “…there is no known way, other than by the distribution of products in a competitive market, to inform individuals in what direction their several efforts must aim so as to contribute as much as possible to the total product.” (838)

Milton Friedman (1912-), Capitalism and Freedom • Liberalism = free discussion + voluntary co-operation (rejection of coercion) • “…the role of the market… is that it permits unanimity without conformity; that it is a system of effectively proportional representation.” (840)

The Market Against Politics? • Political channels… “strain the social cohesion essential for a stable society” But “The widespread use of the market reduces the strain on the social fabric by rendering conformity unnecessary with respect to any activities it encompasses.”(841)

The Game of Society • Need for Rules (Umpire) • The Right Role of Government: “A government which maintained law and order, defined property rights, served as a means whereby we could modify property rights and other rules of the economic game, adjudicated disputes about the interpretation of rules, enforced contracts, promoted competition, provided a monetary framework, engaged in activities to counter technical monopolies and to overcome neighbohoord effects widely regarded as sufficiently important to justify government intervention, and which supplemented private charity and the private family in protecting the irresponsible, whether madman or child—such a government would clearly have important funtions to perform. The consistent liberal is not an anarchist.” (846-7)

The Chicago School