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Transportation subsidies distort the marketplace, create inefficiencies, and preclude aff solvency -- rejecting government intervention in favor of the free market solves best Carson 1!-senior fellow and holder of the Karl Hess Chair in Social Theory at the Center for a Stateless Society. He won the 2011 Beth A. Hoffman Memorial Prize for conomic !ritin".# Ke$in A. %The &istortin" ffects of Trans'ortation S()sidies*+o$em)er 2010 , -ol(me. /0 , 0ss(e. 1 , Print This Post , 2/ comments3 The 4reeman3 htt'.55www.thefreemanonline.or"5feat(res5the6distortin"6effects6of6 trans'ortation6s()sidies5755 8 Altho("h critics on the left are $ery ast(te in descri)in" the e$ils of 'resent6day society3 they (s(ally fail to (nderstand either the root of those 'ro)lems #"o$ernment inter$ention7 or their sol(tion #the o'eration of a freed mar9et7. 0n

Pro"ressi$e commentary on ener"y3 'oll(tion3 and so on:otherwise often ;(ite insi"htf(l:calls for "o$ernment inter$ention are ;(ite common. <eor"e Mon)iot3 for instance3 has written that %=t>he only rational res'onse to )oth the im'endin" end of the ?il A"e and the menace of "lo)al warmin" is to redesi"n o(r cities3 o(r farmin" and o(r

@istin" 'ro)lems of e@cess ener"y cons(m'tion3 'oll(tion3 )i"6)o@ stores3 the car c(lt(re3 and s()(r)an s'rawl res(lt from the %massi$e 'olitical 'ress(re* that has already )een a''lied3 o$er the 'ast se$eral decades3 to %redesi"n o(r cities3 o(r farmin"3 and o(r li$es.* The root of all the 'ro)lems Mon)iot finds so o)Aectiona)le is State inter$ention in the mar9et'lace. 0n 'artic(lar3 s()sidies to trans'ortation ha$e 'ro)a)ly done more than any other factor #with the 'ossi)le e@ce'tion of intellect(al 'ro'erty law7 to determine the 'resent sha'e of the American cor'orate economy. C(rrently 'redominatin" firm sizes and mar9et areas are the res(lt of "o$ernment s()sidies to trans'ortation. Adam Smith ar"(ed o$er 200 years was (ser fees rather than a"o that the fairest way of f(ndin" trans'ortation infrastr(ct(re "eneral re$en(es. %!hen the carria"es which 'ass o$er a hi"hway or
li$es. B(t this cannot ha''en witho(t massi$e 'olitical 'ress(re.* B(t this is 'recisely )ac9ward. a )rid"e3 and the li"hters which sail ('on a na$i"a)le canal3 'ay toll in 'ro'ortion to their wei"ht or their tonna"e3 they 'ay for the maintenance of those '()lic wor9s e@actly in 'ro'ortion to the wear and tear which they occasion of them.* This is not3 howe$er3 how thin"s were act(ally done.

Powerf(l )(siness interests ha$e (sed their 'olitical infl(ence since the )e"innin" of American history to sec(re "o$ernment f(ndin" for %internal im'ro$ements.* The real t(rnin" 'oint was the "o$ernmentBs
role in creatin" the railroad system from the mid6nineteenth cent(ry on. The national railroad system as we 9now it was almost entirely a creat(re of the State. The federal railroad land "rants incl(ded not only the ri"hts6of6way for the act(al railroads3 )(t e@tended 126mile tracts on )oth sides. As the lines were com'leted3 this adAoinin" land )ecame 'rime real estate and s9yroc9eted in $al(e. As new comm(nities s'ran" (' alon" the ro(tes3 e$ery ho(se and )(siness in town was )(ilt on land ac;(ired from the railroads. The tracts also fre;(ently incl(ded $al(a)le tim)erland. The railroads3 accordin" to Matthew Cose'hson #The Do))er Barons73 were %land com'anies* whose directors %did a r(shin" land )(siness in farm lands and town sites at risin" 'rices.* 4or e@am'le3 (nder the terms of the Pacific Dailroad )ill3 the Enion Pacific #which )(ilt from the Mississi''i westward7 was "ranted 12 million acres of land and F2G million worth of H06year "o$ernment )onds. The Central Pacific #)(ilt from the !est Coast eastward7 recei$ed nine million acres and F2I million worth of )onds. The total land "rants to the railroads amo(nted to a)o(t si@ times the area of 4rance. Theodore C(dah3 chief en"ineer for what )ecame the Central Pacific3 ass(red 'otential in$estors %that it co(ld )e done:if "o$ernment aid were o)tained. 4or the cost wo(ld )e terri)le.* Collis H(ntin"ton3 the leadin" 'romoter for the 'roAect3 en"a"ed in a sordid com)ination of strate"ically 'laced )ri)es and a''eals to comm(nitiesB fears of )ein" )y'assed in order to e@tort "rants of %ri"hts of way3 terminal and har)or sites3 and . . . stoc9 or )ond s()scri'tions ran"in" from F1203000 to F130003000* from a lon" strin" of local "o$ernments that incl(ded San 4rancisco3 Stoc9ton3 and Sacramento. <o$ernment also re$ised tort and contract law to ease the carriersB way:for e@am'le3 )y e@em'tin" common carriers from lia)ility for many 9inds of 'hysical dama"e ca(sed )y their o'eration. Had railroad $ent(res )een forced to )ear their own initial ca'ital o(tlays:sec(rin" ri"hts of way3 're'arin" road)eds3 and layin" trac93 witho(t land "rants and "o$ernment '(rchases of their )onds:the railroads wo(ld li9ely ha$e de$elo'ed instead alon" the initial lines on which 8ewis M(mford s'ec(lated in The City in History. many local rail networ9s lin9in" comm(nities into local ind(strial economies. The re"ional and national interlin9a"es of local networ9s3 when they did occ(r3 wo(ld ha$e )een far fewer and far smaller in ca'acity. The com'arati$e costs of local and national distri)(tion3 accordin"ly3 wo(ld ha$e

)een ;(ite different. 0n a nation of h(ndreds of local ind(strial economies3 with lon"6distance rail trans'ort m(ch more costly than at 'resent3 the nat(ral 'attern of ind(strialization wo(ld ha$e )een to inte"rate small6scale 'ower machinery into fle@i)le man(fact(rin" for local mar9ets. Alfred Chandler3 in The -isi)le Hand3 ar"(ed that the creation of the national railroad system made 'ossi)le3 first3 national wholesale and retail mar9ets3 and then lar"e man(fact(rin" firms ser$in" the national mar9et. The e@istence of (nified national mar9ets ser$ed )y lar"e6scale man(fact(rers de'ended on a relia)le3 hi"h6$ol(me distri)(tion system o'eratin" on a national le$el. The railroad and tele"ra'h3 %so essential to hi"h6$ol(me 'rod(ction and distri)(tion3* were in ChandlerBs $iew what made 'ossi)le this steady flow of "oods thro("h the distri)(tion 'i'eline. %The re$ol(tion in the 'rocesses of distri)(tion and 'rod(ction rested in lar"e 'art on the new trans'ortation and comm(nications infrastr(ct(re. Modern mass 'rod(ction and mass distri)(tion de'end on the s'eed3 $ol(me3 and re"(larity in the mo$ement of "oods and messa"es made 'ossi)le )y the comin" of the railroad3 tele"ra'h and steamshi'.* T h e T i ' ' i n " P o i n t The creation of a sin"le national mar9et3 (nified )y a hi"h6$ol(me distri)(tion system3 was 'ro)a)ly the ti''in" 'oint )etween two 'ossi)le ind(strial systems. As M(mford ar"(ed in Technics and Ci$ilization3 the main economic reason for lar"e6scale 'rod(ction in the factory system was the need to economize on 'ower from 'rime mo$ers. 4actories were filled with lon" rows of machines3 all connected )y )elts to dri$e shafts from a sin"le steam en"ine. The in$ention of the electric motor chan"ed all this. A 'rime mo$er3 a''ro'riately scaled3 co(ld )e )(ilt into each indi$id(al machine. As a res(lt3 it was 'ossi)le to scale machinery to the flow of 'rod(ction and sit(ate it close to the 'oint of cons(m'tion. !ith the introd(ction of electrical 'ower3 as descri)ed )y Charles Sa)el and Michael Piore in The Second 0nd(strial &i$ide 3 there were two alternati$e 'ossi)ilities for or"anizin" 'rod(ction aro(nd the new electrical machinery. decentralized 'rod(ction for local mar9ets3 inte"ratin" "eneral6'(r'ose machinery into craft 'rod(ction and "o$erned on a demand6'(ll )asis with short 'rod(ction r(ns and fre;(ent shifts )etween 'rod(ct linesJ or centralized 'rod(ction (sin" e@'ensi$e3 'rod(ct6s'ecific machinery in lar"e )atches on a s(''ly6'(sh )asis. The first alternati$e was the one most nat(rally s(ited to the new 'ossi)ilities offered )y electrical 'ower. B(t in fact what was chosen was the second alternati$e. The role of the State in creatin" a sin"le national mar9et3 with artificially low distri)(tion costs3 was almost certainly what ti''ed the )alance )etween them. The railroads3 themsel$es lar"ely creat(res of the State3 in t(rn acti$ely 'romoted the concentration of ind(stry thro("h their rate 'olicies. Sa)el and Piore ar"(e that %the railroadsB 'olicy of fa$orin" their lar"est c(stomers3 thro("h re)ates* was a central factor in the rise of the lar"e cor'oration. ?nce in 'lace3 the railroads:)ein" a hi"h fi@ed6cost ind(stry:had %a tremendo(s incenti$e to (se their ca'acity in a contin(o(s3 sta)le way. This incenti$e meant3 in t(rn3 that they had an interest in sta)ilizin" the o(t'(t of their 'rinci'al c(stomers:an interest that e@tended to 'rotectin" their c(stomers from com'etitors who were ser$ed )y other railroads. 0t is therefore not s(r'risin" that the railroads 'romoted mer"er schemes that had this effect3 nor that they fa$ored the res(ltin" cor'orations or tr(sts with re)ates.* D e ' r i s i n " t h e D o l e As new forms of trans'ortation emer"ed3 the "o$ernment re'rised its role3 s()sidizin" )oth the national hi"hway and ci$il a$iation systems. 4rom its )e"innin" the American a(tomoti$e ind(stry formed a %com'le@* with the 'etrole(m ind(stry and "o$ernment hi"hway 'roAects. The %most 'owerf(l 'ress(re "ro(' in !ashin"ton* #as a PBS doc(mentary called it7 )e"an in C(ne 11H23 when <M 'resident Alfred P. Sloan created the +ational Hi"hway Esers Conference3 in$itin" oil and r())er firms to hel' <M )an9roll a 'ro'a"anda and lo))yin" effort that contin(es to this day. !hate$er the 'olitical moti$ation )ehind it3 the economic effect of the interstate system sho(ld hardly )e contro$ersial. -irt(ally 100 'ercent of road)ed dama"e to hi"hways is ca(sed )y hea$y tr(c9s. After re'eated li)eralization of ma@im(m wei"ht restrictions3 far )eyond the hea$iest concei$a)le wei"ht the interstate road)eds were ori"inally desi"ned to s(''ort3 f(el ta@es fail misera)ly at ca't(rin" from )i"6ri" o'erators the cost of 'a$ement dama"e ca(sed )y hi"her a@le loads. And tr(c9ers ha$e )een s(ccessf(l at scra''in" wei"ht6distance (ser char"es in all )(t a few western states3 where the '(sh for re'eal contin(es. So only a)o(t half the re$en(e of the hi"hway tr(st f(nd comes from fees or f(el ta@es on the tr(c9in" ind(stry3 and the rest is e@ternalized on 'ri$ate a(tomo)iles. This doesnBt e$en co(nt the 20 'ercent of hi"hway f(ndin" thatBs still s()sidized )y "eneral re$en(es3 or the role of eminent domain in lowerin" the transaction costs in$ol$ed in )(ildin" new hi"hways or e@'andin" e@istin" ones. As for the ci$il a$iation system3 from the )e"innin" it was a creat(re of the State. 0ts ori"inal 'hysical infrastr(ct(re was )(ilt entirely with federal "rants and ta@6free m(nici'al )onds. Professor Ste'hen Pa(l &em'sey of the Eni$ersity of &en$er in 1112 estimated the re'lacement $al(e of this infrastr(ct(re at F1 trillion. The federal "o$ernment didnBt e$en start collectin" (ser fees from airline 'assen"ers and frei"ht shi''ers (ntil 11G1. $en with s(ch (ser fees 'aid into the Air'ort and Airways Tr(st 4(nd3 the system still re;(ired ta@'ayer s()sidies of FH )illion to maintain the 4ederal A$iation AdministrationBs networ9 of control towers3 air traffic control centers3 and tens of tho(sands of air traffic controllers. minent domain also remains central to the )(ildin" of new air'orts and e@'ansion of e@istin" air'orts3 as it does with hi"hways. S()sidies to air'ort and air traffic control infrastr(ct(re are only 'art of the 'ict(re. ;(ally im'ortant was the direct role of the State in creatin" the hea$y aircraft ind(stry3 whose A(m)o Aets re$ol(tionized ci$il a$iation after !orld !ar 00. 0n Harry Tr(man and the !ar Scare of 11IK3 4ran9 Kofs9y descri)ed the aircraft ind(stry as s'iralin" into red in9 after the end of the war and on the $er"e of )an9r('tcy when it was resc(ed )y the Cold !ar #and more s'ecifically Tr(manBs hea$y )om)er 'ro"ram7. &a$id +o)le3 in America )y &esi"n3 made a con$incin" case that ci$ilian A(m)o Aets were only 'rofita)le than9s to the "o$ernmentBs hea$y )om)er contractsJ the 'rod(ction r(ns for the ci$ilian mar9et alone were too small to 'ay for the com'le@ and e@'ensi$e machinery. The GIG is essentially a s'inoff of military 'rod(ction. The ci$il a$iation system is3 many times o$er3 a creat(re of the State. T h e S t a t e a n d t h e C o r ' o r a t i o n 0tBs hard to a$oid the concl(sion that the dominant )(siness model in the American economy3 and the size of

the 're$ailin" cor'orate )(siness (nit3 are direct res(lts of s(ch 'olicies. A s()sidy to any factor of 'rod(ction amo(nts to a s()sidy of those firms whose )(siness

models rely most hea$ily on that factor3 at the e@'ense of those who de'end on it the least. S()sidies to trans'ortation3 )y 9ee'in" the cost of distri)(tion artificially low3 tend to len"then s(''ly and distri)(tion chains. They ma9e lar"e cor'orations o'eratin" o$er wide mar9et areas artificially com'etiti$e a"ainst smaller firms 'rod(cin" for local mar9ets:not to mention )i"6)o@ retailers with their wareho(ses6 on6wheels distri)(tion model. Some conse;(entialists treat this as a A(stification for trans'ortation s()sidies. S()sidies are "ood )eca(se they ma9e 'ossi)le mass6 'rod(ction ind(stry and lar"e6scale distri)(tion3 which are #it is claimed7 inherently more efficient #)eca(se of those ma"ically (nlimited %economies of scale3* of co(rse7. Ti)or Machan ar"(ed A(st the o''osite in the 4e)r(ary 1111 4reeman. Some 'eo'le will say that strin"ent 'rotection of ri"hts =a"ainst
eminent domain> wo(ld lead to small air'orts3 at )est3 and many constraints on constr(ction. ?f co(rse:)(t whatBs so wron" with thatL Perha's the worst thin" a)o(t modern ind(strial life has )een the 'ower of 'olitical a(thorities to "rant s'ecial 'ri$ile"es to some enter'rises to $iolate the ri"hts of third 'arties whose 'ermission wo(ld )e too e@'ensi$e to o)tain. The need to o)tain that 'ermission wo(ld indeed serio(sly im'ede what most en$ironmentalists see as ram'ant:indeed rec9less:ind(strialization. The system of 'ri$ate 'ro'erty

ri"hts . . . is the "reatest moderator of h(man as'irations . . . . 0n short3 'eo'le may reach "oals they arenBt a)le to reach with their own reso(rces only )y con$incin" others3 thro("h ar"(ments and fair e@chan"es3 to coo'erate. 0n any case3 the %efficiencies* res(ltin" from s()sidized centralization are entirely s'(rio(s. 0f the efficiencies of lar"e6scale 'rod(ction were s(fficient to com'ensate for increased distri)(tion costs3 it wo(ld not )e necessary to shift a maAor 'ortion of the latter to ta@'ayers to ma9e the former 'rofita)le. 0f an economic acti$ity is only 'rofita)le when a 'ortion of the cost side of the led"er is concealed3 and will not )e (nderta9en when all costs are f(lly internalized )y an economic actor3 then itBs not really efficient. And when total distri)(tion costs #incl(din" those c(rrently shifted to the ta@'ayer7 e@ceed
mass6'rod(ction ind(stryBs ostensi)le sa$in"s in (nit cost of 'rod(ction3 the %efficiencies* of lar"e6scale 'rod(ction are ill(sory.

"aith in central planning is dangerous -- turns solvency, and makes nuclear #ar inevitable $ock#ell, !% American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent of the A(strian School of economics3 and chairman5C ? of the 8(dwi" $on Mises 0nstit(te. #8lewellyn3 %The Haye9 moment*3 Mises 0nstit(te3 May 200H3 htt'.55mises.or"'@LcontrolNIH1 , Callahan& B(t fail(re does not deter the state . 0ndeed3 we are now as9ed to )elie$e that the !hite Ho(se is not only omni'otent )(t omniscient as well. These 'eo'le in "o$ernment 'res(me to ma9e definiti$e A(d"ments a)o(t the entire 0ra;i r(lin" class 3 e$en "oin" so far as to say that they 9now the secret hostility of a h("e ran"e of 'eo'le toward Saddam3 which th(s ;(alifies them #who A(st ha''en to ha$e essential technical 9nowled"e7 to hel' in administerin" the co(ntry. They canOt 'ossi)ly 9now this. That they )elie$e they can3 or they )elie$e we will )elie$e
their claims to 9now3 is incredi)le and fri"htenin". The alarmin" reality )rin"s to mind Haye9Os +o)el Prize lect(re in 11GI. !ith "reat co(ra"e3 Haye9 s'o9e of the tendency of economists to 'res(me that

they 9now thin"s a)o(t h(man )eha$ior that they do not and cannot 9now . They do this )eca(se they try to a''ly the models of the 'hysical sciences to e@'lain h(man action3 always with an aim toward controllin" the o(tcomes of h(man choice. 0n tr(th3 h(man action is too com'le@ and s()Aecti$e to )e accessed )y social scientists 3 and the attem't will always lead to a)ysmal fail(re . Haye9 went on to e@'lain how his criti;(e of 'ositi$ist economic modelin" a''lies more )roadly to anyone who wo(ld attem't to imitate the form while missin" the s()stance of scientific 'roced(re. PB(t it is )y no means only in the field of economics that far6reachin" claims are made on )ehalf of a more scientific direction of all h(man acti$ities and the desira)ility of re'lacin" s'ontaneo(s 'rocesses )y Oconscio(s h(man controlO. P He mentions that the 'oint a''lies to

Haye9 was raisin" an o)Aection not to the idea of omniscience )(t of the 'ossi)ility of accessin" e$en m(ndane 9nowled"e. +o small "ro(' in "o$ernment3 m(ch less a sin"le 'erson3 can acc(m(late and sort thro("h the 9inds of information necessary to administer society3 m(ch less destroy and reconstr(ct one3 as the B(sh administration 'ro'oses to do thro("ho(t the <(lf re"ion and the Middle ast. The attem't to assem)le s(ch a list is an act of 'ower 3 not intelli"ence. !e are )ein" as9ed to ma9e an enormo(s lea' of faith that the B(sh
sociolo"y3 'sychiatry3 and the 'hiloso'hy of history. administration has somehow sol$ed the "reat 'ro)lem that afflicts (s all. the limits of h(man com'rehension. Beca(se of those limits3 we are ri"ht to try to limit the a)ility of men to e@ercise 'ower o$er their fellows3 at home or a)road. Th(s does Haye9Os 'oint a''ly to 'olitics3 es'ecially to 'olitics3 e$en more

es'ecially to the 'olitics of the military machine. The social scientist who )elie$es he has the master 'lan to r(n the world is eno("h of a menace. B(t the 'olitician who )elie$es this3 and is contem'latin" war3 can )rin" a)o(t massi$e amo(nts of destr(ction and death. 0n these n(clear days:and let (s say what we donOt li9e to contem'late )(t which is nonetheless tr(e:he can )rin" a)o(t the end of the world as we 9now it. As Haye9 notes3 a tyrant who carries the 'retense of 9nowled"e too far can )ecome Pa destroyer of ci$ilization.P P0f man is not to do more harm than "ood in his efforts to im'ro$e the social order3P said Haye93 Phe will ha$e to learn that . . . he cannot ac;(ire the f(ll 9nowled"e which wo(ld ma9e mastery of the e$ents 'ossi)le.P To )elie$e otherwise is foolhardy and dan"ero(s. PThe reco"nition of the ins('era)le limits to his 9nowled"e o("ht indeed to teach the st(dent of society a lesson of h(mility which sho(ld "(ard him a"ainst )ecomin" an accom'lice in menOs fatal stri$in" to control society.PB 'e should reject the affirmative and it(s assumptions that the government has the kno#ledge and po#er to effectively organi)e and manage societal affairs That intellectual stance is critical to survival -- the problem of socialist systems of thought lies in a false faith in central authority to correctly interpret and manage data -- e*posing the failures of centrali)ed systems of kno#ledge is a prere+uisite to resolving all major social problems Ebenstein, !% Alan3 adA(nct scholar at the Cato instit(te3 a(thor of the first n"lish lan"(a"e )io"ra'hy of Haye93 recei$ed his Ph.&. from the 8ondon School of conomics3 Haye9Bs Co(rney. The Mind of 4riedrich Haye9 Pal"ra$e Macmillan '. 2HK62H1
To con$ince the leaders of '()lic o'inion of %this tr(th* )ecame Haye9Bs maAor 'roAect3 and in considera)le 'art he s(cceeded in this tas9. He wrote in the '()lished $ersion of The 4atal Conceit3 in sentiments that were lar"ely his alone. %The dis'(te )etween the mar9et order and socialism is no less than a matter

of s(r$i$al. To follow socialist morality wo(ld destroy m(ch of 'resent =man>9ind and im'o$erish m(ch of the rest.* Classical socialism is dead. The di$ision of 9nowled"e is the fact(al 'remise on which economic systems and societies sho(ld )e )ased . The fra"mentation of 9nowled"e renders central "o$ernment control of an economy im'ossi)le3 he ar"(ed. The )est societies and economies are those that reco"nize and accommodate di$ided 9nowled"e . He em'hasized that as a res(lt of ine$ita)le im'erfections inh(man 9nowled"e and comm(nication3 free mar9et order is the most 'rod(cti$e. 0t o$ercomes the di$ision of 9nowled"e and the a)sence of $er)al
9nowled"e. The "reat insi"ht toward the end of his career that he attem'ted to en(nciate in %The 4atal Conceit* is that h(manityBs instincti$e emotions are often at war with the morals3 r(les3 and laws

necessary to s(stain free mar9et order. Thro("h (nderstandin" this conQict3 h(manity may resol$e it. The str(""le )etween the ad$ocates of free mar9et order and of classical socialism is not3 Haye9 concl(ded3 a moral )(t an intellect(al one. %The main 'oint of my ar"(ment is...that
the conQict )$ocates of the s'ontaneo(s e@tended h(man order created )y a com'etiti$e mar9et... =and> those who demand a deli)erate arran"ement of h(man interaction )y central a(thority )ased on collecti$e

command o$er a$aila)le reso(rces is d(e to a fact(al error )y the latter a)o(t how 9nowled"e of these reso(rces is and can )e "enerated and (tilised. As a ;(estion of fact3 this conQict m(st )e settled )y scientiRc st(dy.* %0 am now 'rofo(ndly con$inced3* he )elie$ed3 %of what 0 had only hinted at )efore3 namely3 that the str(""le )etween the ad$ocates of a free society and the ad$ocates of the socialist system is not a moral )(t an intellect(al conQict.* %!hat 0 am tryin" to do in The 4atal Conceit is to show that their =classical socialistsB> ar"(ment is wholly )ased on fact(al mista9es.* The di$ision of 9nowled"e3 Haye9 tho("ht3 'recl(des classical socialism.

0"norance of this tr(th3 he )elie$ed3 was the "reatest o)stacle to increased and im'ro$ed economic 'rod(ction. +ow3 of co(rse3 thro("h the 0nternet and other im'ro$ements in
comm(nication technolo"y3 it is 'ossi)le to centralize 9nowled"e and decision ma9in" as ne$er )efore. To the e@tent that Haye9Bs ar"(ments for free mar9et order rest on the ina)ility to centralize 9nowled"e and decision ma9in"3 circ(mstances are li9ely to chan"e:'erha's dramatically:in the years ahead. Cohn St(art Mill wrote 120 years a"o in his "reat wor9 Etilitarianism. %+o one whose o'inion deser$es a momentBs consideration can do()t that most of the "reat...e$ils of the world are in themsel$es remo$a)le3 and will3 if h(man affairs contin(e to im'ro$e3 )e in the end red(ced within narrow limits. Po$erty3 in any sense im'lyin" s(fferin"3 may )e com'letely e@tin"(ished )y the wisdom of society.... $en that most intracta)le of enemies3 disease3 may )e indeRnitely red(ced in dimensions....All the "rand so(rces...of h(man s(fferin" are in a "reat de"ree3 many of

con;(era)le )y h(man care and effort.* The economic 'ro)lem for m(ch of the world is close to )ein" sol$ed. !hile3 'artic(larly in s()6Saharan Africa3 e@treme
them almost entirely3 'ri$ation re"(larly occ(rs3 almost e$ery other maAor 'o'(lation area on earth is now in )etter sha'e. There is no reason that this trend of im'ro$ement sho(ld not contin(e. 0n short3 as Mill had it3 almost all the main so(rces of h(man s(fferin" may )e con;(ered )y %h(man care and effort .* The "reatest h(man 'o'(lation

com)ined with the hi"hest standard of li$in" is )oth the (tilitarian and the li)ertarian $ision.


1NC,.NC / Epistemology 0ndict

The affirmative relies on the synoptic delusion, assuming that the government can understand the marketplace -- kno#ledge is too fragmented for any entities to accurately process it 1oopman !26 Professor of Philoso'hy at the Eni$ersity of ?re"on #Colin3 PMorals and Mar9ets. 8i)eral &emocracy Thro("h &ewey and Haye9.P The Co(rnal of S'ec(lati$e Philoso'hy. 151501. ProAect M(se.755T& Thro("ho(t his writin"s on 'olitics and economics Haye9 ar"(es that 9nowled"e can only )e accom'lished within 'ractice3 not 'rior to 'ractice in standards to which 'ractice o("ht to conform. He th(s (nderstands 9nowled"e as an effect of a com'le@ coordination of a $ariety of actors. Deason3 writes Haye93 Pdoes not e@ist in the sin"(lar3 as "i$en or a$aila)le to any 'artic(lar 'erson S )(t m(st )e concei$ed as an inter'ersonal 'rocess .PH Haye9
here names two cr(cial feat(res of rationality. 'rocess and 'l(rality. The first feat(re is 'rocess3 namely3 the idea that

9nowled"e can )e effecti$e only in the conte@t of act(al 'ractical 'rocesses. I 0t is not indi$id(als who e@'ress rationality )y themsel$es )(t 3 rather3 'rocesses in which indi$id(als interact where rationality e$ol$es . The second cr(cial feat(re of Haye9Os acco(nt of 9nowled"e stresses its 'l(ralism.2 There is no sin"(lar rational order in which we are all 'artici'ants )(t3 rather3 a 'l(rality of orders of = nd Pa"e 122> rationality. !e cannot rise a)o$e the 'l(rality of o(r e'istemic 'rocesses to "et a monistic $iew of 9nowled"e as a whole. The most im'ortant conse;(ence of Haye9Os stress on these two feat(res of 'rocess
and 'l(rality is a dee' res'ect for (ncertainty that in t(rn f(els a de"ree of s9e'ticism. As another "reat 'olitical s9e'tic3 Michael ?a9eshott3 claimed3 the fact of (ncertainty is Pthe heart of the matterP in distin"(ishin" 'olitical e$ol(tionists from 'olitical rationalists./ Haye9 "oes on to de'loy his e$ol(tionary e'istemolo"ical s9e'ticism to credit the 'olitical claim that

to Pt(rn the whole of society into a sin"le or"anization )(ilt and directed accordin" to a sin"le 'lan wo(ld )e to e@tin"(ish the $ery forces that sha'ed the indi$id(al h(man minds that 'lanned it. PG Planned or"anization is dan"ero(s )eca(se3 as Adam 4er"(son '(t it at the dawn of the Scottish nli"htenment3 ci$ilization is the res(lt of h(man action )(t not of h(man desi"n .K Haye9 fre;(ently (nderscored his de)ts to the ei"hteenth6cent(ry Scottish li)erals who first wor9ed o(t an e$ol(tionary conce'tion of c(lt(ral 'ro"ress. P The e$ol(tionists made it clear that ci$ilization was the acc(m(lated hard6earned res(lt of trial and errorJ that it was the s(m of e@'erience3 in 'art handed from "eneration to "eneration as e@'licit 9nowled"e3 )(t to a lar"er e@tent em)odied in tools and instit(tions which had 'ro$ed themsel$es s('erior. P1 Pro"ress is achie$ed thro("h coordinated and coo'erati$e action . As s(ch3 it relies on social mechanisms whose com'le@ity is so "reat that we cannot 'ossi)ly "ras' all of the information contri)(tin" to the s(ccess of the 'rocesses . Haye9Os $ision of e'istemic and 'olitical orders as e$ol$in"3 self6creati$e3 and free 'rocesses t(rns o(t to )e remar9a)ly resonant with &eweyOs conce'tion of scientific 9nowled"e and democratic 'olitics as3 well3

e$ol$in"3 self6creati$e3 and free 'rocesses. &ewey wo(ld ha$e fo(nd 'artic(larly attracti$e Haye9Os re'roach of attem'ts to re'lace )ottom6(' c(lt(ral e$ol(tion with the to'6down r(le of e@'ert 'lannin". 0n a 'assa"e that Haye9 'ro)a)ly co(ld ha$e co'ied $er)atim witho(t anyone noticin"3 &ewey ar"(es3 P0t is im'ossi)le for hi"h6)rows to sec(re a mono'oly of s(ch 9nowled"e as m(st )e (sed for the re"(lation of common affairs. 0n the de"ree in which they )ecome a s'ecialized class3 they are sh(t off from 9nowled"e of the needs which they are s(''osed to ser$e.P10 Political 'ractices3 &ewey claims on )ehalf of democracy3 sim'ly cannot )e effecti$ely r(led from a)o$e. B(t &ewey and Haye9 do not merely conc(r in their 'olitical 'reference for e$ol$ed rather than desi"ned instit(tions. They also a"ree on the )roader e'istemolo"ical 'oints that lead them to = nd Pa"e 12/> this 'reference. This has )een recently noted )y Dichard Posner3 who is one of a $ery small n(m)er of contem'orary 'olitical theorists intimately familiar with )oth &ewey and Haye9. 11 Posner s(""ests that &ewey wo(ld a"ree with

s()Aect6centered rationalism and with Haye9Os tho("ht that s(ch leads strai"ht to a tro()lin" di$orce of theory and 'ractice . &ewey wo(ld also a"ree with Haye9 that the )est co(nterwei"ht to s(ch rationalism is to allow additional freedom of mo$ement to those e$ol$ed inters()Aecti$e 'ractices in which o(r
m(ch of Haye9Os s9e'tical criti;(e of rationalism

democratic forms of life ha$e ta9en root . B(t most im'ortant3 &ewey wo(ld a"ree with Haye9 that rationalistic 'hiloso'hical tendencies ne"lect the e$er6im'ortant role that (ncertainty 'lays in e$ery facet of o(r li$es.12

-redictions "ail / General

The aff(s assumption that most factors are kno#able and hence predictable establishes the legitimacy of using political and military intervention to manage international politics 3alby, %- 'rofessor of "eo"ra'hy at the Eni$ersity of Carleton #Simon3 Critical Sec(rity St(dies. Conce'ts and Cases3 ed. )y Keith Kra(se T Michael !illiams '.2I755 8 4inally3 'ossi)ly the most im'ortant reason for (n)(ndlin" the theoretical dimensions of sec(rity is related to the e'istemolo"ical and 'olitical matters im'licit in the 'ositi$ist ass(m'tions of neorealism. The ass(m'tion that most3 if not all3 thin"s are )oth 9nowa)le and hence 'redicta)le thro("h the a''lication of social scientific methods and reasonin" is intimately related to the form(lation of sec(rity as the mana"ement and control of ris9s and threats. B(t A(st a)o(t any social or nat(ral 'henomenon can 'otentially )e hazardo(sJ 'rotectin" a"ainst e$ery e$ent(ality is clearly im'ossi)le. B(t the ass(m'tions of control and 'redicta)ility s(""est that 'olitical and military inter$entions offer the 'ossi)ility of mana"in" international 'olitics. As so m(ch of the 'ast decadeBs 'olitical history s(""ests3 howe$er3 this may )e a dan"ero(s ill(sion. The will to 'ower that is im'licit in the 'ositi$ist e'istemolo"y of neorealism s(""ests that other less am)itio(s a''roaches deser$e to )e ta9en more serio(sly. KH

-redictions "ail / Economics

The affirmative places too much faith in central planning solutions -ceding decision-making authority to supposed e*perts guarantees the collapse of individual liberty and irresponsible domestic and foreign policy solutions -- free market solutions are more accurate and effective $ock#ell, !% American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent of the A(strian School of economics3 and chairman5C ? of the 8(dwi" $on Mises 0nstit(te. #8lewellyn3 %The Haye9 moment*3 Mises 0nstit(te3 May 200H3 htt'.55mises.or"'@LcontrolNIH1 , Callahan& The rele$ance of Haye9 in o(r times e@tends )eyond A(st )(siness cycle analysis. 0n later years3 Haye9 t(rned his attention to other matters concernin" the methods of science #he decried the P'retense of 9nowled"eP affected )y social scientists7 and the (ses of 'ower in society . His Doad to Serfdom warned that the re"imentation of totalitarian societies can only come to Britain and the ES thro("h central 'lannin". !hat is at sta9e3 he wrote3 is not A(st 'rod(cti$e economies )(t freedom itself. 0n o(r time3 that freedom is threatened )y inter$ention in e$ery as'ect of economic life )(t also thro("h the (se of military 'ower. <o$ernment not only claims it is smart eno("h to mana"e the economy3 fi@ (' o(r comm(nities3 r(n o(r schools3 )(t also to decide which forei"n 'oliticians deser$e to )e 'rotected and which deser$e to )e destroyed. The im'licit ass(m'tion is always that "o$ernment 9nows more and )etter than the rest of (s3 and that this 9nowled"e is s(fficient to "i$e it ri"hts the rest of (s do not ha$e. 0t is often said that 9nowled"e is 'ower. 0n the case of "o$ernment3 howe$er3 its 'ower $astly e@ceeds its 9nowled"e. !hen Alan <reens'an of the 4ed #a )ranch of "o$ernment in e$ery im'ortant res'ect7 testifies )efore Con"ress3 le"islators listen attenti$ely to find o(t what he 9nows a)o(t the state of the economy3 as if he has some 'ri$ile"ed access to hi"h6le$el data not re'orted elsewhere. 0t is f(rther ass(med that he 9nows 'recisely how to act on it. 0t is this 9nowled"e that allows him to o'erate the "ears and le$ers of the economy3 so it is )elie$ed. The same ass(m'tions are made a)o(t many as'ects of "o$ernment. Many 'eo'le who ha$e )ac9ed war with 0ra; ass(me that the "o$ernment m(st 9now somethin" awf(l a)o(t Saddam that it cannot share with the "eneral '()lic . 0tOs tr(e3 they admit3 that Saddam
does not ha$e n(clear wea'ons and that there is not '()lic information that s(""ests he is 'lottin" the destr(ction of America as we 9now it. B(t s(rely the !hite Ho(se m(st 9now somethin" we do not3 and 9now what to do a)o(t it3 else why wo(ld the administration )e so intent on remo$in" him from 'owerL

The )elief that 'owerf(l 'eo'le 9now more than the rest of (s is a main so(rce of their 'ower . 0tOs tr(e only to this e@tent. 'owerf(l 'eo'le are li9ely to 9now when they are tellin" the tr(th and when they are not. The rest of (s are '(t in a 'osition of ha$in" to "(ess or di" to $erify their claims 'oint )y 'oint. @'erience teaches that 'oliticians often lie. B(t thereOs an e$en more im'ortant 'oint. )eca(se "o$ernment acti$ity ta9es 'lace o(tside the framewor9 of the mar9et economy3 "o$ernment has no idea how to (se the information it does ha$e to achie$e social "ood. Thin9 of all the )its of information the "o$ernment had )een collectin" to assess the li9elihood of a terrorist
incident. A few warnin"s amon" tens of tho(sands of ti's did not s(ffice to 're$ent this destr(cti$e attac9. The acc(m(lation of information has "rown steadily more $ol(mino(s. The "o$ernment is in no )etter 'osition to ma9e

0n contrast3 ins(rance com'anies are in the )(siness of assessin" ris9 all the time3 and they do this )y means of a system of 'rofit and loss3 which Mises demonstrated is essential to a rationally or"anized society . <o$ernment3 on the other hand3 A(st collects 'iles of data and is com'letely at a loss on how to assess the relati$e li9elihood of any 'artic(lar scenario3 or what to do a)o(t it.
A(d"ments a)o(t it today than it was two years a"o.

-redictions are impossible -- the human mind can(t process all the kno#ledge necessary to accurately understand economics Cro#ley, 1. Mana"in" &irector of the Macdonald68a(rier 0nstit(te3 a national '()lic 'olicy thin9 tan9 )ased in ?ttawa. He was also the fo(ndin" President of the Atlantic 0nstit(te for Mar9et St(dies #A0MS73 a '()lic 'olicy thin9 tan9 )ased in Atlantic Canada. #Brian 8ee3 %The Man !ho Chan"ed $eryoneOs 8ife*3 The Macdonald68a(rier 0nstit(te3 20123 http4,,### macdonaldlaurier ca,files,pdf,5ayek-Commentary-6ay.!1. pdf, Callahan& Plannin" an economy therefore im'lies 9nowin" all sorts of thin"s. !hen and why 'eo'le want to wor93 and when and where their 'artic(lar s9ills are re;(iredJ the state of f(t(re demand for 'artic(lar "oods and ser$ices3 and therefore when to )(ild new 'rod(cti$e ca'acity or when to close down the oldJ how emer"in" technolo"ies and other disco$eries will ca(se 'eo'leOs needs and wants to shift in (nforeseen directions. Most cr(cially3 it in$ol$es 9nowin" what 'eo'le act(ally want and need. P(t a foot wron" in any of these decisions and the whole com'licated fa)ric of the economy )e"ins slowly to (nwind. Uet Haye9Os main 'oint is that all h(man 9nowled"e3 and es'ecially that a$aila)le to social 'lanners3 is irremedia)ly fra"mentary and incom'lete. +o one can ha$e the 9nowled"e that 'lanners re;(ire to s(ccessf(lly order
social relations. The a(thor of The Doad to Serfdom ne$er tired of claimin" that his own economics 'rofession was "(ilty of 'retendin" to ha$e 9nowled"e at its dis'osal that it did not and co(ld not ha$e3 th(s (sin" the 'resti"e of science to mas9 a cr(de "ra) for 'ower and infl(ence. So central was this idea to his whole $iew of social scienceOs role in the e$ol(tion of ci$ilization that Haye9 (sed the most 'resti"io(s 'latform he was e$er to occ('y3 his +o)el Prize acce'tance s'eech3 to dri$e it home. Enre'entant in the $iews that had earned him academic ostracism H0 years earlier3 he casti"ated his fellow economists for their P'retence of 9nowled"e P #the title of the

Belie$in"3 and leadin" others to )elie$e3 that they 9new eno("h3 or co(ld 9now eno("h3 to direct and control somethin" as intricate and com'le@ as an economy. T? TH M?& D+ M0+&3 ?4 C?EDS 3 HAU KBS ATTACK ?+ S?C0A8 SC0 +C MAU APP AD T? B A K0+& ?4 K+?!6+?TH0+<0SM. After all3 modern ci$ilization clin"s to few 'reA(dices more tenacio(sly than the )elief that nothin" is )eyond the "ras' of h(man (nderstandin" and control. And science and reason3 thro("h their many a''arent mar$els and miracles3 ha$e "i$en (s little reason to do()t their 'ower. Perha's ironically3 Haye9Os mission in life was to (se reason to con$ince h(manity of the limits of reason. He tho("ht that3 whate$er o(r im'ressi$e information6"atherin" and 'rocessin" tools3 we are all (na$oida)ly h(man and therefore s()Aect to the wea9nesses of the h(man condition. Headin" the list of these wea9nesses is o(r main instr(ment for (nderstandin" and inter'retin" o(r im'ressi$e scientific 9nowled"e. The h(man mind. 4or all the wonders that the collecti$e h(man mind has accom'lished within the conte@t of c(lt(re and society3 the indi$id(al h(man mind remains a remar9a)ly limited instr(ment. This was a s()Aect of end(rin" fascination for Haye93 the early st(dent of 'sycholo"y3
lect(re7. who in the 1120s wrote a seminal wor9 in the field called The Sensory ?rder #11227. Desearch demonstrates3 for e@am'le3 that each of (s is ca'a)le of ha$in" an astonishin"ly limited n(m)er of ideas

in o(r mind at any moment V ideas a$aila)le to the disci'lined ima"ination for reflection3 A(@ta'osition3 and mani'(lation. This Pchannel ca'acity3P as it is 9nown3 is limited in the a$era"e 'erson to )etween 2 and 10 ideas at a time and has chan"ed little o$er the co(rse of h(man ci$ilization. 0t is h(m)lin"3 )(t instr(cti$e3 to com'are this 'itif(l channel ca'acity with the ;(antity of information that e@ists a)o(t the social3 economic3 and 'hysical world. H(man 9nowled"e is e@'lodin" at an (n'recedented rate . 0t has )een ar"(ed that3 in c(ttin" ed"e fields s(ch as com'(ter science or nanotechnolo"y3 the total amo(nt of 9nowled"e do()les a''ro@imately e$ery 1K to 2I months3 while the whole )ody of h(man 9nowled"e may do()le ro("hly e$ery 12 years or so. ach of (s is th(s '(shed to an e$er "reater de"ree of s'ecialization in an e$er narrower field. P(t another way3 o(r relati$e i"norance "rows

faster than we can e$er ho'e to ed(cate o(rsel$es )eca(se o(r a)ility to ac;(ire and reflect on information is relati$ely fi@ed3 while o(r collecti$e 9nowled"e is e@'andin" e@'onentially. conomic 'redictions are im'ossi)le 66 differin" e@'ectations ma9e cons(mer decisions (n'redicta)le. 7rthur 286 Desearcher at the Sante 4e 0nstit(te #Brian3 PThe nd of Certainty in conomics.P Kl(wer Academic P()lishers. 111I. t($al(.santafe.ed(5Ww)arth(r5Pa'ers5Ma"ritte.'df755T& !orse3 e@'ectations )ecome (nsta)le. 0ma"ine that a few 'eo'le thin9 that 'rices on the mar9et are "oin" to "o ('. 0f 0 )elie$e this and 0 )elie$e that others )elie$e this3 0 will re$ise my e@'ectations ('ward. B(t then 0 may 'ic9 (' some ne"ati$e r(mor. 0 will reassess downward3 )(t realizin" that others may reassess and that they too realize that others3 0 may f(rther reassess. @'ectations )ecome f("iti$e3 ri''lin" (' or down whether trades are made or not. Predictions )ecome (nsta)le . This is the way 'rice )())les start. 0f somehow 'eo'le e@'ect 'rices to "o ('3 they will forecast that other 'eo'le will forecast that 'rices will "o ('. So they will )(y in3 and once the )())le th(s starts off3 'eo'le can see 'rices "o (' and their e@'ectations of ('ward motion f(lfilled. Therefore 'rices may contin(e to "o ('. Similar lo"ic a''lies to %floors* and %ceilin"s.* 0f3 for e@am'le3 the 'rice is K1I3 many in$estors )elie$e that at 100 there is some sort of mem)rane3
a ceilin"3 and when the 'rice reaches this ceilin" it will )o(nce )ac9 down with a certain 'ro)a)ility or it may %)rea9 thro("h.* S(ch ideas seem stran"e at first. B(t it is ;(ite 'ossi)le that many in$estors ha$e sell orders at 1003 sim'ly )eca(se it is a ro(nd n(m)er. So e@'ectations that the 'rice will fall if it hits 100 are li9ely to )e f(lfilled. Ceilin"s and floors emer"e as 'artially self6f(lfillin" 'ro'hesies3 held in 'lace )y their )ein" con$enient sell and )(y 'laces. !e are now a lon" way from homo"eneo(s rational e@'ectations . Ender the realistic ass(m'tion that traders may inter'ret the same information differently3 e@'ectations )ecome indeterminate and (nsta)le. And they may )ecome m(t(ally self6f(lfillin".10

-redictions "ail / 0$
<o$ernments ca'acity to (nderstand international relations is limited 66 reliance on ins(lar and inacc(rate 9nowled"e create )ad forei"n 'olicy decisions and t(rns the case. 5ader !86 Ph& in 0nternational relations from American Eni$ersity3 !ashin"ton corres'ondent for the Sin"a'ore B(siness Times #8eon3 P0ntelli"ence Ser$ices are +ot 0ntelle"ent.P Cato. A("(st 213 200I. www.cato.or"5'()lications5commentary5intelli"ence6ser$ices6are6not6intelli"ent755T& 0tOs that 9ind of )elief in the 'ossi)ility of indi$id(als and or"anizations 9nowin" eno("h to 'redict h(man )eha$ior and to alter its o(tcome that was criticized )y the renowned economist 4riedrich Haye9 as Ph()risP66 that is3 the 'ride which challen"es the "ods . 8eon
Hadar3 a research fellow in forei"n 'olicy st(dies at the Cato 0nstit(te3 is the a(thor of X(a"mire. America in the Middle ast #11127. The winner of the +o)el Prize in economics and one of the leadin" intellect(al forces )ehind free mar9et economics in the late 20th cent(ry didnOt foc(s m(ch attention on national sec(rity 'olicy3 and he ne$er st(died the o'erations of "o$ernment intelli"ence a"encies. B(t

Haye93 thro("ho(t his life3 attac9ed what he called PscientismP 66 the imitation in the social sciences3 incl(din" economics and 'olitical science3 of the methods of the 'hysical sciences. 0t was the limitations of h(man 9nowled"e that in Haye9Os $iew3 made the mar9et so im'ortant )eca(se it created3 con$eyed3 and re$ealed information in a way no other h(man instit(tion3 and certainly no "o$ernment a"ency3 co(ld e$er em(late. The free mar9et model 'res(mes that the flow of data3 9nowled"e3 and ideas can 'ermit cons(mers to "ain access to com'lete and acc(rate information on the )asis of which they can ma9e the reasona)le choices. As Haye9 ar"(ed3 a mar9et of information and ideas3 free from the control of "o$ernment and other centralized 'owers3 res(lts in a com'etiti$e disco$ery 'rocess that cannot )e 'redicted in ad$ance. His ideal model was )ased on
anarchic )(t that hel's 'rod(ce acc(rate information and efficient res(lts.

coo'erati$e and com'etiti$e )eha$ior amon" indi$id(als3 ho(seholds3 and enter'rises that a''ears ha'hazard and

The "o$ernmentOs intelli"ence a"encies are the (ltimate antithesis to this model of a free mar9et of information and ideas. 0f anythin"3 they re'resent the ideal of PscientismP and social en"ineerin" that was dis'ara"ed )y Haye9. By definition3 these instit(tions are '()lic mono'olies that collect and mani'(late information. They re'resent the most secreti$e3 restricti$e3 and a ti"htly controlled )(rea(cracy in a "o$ernment that a)hors the notion of a Ps'ontaneo(s orderP that res(lts from the com'etition of ideas. That is the nat(re of the
)east3 of the intelli"ence a"ency that o'erates in a confined and el(si$e s'here of '()lic 'olicy called Pnational sec(rity3P (nder the strict control of

"o$ernment officials that are dri$en not )y the search for the tr(th )(t rather )y )(rea(cratic and 'olitical interests. 0t is a system that is )o(nd to create a P"ro(' thin9P mentality and to down'lay and dismiss information that doesnOt fit the a"enda of 'olicyma9ers. $en (nder the )est of circ(mstances in which the C0A

is a)le to recr(it the )est and the )ri"htest3 it will ne$er )e a)le to 'redict the o(tcomes of "lo)al 'olitical and economic 'henomena. 0f anythin"3 as the case of 0ra;Os alle"ed !M& demonstrates3 the mono'oly o$er information and 'olitical a(thority that the intelli"ence a"ency has co(ld end (' distortin" the free flow of information and

that will ma9e it less li9ely that the '()lic and the "o$ernment will arri$e at decisions that reflect the interests and $al(es of a maAority of Americans.
ideas. And

7. E*perts Good
$eliance on elite e*perts ensures policy failure -- kno#ledge is too decentrali)ed for any individual to gain an accurate picture of the #orld 1ing 1!6 Ph& in economics from M0T3 former senior economist for 4reddie Mac3 and adA(nct scholar at the Cato 0nstit(te. #Arnold3 PThe ra of @'ert 4ail(re.P Cato. Se'tem)er5?cto)er 2010.www.cato.or"5'()s5'olicyMre'ort5$H2n25c'H2n261.html !ith "o$ernment e@'erts3 the 9nowled"e6 'ower discre'ancy is 'artic(larly ac(te. As we ha$e seen3 the e@'ectations 'laced on "o$ernment e@'erts tend to )e (nrealistically hi"h. This selects for e@'erts with (n(s(al h()ris. The a(thority of the state "i$es "o$ernment e@'erts a dan"ero(s le$el of 'ower . And the a)sence of mar9et
disci'line "i$es any errors that these e@'erts ma9e an o''ort(nity to acc(m(late and com'o(nd almost witho(t

Knowled"e has "rown more dis'ersed3 while "o$ernment 'ower has )ecome more concentrated . The economy today is m(ch more com'le@ than it was A(st a few decades a"o. There are many more ty'es of "oods and ser$ices . Cons(mers who once were concei$ed as a mass
limit. 0n recent decades3 this 9nowled"e6'ower discre'ancy has "otten worse.

mar9et now ha$e sorted into an e$ere@'andin" array of niches. 0n the 11/0s3 most ho(seholds had one tele$ision3 which was (s(ally t(ned to one of A(st three maAor networ9s. Today3 some ho(seholds ha$e many tele$isions3 with each family mem)er watchin" a different channel. Some 'eo'le still watch maAor networ9s3 )(t many others

This increased di$ersity of cons(mer tastes in a world of tremendo(s $ariety ma9es the 'ro)lem of a""re"atin" cons(mer 'references more diffic(lt. 0t )ecomes harder for "o$ernment e@'erts to determine which 'olicies are in cons(mersO interests . 4or
instead foc(s on 'artic(lar interests ser$ed )y s'ecialty ca)le channels. Still others watch $ery little T- at all. e@am'le3 is a national )road)and initiati$e "oin" to "i$e cons(mers access to somethin" they ha$e )een denied or somethin" that they do not wantL

The ad$ances of science are lea$in" (s with 'ro)lems that are more com'le@. As fewer Americans die of heart ailments or cancer in their fifties and si@ties3 more of o(r

health care s'endin" "oes to treat 'atients with m(lti'le ailments in their ei"hties and nineties. <i$en the com'le@ity of each indi$id(al case3 it seems odd that health care reformers )elie$e that "o$ernment can effecti$ely set ;(ality standards for doctors. 0n )(siness3 'erformance e$al(ation of 'rofessionals is (nderta9en )y other 'rofessionals who are in the same wor9 "ro('3 o)ser$in" their wor9ers directly3 and who (nderstand the conte@t in which the 'rofessionals are wor9in". $en then3 'erformance e$al(ation and com'ensation6settin" are challen"in" tas9s. 0n health care3 'ro'onents of "o$ernment P;(ality mana"ementP 'ro'ose to e$al(ate the decision6ma9in" of 'rofessionals and adA(st their com'ensation on the )asis of lon"6distance re'orts. Ta9in" into acco(nt the

4inancial transactions ha$e "otten e@tremely com'le@. Some critics )lame the (se of ;(antitati$e ris9 models and deri$ati$e sec(rities . Howe$er3 remo$in" these tools wo(ld not remo$e financial ris93 and in many res'ects co(ld ma9e it more tro()lesome. ?ne conse;(ence of modern finance is that it e@acer)ates the 9nowled"e6'ower discre'ancy. 0t is as f(tile for financial re"(lators to try to trac9 down all so(rces of
9nowled"e6'ower discre'ancy3 this notion of ;(ality mana"ement from afar is (tterly im'la(si)le. ris9 as it is for sec(rity a"encies to try to 9ee' trac9 of all 'ossi)le terrorist threats. How can we deal with the 9nowled"e'ower discre'ancy in "o$ernmentL

0t wo(ld )e "reat if we co(ld sol$e the 'ro)lem )y increasin" the 9nowled"e of "o$ernment e@'erts. Enfort(nately3 all e@'erts are falli)le. 0f anythin"3 e@'ert 9nowled"e has )ecome more diffic(lt for any one indi$id(al to o)tain and synthesize. Analysts of the scientific 'rocess ha$e doc(mented a lar"e increase in colla)orati$e wor93 incl(din" 'a'ers with m(lti'le a(thors and 'atent filin"s )y "ro('s and or"anizations. Scientists tend to )e older when they ma9e their 9ey disco$eries than was the case in the first half of the 20th cent(ry . !hen he was an e@ec(ti$e at S(n Microsystems3 Bill Coy said3 P +o matter who yo( are3 the smartest 'eo'le wor9 for someone else.P CoyOs 8aw of Mana"ement a''lies to "o$ernment at least as m(ch as to )(siness. There is no way to collect all forms of e@'ertise in a sin"le 'lace. 0nstead3 the way to address the 9nowled"e6 'ower discre'ancy is to

red(ce the concentration of 'ower. !e sho(ld try to resist the tem'tation to "i$e 'ower to "o$ernment e@'erts3 and instead allow e@'erts in )(siness and non'rofit instit(tions to "ro'e toward sol(tions to 'ro)lems. $eliance on e*pertism to guide government planning is the #rong approach -- it degrades democracy, diminishes freedom, and can(t produce accurate kno#ledge 1ing 1!6 Ph& in economics from M0T3 former senior economist for 4reddie Mac3 and adA(nct scholar at the Cato 0nstit(te. #Arnold3 PThe ra of @'ert 4ail(re.P Cato. Se'tem)er5?cto)er 2010.www.cato.or"5'()s5'olicyMre'ort5$H2n25c'H2n261.html The additional 'ower that is )ein" "ranted to e@'erts (nder the ?)ama administration is indeed stri9in". The administration has a''ointed PczarsP to )rin" e@'ertise to )ear o(tside of the traditional ca)inet 'ositions. Con"ress has enacted swee'in" le"islation in health care and finance3 and &emocratic leaders ha$e e;(ally am)itio(s a"endas that en$ision 'lacin" "reater tr(st in e@'erts to mana"e ener"y and the en$ironment3 ed(cation and h(man ca'ital3 and trans'ortation and comm(nications infrastr(ct(re. Howe$er3 e;(ally stri9in" is the fail(re of s(ch e@'erts. They failed to 're$ent the financial crisis3 they failed to stim(late the economy to create Ao)s3 they ha$e failed in Massach(setts to hold down the cost of health care3 and sometimes they ha$e failed to 're$ent terrorist attac9s that instead had to )e thwarted )y ordinary ci$ilians. 0ronically3 whene$er "o$ernment e@'erts fail3 their instincti$e reaction is to as9 for more 'ower and more reso(rces. 0nstead3 we need to ste' )ac9 and reco"nize that what we are seein" is not the $indication of Keynes3 )(t the $indication of Haye9. That is3 decentralized 9nowled"e is )ecomin" increasin"ly im'ortant3 and that in t(rn ma9es centralized 'ower increasin"ly anomalo(s . TH A< ?4 TH YP DT Po'(lists often ma9e
the mista9e of )ashin" e@'erts3 claimin" that the Pcommon manP has A(st as m(ch 9nowled"e as the trained s'ecialist. Howe$er3 trained 'rofessionals really do ha$e s('erior 9nowled"e in their areas of e@'ertise3 and it is dan"ero(s to 'retend otherwise. 0 ha$e faith in e@'erts. $ery time 0 "o to the store3 0 am showin" faith in the e@'erts who desi"n3 man(fact(re3 and shi' 'rod(cts. $ery time 0 (se the ser$ices of an acco(ntant3 an attorney3 or a dentist3 0 am showin" faith in their e@'ertise. $ery time 0 donate to a charity3 0 am showin" faith in the e@'ertise of the or"anization to (se my contri)(tions effecti$ely. 0n fact3 0 wo(ld say that o(r de'endence on e@'erts has ne$er )een "reater. 0t mi"ht seem romantic to li$e witho(t e@'erts and instead to rely solely on yo(r own instinct and 9now6how3 )(t s(ch a life wo(ld )e 'rimiti$e. @'ertise )ecomes 'ro)lematic when it is

lin9ed to 'ower. 4irst3 it creates a 'ro)lem for democratic "o$ernance . The elected officials who are acco(nta)le to $oters lac9 the com'etence to ma9e well6informed decisions. And3 the e@'erts to whom le"islators cede a(thority are (nelected. The citizens who are affected )y the decisions of these e@'erts ha$e no in'(t into their selection3 e$al(ation3 or remo$al. A second 'ro)lem with lin9in" e@'ertise to 'ower is that it diminishes the di$ersity and com'etiti$e 'ress(re faced )y the e@'erts. A 9ey difference )etween e@'erts in the 'ri$ate sector and e@'erts in the "o$ernment sector is that the latter ha$e mono'oly 'ower3 (ltimately )ac9ed )y force. The 'ower of "o$ernment e@'erts is concentrated and (nchec9ed #or at )est chec9ed $ery 'oorly73 whereas the 'ower of e@'erts in the 'ri$ate sector is constrained )y com'etition and chec9ed )y choice. Pri$ate or"anizations ha$e to satisfy the needs of their constit(ents in order to s(r$i$e. Eltimately3 'ri$ate e@'erts ha$e to res'ect the di"nity of the indi$id(al3 )eca(se the indi$id(al has the freedom to i"nore the e@'ert. These 'ro)lems with lin9in" e@'ertise with 'ower can )e ill(strated )y s'ecific iss(es. 0n each case3
elected officials want res(lts. They t(rn to e@'erts who 'romise res(lts. The e@'erts cannot deli$er. So the e@'erts m(st as9 for more 'ower. C?B CD AT0?+ !ith the (nem'loyment rate close to 10 'ercent3

there is a cry for the "o$ernment to Pcreate Ao)s.P B(t the iss(e of Ao) creation ill(strates the increasin"ly decentralized nat(re of the necessary 9nowled"e.

$eliance on e*perts is also bad because it e*cludes the voices of the people #ith lived e*periences thereby missing the root causes of conflict 6ilovanovic 9 :chehr, 22 #&ra"on Milo$ano$ic V Assistant Professor in the Criminal C(stice Pro"ram at the Eni$ersity of 0llinois S'rin"field T Do)ert C. Schehr V Professor in the &e'artment of Criminal C(stice3 Sociolo"y and Social !or9 at +ortheastern 0llinois Eni$ersity3 Social C(stice3 %Conflict mediation and the 'ostmodern. Chaos3 catastro'he3 and 'sychoanalytic semiotics3* S'rin"3 $ol. 2/3 no. 13 Pro;(est7
Decent indications of renewed hostilities in co(ntries not (nfamiliar with ethnic3 reli"io(s3 "eo'olitical3 economic3 and c(lt(ral str(""le #e.".3 America50ra;3 0ndia3 Pa9istan3 Per(3 Dwanda3 U("osla$ia3 +orthern 0reland3 the So(th China Sea3 B(r(ndi3 and the Ara)50sraeli conflict7 once a"ain "i$e rise to methodolo"ical concerns re"ardin" the efficacy of contem'orary conflict inter$ention strate"ies. Similarly3 with the E.S. 'rison 'o'(lation well o$er 1.2 million inmates3 with 'rison constr(ction )oomin"3 and with some fi$e million Americans (nder some form of s('er$ision3 alternati$e tho("ht is s(rely needed that more ade;(ately deals with the

crisis and 'artic(larly with conflict inter$ention a''roaches . 0n this essay3 we contend that con$entional conflict resol(tion methods 6 those artic(lated )y 4isher #11117 as conciliation3 cons(ltation3 ar)itration and mediation with m(scle3 and 'eace9ee'in" 6 will contin(e to 'ro$e to )e only 'artially effecti$e in calmin" dis;(iet and new directions m(st )e so("ht. There are fi$e 'rimary reasons for the shortcomin"s. the 'ri$ile"in" of hierarchical re'resentations3 the s(''osition of order3 the cele)ration of the ideal s'eech sit(ation and consens(s dynamics3 the contin(o(s encroachment of le"al disco(rse at the e@'ense of alternati$e disco(rses3 and3 finally3 the lac9 of connected strate"ies )etween the macro and micro domains . 4irst3 contem'orary conflict resol(tion strate"ies "enerally rely on hierarchical re'resentation of conflictin" "ro('s3 ne"lectin" the com'le@ com'osition of 'henomenolo"ical and "ro(' identification . Political3 economic3 and c(lt(ral )eliefs3 interests3 and concerns intersect within the lifeworld#17 to create and recreate modes of s()Aect and "ro(' identification that may or may not )e ade;(ately re'resented )y elected3 a''ointed3 or declared re'resentati$es d(rin" conflict ne"otiation sessions. This 'oint has recently )een made )y Timothy Sis9 #111/7 of the Enited States
0nstit(te for Peace #ES0P7. 0n a man(scri't meant to "(ide 'olicy6ma9ers thro("h the conflict ne"otiation 'rocess3

Sis9 contends that 'ower6sharin" arran"ements Psho(ld )e )ased 'rimarily on the 'olitical will of the 'arties in conflict and not )e the res(lt of e@cessi$ely hea$y 'ress(res from the o(tsideP #0)id.. 117. The second3 related concern in this essay is the 'ri$ile"in" of
order in m(ch of the literat(re. !e wish to resit(ate the disc(ssion in order to c(lti$ate methods of conflict resol(tion that 'ri$ile"e )oth insta)ility and difference3 within a more sta)le whole. That is3 rather than $iewin" conflict and insta)ility as anomalo(s and (ncharacteristic of h(man )eha$ior3 they sho(ld )e $iewed as an ine$ita)le 'rod(ct of h(man interaction. Most radical and 'otentially contentio(s in o(r 'ro'osition is to e@'lode the )o(ndaries constit(tin" 're$io(s conce't(alizations of conflict resol(tion to eliminate mor'holo"ical efforts that 'ri$ile"e inter$ention at the state le$el. Therefore3 the linearity im'lied in conflict ne"otiation #Prein3 11KI7 will )e called into ;(estion here. To esta)lish an alternati$e to esta)lished modes of conflict resol(tion3 we will t(rn to the theoretical insi"hts of chaos3 catastro'he theory3 and 'sychoanalytic semiotics. ?(r third concern with m(ch of the con$entional literat(re is the ass(m'tion of an (nderlyin" meta'hysics cele)ratin" PrationalP ar"(ments tendin" toward ideal s'eech sit(ations #Ha)ermas3 11KI7 and consens(s #8yotard3 11K17. 0t is not that we cannot come (' with tentati$e concl(sions3 'ositions3 $iew'oints3 stand'oints3 )indin" resol(tions3 etc.J rather3 followin" the dynamics im'lied )y chaos theory3 with its notion of Pdissi'ati$e str(ct(res3P alon" with the close ne@(s with 'ostmodern feminist 'ositions of Pcontin"ent (ni$ersalities3P contin"ent 'ositions can )e de$elo'ed that )ecome the )asis of relati$ely sta)le forms of action and lifeworlds. Uet these 'ositions or stand'oints are always s()Aect to re$ision3 chan"e3 deletion3 and s()stit(tion. The lifeworld3 in short3 can )e reconce't(alized in terms of dissi'ati$e str(ct(res and far6from6e;(ili)ri(m conditions. 4o(rth3 mediation 'ro"rams are in contin(o(s dan"er of )ein" s()$erted )y le"al disco(rse #&el"ado3 11K1J &el"ado et al.3 11K2J <rillo3 1111J H(dson3 111HJ Massaro3 11K17. 8inear lo"ic #syllo"istic reasonin"73 ded(cti$e lo"ic3 le"al a)stractions #e.".3 the A(ridic s()Aect73 formalism #e.".3 formal rationality73 and the law of e;(i$alence #e.".3 ca'ital lo"ic7 (ndermine other disco(rses #e.".3 )ased on needs3 differences3 m(ltic(lt(ral di$erse $oices3 etc.7 and 'ossi)ly more li)eratin" narrati$e constr(ctions.

4inally3 traditional 'ro"rams "enerally lac9 lin9a"es )etween the macro and micro le$els where chan"e is concerned . Pa$lich #111/)73 for e@am'le3 has indicated that mediation 'ro"rams often ha$e more to do with )ein" Pconfessionals3P where)y a

nonconflict(al self is constit(ted. This is well in line with 4o(ca(ltOs notion of Pdocile )odiesP and
P)odies of (tility3P res(lts of 'ano'ticism. lsewhere #Henry and Milo$ano$ic3 111/. 1K173 we indicated that of si@ ideal ty'es of social inter$ention strate"ies3 two #e.".3 Pradical acc(satoryP and Preformist remedialP7 remain (n(sed. m'hasis in criminal A(stice 'olicy wo(ld also incl(de macro6le$el chan"e since the (nderlyin" ass(m'tions incl(de the idea that social str(ct(re is a contri)(tin" factor in the manifestation of conflict. Conflict Mediation as Contin"ency. Cross6C(lt(ral Macro6 and Micro68e$el &is'(te Desol(tion A theoretical and 'roced(ral

em'hasis on 'ri$ile"in" m(lti'le 'ossi)le methods for resol$in" dis'(tes is one of the more recent inno$ations in conflict resol(tion #4isher3 11KHJ Prein3 11KIJ Cohen3 1111J 4isher and Keashly3 1111J Keashly and 4isher3 1110J Keashly3 4isher3 and <rant3 111HJ Miall3 11127. 4ollowin" H("o Prein #111I73 a contin"ency6centered conflict resol(tion strate"y a$oids 'ri$ile"in" any one s'ecific method of conflict resol(tion3 while o'tin" instead for a more fl(id3 and 'erha's refle@i$e3 inter'retation and res'onse to conflict(al sit(ations .
Contin"ency6centered conflict resol(tion first a''eared in or"anizational settin"s d(rin" the late 11/0s and 11G0s #see Hazewin9el3 11K0J -room and Uetton3 11GHJ Bowers3 4ran9lin3 and Pecorella3 11G2J Do))ins3 11GI7. At a

s'ecific sta"e in the e$ol(tion of a conflict(al sit(ation3 it was ar"(ed3 a mode of inter$ention most a''ro'riate for that sit(ation sho(ld )e identified and a''lied. 0nterestin"ly3 altho("h Prein #11KI7 esta)lishes what is "enerally considered to )e the first em'irical s(''ort for a contin"ent inter$ention strate"y3 he is ;(ic9 to note that there are "ood reasons to 'roceed with d(e ca(tion when considerin" its a''lication. Contin"ency models ass(me the e@istence of more or less identifia)le sta"es characteristic of all conflicts that are reco"niza)le )y the trained third6'arty 'ractitioner. 0n a hy'othesis a''roachin" an insi"ht of chaos theory3 Prein contends that the fo(ndational
ass(m'tions of contin"ency may )e inherently flawed. To s'ec(late that all conflicts ass(me the same mor'holo"ical character from start to finish and that one m(st merely correctly assess the s'ecific sta"e in the e$ol(tion of that conflict to determine the s'ecific inter$ention strate"y is to 'ri$ile"e )oth essentialism #in s(s'ectin" there may only )e easily o)ser$a)le Tr(ths7 and nli"htenment6ins'ired linear tho("ht #which3 in the $iew of chaos and 'ostmodern theorists3 is 'atholo"ically relied ('on7. Prein clearly saw that. conflicts

are not "i$en. Conflicts are com'le@ and dynamic 'rocesses3 of which it is diffic(lt to say what the content e@actly is. The characterization of a conflict is a matter of definitionJ se$eral different 'ers'ecti$es are (s(ally 'ossi)le and those 'ers'ecti$es are 6 es'ecially in conflict sit(ations 6 often incom'ati)le #Prein3 11KI. K27. This indicates a fiss(re in the conflict resol(tion literat(re that may )e s()stantial eno("h to allow a dee'er 'ro)e into a more "en(ine model of contin"ency. Altho("h Prein clearly reco"nizes the contin"ent nat(re of "ro(' interaction #see TaAfel3 11GK7 as 'ossi)ly 'rod(cin" (nantici'ated o(tcomes3 he ne$ertheless '(shes ahead with his efforts to constr(ct a linear conflict resol(tion ty'olo"y )ased on the 'remise that third6'arty actors ha$e the o'tion of choosin" which inter$ention strate"y to (se accordin" to the s'ecific sta"e of the conflict #see 4isher and Keashly3 11117. The literat(re s(''ortin" contin"ency is characterized )y two si"nificant tensions. reliance ('on a linear mor'holo"ical acco(nt of conflict and the re'rod(ction of hierarchical decision6ma9in" models. !e will see9 to esta)lish not only the
'er'et(al nat(re of conflict3 )(t also the 'resence of m(lti'le 'ossi)le modes of e@'ressin" anta"onism that may )e more efficacio(sly addressed and diff(sed within ci$il society at the le$el of the lifeworld. To accom'lish

this3 we m(st relin;(ish the social scientific )iases that 'ri$ile"e $iewin" systems and )eha$ior thro("h mor'holo"ical #)e"innin"3 middle3 and end7 lenses3 which limits o(r conce't(alization and reco"nition of nonlinear modes of resistance acted o(t daily in n(mero(s rit(alistic ways3 )(t which may not 'rod(ce the moment of collecti$e effer$escence 'ri$ile"ed )y o(r c(rrent academic research. 0ndeed3 a model of inter$ention that reco"nizes the contin"ent nat(re of h(man interaction in "ro('s and instit(tions wo(ld "o far toward com'rehendin" the root ca(ses and rationales for all $arieties of conflict. To s(mmarize3 contin"ency in the conflict resol(tion literat(re3 which
em'hasizes the 'roced(ral dimension of conflict inter$ention models3 differs $astly from the way in which chaos and 'ostmodern theorists $iew contin"ency. As will )ecome clear3 a more "en(ine contin"ent model of conflict inter$ention will mo$e to the le$el of the lifeworld3 witho(t ne"lectin" either ci$il society or the state3 to (nco$er 'henomenolo"ical and "ro('6le$el inter'retations of sit(ations. This 'oses a far more com'le@ array of 'ro)lems

for third6'arty inter$ention3 )(t "ro('s and or"anizations contin(e to reco"nize this as the most rele$ant com'onent of conflict resol(tion. The second tension in the con$entional literat(re is its 'rioritization of hierarchical decision6ma9in". 0t is manifested in two ways. 4irst3 it offers a restricted artic(lation of the third6'arty cons(ltant3 which is intimately related to a limited conce't(alization of contin"ency. Shared )y the literat(re as a whole3 this artificially minimizes em'hasis on microlo"ical inter'retations of e$ents. Second is the cons'ic(o(s

'ri$ile"in" of third6'arty Pe@'ertsP 6 what 8aca n #11GG7 referred to as the disco(rse of the master 6 where only 9nowled"ea)le and dis'assionate actors are ca'a)le of 'roc(rin" a reasona)le settlement. An em'hasis on e@'erts de$al(es the 9nowled"es of the s()altern3 while 'ri$ile"in" the interests and 9nowled"es of elected3 a''ointed3 or declared re'resentati$es #4reire3 11GH7. !e will )riefly comment on each of these in t(rn. The con$entional conflict mediation literat(re 'ri$ile"es reco"nition of hierarchical decision6ma9in" #Di")y3 1112J see Cr(i9shan93 11KG3 for an e@ce'tion7. 0ndeed3 it is ty'ically ass(med that the 'artici'ants in conflict ne"otiation are the elected3 a''ointed3 or declared re'resentati$es of Pthe 'eo'le.P ?$erloo9ed3 howe$er3 are the $oices from the streets. A 'rimary methodolo"ical foc(s sho(ld )e on the elimination of hierarchical decision6ma9in" and the incl(sion of m(lti'le sites for the 'er'et(al disc(ssion of matters of interest to the s()altern. ?$erreliance on master
narrati$es 'romotes an ideolo"ical commitment to dominant interests )y occl(din" the lan"(a"e and3 hence3 the c(lt(ral ca'ital and ha)it(s of the s()altern #see Bo(rdie(3 11KI7. P(t in another way3 si"nifiers are

PfilledP with the content of dominant "ro('s and interests #8acla(3 111/. II7. Master si"nifiers #those emanatin" from the 'owerf(l7 'rod(ce 9nowled"e $ia a linear ded(cti$e lo"ic. Alternati$e constr(ctions are re'ressed. Con$entional conflict resol(tion disco(rse ass(mes and $al(es sta)ility3 'redicta)ility3 consistency3 stases3 e;(ili)ri(m5homeostatic dynamics3 and 'ermanence . Those officially reco"nized as )ein" res'onsi)le for the artic(lation of interests within conflict(al settin"s will find that their decisions #their methods of resol$in" dis'(tes and their s'ecific remedies7 will3 o$er time and with re'eated a''lication3 a''roach stasis. The methods and concl(sions3 discerned $ia the disco(rse of the master3 coalesce into what chaos theorists refer to as 'oint attractors. That is3 they esta)lish the 9nowled"e3 interests3 $al(es3 and )eliefs of the master disco(rse #hierarchical re'resentati$e of conflictin" interests7 as le"itimate. The effect is not only to limit access to decision6ma9in" to those who ha$e the reco"nized sym)ols constit(tin" the disco(rse of the master3 )(t also to diminish the le"itimacy of 9nowled"e3 interests3 $al(es3 and )eliefs of the s()altern. This sit(ation is )oth (ne;(ita)le and 'otentially dan"ero(s3 as history seems to )are o(t. Cognitive psychology proves our kno#ledge arguments Gick !%6 Professor of economics at &artmo(th # $elyn3 PCo"niti$e theory and moral )eha$ior. The contri)(tion of 4. A. Haye9 to )(siness ethics. CB .P Co(rnal of B(siness thics. C(ne 200H. Pro;(est7
0n Haye9Os seminal wor93 PThe Sensory ?rderP #11227 as well as in his essays PD(les3 Perce'tion and 0ntelli"i)ilityP #11/G3 ''. IH6/273 PThe Primacy of the A)stractP #11GK3 ''. H26I173 and PThe Theory of Com'le@ PhenomenaP #11/G3 ''. 226I273 his aim is to e@'lain 'erce'tion as well as h(man action as a '(rely indi$id(al or s()Aecti$e 'henomenon. Haye9 com)ines meta'hysical iss(es with ne(ro)iolo"ical ones in

showin" how ne(rons and ne(ronal connections 'lay a s'ecific role in the h(man )rain. Altho("h these ar"(ments were lar"ely reAected d(rin" his lifetime3 c(rrent research in co"niti$e 'sycholo"y re$eals that Haye9Os a''roach is correct in most as'ects
#Dizzello3 11117. The startin" 'oint of Haye9Os co"niti$e theory is the relationshi' )etween stim(l(s and res'onse on an indi$id(al 'lane.1 Haye9 thoro("hly reflects on a sim'le stim(l(s6res'onse

mechanism and lin9s 'rocesses that occ(r on a ne(ral 'lane with 'hiloso'hical reasonin". The ar"(ment that connects Haye9 with the co"niti$e a''roach called P<estalts'sycholo"ieP is that stim(li cannot )e 'ercei$ed )y an indi$id(al in their ori"inal and '(re sha'e. Stim(li are only 'ercei$ed when connected with other

stim(li. $ery 'ercei$ed stim(l(s or )(nch of stim(li m(st fit into socalled cate"ories. These cate"ories wor9 as a filter in that only cate"orized or classified stim(li may lead to an action. After stim(li ha$e 'assed the 'rocess of classification3 the h(man mind is a)le to 'ercei$e them )eca(se they )elon" to a certain set of cate"ories the )rain 'ossesses . ?ne may find 'arallels to KantOs conce't of Pcate"ories.P !hile KantOs
cate"ories of mind are (nchan"ea)le and 'ermanent3 Haye9Os conce't allows for a semi6'ermanent nat(re of these 'atterns. Haye9 a"rees with Kant that cate"ories are "enetically transmitted3 )(t "oes

f(rther to say that they are also hi"hly infl(enced )y indi$id(al e@'erience and3 hence3 can )e chan"ed. This fact mar9s the startin" 'oint of Haye9Os indi$id(alism. 0n other words3 cate"ories lead to the 'erce'tion of data from o(tside the mind. Since these cate"ories are indi$id(ally (ni;(e 6 inherited and formed )y e@'erience 6 e$ery indi$id(al has his own framewor9 )y which he is a)le to 'ercei$e the world . 0n Haye9Os #11227 descri'tion3 the mind itself can )e descri)ed as a framewor9 that or"anizes the 'erce'tions recei$ed from the o(tside world. Howe$er3 'ercei$in" is not a 'assi$e actJ it entails an act of inter'retation #Dizzello3 11113 '. 227. Pthe 'lacin" of somethin" into one or
se$eral classes of o)AectsP #Haye93 11223 '. 1I27. 4(rthermore3 indi$id(al 'erce'tion is3 as Haye9 claims3 necessarily red(ced to 'arts of any 'hysical e$ent3 which refers to those 'arts that can )e related to already classify stim(li #Haye93 11223 '. 1IH7. Hence3 e@'erience 'lays a cr(cial role in )(ndlin" the res(lts into a "ro(' of stim(li. !hat we 'ercei$e is what we ha$e already com'ared with other classes of e$ents on a ne(ral 'lane. 0n other words3 mind is a framewor9 attri)(tin" classifications to "ro('s of stim(li. 0n a''roachin" Haye9Os indi$id(alism3 that will e@'lain his tho("hts a)o(t 9nowled"e we shall )ecome familiar with the central conce't of the co"niti$e writin"s 6 Pdis'ositions.P !ith the introd(ction of the conce't of dis'ositions3

Haye9 is a)le to e@'lain why an indi$id(al (ses certain cate"ories and not others3 and why he is li9ely to res'ond to stim(li in a certain way . &is'ositions are Pthe most
con$enient startin" 'oint . . . which ma9es an or"anism inclined to res'ond to stim(li of a certain class3 not )y a 'artic(lar res'onse3 )(t )y a res'onse of a certain 9indP #Haye93 11GK3 '. I07. &is'ositions can )e fo(nd on two le$els. either on the le$el of 'erce'tion or on the le$el of action. Cate"ories follow dis'ositions. The inter'retation of the 'erce'tions or the classifications )y which a recei$ed stim(l(s has a s'ecific si"nificance is )ased on inclination3 a dis'osition of an indi$id(al to 'ercei$e this stim(l(s in this way.2 Beca(se dis'ositions ha$e formed cate"ories3 they share some similarities. &is'ositions are "enetically inherited )(t are also the res(lt of the societyOs e@'eriences. Hence they may )e re"arded as the res(lt of the socialization 'rocess in a )roader sense3 encom'assin" )oth ed(cation and li$in" conditions3 as well as indi$id(al e@'erience. A dis'osition to act is a)stract as is the classified 'erce'tion3 which was the startin" 'oint for the dis'osition to act. Therefore3 the dis'osition to act is only a $ery $a"(e and a)stract 'attern. 0t is called a P"eneral r(leP or P'attern of action3P and is (s(ally s('erim'osed )y other dis'ositions #see 4i"(re 17. These additional dis'ositions refer to the c(rrent sit(ation of the indi$id(al and e$o9e the indi$id(alOs res'onse. 0t is im'ortant for o(r '(r'oses to hi"hli"ht the a)stract ;(ality of the 'rimary dis'ositions. These 'redis'ose an action in a $ery "eneral sense. 0t e@'lains why Haye9

(nderlines the 'ossi)ility only to 'redict a "eneral dis'osition )(t the im'ossi)ility to 'redict an indi$id(al action . This means that $al(a)le 'ro"nosis can )e done re"ardin" the 'attern of
e$ents since 9nowled"e of only a few sit(ational circ(mstances3 which concern the connection )etween the characteristics of the e$ent3 are necessary. 0n the followin" section3 we will see how the conce't of 'attern 'rediction is related to the conce't of limited 9nowled"e in a world of com'le@ 'henomena. H. The 9nowled"e 'ro)lem As we ha$e seen3 the conce't of the h(man dis'ositions (nderlines Haye9Os em'hasis on indi$id(alism.

Altho("h mem)ers of a society will tend to act in a s'ecific way )eca(se of the social ;(ality of their dis'ositions3 the final indi$id(al action cannot )e 'redicted )eca(se of the indi$id(al ;(ality of the dis'ositions. &is'ositions are therefore res'onsi)le for what is 'ercei$ed )y the indi$id(al3 and 'erce'tion and action ha$e a s()Aecti$e character. 0t is easy to show how this a''roach lin9s to the conce't of 9nowled"e. The 9ey element of Haye9Os theory is that h(man 9nowled"e is limited. !hy indi$id(als ha$e only limited 9nowled"e a)o(t their en$ironment and are a)le to act only )y referrin" to a small 'art of it lies in the fact that the social system3 the mar9et'lace in economic system s3 and the ner$o(s system are com'le@ 'henomena. There are so many $aria)les or circ(mstances that )rin" forth a res(lt that one cannot ta9e them all into acco(nt #!eimer and Palermo3 11K27.


;inks / Centrali)ed -lanning

The affirmati$eBs faith in centrali)ed economic solutions relies on a synoptic delusion -- the market is too comple* to be managed or understood by government planners Cro#ley, 1. Mana"in" &irector of the Macdonald68a(rier 0nstit(te3 a national '()lic 'olicy thin9 tan9 )ased in ?ttawa. He was also the fo(ndin" President of the Atlantic 0nstit(te for Mar9et St(dies #A0MS73 a '()lic 'olicy thin9 tan9 )ased in Atlantic Canada. #Brian 8ee3 %The Man !ho Chan"ed $eryoneOs 8ife*3 The Macdonald68a(rier 0nstit(te3 20123 http4,,### macdonaldlaurier ca,files,pdf,5ayek-Commentary-6ay.!1. pdf, Callahan& +either of the two co'in" strate"ies (s(ally trotted o(t )y as'irin" 'lanners can in fact o$ercome this disa)ility. The first s(ch strate"y relies on technolo"y. 0f we )(ild im'ressi$e eno("h com'(ters and cram them with com'rehensi$e eno("h data3 we can 'rocess the information artificially3 )y'assin" the constraints of the h(man mind . Alas3 they for"et that com'(ters 9now no more than the h(mans that 'ro"ram them3 and that many of the 'ieces of information on which the economy de'ends are often not 9nown )y any)ody at all or are ine@trica)ly lin9ed to a 'artic(lar 'lace and time3 or their im'ortance is ill (nderstood )y h(mans3 incl(din" those who 'ro"ram com'(ters. +or is the stoc9 of 9nowled"e itself a constant3 as technical and other inno$ations V com)ined with chan"es in 'eo'leOs needs and 'references V re"(larly resha'e the intellect(al landsca'e of society and the economy. 4or e@am'le3 a man in r(ral +o$a Scotia had a little )(siness ma9in" and sellin" hi"hland 'ara'hernalia3 s(ch as s'orrans3 da""ers3 and )elt )(c9les. ?ne day3 his eye fell on a news'a'er ad callin" for tenders for the ma9in" of aircraft 'arts. He ;(ic9ly realized that3 with the e;(i'ment he 'ossessed3 he co(ld easily ma9e the 'arts descri)ed3 and he s()mitted a )id. He is now s(ccessf(l in )oth lines of wor9. +ote3 howe$er3 that no 'lanner sittin" in Halifa@ or ?ttawa wo(ld ha$e incl(ded this man in their in$entory of aircraft 'arts ma9ers3 )eca(se he did not 9now himself that he 'ossessed this ca'acity. By the chance act of readin" the ad3 he learned somethin" a)o(t himself3 and transformed the tiny 'art of the economy of which he is the centre. The economy as a whole is com'osed of )illions of s(ch indi$id(als whose tr(e circ(mstances are ne$er f(lly 9nown to themsel$es3 let alone to distant 'lanners. The other strate"y social 'lanners trot o(t for o$ercomin" their i"norance is to claim that they donOt need to 9now the details3 )(t only the "rand o(tlines V that they can sim'lify com'le@ social 'rocesses down to lar"e statistical a""re"ates. B(t in the Haye9ian $iew3 this is the Psyno'tic del(sion3P li9e mista9in" a two6dimensional ma' for the real three6 dimensional world. Ma's are (sef(l for "ettin" aro(nd or for seein" 9ey data in relation to one another3 )(t can accom'lish this only )y stri''in" the world of its messy com'le@ity3 and distortin" its real sha'e to fit on a 'iece of 'a'er. Beca(se most 'eo'leOs idea of the arth is sha'ed )y ma's )ased on MercatorOs 'roAection3 they thin9 <reenland is ro("hly the same size as So(th America3 whereas in reality the so(thern continent is 11 times lar"er. Since 'eo'le li$e in a com'le@ reality3 not cr(de 'ict(res3 those who try to 'lan the world on the )asis of ma's or statistical a""re"ates only end (' so(ndin" li9e they come from another 'lanet3 which3 in a sense3 they do. All o(r $ast a)ility to satisfy h(man wants and needs is created )y o(r 9nowled"e of how to do thin"s3 )(t that 9nowled"e is V and m(st )e V widely dis'ersed and loc9ed in the minds and e@'eriences of )illions of indi$id(als . !ith minds so limited3 and 9nowled"e so $ast3 $arie"ated3 and inca'a)le of

com'rehensi$e statement3 we are condemned to "rowin" s'ecialization as indi$id(als and3 the corollary of that3 to a "rowin" de'endence on others similarly s'ecialized in their fields. Haye9Os -iennese contem'orary3 and 8S collea"(e3 the 'hiloso'her of science Karl Po''er3 '(t it this way. P?(r 9nowled"e can only )e finite3 while o(r i"norance m(st necessarily )e infiniteP #11/07.

E*ts / Centrali)ed -lanning "ails

-lanning to create gro#th is impossible -- policymakers can(t control economic comple*ities 5aynes, !< De'resents the //th Assem)ly &istrict3 which incl(des 'ortions of !estern Di$erside Co(nty and +orthern San &ie"o Co(nty. #Day3 %<o$ernment Plans +e$er !or9*3 Mises 0nstit(te3 ?cto)er 20023 htt'.55mises.or"'@LcontrolN2/G , Callahan& Anyone who thin9s that 'lannin" for P"rowthP is anythin" other than a e@ercise in f(tility is still e@'eriencin" the mind6alterin" $isions that their colle"e chemicals $isited ('on him or her so many years a"o. TodayBs 'lanners meet in little rooms3 draw 'retty 'ict(res on 'a'er ma's3 (se the 'rettiest crayons they can find3 and:whamo:the city has a 'lan. !onder and (to'ia are s(''osed to follow3 and ne$er a"ain will the city e@'erience traffic
con"estion or cosmic disharmony. !e also donBt ha$e eno("h ho(ses3 a'artments3 or commercial )(ildin"s. More im'ortant3

these necessary commodities all end (' in the wron" 'lace3 and their 'lacement seems to increase traffic and school con"estion. The "reat 'lans 3 drawn )y the learned 'lanners3 in search of comm(nity (to'ia3 ha$e all failed. The fact is3 'eo'le )(ild st(ff where they want to )(ild it3 when they want to )(ild it3 and how they want to )(ild it3 no matter what the "o$ernment says . The only reason they donBt )(ild it is that the "o$ernment will throw them in Aail if they donBt com'ly with the 'lan. The only 'eo'le that donBt )(ild the ri"ht st(ff in the ri"ht 'lace at the ri"ht time are those that wor9 for the "o$ernment . 0n other words3 we donBt ha$e traffic con"estion )eca(se of de$elo'ersJ we ha$e traffic con"estion )eca(se 'lanners donBt )(ild roads3 and the "o$ernment has more 'lanners than they ha$e road )(ilders. !hen the "o$ernment draws (' a 'lan3 the 'lan wor9s if the 'eo'le who own the land a"ree with the 'lan #that is3 if they thin9 they will ma9e money if they follow the 'lan7. 0f they donBt thin9 they will ma9e money3 the land stays $acant. 0nterestin"ly eno("h3 e$en de$elo'ers donBt decide what will "et )(ilt3 as they are also s()Aect to mar9et forces. Home)(yers and retail c(stomers decide )y choosin" to $isit the )(siness or )(y the homes that are )(ilt. +o)ody )(ilds a home that no one will )(y3 or starts a )(siness that no one will $isit. C(stomers and home)(yers decideJ not )(siness3 not de$elo'ers3 and
'artic(larly not "o$ernment 'lanners. That is why 0 ch(c9le whene$er 0 hear my collea"(es in Sacramento tal9 a)o(t Pten year 'lans.P This wee93 the le"islat(re had a )ill for a Pten yearP road 'lan. ?f co(rse3

in California3 it ta9es 2H years to )(ild a freeway3 )eca(se we 'lan and 'lan3 and ne$er )(ild. The le"islat(reBs sol(tionL Another 'lan. !e ha$e 'lanned so well in this state that today o(r roads are
e@tremely con"ested3 o(r ho(ses cost entirely too m(ch3 o(r schools are horrendo(sly o$ercrowded3 o(r )(d"et is o(t of )alance3 and we are r(nnin" short on water3 electricity3 and "asoline.

And we contin(e to e@tol the

$irt(e of "o$ernment 'lans.

ha$e the ri"ht 'lan.

!e 9now that socialism is a failed e@'eriment3 as demonstrated )y the fail(re of the So$iet Enion3 socialismBs most de$oted 'ractitioner. My socialist collea"(es in the le"islat(re3 howe$er3 thin9 that they are smarter than the D(ssians and that socialism will wor9 here in California if we A(st

The most recent 'olls tell (s that the '()lic is not satisfied with how we are doin" o(r Ao). May)e we sho(ld try somethin" different3 li9e freedom and free enter'rise3 the 'rinci'les that made this co(ntry "reat. The aff can(t create effective economic solutions -- only the alt solves 'illiams 226 Ph& from Manchester Eni$ersity #<areth3 PHaye9Os Criti;(e of Constr(cti$ism. A 8i)eratarian A''raisal.P 8i)eratarian Alliance. 1111'()s5econn5econn0K2.'df7
raised se$eral 'oints.

The 'ercei$ed $ictory of 8an"e o$er Mises 'rom'ted Haye9 to edit Collecti$ist conomic Plannin" #11H27. Haye9

By foc(sin" on the inade;(acies of static e;(ili)ri(m theory3 as a descri'tion of what the mar9et does3 Haye9 was a)le to hi"hli"ht 'ro)lems in the decisions of the central 'lannin" a"ency with re"ard 'ricin". The A(strian analysis )etter

re'resents what occ(rs in the mar9et3 and e@'lains the ina)ility of the mar9ets to reach and maintain e;(ili)ri(mJ it wo(ld th(s seem that the A(strian analysis is s('erior to that of the neo6classical school on )oth 'ractical and theoretical "ro(nds. The sol(tion offered )y 8an"e to MisesB challen"e3 was )ased ('on the re'lication of a framewor9 of analysis which )oth Haye9 and Mises e@'licitly reAected. The model of ca'italism which 8an"e (sed was a m(ch easier model to d('licate than that ado'ted )y the A(strians3 and was a model which does not re'resent how the mar9et wor9s. The central thr(st of Haye9Bs res'onse was to deny the 'ossi)ility of a socialist economy achie$in" the same le$el of ac;(isition and (se of 9nowled"e as is achie$ed in a ca'italist economy.

4o(r elements are a''arent in Haye9Bs theory of 9nowled"e. These are. that information is im'erfect3 decentralised3 im'ossi)le to collect in any com'rehensi$e manner3 and that it is im'ossi)le to select with certainty A(st what information will 'ro$e rele$ant to oneBs 'roAect. These 'ro)lems affect )oth central 'lanners and mar9et a"ents3 and 're$ent )oth from attainin" 'erfect res(ltsJ the stren"th of Haye9Bs defence of ca'italism de'ends ('on the e@tent to which he can show that 9nowled"e will )e )etter collected and (tilised in a ca'italist society than in a socialist one. Haye9 considers se$eral factors to s(""est that the 9nowled"e 'ro)lem militates in fa$o(r of ca'italism. 4irstly3 and most cr(cially3 indi$id(al mar9et a"ents do not ha$e to res'ond to as $ast an array of information as a central 'lanner does. &eterminin" the 'rice of a 'rod(ct3 in the way 8an"e s(""ests3 re;(ires the 'lanner to acc(m(late information from across the economy #which3 de'endin" ('on tradin" relations3 can mean (' to the size of the world7 re"ardin" the 'rod(ct concerned. The information re;(ired incl(des the scarcity of the 'rod(ct relati$e to demand and relati$e to other 'rod(cts which co(ld )e s()stit(ted for it3 the #chan"in"7 n(m)er of (ses to which the 'rod(ct can5will )e '(t3 and localised $ariations in demand to"ether or other factors #e.". trans'ort costs etc.7 which affect the social cost of the (se of a 'rod(ct within a locality. ?ne m(st f(rther remem)er that the acc(racy of this information is cr(cial to determinin"
what 'rimary 'rod(cts sho(ld "o into ma9in" a secondary 'rod(ct. Miscalc(lation as to the a''ro'riate 'rice for a 'rod(ct can res(lt in a 'rod(ct )ein" (sed to ma9e a "ood when another 'rod(ct wo(ld )e )etter (sed in its 'lace3 th(s creatin" a mis6allocation of reso(rces. 0n contrast to a central 'lanner3 who has to ma9e

#after ha$in" collected and 'rocessed information7 an a(thoritati$e decision as to the 'rice at which to sell a 'rod(ct3 mar9et a"ents each try to sell their 'rod(ct at a 'rice they select. They recei$e a reward in 'ro'ortion to their s(ccess at settin" a mar9et clearin" 'rice and are a)le to res'ond to localised and s'ecific information with immediate effect. ?f co(rse3 as Haye9Bs o''osition to static e;(ili)ri(m theory s(""ests3 the mar9et can incorrectly set the 'rice for a 'rod(ct and the mar9et can fail to clear as a res(lt. !hen information or its 'rocessin" are 'oor and dise2 ;(ili)ri(m res(lts #or is li9ely to res(lt if action is not ta9en7 an incenti$e is 'rod(ced in the mar9et for the dis'ersal of the rele$ant information )y those who are 'arty to it. As Haye9 states. %where only a few 9now of a new fact3 the m(ch mali"ned s'ec(lators will see to it that the rele$ant information will ra'idly )e s'read )y an a''ro'riate chan"e of 'rices.* H2 S(ch
s'ec(lators are rewarded for acc(rately assessin" f(t(re mar9et acti$ity3 and 'enalised for inacc(rately assessin" it. Their actions con$ey small 'ieces of information thro("h the 'rice mechanism to which 'rod(cers #who need ne$er 9now of the (nderlyin" ca(se )ehind the 'rice chan"e7 can res'ond.

6arket comple*ities make central planning impossible 1ennedy !1 #Cose'h -.3 %A Better !ay to De"(late3* Hoo$er 0nstit(te3 Policy De$iew +.1013 htt'.55www.hoo$er.or"5'()lications5'olicy6re$iew5article5G0GH55M9oo7 MECH ?4 !HAT is wron" with "o$ernment is str(ct(ral. The traditional a''roach to "o$ernment stresses a to'6down mana"ement style that may ha$e )een a''ro'riate in the 1120s and 11/0s )(t is increasin"ly o)solete in a world of ra'id chan"e and increased com'etition. Pro"rams that centralize control and limit indi$id(al discretion m(st necessarily resort to com'le@ r(les. 0n the a)sence of com'etition3 centralization has made it easier to co6o't "o$ernment a"encies and has led to a 'rofo(nd ri"idity in )(rea(cratic str(ct(res. 0t has also 're$ented

im'ortant sectors of the economy from res'ondin" to mar9et forces. Modern society is not well s(ited to traditional "o$ernment. conomic and social instit(tions are increasin"ly com'le@. The flow of information from the mar9ets is too "reat and too differentiated to )e mana"ed from the to'. <o$ernment will therefore ha$e to follow the 'ri$ate sector in mo$in" toward a more decentralized mana"ement str(ct(re. B(t decentralization of 'ower witho(t decentralization of res'onsi)ility often leads to a)(ses of discretion. 0n order to 're$ent officials from a)(sin" their new 'owers3 "o$ernment reforms m(st hold them increasin"ly acco(nta)le for the conse;(ences of their actions and m(st try to increase the choices a$aila)le to those who deal with a"encies. This is what the 'rofit moti$e and com'etition accom'lish in the 'ri$ate sector. S(ch reform will re;(ire si"nificant str(ct(ral chan"es in the way "o$ernment o'erates. <o$ernment reform is more li9ely to )e effecti$e if it ma9es the ma@im(m feasi)le (se of the same com'etiti$e 'ress(res that a''ly to the 'ri$ate sector. Altho("h mar9et forces red(ce certainty and increase di$ersity3 there are stron" theoretical and em'irical reasons for )elie$in" that they are more efficient o$er the medi(m and lon" term in fosterin" economic and social 'ro"ress. The 'rimary foc(s of reform efforts sho(ld )e on ma9in" the ma@im(m (se of these forces. To do this Con"ress m(st rewrite the (nderlyin" stat(tes. Central regulation fails -- bureaucracy, interest groups, overcomple*ity 1ennedy !1 #Cose'h -.3 %A Better !ay to De"(late3* Hoo$er 0nstit(te3 Policy De$iew +.1013 htt'.55www.hoo$er.or"5'()lications5'olicy6re$iew5article5G0GH55M9oo7
?$er the 'ast si@ decades3 two $iews of the 'ro'er relationshi' )etween the 'ri$ate and '()lic sectors ha$e contended for s(''ort. The left ar"(ed that the '()lic sector re'resents the re'ository of 'o'(lar consent witho(t which all 'ri$ate acti$ity is s(s'ect. As the re'ository of consent3 "o$ernment is )etter a)le to consider all the interests of society and3 thro("h 'ro'er 'lannin"3 can command the 'ri$ate sector to 'rod(ce o'timal res(lts. This $iew is moti$ated )y a 'hiloso'hy of "o$ernment that '(ts "reat faith in the a)ility of "o$ernment a"encies to disco$er and im'lement the )est '()lic 'olicies. De"(latory a"encies were "i$en )road 'owers to

inter'ret and enforce le"islation. The e@istence of s'ecialized a"encies often "a$e Con"ress an e@c(se to 'ass $a"(e and often contradictory stat(tes3 lea$in" im'ortant '()lic iss(es to re"(lators rather than elected re'resentati$es to decide. Enfort(nately3 this a''roach often failed to achie$e im'ortant social "oals at a reasona)le cost and 'rod(ced r(les that were (na)le to ada't to chan"es in the economy. 4or instance3 (ntil recently )an9in" and sec(rities laws serio(sly im'eded the a)ility of financial mar9ets to ta9e ad$anta"e of chan"es in international finance and technolo"y. fforts at stat(tory reform often la" as m(ch as a decade )ehind mar9et de$elo'ments as re"(lators and le"islators str(""le to (nderstand chan"in" conditions. Se$eral additional years can se'arate the )e"innin" of reform efforts from the a''earance of a final )ill and accom'anyin" re"(lations3 )y which time the mar9ets ha$e e$ol$ed f(rther. Altho("h stat(tes are fre;(ently amended3 chan"es (s(ally add a new layer of com'le@ity to e@istin" law . The )asic a''roach to federal in$ol$ement is seldom reformed to reflect new circ(mstances. ?$er time3 re"(latory a"encies often fall into a )(rea(cratic mindset that lac9s an a''reciation and (nderstandin" of mar9et forces. At other times3 a"encies )ecome hosta"e to s'ecial6interest "ro('s and reflect their $iews rather than the '()lic interest. Most im'ortant3 the "oal of minimizin" costs is not stressed nearly as m(ch as that of increasin" 'ercei$ed )enefits.

Centrali)ation fails -- subsidies are delivered to suppliers not consumers #ho lack purchasing po#er 1ennedy !1 #Cose'h -.3 %A Better !ay to De"(late3* Hoo$er 0nstit(te3 Policy De$iew +.1013 htt'.55www.hoo$er.or"5'()lications5'olicy6re$iew5article5G0GH55M9oo7 Sometimes the "o$ernment allows 'ri$ate mar9ets to o'erate )(t deli$ers lar"e s()sidies to some 'artici'ants in order to s9ew the final res(lt. P()lic trans'ortation is hea$ily s(''orted )y federal s()sidies3 as is low6income ho(sin". Es(ally3 these s()sidies are deli$ered not to cons(mers who lac9 '(rchasin" 'ower3 )(t to s(''liers of ser$ices that the "o$ernment thin9s are in short s(''ly . Beca(se their cons(mers contin(e to lac9 the '(rchasin" 'ower to sho' elsewhere3 s(''liers contin(e to lac9 an incenti$e to deli$er the ser$ices efficiently and in "ood ;(ality. A
'ri$ate mono'oly has re'laced a "o$ernment one. Centralizin" the deli$ery of s()sidies also allows 'olitical fa$oritism rather than mar9et forces to "(ide the distri)(tion of f(nds. To try to 're$ent this3 the "o$ernment often hea$ily re"(lates the (se of these s()sidies3 introd(cin" f(rther com'le@ity. The deli$ery of $o(chers to

those who lac9 '(rchasin" 'ower "i$es reci'ients direct mar9et 'ower and allows other s(''liers to enter the mar9et3 'ro$idin" "reater choice. 0t also red(ces the need for hea$y re"(lation The government fails -- profit motives are the only effective incentive for progress 1ennedy !1 #Cose'h -.3 %A Better !ay to De"(late3* Hoo$er 0nstit(te3 Policy De$iew +.1013 htt'.55www.hoo$er.or"5'()lications5'olicy6re$iew5article5G0GH55M9oo7 TH PD?B8 M !0TH many "o$ernment standards is that nothin" e;(i$alent to the 'rofit moti$e constantly dri$es them to add $al(e to society or ens(res that they res'ond to new de$elo'ments. Ma9in" com'liance $ol(ntary is the )est way to ens(re that ;(ality standards reflect im'ro$ements that cons(mers are willin" to 'ay for. ?ften the main )enefit to ha$in" a standard de'ends $ery little on the act(al standard chosen. Most of the )enefits come from the mere fact that a sin"le standard or set of standards im'ro$es mar9et coordination )y "i$in" e$eryone the same set of e@'ectations.

;inks / Govt 0ntervention

0ntervention in the free market forces the government into a cycle of continuous intrusion -- distorts the market, destroys individual liberty, and turns the case Cro#ley, 1. Mana"in" &irector of the Macdonald68a(rier 0nstit(te3 a national '()lic 'olicy thin9 tan9 )ased in ?ttawa. He was also the fo(ndin" President of the Atlantic 0nstit(te for Mar9et St(dies #A0MS73 a '()lic 'olicy thin9 tan9 )ased in Atlantic Canada. #Brian 8ee3 %The Man !ho Chan"ed $eryoneOs 8ife*3 The Macdonald68a(rier 0nstit(te3 20123 http4,,### macdonaldlaurier ca,files,pdf,5ayek-Commentary-6ay.!1. pdf, Callahan& This too3 Haye9 co(ntered3 is a del(sion. S(''ly and demand3 and the 'rices that s(mmarize it3 re'resent a $ast and ti"htly interwo$en comm(nication networ9 . De'lace one 'art of the networ9 with false information V that is3 with )(rea(cratsO notions of what the information sho(ld )e3 as o''osed to what 'eo'leOs actions indicate it is V and the networ9 starts to (nra$el. The effect is $ery slow and almost im'erce'ti)le at first3 )(t a"ain3 there is that incon$enient lon" r(n. Haye9 ar"(ed forcef(lly that the conse;(ence of e$en $ery limited inter$ention wo(ld )e a "rowin" demand for e$er more inter$ention. S(''ose3 for e@am'le3 that the "o$ernment decides that it wo(ld )e "ood for childrenOs health if more mil9 were dr(n9 )y families. Most 'eo'le wo(ld a"ree that this was a worthy o)Aecti$e. The "o$ernment decides that the )est co(rse is to set the 'rice of mil93 )y )(rea(cratic order3 at a lower 'rice than it is offered on the mar9et . Presto. Chea'er mil9 a''ears in the stores. B(t of co(rse two contradictory effects res(lt from s(ch action. ?n the one hand3 as the "o$ernment intended3 demand is stim(lated . More mil9 is dr(n9 than )efore. B(t the (nintended conse;(ence is that mar"inal mil9 'rod(cers3 those who were A(st ma9in" it at the ori"inal mil9 'rice3 are dri$en o(t of )(siness3 ta9in" a 'art of the s(''ly o(t of the mar9et. Shorta"es res(lt. +ow the "o$ernment has a choice. 0t can either withdraw its ori"inal inter$ention3 which (n)alanced the e;(ili)ri(m )etween the demand for and the s(''ly of mil93 or it can allow itself to )e drawn f(rther into s()stit(tin" its own A(d"ment for the mar9etOs. 4or e@am'le3 it can try to lower farmersO costs3 )y controllin" the 'rices of thin"s li9e feed3 cattle3 and farmland. ?r it can 'ay farmers more and s()sidize the 'rice difference with ta@ dollars. ?r it can nationalize the farms3 th(s eliminatin" Pwastef(lP 'rofit. ?r it can coerce farmers to 'rod(ce mil9 at a loss. B(t each one of these res'onses )rin"s f(rther (ndesira)le conse;(ences . Mil9 la9es emer"e that m(st )e stored or d(m'ed on international
mar9ets3 as "o$ernment tries to stim(late mil9 'rod(ction )y s()sidies and other ind(stries or"anize 'olitically to ha$e themsel$es declared essential to '()lic health so that they3 too3 can recei$e s()sidies. ?r s(''liers of farm in'(ts withdraw from )(siness )eca(se3 (nder controlled 'rices3 they canOt s(r$i$e either. ?r )(rea(crats '(t on "(m)oots and mil9 the cows accordin" to the sched(le laid down in their collecti$e a"reement. ?r mil9 farms are a)andoned )y im'o$erished farmers3 and s(''ly colla'ses o$er time.

The circle of disco6ordination widens with e$ery t(rn of the inter$entionist screw. Haye9Os critics claimed that he ar"(ed that
the sli"htest inter$ention led a(tomatically and ine$ita)ly to totalitarianism3 )(t he said nothin" of the sort. !hat he said was that

each inter$ention forces "o$ernment to ma9e a choice. ither )e drawn into e$er more inter$ention than was intended at the o(tset3 or withdraw the ori"inal inter$ention. There is no e;(ili)ri(m 'oint. ?ne is either swe't alon" )y the lo"ic of inter$ention3 which leads to lar"e losses of freedom )y tiny de"rees3 or one t(rns )ac9. Strictly limited or s(r"ically tar"eted inter$ention3 whether it )e a"ric(lt(ral s()sidies3 rent controls3 mana"ed trade3 or demand mana"ement3 is a myth. +or is it any more acc(rate to say that Haye9 o''osed all forms of 'lannin". ?n the contrary3 Haye9 saw that all of (s3 indi$id(ally3 and in the or"anizations to which we )elon"3 ha$e to 'lan

constantly in order to realize o(r "oals. ach )(siness m(st ha$e a 'lan of how to disco$er what cons(mers want3 of how to ma9e them aware of what the )(siness offers3 of what in$estments to ma9e3 of how to finance them3 and so forth. The economy is constit(ted of myriad little 'lannin" or"anizations 3 each dealin" with a mana"ea)ly small slice of economic life. B(t3 Haye9 noted3 'lanners can only 'lan for society as a whole )y s()stit(tin" their o$erall 'lan for the 'lans of millions of indi$id(als and or"anizations3 forcin" society to rely on a radically less com'rehensi$e stoc9 of 9nowled"e3 ma9in" e$eryoneOs efforts enormo(sly less (sef(l to themsel$es and others. Government intervention in the marketplace has a history of failure -embracing free enterprise sustains gro#th best =ordan 1!6 C ? of The 4ederal Deser$e Ban9 in Cle$land #Cerry3 PEse ?f <o$Ot S'endin" As Stim(l(s Throws Sand 0n <ears ?f <rowth.P 0n$estors B(siness &aily. Se'tem)er 1th 2010. Pro;(est755T& Haye9 disa"reed with KeynesO dia"nosis3 )elie$in" that a mar9et economy had an inherent resiliency and a nat(ral tendency to e@'and. The economy was s()Aect to shoc9s 66 wars3 )an9 fail(res3 'er$erse "o$ernment 'olicies 66 )(t in the aftermath of the shoc9 was a nat(ral tendency to e@'and. Call it the Pin$isi)le handP or Pma"ic of the mar9et'laceP or Panimal A(ices of entre'rene(rs3P )(t a tr(e mar9et economy s(''orted )y so(nd instit(tions wo(ld e@hi)it a nat(ral tendency for e@'ansion3 witho(t P'(m' 'rimin"P )y "o$ernment. Accordin" to a Haye9ian $iew of the world3 "o$ernment actions to Pstim(lateP "rowth were co(nter'rod(cti$e. They create (ncertainties a)o(t what the "o$ernment will im'ose on (s ne@t. <o$ernment efforts to mani'(late a""re"ate economic acti$ity yield less sta)ility3 "reater fl(ct(ations and lon"er 'eriods of sta"nation or s()'ar "rowth. 0f a mar9et economy 66 one )ased on 'ri$ate 'ro'erty and mar9et6
determined 'rices to direct reso(rces to their hi"hest6$al(ed (ses 66 is not e@'andin" and f(lly (tilizin" a$aila)le 'rod(cti$e reso(rces3 the ;(estion for 'olicyma9ers sho(ld )e. !hat is the sand in the "ears that is 're$entin" economic "rowthL M(ch of historical e@'erience has )een that it is some actions or

intr(sions of "o$ernment 66 ta@es3 re"(lations3 tariff and non6tariff )arriers3 licens(re re;(irements and other interference with 'rice settin" or enforcement of 'ro'erty ri"hts. Three central tr(ths ha$e emer"ed from many years of e@'erience . #17 +o co(ntry has e$er s'ent and ta@ed its way to 'ros'erity. That 'ro'osition is now )ein" tested. #27 A nation (nwillin" or (na)le to maintain fiscal disci'line is (nli9ely to maintain monetary disci'line. #H7 !orld inflation came down in the final two decades of the 'ast cent(ry3 )(t so did fiscal deficits. !hat has not )een tested is whether di$er"ent fiscal and monetary 'olicies 66 h("e increases in "o$ernment s'endin" and massi$e )(d"et deficits3 to"ether with anti6inflationary monetary 'olicies 66 can )e s(stained. Government intervention can never be successful -- attempts to manage the economy al#ays result in failure 1ir)ner, >. Kirzner is 'rofessor of economics at +ew Uor9 Eni$ersity. He is the a(thor of Com'etition and ntre'rene(rshi'J Perce'tion3 ?''ort(nity3 and ProfitJ and The Perils of De"(lation. A Mar9et6Process A''roach. #0srael3 %Com'etition3 De"(lation3 and the Mar9et Process. An PA(strianP Pers'ecti$e*3 CAT? 0nstit(te3 Se'tem)er H03 11K23 htt'.55www.cato.or"5'()s5'as5'a01K.html , Callahan&
!e are now in a )etter 'osition to see how the A(strian $iew of the mar9et o(tlined in this article may lead to a critical stance toward "o$ernment re"(lation3 and how the )asis for s(ch a critical stance differs from that of the more orthodo@3 neoclassical defense of the free mar9et. !e may '(t the matter ;(ite s(ccinctly. 4or reasona)ly s(ccessf(l coordination within a decentralized decision6ma9in" system3 the disco$ery 'rocess constit(ted )y com'etiti$e6entre'rene(rial alertness to 'rofit o''ort(nities is cr(cial. Attem'ts at im'ro$ement )y

direct re"(lation are li9ely to )e )ased on erroneo(s information #)eca(se the re"(lators cannot (tilize the disco$ery 'rocess of 'rofit '(rs(it7 and are li9ely to )loc9 or distort the mar9etOs own delicate disco$ery 'rocess. 8et (s s(''ose that the need to re"(late is asserted on the )asis of some 'ercei$ed P(ndesira)leP 'henomenon arisin" from the (nre"(lated mar9et. 4or e@am'le3 the 'rices of certain "oods are held to )e Ptoo hi"hP #mil9 to cons(mersL73 or Ptoo lowP #wheat 'rices recei$ed )y farmersL7. ?r the ;(antity a$aila)le of a certain 'rod(ct is held to )e Ptoo lowP #medical careL7 or Ptoo hi"hO #(nsafe toysL7. And so on 8et (s ima"ine #'erha's fancif(lly7 that "o$ernment decisionma9ers are moti$ated solely )y the (r"e to ind(ce a 'attern of 'henomena that faithf(lly reflects cons(mer 'references #which they )elie$e to ha$e )een somehow fr(strated )y the (ncoordinated free mar9et7. ?(r disc(ssion sho(ld ha$e made clear that these selfless3 '()lic6minded officials lac9 the means to )e a)le to res'ond to the inn(mera)le ran9in"s of 'reference #)y cons(mers and owners of reso(rces7 of which they may initially not )e directly aware. There is no way they can 9now the PcorrectP 'rice or the PcorrectP ;(antity for any 'artic(lar 'rod(ct or reso(rce. There is nothin" #corres'ondin" to the entre'rene(rial moti$e to disco$er '(re 'rofit o''ort(nities7 that co(ld lead them systematically to 6disco$er where fail(res of coordination in fact e@ist. More serio(s is the fact that direct controls )y "o$ernment on 'rices3 ;(antities3 or ;(alities of o(t'(t 'rod(ction or in'(t em'loyment may (nintentionally )loc9 acti$ities which ha$e3 as yet3 not )een s'ecifically en$isa"ed )y anyone. !here these )loc9ed acti$ities t(rn o(t to )e entre'rene(rially 'rofita)le acti$ities #'erha's as a res(lt of (nforeseen chan"es in data73 the li9elihood of their )ein" disco$ered is then shar'ly diminished. !itho(t necessarily intendin" it3 the s'ontaneo(s disco$ery 'rocess of the free mar9et has th(s )een3 to some e@tent3 stifled or distorted. !e saw earlier how im'ortant for the com'etiti$e6entre'rene(rial disco$ery 'rocess is the 'otential for (nfettered entry )y 'rofit6see9in" entre'rene(rs into e@istin" mar9ets . 0ne$ita)ly3 "o$ernment re"(latory restrictions )loc9 s(ch entry. 0n the rele$ant sense3 s(ch restrictions are anti6 com'etiti$e. They tend to fr(strate the disco$eries that the com'etiti$e 'rocess is li9ely to "enerate. $en where "o$ernment re"(lation #'erha's ins'ired )y a mista9en ideal of Pcom'etitionP in which any si"nificant size is s(s'ect 'er se7 is desi"ned to Pmaintain com'etitionP #e.". )y )loc9in" mer"ers73 this too m(st )e set down as anti6com'etiti$e. 4or e@am'le3 this may )loc9 the entre'rene(rial 'rocess )y which the o'tim(m scale for the 'rod(cin" firm mi"ht )e disco$ered. 0t is easy for com'etent "o$ernment officials to ima"ine that they 9now what is "ood for the economy. B(t this is li9ely to mean that in the incredi)ly com'le@ economies of o(r time3 it is easy for well6 meanin" indi$id(als not to realize their i"norance in s'ecific instances . 4or 'ri$ate
entre'rene(rs3 the de$ice for the comm(nication of s(ch (ns(s'ected missin" information is 'ro$ided )y the attracti$eness of the o''ort(nities for '(re 'rofit which s(ch missin" information "enerates. +ot only are

re"(lators (na)le to )enefit )y s(ch 'rofit6ins'ired disco$eriesJ their direct inter$ention in the mar9et'lace can hardly fail to fr(strate3 stifle3 and distort the socially )eni"n disco$ery 'rocess that de'ends on freedom of entry into )ranches of acti$ity for which the social desira)ility has not yet )een esta)lished. 0t follows that the harmf(l effects of re"(lation #as
A(d"ed from the 'ers'ecti$e of cons(mer 'references3 not from that of ar)itrarily6ado'ted canons of social im'ortance7 are not necessarily fo(nd in 'al'a)le fail(re #as e@'ressed3 for e@am'le3 in shorta"es3

The harmf(l effects of re"(lation also may manifest themsel$es in cases where there is an a)sence of coordination of which no one is aware. The 'oint is that re"(lation may )e res'onsi)le for s(ch a)sences of coordination not )ein" disco$ered. The mar$el of the com'etiti$e6entre'rene(rial mar9et is its a)ility
or "l(ts3 or other Po)$io(sP a)sences of coordination7. to ins'ire coordinati$e acti$ities the $ery need for which wo(ld3 in the a)sence of the mar9et3 ne$er )e re$ealed.

The government doesn(t have enough kno#ledge to effectively plan the economy -- only embracing free enterprise solves :mith !?6 'rofessor of 'olitical 'hiloso'hy at the Eni$ersity of St. AndrewOs #Crai"3 PAdam SmithOs Political Philoso'hy. The 0n$isi)le Hand and S'ontaneo(s ?rder.P Do(tled"e. 200/. catcha'man.'owwe).com5theMswam'5eBoo9s5Philoso'hy Z20e)oo9s5adamZ20smithsZ20'olZ20'hiloso'hy.'df755T& !e sho(ld note at this 'oint that Haye9 relates this ar"(ment to his )elief in the e@istence of concrete e'istemic limitations on the a)ility of "o$ernment to act efRciently . As we will see in the ne@t cha'ter3 he )elie$es that it is im'ossi)le for a "o$ernment to centralize the 9nowled"e necessary to 'lan a social order in detail . This leads to the s('erior efRciency of self adA(stment and s'ontaneo(s order formation. The tas9 of "o$ernment is restricted )y the [9nowled"e 'ro)lemB3 and its lawma9in" f(nction is sha'ed )y a desire to ma9e (se of the s'ontaneo(s orderin" de$ices that arise when indi$id(als can rely on "eneralized r(les of )eha$io(r which 'ro$ide sta)ility of e@'ectations. As we noted in the section on the ori"in of "o$ernment the "eneralized r(les are not rationally constr(cted )y a "o$ernment3 )(t rather re'resent artic(lations of esta)lished o'inion. S(ch is the im'ortance of '()lic o'inion to the contin(ed e@istence of any "o$ernment
that its actions will always )e to a certain e@tent "(ided or circ(mscri)ed )y it. 0f the law is to )e effecti$e in sta)ilizin" e@'ectations and ind(cin" order3 then it m(st )e acce'ta)le to the maAority of the 'o'(lation. As Haye9 notes. [To )ecome le"itimized3 the new r(les ha$e to o)tain the a''ro$al of society at lar"e V not )y a formal $ote3 )(t )y "rad(ally s'readin" acce'tanceB #888 $ol. H. 1/G7. <o$ernment is limited as to the form that

these "eneralized r(les of cond(ct can ta9e )y the o'inion of the 'eo'le amon" whom they see9 to ind(ce order. ?ne conse;(ence of this is that the enactments of "o$ernment o("ht to )e restricted to areas where it is 'ossi)le to sec(re an a"reement of the maAority #Haye9 1111. I27. This a"reement need not )e formally achie$ed3 )(t if it were not at least 'ossi)le then the enforcement of the "eneral r(le wo(ld re;(ire a de"ree of ar)itrary coerci$e effort )y the "o$ernment which wo(ld desta)ilize e@'ectations and 'rom't disorder. 12 Centrali)ed intervention destroys market competition, creativity, and innovation :tossel, 1! American cons(mer re'orter3 in$esti"ati$e Ao(rnalist3 a(thor and li)ertarian col(mnist. #Cohn3 %H(rtlin" &own the Doad to Serfdom*3 Deason 4o(ndation3 4e)r(ary 113 20103 htt'.55reason.or"5news5'rinter5h(rtlin"6down6the6 road6to6serf, Callahan& <o$ernment is ta9in" (s a lon" way down the Doad to Serfdom. That doesnOt A(st mean that more of (s m(st wor9 for the "o$ernment. 0t means that we are chan"in" from inde'endent3 self6res'onsi)le 'eo'le into a s()missi$e floc9. The welfare state 9ills the creati$e s'irit. 4.A. Haye93 an A(strian economist li$in" in Britain3 wrote The Doad to Serfdom in 11II as a warnin" that
central economic 'lannin" wo(ld e@tin"(ish freedom. The )oo9 was a hit. DeaderOs &i"est 'rod(ced a condensed $ersion that sold 2 million co'ies. Haye9 meant that "o$ernments canOt 'lan economies witho(t

'lannin" 'eo'leOs li$es. After all3 an economy is A(st indi$id(als en"a"in" in e@chan"es. The scientific6so(ndin" lan"(a"e of President ?)amaOs economic 'lannin" hides the fact that
'eo'le m(st shel$e their own 'lans in fa$or of "o$ernmentOs sin"le 'lan. At the )e"innin" of The Doad to Serfdom3 Haye9 ac9nowled"es that mere material wealth is not all thatOs at sta9e when the

"o$ernment controls o(r li$es. PThe most im'ortant chan"e ... is a 'sycholo"ical chan"e3 an alteration in the character of the 'eo'le.P This sho(ldnOt )e contro$ersial. 0f "o$ernment relie$es (s of the res'onsi)ility of li$in" )y )ailin" (s o(t3 character will atro'hy. The welfare state3 howe$er "ood its intentions of creatin" material e;(ality3 canOt hel' )(t ma9e (s de'endent. That chan"es the 'sycholo"y of society. 0Oll e@'lore this toni"ht on my 4o@ B(siness show3 K '.m. astern #re)roadcast 4riday at 10 '.m.7. Accordin" to the Ta@ 4o(ndation3 /0 'ercent of the

'o'(lation now "ets more in "o$ernment )enefits than it 'ays in ta@es. !hat does it say a)o(t a society in which more than half the 'eo'le li$e at the e@'ense of the restL !orse3 the
de'endent class is "rowin". The /0 'ercent will soon )e G0 'ercent. De'. Pa(l Dyan of !isconsin seems to (nderstand the threat. He worries that Pmore 'eo'le ha$e a sta9e in the welfare state than in free enter'rise. This is a road that Haye9 'erfectly descri)ed as Othe road to serfdom.OP #Toni"ht 0 will as9 Dyan why3 if he (nderstands this3 he $oted for TADP and the a(to )ailo(ts.7 K(rt -onne"(t (nderstood the threat of

"o$ernment6im'osed e;(ality. His short story PHarrison Ber"eronP 'ortrays a f(t(re in which no one is 'ermitted to ha$e any 'hysical or intellect(al ad$anta"e o$er anyone else. A "o$ernment Handica''er <eneral wei"hs down the stron" and a"ile3 mas9s the faces of the
)ea(tif(l3 and distracts the smart. So far3 the Handica''er <eneral is A(st fantasy. B(t -ice President Coe Biden did sho(t at the &emocratic +ational Con$ention. P $eryone is yo(r e;(al3 and e$eryone is e;(al to yo(.P 0f he

meant that weOre all e;(al in ri"hts and )efore the law3 fine. 0f he meant "o$ernment sho(ldnOt '(t )arriers in the way of o''ort(nity3 "reat . B(t statists li9e Biden (s(ally ha$e more in mind. They want "o$ernment to ma9e res(lts more e;(al. Two act(al
e@am'les of the l(nacy. !hen colle"es inno$ated )y ha$in" st(dents (se Kindle e6)oo9 readers instead of e@'ensi$e te@t)oo9s3 the C(stice &e'artment s(ed them3 com'lainin" that the Kindle discriminates a"ainst )lind st(dents. The de'artment also is s(in" the Massach(setts 'rison system )eca(se it ma9es 'ros'ecti$e 'rison "(ards ta9e a 'hysical test. Since women donOt do as well as men on that test3 C(stice claims the test discriminates a"ainst women. Arth(r Broo9s3 who heads the American nter'rise 0nstit(te3 says statism is )ecomin" the

Pcentral or"anizin" 'ower in o(r economy 3P and that the )attle )etween free enter'rise and statism
will sha'e o(r f(t(res. He remains o'timistic )eca(se a recent 'oll showed that G0 'ercent of Americans want free enter'rise. 0Om less san"(ine. 0n that same 'oll3 2I 'ercent of Americans said "o$ernment sho(ld e@ert more control o$er the economy. Broo9s disco(nts that3 claimin" 'eo'le for"et their Pcore $al(esP d(rin" crises. B(t he as9s the ri"ht ;(estion. &o we want a c(lt(re of ta9ers or ma9ersL Dyan and Broo9s say

most 'eo'le want Pthe American ideaP. freedom and self6res'onsi)ility . 0 fear they want a Mommy State to ta9e care of them. !hat do yo( thin9L The choice is cr(cial. 0f we contin(e down the Doad to Serfdom3 o(r destination will )e a 'oorer society3 hi"h (nem'loyment3 sta"nation3 and com'lacency.

;inks / -rivate--ublic -artnerships

0ncremental government inclusion of the free market is insufficient -central planning creates moral failures and distorts the market :layback, 11 6 4ellow at the Harlan 0nstit(te #\achary3 %Pri$atize the Hi"hways : and All Doads for That

Matter*3 8(d$i" $on Mises 0nstit(te3 K5H3 htt'.55mises.or"5daily52I1K5Pri$atize6the6Hi"hways6and6All6Doads6for6That6 Matter755D0

0f we tr(ly wish to ha$e 211 : or any other hi"hway or road for that matter : finished3 then we o("ht to )e ad$ocatin" for com'lete 'ri$atization of the hi"hways. Pri$atization wo(ld ens(re that the 'roAect wo(ld )e finished in a timely manner3 wo(ld remo$e the moral hazard of )(ildin" a 'ossi)ly (nnecessary hi"hway with '()lic f(nds3 and wo(ld not force e$ery indi$id(al to f(nd the 'roAect3 whether they wish to (se it or not. 8et (s )e"in with why the mar9et wo(ld )e a more efficacio(s tool for com'letin" the hi"hway. The free mar9et has 'ro$en thro("ho(t history to )e a )etter A(d"e of the enter'rises than any "o$ernment. By o'enin" (' the o''ort(nity to finish Do(te 211 to 'ri$ate com'anies3 these $ent(res wo(ld )e a)le to test the mar9et to see what e@actly is necessary for the com'letion of Do(te 211. Sho(ld a com'any decide that any hi"hway is a $ia)le $ent(re for their ownershi' and stoc9holders3 !hen "o$ernment has a mono'oly on any mar9et3 com'etition is stifled3 and the (ltimate losers are not only the com'anies who co(ld ha$e in$ested in a desi"nated area 3 s(ch as the Somerset Co(nty area3 )(t also =and> the cons(mers3 who are forced to settle for a noncom'etiti$e3 (s(ally s()'ar 'rod(ct. B(t central 'lanners maintain the "(ise of com'etition )y a(ctionin" off the ri"hts to )(ild their central 'lans. 0n a free6mar9et system3 the si"nals sent $ia the 'rice mechanism allow the mar9et to adA(st to any chan"es m(ch more ;(ic9ly and efficiently than the c(rrent centrally 'lanned model (nder which we o'erate .
hi"hway7 wo(ld )e chosen )y cons(mers to deli$er that 'rod(ct $ia the 'rice system.

then it wo(ld )e on that com'any to )(ild a 'rod(ct that cons(mers wo(ld wish to (se. 0f se$eral com'anies wished to )(ild a hi"hway3 then whiche$er com'any offered the )est 'rod(ct #i.e.3 the )est6maintained3 chea'est3 fastest


0m'acts V con Collapse

$eliance on central planning and government stimulus makes economic collapse inevitable -- government stimulus is empirically unsuccessful $ock#ell, !% American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent of the A(strian School of economics3 and chairman5C ? of the 8(dwi" $on Mises 0nstit(te. #8lewellyn3 %The Haye9 moment*3 Mises 0nstit(te3 May 200H3 htt'.55mises.or"'@LcontrolNIH1 , Callahan&

Haye9 co(ntered with a defense of laissez6faire )eefed (' )y the insi"hts of the A(strian School of economics. He had wor9ed with 8(dwi" $on Mises in -ienna after the 'eriod in which Mises first laid o(t his )(siness cycle theory.

The dan"er of central )an9s3 wrote Mises3 is that they e@ercise 'ower of interest rates3 and can there)y distort the 'rod(ction str(ct(re of an economy . They can create artificial )ooms3 which either lead to hy'erinflation or economic )(st. Haye9 ad$anced this theory as the alternati$e e@'lanation for the "lo)al de'ression3 and wor9ed mi"htily all those years to show how the stoc9 mar9et crash was not the onset of the crisis )(t rather the m(ch6needed li;(idation of a 'recedin" )oom . He f(rther showed how the actions of the British and American "o$ernments were 'rolon"in" the crisis. 0n the "reat de)ates of the

'eriod3 it was said that Haye9 had lost to the +ew conomics of Keynes and his followers. 0t was more 'recisely tr(e that the Keynesians had won not )y ha$in" )etter ar"(ment )(t force of "o$ernment 'olicy. The Misesians and Haye9ians of the time decided that they wo(ld fi"ht the )attle of ideas and th(s s'ran" (' a host of instit(tions that wo(ld contin(e the wor9 of li)erty3 des'ite all 'olitical im'ediments. 0n a series of lect(res named in honor of Haye9 and s(''orted )y Mises 0nstit(te mem)ers3 the s'irit of those years at the 8ondon School of conomics is

The Mises6Haye9 e@'lanation for economic )ooms and )(sts is recei$in" all new attention d(rin" this c(rrent 'eriod of recession and mar9et meltdown. The (s(al Keynesian 'rescri'tions for more cons(mer s'endin"3 e$er chea'er credit3 and "o$ernment s'endin" ha$e done nothin" to sol$e the 'ro)lems in the ES3 (ro'e3 or Ca'an. The series )e"ins with lect(res )y Do"er !. <arrison3 who has 'ro$ided the most e@tended and
)ac9. com'rehensi$e ela)oration on the Mises6Haye9 theory of the )(siness cycle.

0m'acts V n$ironment
:#elling government control allo#s for environmental degradation -market forces create more sustainable practices @erlau et al 1! 6 Senior 4ellow at the Center for economic freedom #Cohn3 P8i)erate to Stim(late.P Com'etiti$e nter'rise 0nstit(te. 2010. cei.or"5sites5defa(lt5files5C 0 Z206Z208i)erateZ20toZ20Stim(late.'df755T& Pri$ate stewardshi' and mar9ets 'lay a critical role in land and nat(ral reso(rce conser$ation. M(ch of AmericaBs land and other nat(ral reso(rces ha$e s(ffered )eca(se "o$ernment ownershi' enco(ra"es mismana"ement and o$er(se3 )eca(se no indi$id(al has a lon"6term sta9e in 'rotectin" reso(rces owned in common . 0n addition3 '()lic lands are mana"ed )ased on 'olitical 'riorities that often 'rod(ce mis"(ided 'olitical mana"ement decisions. @am'les incl(de the de$astation ca(sed )y (ncontrolled forest fires3 o$er"razin"3 and destr(ction of s'ecies and ha)itat. , 8awma9ers sho(ld consider mar9et'lace incenti$es and 'ri$ate 'ro'erty6)ased a''roaches to 8awma9ers sho(ld loo9 for ways to 'ri$atize reso(rces owned in common to allow 'ri$ate conser$ation . Areas in which this
Act3 wetlands re"(lations3 and 'otential in$asi$e s'ecies laws. ,

enco(ra"e land and nat(ral reso(rce conser$ation. , @istin" laws im'ede 'ri$ate conser$ation )y ma9in" 'ro'erty owners lose (se of their land. These laws sho(ld )e reformed. These incl(de meas(res in the ndan"ered S'ecies

has )een done s(ccessf(lly )(t co(ld )e e@'anded incl(de the esta)lishment of fishin" ri"hts3 'ri$atization of coral reefs3 and 'ri$atization of s'ecies and their ha)itats in 'ri$ate wildlife ref("es.

0m'acts V thics
"ree market key to ethics :irico, 1! American Doman Catholic 'riest and the fo(nder of the Acton 0nstit(te for the St(dy of Deli"ion and 8i)erty. He is a well69nown 'olitical and c(lt(ral commentator. #De$erend Do)ert3 %The Moral Basis for conomic 8i)erty*3 Herita"e 4o(ndation3 C(ly 1H3 20103 htt'.55www.herita"e.or"5research5re'orts5201050G5the6 moral6)asis6for6economic6li)erty, Callahan& The thics of Ca'italism 4ar from ha$in" achie$ed $ictory3 the economic order of li)erty is in a 'recario(s 'osition. 0ts (tility has )een demonstrated time and a"ain3 and $ery few res'onsi)le intellect(als
ca'italism has won the day3 so )e it. The )i" )attles o$er ideolo"y may )e o$er3 tho("h

or cler"ymen are willin" '()licly to s(''ort concrete and radical alternati$es to the mar9et economy. 0f democratic

recent 'olicy 'ro'osals that centralize and increase "o$ernment control s(""est that the ;(estion is not entirely settled in o(r 'olitics. This m(ch we can 9now. The )i" )attles o$er morality in '()lic life ha$e A(st )e"(n. 0t is3 moreo$er3 entirely e$ident that in this de)ate on the
morality of economic systems3 the ad$ocates of the mar9et economy do not yet ha$e the (''er hand. Too often3 economists ref(se to s'ea9 in normati$e terms3 and they often act as if they sho(ld not.

Those who are char"ed with 'rono(ncin" on morality in '()lic life do not ha$e stron" sym'athies with the ethic of ca'italism:if they are sym'athetic to it at all. Most 'eo'le are content to
settle with a system that seems to reconcile the %ethics* of socialism with the 'rod(cti$ity of ca'italism. Uet

'olitical economy and ethics sho(ld )e and m(st )e reconciled. 0f we contin(e to 'romote an %ethics* of socialism3 it will e$ent(ally endan"er instit(tions that s(''ort the 'rod(cti$e ca'acity of ca'italism. 0t is not a tri$ial fact that e$ery ste' away from the
0t s'ea9s to the essence of what it means to act $irt(o(sly.

free mar9et is a ste' away from $ol(ntarism and that e$ery ste' toward inter$entionism is a ste' away from li)erty.

A moral ar"(ment for economic li)erty sho(ld not shrin9 from its own lo"ical im'lications 3 howe$er 'olitically (nfashiona)le. An im'erati$e a"ainst theft and in fa$or of the sec(rity of 'ri$ate 'ro'erty m(st also s(""est ca(tion a)o(t ta@es a)o$e the minimal le$el necessary for the r(le of law . 4reedom of contract m(st incl(de the freedom not to contract. 4reedom of association m(st incl(de the freedom not to associate. Toleration of indi$id(al differences m(st incl(de tolerances for the ine;(ality in wealth that will )e the (na$oida)le res(lt . And a morality
that fa$ors $irt(e in the conte@t of li)erty m(st allow room for 'ersonal moral fail(re and an (nderstandin" of the difference )etween $ice and crime.

0t is sometimes said that no one dreams of ca'italism. This too m(st chan"e. Di"htly (nderstood3 ca'italism is sim'ly the name for the economic com'onent of the nat(ral order of li)erty. 0t means e@'ansi$e ownershi' of 'ro'erty3 fair and e;(al r(les for all3 economic sec(rity thro("h 'ros'erity3 strict adherence to the )o(ndaries of ownershi'3 o''ort(nity for charity3 wise reso(rce (se3 creati$ity3 "rowth3 de$elo'ment3 'ros'erity3 a)(ndance. Most of all3 it means the economic a''lication of the 'rinci'le that e$ery h(man 'erson has di"nity and sho(ld ha$e that di"nity res'ected. 0t is a dream worthy of o(r s'irit(al ima"inations.

0m'acts V 4reedom
Government intervention creates a bureaucratic nightmare that results in authoritarianism and destroys individual liberty @ernhol), >? Professor emerit(s at Basel Eni$ersity3 Switzerland. His wor9 foc(ses on monetary economics3 real ca'ital theory3 and '()lic choice. He is a mem)er of the Academic Ad$isory Board of the <erman Minister of conomics. #Peter3 %<rowth of <o$ernment3 conomic <rowth and 0ndi$id(al 4reedom*3 Co(rnal of 0nstit(tional and Theoretical conomics3 CST?D3 Callahan7 /. 4(rther Delati$e <rowth of the State. 0s 0t &an"ero(s to the D(le of 8aw3 8i)erty and &emocracyL The conse;(ences of e$er6increasin" state acti$ity are not limited to its effects on economic efficiency and "rowth3 nor are they necessarily more im'ortant than those for indi$id(al freedom3 the r(le of law and democracy. The declinin" share of real dis'osa)le 'er ca'ita income diminishes the relati$e domain of self6determination and leads to more o(tside infl(ence ('on indi$id(als. ?)li"atory old a"e 'ension schemes im'ly a distri)(tion of incomes and e@'endit(res o$er time which may stand in contradiction to indi$id(al 'references. An increasin" n(m)er of laws and decrees means a decline in the 'ro'ortion of them that can )e 9nown )y indi$id(als. Citizens
are th(s more li9ely to $iolate the law witho(t intendin" to do so3 and to feel that they are $ictims of e$er more n(mero(s ar)itrary orders of anonymo(s )(rea(cracies.

The com'lications of ta@ laws3 e.".3 are today a)o$e the head of e$ery non6s'ecialist . Anyone tryin" to com'lete an income ta@ declaration is aware of these diffic(lties. 0ncreasin" state acti$ity re;(ires a "rowin" )(rea(cracy3 which is scarcely inno$ati$e and efficient3 and of necessity m(st ma9e hierarchical decisions. Beca(se of the sheer n(m)er of 'ro)lems to )e decided3 any indi$id(al $oter3 mem)er of 'arliament or e$en ca)inet mem)er cannot ho'e to o)tain all the information that is necessary if they are to ma9e meanin"f(l decisions . $en leadin" mem)ers of the "o$ernment
are de'endent ('on the information 'ro$ided to them and ('on the willin" coo'eration of their ci$il ser$ants. The

as state acti$ity increases3 the control of the )(rea(cracy )y $oters3 'arliamentarians and e$en )y the ca)inet )ecomes less and less effecti$e . 0t follows that the e@tension of the state wea9ens the $al(e of the ri"ht of citizens to 'artici'ate in ma9in" '()lic decisions. A meanin"f(l control of the state )ecomes more and more
res(lt is that

diffic(lt )eca(se of the "rowin" information 'ro)lem. 0ncreasin" state acti$ity and "rowin" concentration and cartelization of the economy stren"then the infl(ence of interest "ro('s incl(din" )(rea(cratic a"encies and (nions73 since they enAoy increasin" mar9et 'ower and a ;(asimono'oly of information with which they are a)le to

more and more 'ro)lems are settled o(tside 'arliament )y )ar"ainin" )etween the "ro('s and 'olitical 'arties. G. Concl(sions 0ncreasin" state acti$ity is 'ro)a)ly 'rod(cti$e (' to a certain threshold.
infl(ence 'olitical decision 'rocesses #&owfls #112G7J B8DrBH?8\ 111/117. As a conse;(ence3 Moreo$er3 it ena)les the elimination of the worst conse;(ences of 'o$erty and want3 "ross ine;(ality3 insec(rity and lac9 of ed(cation of )road se"ments of the 'o'(lation. B(t

the democratic welfare state a''arently has an innate tendency in mar9et economies to e@'and to e$er hi"her le$els. 0t th(s ends (' )y endan"erin" the $ery economic fo(ndations themsel$es and the 'rinci'les of self6determination3 'artici'ation of citizens in 'olitical decision 'rocesses and the r(le of law ('on which it rests and from which it sets o(t. How3 then3
may this system de$elo' in the f(t(reL Three 'ossi)ilities seem to s(""est themsel$es. 4irstly3 )eca(se of the e$er6 increasin" infl(ence e@erted )y interest "ro('s incl(din" 'arties3 (nions and )(rea(cracies3 the system de$elo's into a 9ind of +eo64e(dalism on a f(nctional )ase. The first ste's toward s(ch a system can already )e o)ser$ed in

the inefficiency )ro("ht a)o(t )y f(rther relati$e "rowth of the welfare state may lead to s(ch red(ctions of indi$id(al well6)ein" that the 'o'(lation is 're'ared to sacrifice their remainin" freedoms 3 in the ho'e of sec(rin" their standard of li$in" )y mo$in" to a strictly 'lanned economy or"anized )y a dictatorshi' or oli"archy. Both +eo6
many nations. Secondly.

4e(dalism and dictator shi' or oli"archy wo(ld3 of co(rse3 contin(e to call themsel$es democracies. 0ntervention in the marketplace destroys the distinction bet#een government and la#, destroying individual freedom Gamble, A2 British a(thor and academic. Since Can(ary 200G he has )een Professor of Politics at the Eni$ersity of Cam)rid"e. Pre$io(sly he wor9ed in the &e'artment of Politics at the Eni$ersity of Sheffield #11GH6200G7. d(cated initially at Bri"hton Colle"e3 as an (nder"rad(ate he read economics at Cam)rid"e3 )efore "ainin" his MA in 'olitical theory from the Eni$ersity of &(rham. #Andrew3 %The 4ree conomy and the Stron" State V The Dise of the Social Mar9et conomy*3 Socialist De"ister3 11G13 htt's.55tw'l6li)rary6(toronto6 ca.''h'5sr$5article5$iew52IH1 , Callahan& &emocracy therefore enco(ra"es e$er "reater )(rea(cratic interference with the 'ri$ile"ed 'ri$aAte s'here:the s'here of mar9et relationshi's )etween indi$id(als As )(rea(cracy rises3 so the law declines:the second of Haye9Os )asic distinctions. He does not s(""est that )(rea(cracy can )e dis'ensed with #his tho("ht is ne$er (to'ian in that sense73 )(t he does ar"(e that for li)erty to flo(rish the realm of law m(st dominate the realm of )(rea(cracy. <eneral laws3 i.e.3
9nown r(les that are a''lica)le to all3 m(st re"(late social )eha$io(r o$er as wide an area as 'ossi)le and discretionary administrati$e decisions )e minimized as m(ch as 'ossi)le. The essence of collecti$ism

the 'rel(de to totalitarianism and allows him to ran"e welfare state and +ew is the disre"ardin" of the distinction )etween law and administration3 so that law )ecomes not a means for chec9in" the "rowth of administration )(t a means of facilitatin" it3 )y 'ro$idin" new (ns'ecified discretionary 'owers for "o$ernment a"encies. 4rom this flows the o''osition )etween 'lannin" and the mar9et. The mar9et is 'otentially the s'here of free3 $ol(ntary indi$id(al )eha$io(r re"(lated )y law3 and 'rotected from the coercion 'ractised either )y other indi$id(als or )y the state. Plannin" si"nifies the intr(sion ?f the (nre"(lated discretionary 'ower of 'oliticians and )(rea(crats 31/ s(''osedly actin" in the national interest3 in accordance with the wishes of the electorate3 )(t in 'ractice interferin" with and red(cin" the only 9ind of li)erty that is 'ossi)le.
#what ma9es it3 for Haye93 &eal 'olicies in the same contin((m as socialism3 fascism3 and comm(nism7

0m'acts V Totalitarianism
Central 'lannin" fails and 'a$es the way for totalitarianism 66 the s'ontaneo(s order sol$es )etter. 6arks ><6 AB from Uale3 MA in 8aw from ?@ford3 a meme)er of the Society of Sec(rity Analysts #Cohn3 PTwo Kinds of ?rder.P 11K2. htt'.55www."oo"le.com5(rlL saNtTrctNAT;NTesrcNsTso(rceNwe)TcdN2HT$edN0C4 X4AAC?BXT(rlNhtt'ZHA Z24Z24m@.nth(.ed(.twZ24Wcshwan"Z24teachin"6economics Z24econ/1G1Z24econ/1G16116?rderZ2220andZ2220D(leZ24econ/1G16116H6 ?rderZ24Haye9ZH&KindsZ2220ofZ2220?rderZ2220in Z2220Society.docTeiN\iYiT/S@C0iI1XTK'?m<CAT(s"NA4XAC+4eA1?t6 <KU ;-Kz@Cl<H;112PeB"Tsi"2NG"y'&<?oXe&d4Ac'm8M'""755T& B(t s(ch desi"n is neither act(al nor feasi)le. 0t is not 'ossi)le for any indi$id(al or small "ro(' to 9now all the rele$ant facts needed to desi"n com'le@ social instit(tions. To thin9 that this is 'ossi)le is to s(ffer from what Haye9 calls the syno'tic del(sion. And many of the
social instit(tions which are indis'ensa)le in a modern ind(strial society ha$e not )een conscio(sly desi"ned. Hence

we need to reco"nise the im'ortance of e$ol(tionary rationalism and of self6 "eneratin" or s'ontaneo(s orders to which the ideas of '(r'ose and desi"n do not a''ly. ?r"anisms3 lan"(a"es3 mar9et economies3 societies are orders which were not desi"ned. they e$ol$ed. $ol(tionary rationalists insist on the distinction )etween desi"ned and

s'ontaneo(s orders3 es'ecially in (nderstandin" man and society. Man is seen as a r(le6followin" animal as well as a '(r'osi$e one3 and h(man c(lt(re as 'artly an order of r(les which we inherit3 and only 'artly as an order of r(les which ha$e )een either desi"ned or f(lly e@'licated. Many r(les and instit(tions ha$e e$ol$ed3 and ha$e )een stren"thened and refined )y selection. Man has often )een s(ccessf(l )eca(se he o)ser$ed r(les3 not )eca(se he (nderstood why de did so. 0t is not in any way irrational to follow r(les we do not clearly (nderstand. 4or e@am'le3 e$en today we ha$e only a small (nderstandin" of the str(ct(re of lan"(a"e 6 yet witho(t lan"(a"e $irt(ally nothin" of o(r c(lt(re wo(ld e@ist. So e$ol(tionary rationalists ar"(e that the e$ol(tion of social r(les and instit(tions is as im'ortant for (nderstandin" man and society as is )iolo"ical e$ol(tion for (nderstandin" man as a s'ecies. B(t to reco"nise this is not to deny the im'ortance of constr(cti$e rationalism in limited areas. 0n almost all real sit(ations3 )oth 9inds of rationalism are in$ol$ed. 0f we reco"nise this3 we can a''reciate more acc(rately the 'otential )enefits and limitations of conscio(s desi"n. !e shall also3 )e a)le3 0 ho'e3 to distin"(ish sit(ations where

A com'le@ self6"eneratin" order of indi$id(als3 instit(tions and or"anisations3 which is a modern society3 ma9es contin(al (se of constr(cti$e rationalism in limited areas.3 )(t in its totality s(ch a society )ears little resem)lance to a machine . Howe$er3 if we ado't a constr(cti$e rationalist a''roach and attem't to 'lan the whole of o(r society 6 A(st as if it were a machine 6 then we will )e mo$in" in a totalitarian direction.
the constr(cti$e rationalist model will )e most fr(itf(l.

0m'acts V T(rns Case

Central trans'ortation 'lannin" fails 66 incom'lete information e@'lains decades of federal fail(res. ;ove and Co*, 21--0llinois6)ased cons(ltants who s'ecialize in trans'ortation3 'ri$atization3 and the economics of the '()lic sector. #Cean and !endell3 %4alse &reams and Bro9en Promises. The !astef(l 4ederal 0n$estment in Er)an Mass Transit*3 1051G3 htt'.55www.cato.or"5'()s5'as5'a61/2.html755 M +early half the 'lans re$iewed here are not cost effecti$e in meetin" trans'ortation "oals. These 'lans rely hea$ily on )eha$ioral tools s(ch as land6(se re"(lation3 s()sidies to dense or mi@ed6(se de$elo'ments3 and constr(ction of e@'ensi$e rail transit lines. +early I0 years of e@'erience with s(ch tools has shown that they are e@'ensi$e )(t 'ro$ide ne"li"i)le trans'ortation )enefits. 8on"6ran"e trans'ortation 'lannin" necessarily de'ends on (ncertain forecasts. Planners also set ;(alitati$e "oals s(ch as %$i)rant comm(nities* and ;(antifia)le )(t incom'ara)le "oals s(ch as %'rotectin" historic reso(rces.* S(ch $a"aries res(lt in a 'oliticized 'rocess that cannot ho'e to find the most effecti$e trans'ortation sol(tions. Th(s3 lon"6ran"e 'lannin" has contri)(ted to3 rather than 're$ented3 the he@t('lin" of con"estion American (r)an areas ha$e s(ffered since 11K2. 0deally3 the federal "o$ernment sho(ld not )e in the )(siness of f(ndin" local trans'ortation and dictatin" local trans'ortation 'olicies. At the least3 Con"ress sho(ld re'eal lon"6ran"e trans'ortation 'lannin"
re;(irements in the ne@t rea(thorization of federal s(rface trans'ortation f(ndin". 0nstead3 metro'olitan trans'ortation or"anizations sho(ld foc(s 'lannin" on the short term #2 years73 and concentrate on ;(antifia)le factors that are directly related to trans'ortation3 incl(din" safety and con"estion relief.

0m'acts V !ar,E*tinction
Government management guarantees serial policy failure -- inability to plan accurately risks #ar and the collapse of civili)ation $ock#ell, !% American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent of the A(strian School of economics3 and chairman5C ? of the 8(dwi" $on Mises 0nstit(te. #8lewellyn3 %Central Plannin" Doad Tri'*3 Mises 0nstit(te3 +o$em)er 200H3 htt'.55mises.or"'@LcontrolNI213 Callahan7 8etOs start with the )i" error. They )elie$ed that their will alone was eno("h to ma9e and rema9e a co(ntry #whether 0ra; or Af"hanistan7 and the world. They saw 'eo'le as 'lia)le3 all e$ents as controlla)le3 and all o(tcomes as the ine$ita)le wor9in" o(t of a well6constr(cted 'lan. Bein" the to' do"s of the worldOs only s('er'ower3 they ne$er do()ted their a)ility to dictate the terms and so they had no 'lan for what to do if thin"s went wron". This for"ets se$eral essential com'onents of the str(ct(re of reality. Peo'leOs free will is often )ac9ed )y the willin"ness to (nderta9e enormo(s sacrifice. S(ch sacrifices are made e$ery day )y a$era"e 0ra;is. Most es'ecially it o$erloo9s certain (nderlyin" laws that limit what is 'ossi)le in h(man affairs. 0n the scheme of how the world wor9s3 e$en the lar"est state is only a )it 'layer. 0t is ca'a)le of creatin" enormo(s chaos and transferrin" h("e amo(nts of wealth3 )(t not of controllin" e$ents themsel$es. <o$ernment action often "enerates res(lts o''osite of those the 'olicy is constr(cted to create. The B(sh administration did not want to )elie$e this. ?fficials had a $ery sim'le model in mind3 namely that 0ra; was a co(ntry lorded o$er )y a sin"le
dictator3 and so all that was necessary to ta9e o$er the co(ntry was to dis'lace #deca'itate7 the dictator and install a new form of "o$ernment that wo(ld r(n the co(ntry accordin" to the li9in" of the B(sh administration.

0t f(rther )elie$ed that all resistance co(ld )e cr(shed )y a 'ro'er a''lication of $iolence and the threat of $iolence. The tr(th is that no society o'erates li9e this. H(man )ein"s donOt res'ond well to )ein" treated li9e 'risoners in someone elseOs central 'lan. 0f the desire is to wholly mana"e the f(t(re3 the me"a6'lanner is always a me"a6fail(re3 if not always in the short term certainly always in the lon" term. The B(sh administration had )i""er dreams than !ilson or 4&D. B(t as Ma(reen &owd a'tly '(ts it. P The "ro(' that started o(t 'res(min" it co(ld sha'e the world is now "ettin" sho$ed )y the world.P 0n the meantime3 tens of tho(sands of li$es ha$e )een sn(ffed o(t d(e to the decisions of this administration. To con$ince themsel$es of the ri"htness of their ca(se3 howe$er3 the B(sh administration t(rned to an ancient myth . They came to )elie$e that the
no)ility and constr(cti$e 'ower of war far o(twei"hs its costs. 4or intellect(al s(''ort3 neocon scholars 'romoted the 're6Christian romance of war3 the idea that war "i$es life meanin" and 'ro$ides an essential o''ort(nity for )ra$ery3 camaraderie3 and the c(lti$ation of character3 in the life of the indi$id(al soldier and that of a nation.


all lies. war is a)o(t )lood and destr(ction and nothin" more . The destr(ction is wro("ht
)a"s3 and a "eneration scarred )y witnessin" destr(ction on a scale no 'ri$ate 'arties co(ld )e ca'a)le of.

a"ainst the enemy and the $ictor. After the PheroicP and Pno)leP str(""le is o$er3 what are we left withL &e)t3 )ody

!ar lea$es in its wa9e a c(lt(re that has a lower re"ard for financial 'r(dence3 for freedom from le$iathan3 and for the $al(e of life itself. !ar is (nci$ilized. 0t is a )ar)aric enter'rise. 0t has ne$er mo$ed society forward. 0t is always a set)ac9. 0t 'romises to "i$e life meanin" )(t ends in attac9in" the $ery so(rce of meanin". ?ne
thin" war does do in the short term is ca(se 'eo'le to rally aro(nd the fla"3 an effect which the 'olitical cynics co(nt on to co$er the disaster that war always is. B(t there was more than this o'eratin" at the !hite Ho(se.

They didnBt want to merely )oost B(shOs 'oll ratin"sJ they wanted to instill a new national ethos to s(''lant one that they didnOt li9e. The neocons who "a$e (s this war )elie$ed that Americans needed a new ci$ic mytholo"y to (nite the co(ntry aro(nd "reat ideals3 and that cheerin" on a war wo(ld re$i$e the idea of national (nity. They lon"ed for the Cold6!ar ideal when an entire 'o'(lation h(n9ered down as hosta"es to the doctrine of m(t(ally ass(red destr(ction. Their writin"s heralded the eras

of Pnational "reatnessP when the Panama Canal was )(ilt3 when e$ery )(siness dis'layed a Bl(e a"le3 when e$ery American mo(rned the death of C4K3 when e$eryone cheered the moonshot. The Pnational moodP

followin" 1611 con$inced them that this co(ld )e re$i$ed. $en more than that3 they contin(e to con$ince themsel$es of the "reat 8incoln Myth3 a man who (sed immoral means to (nite a co(ntry )(t somehow mana"ed to emer"e from it with the re'(tation of a "reat li)erator3 a new fo(ndin" father . The tric93 they )elie$ed3 was to
ha$e the Pmoral determinationP to inflict as m(ch $iolence as 'ossi)le in the ho'es that they wo(ld )e seen as $isionaries3 and to (tterly demoralize the enemy. 0n fact3 the idea of national (nity3 )elo$ed )y e$ery wo(ld6)e tyrant3

is somethin" to )e feared. 0t is not a si"n of freedom )(t of des'otism. 0t is the morality of the ant hea'. 0n any case3 the forced (nity of the !orld !ar 00 era is lon" "one. <ood riddance. The co(ntry is too di$erse3 and the c(lt(re too )ro9en into niche mar9ets3 too many 'eo'le too 9nowin". May the (n6American P(nityP of the !orld !ar 00 'eriod ne$er ret(rn. There were also serio(s miscalc(lations concernin" 0ra;. ?fficials )elie$ed that they co(ld i"nore the co(ntryOs internal ethnic and reli"io(s di$ersity3 'artic(larly the reli"io(s lon"in"s of the Shiites. Perha's they )elie$ed it wo(ld )e eno("h to 'ass a 4irst Amendment to con$ince these 'eo'le to 'ri$atize their )eliefs in the national interest. 0f so3 this is nothin" )(t a $ariant of the initial error that "o$ernment can )rin" a)o(t miracles. They are now dealin" with mana"in" intracta)le social
and c(lt(ral conflicts3 and shoc9ed that all their tal9 a)o(t freedom and di$ersity is fallin" on (ncom'rehendin" ears. ?f co(rse there is a contradiction associated with attem'tin" to im'ose any

form of freedom )y force. The )est sym)ol of the B(sh administrationOs fail(re in this re"ard is the fate of
the 0ra;i dinar3 which the administration ass(med wo(ld $anish after the in$asion. Today it is still the national c(rrency3 and the ES has ta9en to 'rintin" it3 with SaddamOs 'ict(re. They ha$e (tterly failed to

mana"e the money in 0ra;. This 'oints to another serio(s miscalc(lation. +o effort at all was '(t into how these "reat con;(erin" heroes wo(ld mana"e an economy after they too9 'ower. 0tOs as if they A(st com'letely for"ot a)o(t the 'eo'leOs needs for electricity3 clean r(nnin" water3 food3 and comm(nication . The one 'rinci'le that has
"(ided the occ('iers in their economic affairs in 0ra; has )een that whate$er ha''ens3 the ES sho(ld )e in char"e of it. The error has led them to 9ic9 o(t 'ri$ate entre'rene(rs who attem'ted to start cell 'hone com'anies and airlines. +ot that the B(sh administration e$er really (nderstood what freedom really

meant. They )elie$ed it was somethin" "ranted )y "o$ernment3 or the military as a 'ro@y for "o$ernment. They )elie$ed that freedom is somethin" that e@ists )eca(se of the 'eo'le r(nnin" the "o$ernment or the laws that mana"e society. 0n fact3 freedom means the a)sence of "o$ernment. 0t can ne$er )e "ranted )y the state. 0t can only )e ta9en away )y the state. 0f a "o$ernment mana"er desires freedom for a society3 his only 'ath is to "et o(t of the way. That is somethin" the B(sh administration ref(ses to do at home or a)road. They can say they want freedom3 )(t in this case3 freedom is red(ced to a fiction. And s'ea9in" of fiction3 we now come to the )i""est error of all. The B(sh administration )elie$ed that e$en in the a"e of <oo"le3 it co(ld still )am)oozle the 'o'(lation with claims (tterly contradicted )y reality . 4or
e@am'le3 they )elie$ed they co(ld contin(e to assert that Saddam had !M&s and that somehow this wo(ld )ecome acce'ted tr(th. How co(ld they )e so na]$eL Their so'histication in$ol$ed old technolo"ies of the 9ind yo( find in the ener"y ind(stries. This is why the administration always seems to )e )ehind the

c(r$e. The a$era"e e$enin" we) s(rfer is more ahead of the news and e$ents than the 'eo'le who "ather in the
?$al ?ffice to disc(ss the f(t(re of the world. 0t is increasin"ly clear that the total cost of the 0ra; war will r(n into the h(ndreds of )illions3 and they 'roceed as if there are no worries a)o(t 'ayin" it. ?f co(rse the administration )enefits )y the 'resence of that "reat mar)le 'alace down the street that 'romises to 'rint (nlimited ;(antities of dollars to 'ay for whate$er "o$ernment wants to do. B(t e$en then3 there are limits. The )(d"et deficit has already 'assed the F200 )illion mar9 and the national de)t is an incom'rehensi)le F/.K trillion. This scandal s'ea9s to a lar"er tr(th. The war 'olicy of this administration may ha$e failed in e$ery way to

achie$e its stated aims3 )(t it has s(cceeded in the one way war does s(cceed. it has transferred h("e amo(nts of money and 'ower from the 'ri$ate sector to the '()lic sector. 0n )elie$in" that war is "ood for the r(lin" re"ime3 rarely ha$e so few )een ri"ht a)o(t so m(ch . The only way to 're$ent a re'eat of this war mess is thro("h a )roader acce'tance of the "reat tr(th of o(r time and all time. the state3 no matter who is in char"e of it3 is always and e$erywhere the enemy of 'eace3 'ros'erity3 and ci$ilization.

"aith in central planning cedes political decisionmaking authority to the elites and guarantees massive military interventions $ock#ell, !%. American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent of the A(strian School of economics3 and chairman5C ? of the 8(dwi" $on Mises 0nstit(te. #8lewellyn3 %!ar and Central Plannin"*3 Mises 0nstit(te3 C(ne 200H3 htt'.55mises.or"'@LcontrolNIIH3 Callahan7 PThe enemy weOre fi"htin" is a )it different from the one we had war6"amed a"ainst3P said <eneral !illiam !allace after the first wee9 of fi"htin" in 0ra; had not "one as 'lanned. The comment s'ea9s to a tr(th of which we are reminded in wartime. the military is a "o$ernment o'eration that (nderta9es its acti$ities accordin" to a 'lan coo9ed (' )y nonmar9et actors. The )(rea(crats are denied access to 'rices3 the si"nalin" de$ices that ser$e as the )asis for assessin" the s(ccess or fail(re of any 'artic(lar 'roAect on the mar9et. As s(ch3 e$en the )est military 'lans3 e$en those that lead to a declared $ictory3 will 'arta9e of feat(res similar to that of any form of central 'lannin". The reason wars can tend to a''ear s(ccessf(l whereas socialism ne$er does is d(e to the "oal of the war 'lan #destr(ction rather than wealth creation7 and the means #fire'ower 'ro$in" more accom'lished at destr(ction than efficiency73 )oth of which can )e accom'lished )y "o$ernments with eno("h reso(rces at their dis'osal. !ar "amin" may )e the newest term for the static trial r(ns that "o$ernment officials (se as 'ro@ies for a real world that always s(r'rises them . 0f we want to call war 'lannin" a Psocial scienceP:thatOs how the Penta"on thin9s of it:what we ha$e here is a classic error. the )elief that "o$ernment 'olicy and its effects can )e modeled in the same way as the 'hysical sciences. B(t as 8(dwi" $on Mises says3 Pin the field of '(r'osi$e h(man action and social relations no
e@'eriments can )e made and no e@'eriments ha$e e$er )een made.P To the e@tent that models deal with real conditions3 all data (sed in the model are deri$ed from history. The f(t(re is somethin"

else entirely. Conditions chan"e. -aria)les and chan"e cannot )e isolated from other $aria)les and chan"es. 0n the "ames 'lanners 'lay3 the model )(ilder wins )y o(tsmartin" an o''onent 'ro"rammed to react in 'redicta)le ways. The concl(sion is decided )y the ass(m'tions )(ilt into the system . The more $aria)les in the "ame3 the harder it )ecomes to win. As for tr(ly (n'redicta)le and (n9nown $aria)les3 the 9ind we associate with acts of h(man will3 they cannot )e modeled . 0f this is tr(e in 'eace3 it is all the more tr(e in war. The "ames of central 'lanners ha$e nothin" to do with the demands 'laced on the mar9et in the real world. ntre'rene(rs m(st disco$er the $al(es and 'riorities of cons(mers thro("h a real6world 'rocess of trial and error. &i$$yin" (' ca'ital )etween com'etin" ends re;(ires 'ro'erty titles3 the a)ility to e@chan"e3 and the freedom to choose. The fact of e@chan"e "enerates mar9et 'rices that 'ermit 'rofits and losses to )e calc(lated3 and hence "(ide 'rod(ction. Central 'lanners who attem't to re'licate this 'rocess within the str(ct(re of an e;(ation or a static "ame sim(lation are foolin" themsel$es. They are merely 'layin" a "ame called Pmar9et3P and not tr(ly en"a"in" the real world. The "ame called PwarP is no )etter at 're'arin" central 'lanners for real6life economizin" than the "ame called Pmar9et .P !hatOs es'ecially interestin" is how attem'ts at central 'lannin" dis'lay a series of hi"hly ty'ical feat(res. 4irst3 they o$er(tilize reso(rces. At the o(tset3 the war 'lanners antici'ated that 0ra; co(ld )e won with a few strate"ically 'laced )om)s3 and a massi$e dis'lay of h(man will com)ined with 'lenty of 'sycholo"ical o'erations. 4aced with the s(dden reality that the first ro(nd of 'lans didnOt wor93 the res'onse is wholly 'redicta)le. more of the same. The same a''roach is (sed in domestic economic 'olicy. !hen one Pstim(l(s 'lanP fails to re$i$e an economy3 the "o$ernmentOs a''roach is to s'end e$er more money or dri$e interest rates e$er lower. 0n war3 the a''roach is to dro' more )om)s and send more troo's. !e are familiar with this line of thin9in" from the 'ro'onents of the welfare state.

B(t the same is tr(e for the warfare state. The rationale )ehind this a''roach in war is to con$ey to
the enemy:whether that enemy is a recession or a forei"n foe:that 'lanners really mean )(siness. 0n a world of li)erty and 'eace3 the economy is always wor9in" to do more with less. +o entre'rene(r has the l(@(ry of A(st throwin" more money and la)or at a 'ro)lem. !hen the enter'rise is not 'rofita)le3 the ca'italist see9s to economize and reassess. The e@act o''osite im'(lse dri$es the socialist 'lanner or war 'lanner. 0nstead of

c(ttin"3 ca'ital and la)or are o$er(tilized3 while the (nderlyin" 'lan remains (nchan"ed3 with the res(lt of increased s;(anderin" and wealth destr(ction. The definin" mar9 of the 'lanners tend to not acco(nt for the 'ossi)ility of error. The 'lanners who '(t to"ether the war on 0ra;3 for e@am'le3 e@'ected the troo's to )e treated as li)erators3 )(t someone 'lannin" the 0ra; war for"ot to consider the reality that has dominated the entire "(lf re"ion for 10 years. the hatred en"endered )y deadly sanctions. The sanctions com'romised the ima"e of America as a force for li)eration. B(t the war 'lanners t(rned a )lind eye to this3 e$en after the Se'tem)er 11th terrorists s'ecifically cited the sanctions as an (nderlyin" so(rce of their hate. This is the )i" 'ict(re that the war 'lanners missed. They failed to critically e@amine the 'ossi)ility that the 0ra;is will resent the in$aders e$en more than their own "o$ernment. Third3 'lanners nearly always fail to antici'ate the will to resist . They )elie$e that once 'eo'le ha$e the merits of the 'lan e@'lained to them3 they will "o alon" with it. The 'eo'le are the clay and the 'lanners are the masters3 so their h()ristic minds )elie$e. B(t the tr(th is that 'eo'le are not a(tomatons and there are other forces at wor9 )esides the will of the 'lannin" re"ime. Peo'le resist central economic 'lans and they resist wartime 'lans too. The (s(al res'onse of the 'lanner when faced with resistance is to li;(idate those who dare not "o alon". ?nce these meddlesome tro()lema9ers are eliminated3 they )elie$e3 the
o$er(tilization is the fail(re to acco(nt for costs3 )oth in lost 'hysical reso(rces and h(man li$es. Second3 res(lts of the 'lan will )e"in to show. 0n the E9raine in the 11H0s3 and Cam)odia in the 11G0s3 that was 'retty m(ch e$eryone. 4o(rth3 the 'lanners ty'ically ref(se to admit error and rather shift the

)lame. !allaceOs o'en admission that somethin" was amiss was hi"hly (n(s(al. They
(s(ally stic9 )y the 'lan and admit no error. The '()lic mi"ht act(ally )e more s(''orti$e if the central 'lanners were willin" to admit error. B(t that is not the way of the 'lanners. They )elie$e that they m(st

'ost(re as "ods on earth while insistin" on total deference. 4ifth3 'lanners ass(me that the world is theirs for the ma9in". The 'lanners are loath to admit that there are forces )eyond their control3 forces li9e c(lt(re3 economics3 and the inherent limits of 'ower to accom'lish its aims. The 'eo'le who 'lanned the war on 0ra; dismiss s(""estions that 'erha's not e$eryone in 0ra; is "oin" to )e o$erAoyed at the 'ros'ect of "ainin" freedom thro("h )om)in"3 destr(ction3 and martial law administered )y a ES military dictatorshi'. They dismiss the 'ossi)ility that reso(rces to im'ose the 'lan may e$ent(ally r(n o(t. 8oo9in" to the f(t(re3 there are many 'eo'le in !ashin"ton who ha$e o'inions on how )est to mana"e a 'ost6war 0ra;. They ha$e 'ro)a)ly P"amedP this scenario too3 and come (' with the idea that 0ra; needs a military dictatorshi' for a time. B(t the ad$ocates of dictatorshi' always ass(me that they will )e in a 'osition to ma9e all the decisions. They consider the $ia)ility of their own 'lan and not the 'ossi)ility that someone elseOs 'lan will 're$ail. 4inally3 'lanners tend to 'ersist in i"norance. 4.A. Haye9 descri)ed the $ol(ntary society as one of contin(al learnin". !e mi"ht descri)e "o$ernment 'lannin" as one in which i"norance 'ersists no matter what. 0n war as in socialism3 the world wo(ld )e a m(ch safer 'lace if the 'lanners wo(ld stic9 to their "ames and lea$e real life alone. .4M


Alt Sol$es V &emocracy

Embracing market forces ameliorates political problems and bolsters democracy 1oopman !26 Professor of Philoso'hy at the Eni$ersity of ?re"on #Colin3 PMorals and Mar9ets. 8i)eral &emocracy Thro("h &ewey and Haye9.P The Co(rnal of S'ec(lati$e Philoso'hy. 151501. ProAect M(se.755T&
&eweyOs and Haye9Os shared 'hiloso'hical em)race of (ncertainty has tremendo(s meta'hiloso'hical conse;(ences for how we concei$e of the wor9 of 'olitical 'hiloso'hy. ?ne s(ch conse;(ence concerns how we o("ht to conce't(alize the 'ractical3 instit(tional3 and social tas9s of realizin" li)eral democratic A(stice.

The classical 'olitical 'hiloso'hical 'roAect is that of an ideal theory of A(stice that is ca'a)le of )ein" instit(tionally manifested in state6)ased instit(tions and 'ractices . The e$ol(tionist 'roAect anno(nced )y &ewey and Haye9 ta9es a )roader $iew in (r"in" that democratic )etterment m(st draw on a n(m)er of instit(tional mechanisms . &eweyans followin"
&ewey ha$e3 howe$er3 not always realized the e@tent to which this conce'tion of democracy re;(ires ta9in" serio(sly certain nonstate 'olitical mechanisms3 s'ecifically mar9ets and cor'orations3 as forces for democracy.

Haye9ian theory can )e of 'artic(lar (se here in e@'andin" &eweyansO attention to incl(de mar9ets alon"side states as some of the tools we ha$e at o(r dis'osal for the diffic(lt wor9 of democratic melioration . This e@'ansion is to )e recommended for two 9inds of reasons. Positi$ely3 mar9ets now ha$e a ()i;(ito(s 'resence in o(r 'olitical 'rocesses3 and to the e@tent that &eweyan theory i"nores them as 'otential mechanisms for democratic melioration3 this )ranch of theory will find itself o(t of to(ch with the 'ossi)ilities for 'olitical melioration a$aila)le to (s in the 'resent . +e"ati$ely3 &eweyan
theorists reco"nizin" the limitations of states ha$e th(s far concentrated their e@cl(si$e attention on comm(nity or"anizations as forces for democratic meliorationJ )(t

in an a"e of "lo)alization and 0nternetization the local comm(nity is increasin"ly limited in its 'otential3 and whate$er 'otentials it does 'ossess are often )est realized in connection with mar9ets rather than in o''osition to them. These = nd Pa"e 12G> two sets of reasons 'ro$ide a warrant for chartin" o(t new directions in &eweyan theory )eyond the familiar 'aradi"ms of deli)eration6centric and e@'erience6centric $iews now dominant. The 'ositi$e reasons enco(ra"e (s to mo$e )eyond deli)erati$ism3 which too often i"nores the coordination of mar9ets and states d(e to a 'reference for state6centered deli)eration as a"ainst mar9et6centered e@chan"e. The ne"ati$e reasons enco(ra"e (s to loo9 )eyond e@'erientialism3 which too often i"nores mar9ets d(e to a 'reference for face6to6face comm(nity6centered or"anizations that are s(''osedly distorted )y mar9et6centered e@chan"e .

Alt Sol$es V ach 0nstance Key

Each rejection of government ordering and endorsement of nonaggression can help change the system 3r $u#art, 2% #&r. Mary C. D(wart3 Senior Scientist at a maAor 'harmace(tical firm and a former Assistant Professor of S(r"ery at St. 8o(is Eni$ersity Medical School3 Healin" ?(r !orld. The ?ther Piece of the P(zzle3 htt'.55www.r(wart.com5Healin"5r(wartMall.html37
0f yo(O$e read this far3 yo( are (ndo()tedly interested in seein" at least some as'ects of non6a""ression im'lemented.

Se$eral ideas may seem more rele$ant to yo( than others. 0f yo( are

$en the smallest contri)(tion can )e 'i$otal. My fa$orite story ill(stratin" this 'oint is a)o(t a )lac9smith
wonderin" whether a lone indi$id(al li9e yo(rself can ma9e a difference3 'lease )e ass(red that yo( can. who failed to '(t the final nail in a horseOs shoe. 4or lac9 of a nail3 the horse lost his shoe and went lame. The rider3 who was carryin" critical news to his 9in"3 had to contin(e on foot. As a res(lt3 he reached his so$erei"n too late. !itho(t this im'ortant information3 the 9in" lost the )attle he was fi"htin" and the 9in"dom fell to in$aders. The h(m)le )lac9smith was 'i$otal to the safety of the 9in"dom. +e$er do()t that yo(r contri)(tion is A(st as im'ortant. Demem)er that

the family and friends who tal9 with yo( a)o(t the win6win world 'ossi)le thro("h non6a""ression will in t(rn tal9 to others3 who will share the "ood news. 8i9e a chain reaction3 yo(r messa"e of ho'e will s'read thro("ho(t o(r co(ntry and the world3 )earin" fr(it in the most (ne@'ected ways. 0f yo( do nothin" more than e@tol the $irt(es of non6 a""ression to those aro(nd yo(3 yo( will ha$e done m(ch toward manifestin" it^ ?f

co(rse3 yo( neednOt sto' there. The many "ro('s cited a)o$e wo(ld welcome yo(r 'artici'ation. Are there any that e@cite yo(L !o(ld yo( li9e to Aoin a 'olitical cam'ai"n or s'ea9 on colle"e cam'(sesL &o yo( 'ercei$e a need for other strate"ies that yo( co(ld initiate on yo( own or with othersL Can yo( im'lement non6a""ressi$e sol(tions in the midst of a""ression6 thro("h6 "o$ernment3 m(ch li9e <(y Polhe(s and Kimi <ray did #Cha'ter 11. S'rin"in" the Po$erty Tra'7L All these thin"s and more are needed to hel' others reco"nize that non6a""ression is in e$ery)odyOs

!e each ha$e a 'art to 'lay3 a "ift to the world that will one day )e reflected )ac9 to (s as a )etter world. ?(r world is a Aoint creation. !e all ha$e o(r own 'ower and
)est self6interest. affect those aro(nd (s 'rofo(ndly. ach of (s has o(r own wisdom to identify the 'iece of the '(zzle that we can

what yo( can do3 howe$er small it may seem to yo(3 is essential. 0 (r"e yo( to em)race whate$er as'ect of non6
lay in the mosaic. $ery 'iece is needed to constr(ct the wholeJ ne$er do()t that

a""ression seems most $al(a)le to yo( and a''ro'riate to yo(r (ni;(e talents. !hether yo( wor9 )ehind the scenes or in the limeli"ht3 rest ass(red that the world will ta9e notice. !hate$er way yo( feel mo$ed to 'artici'ate is a "ift yo( "i$e to yo(rself and others. 8et me )e the first to than9 yo( for ma9in" the world a )etter 'lace^

Alt Sol$es V 4reedom

Embracing a realm of private enterprise free from government coercion is critical to individual liberty Carson, >< &r. Carson is an e@'erienced o)ser$er and analyst of 'olitical and economic affairs. He is a s'ecialist in American history with his Ph.&. de"ree from -ander)ilt Eni$ersity. He is the a(thor of se$eral )oo9s3 and is c(rrently at wor9 =in 11K2> on a fi$e6$ol(me te@t3 A Basic History of the Enited States. #Clarence3 %4ree nter'rise. The Key to Pros'erity*3 The 4reeman3 ?cto)er 11K23 htt'.55www.thefreemanonline.or"5col(mns5free6enter'rise6the69ey6to6'ros'erity5 , Callahan& 4reedom is a seamless cloth3 its 'arts inse'ara)le from one another. 4ree enter'rise is a 'art of and necessary to freedom within a society. 0t not only 'ro$ides )read )etter than
any other system )(t it also )(ttresses and ro(nds o(t the str(ct(re of 'olitical3 social3 intellect(al3 and reli"io(s freedom of a 'eo'le.

4reedom is indi$isi)le. Some of those who 'rofess to $al(e freedom )(t not free enter'rise ha$e tried to maintain that this is not the case . They distin"(ish )etween 'ro'erty ri"hts and h(man ri"hts3 and hold that h(man ri"hts are s('erior to 'ro'erty ri"hts. Pro'erty ri"hts are3 howe$er3 h(man ri"hts3 ri"hts of h(mans to the fr(its of their la)or. Ar"(ments a)o(t which ri"hts are s('erior are on the same order of those as to whether the heart is s('erior to the li$er or whether the l(n"s are s('erior to the 9idneys3 for the fact is that h(man life and acti$ity de'end on all of these. C(st so3 freedom de'ends on the ri"ht to 'ro'erty A(st as it does to ri"hts of free s'eech. The reason for this needs to )e e@'lored. There is no h(man acti$ity that does not in$ol$e the (se of 'ro'erty. !e cannot slee'3 wa9e3 eat3 wal93 dri$e3 fly3 swim3 )oat3 wor93 "o to ch(rch3 'rint a 'a'er3 $iew a mo$ie3 ma9e a s'eech3 'rocreate3 or en"a"e in con$ersation witho(t (sin" 'ro'erty in some one or more of its dimensions. 0f a ch(rch cannot )e owned )y its comm(nicants3 their freedom
to worshi' is (nder the control of someone else. 0f a 'ress cannot )e 'ri$ately owned3 freedom of the 'ress is an ill(sion. 0f "o$ernment controls all 'ro'erty3 freedom of s'eech is somethin" )elon"in" to "o$ernment3 not to indi$id(als. The Breadth of 4reedom not mean sim'ly the ri"ht to en"a"e in material 'rod(ction and distri)(tion .

4ree enter'rise:which em)races 'ri$ate 'ro'erty :does 0t means the ri"ht to en"a"e in e$ery 9ind of 'rod(cti$e acti$ity. not only the man(fact(re of wid"ets )(t also formin" a fraternal or"anization3 startin" a charita)le or"anization3 '()lishin" a news'a'er3 or"anizin" a ch(rch3 and fo(ndin" a colle"e . +ot all (nderta9in"s in$ol$e 'rofit ma9in"3 )(t all do in$ol$e the (se of 'ro'erty and the ma9in" of transactions. The thr(st of "o$ernment inter$ention in the economy is toward "o$ernment control of all life and the destr(ction of the inde'endence of the citizenry. +ot e$ery "o$ernment inter$ention will in fact
res(lt in the totalizin" of inter$ention3 of co(rse. <o$ernment may inter$ene here and not there3 may e@tend its 'ower for a time and withdraw3 may e$en re$erse its direction.

B(t the tendency of men in 'ower is to "ras' for more. The tendency of those who "ain some control o$er enter'rise is to e@tend it into more and more areas. Many !estern socialists do not acce't the totalitarian tendency of their doctrines. They clin" to the )elief that freedom can )e retained in areas that they consider $al(a)le while it is yielded (' in the economic realm. They ha$e nowhere3 to my 9nowled"e3 s()mitted their theory to the test. Their e@'eriments with socialism ha$e )een limited. They ha$e nationalized some ind(stries3 e@'ro'riated some 'ro'erty3 ta9en o$er the 'ro$idin" of some ser$ices3 created )(rea(cracies to control some (nderta9in"s3 em'owered la)or (nions3 and drawn (' $ario(s sorts of restrictions .
They ha$e (s(ally allowed considera)le enter'rise within the interstices of their systems. S(ch systems are o''ressi$e3 do ham'er enter'rise3 do not f(nction $ery well3 )(t they are not totalitarian:not yet3 anyway. They are not f(ll6fled"ed socialism3 either. The same cannot )e said for those co(ntries in which there ha$e )een all6o(t efforts to a)olish 'ri$ate 'ro'erty3 to control e$ery as'ect of the economy3 to )rin" all em'loyment (nder state control3 in a word to instit(te socialism in its most $ir(lent form3 Comm(nism. 0n these co(ntries3 freedom is cr(shed. S(ch a co(ntry is r(led )y terror3 the terror administered )y secret 'olice3 )y the shot in the )ac9 of the

nec93 )y sla$e la)or cam's3 )y the ar)itrariness of all "o$ernment action3 which is the (ltimate terror. Terror is as essential to thoro("h"oin" socialism as s(nli"ht is to 'hotosynthesis. 0t is essential )eca(se man nat(rally has to loo9 after himself and see9s means to do so3 t(rns whate$er he has into 'ri$ate 'ro'erty3 and e@erts his ima"ination and enter'rise to 'ro$ide for himself and his own. Man fore$er la)ors to car$e o(t areas of freedom for himself. By so doin"3 he s()$erts socialist control. The only means for holdin" him )ac9 is terror and ar)itrary "o$ernment control. Those who fa$or free enter'rise are wor9in" to maintain or esta)lish

h(man freedom. They are on the side of the h(man s'irit where$er efforts are )ein" made to cr(sh it. Those who stand for free enter'rise ha$e a no)le ca(se3 for it is the ca(se of freedom and of free men.

Alt Sol$es V 4ree Mar9et

The free market is the greatest force for good -- government intervention guarantees failure $ock#ell, !< American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent of the A(strian School of economics3 and chairman5C ? of the 8(dwi" $on Mises 0nstit(te. #8lewellyn3 %The Self6De"(latin" conomy*3 Mises 0nstit(te3 Can(ary 20023 htt'.55mises.or"'@LcontrolN22I3 Callahan7 0t is the con$iction of the li)eral intellect(al tradition datin" )ac9 to the Middle A"es that society contains within itself the ca'acity for internal self6mana"ement . This is in contrast to the claims of the
sociolo"y literat(re3 which 'osits that h(man society is riddled with conflict )etween "ro('s. races3 a"es3 ethnicities3 and a)ilities. The sociolo"ists ha$e sliced and diced the h(man 'o'(lation to s(ch an e@tent that it wo(ld seem im'ossi)le for anyone to "et alon" at all3 and certainly not in times of emer"ency.

The wor9in"s of the free mar9et are the )est ill(stration of why the Pconflict theoryP of society is wron". The mar9et economy is made (' of millions and )illions of small e@chan"es that ta9e 'lace toward the m(t(al )etterment of e$eryone in$ol$ed. There are many 'aths to h(man coo'eration. 0t can ta9e commercial forms or it can ta9e the form of charity3 and within each of those we see tho(sands of $ariations of forms . 0n the end3 society wor9s to accom'lish amazin" thin"s )y )rin"in" to"ether the indi$id(al efforts of e$ery 'erson and 'ro'erty owner3 and it does it all witho(t central command or coordination. Consider the scene after a nat(ral disaster s(ch as a h(rricane. !ithin a wee93 than9s to the wor9 of h(man coo'eration3 we find that most 'laces ha$e restored normalcy and order and e$en )ea(ty. All that is left to do
in$ol$es 'lantin"s and more f(ndamental )(ildin" 'roAects of $ario(s sorts. B(t the settin"s ha$e )een f(lly 're'ared. The reco$ery is well on its way.

Peo'le lo$e to )ra" and tal9 and "o on a)o(t all the horrors created )y nat(ral disasters3 )(t the tr(ly mar$elo(s and newsworthy thin" is not the disaster )(t the wonderf(l manner in which it is re'aired. )y $ol(ntary h(man effort. $ery comm(nity see9s disaster assistance3 money that (s(ally ends (' in the hands of local "o$ernments where officials 'ass it o(t to their friends . The news'a'ers coo'erate in this
these days this is for a reason that "oes )eyond the (s(al )(rea(cratic incom'etence.

The '()lic 'ar9s3 the school "ro(nds3 and the land claimed )y the state is (s(ally cleaned (' in far lon"er time. B(t

creation of 'hony disasters in the ho'e of "ettin" )i" )(c9s from the li9es of the 4ederal mer"ency Mana"ement A"ency. The mornin" after 0$an3 o(r local 'a'er headline read in massi$e ty'e. & -ASTAT0?+. 0t showed a 'ict(re of a man carryin" stic9s across his lawn3 an awnin" from a )(r"er Aoint fli''ed (' d(e to wind3 and a tree that had ti''ed o$er onto someoneBs 'orch. This was not e@actly the 9ind of de$astation that wo(ld ta9e h(ndreds of millions of ta@'ayer dollars to fi@. B(t e$eryone 9nows that after the storm3 all official instit(tions ha$e to 'lay ('

The whole enter'rise of disaster aid has )ecome one of the "reat rac9ets of modern "o$ernment. Today we
dama"e as m(ch as 'ossi)le in order to "ain the attention of federal a(thorities. to )elie$e that they 9now more a)o(t the 'ro'er co(rse of action than ins(rance adA(sters and 'ro'erty owners.

ha$e the dis"(stin" s'ectacle of senators and 'residents comin" to $isit weather6inA(red 'laces3 as if they ha$e within their ca'acity the a)ility to size (' dama"e and ma9e 'ro$isions for ma9in" it all correct. !e are s(''osed


we had honest 'oliticians3 they wo(ld say. P?f co(rse 0Bm sorry a)o(t what ha''ened to that )each in 4lorida3 )(t my 'resence there wo(ld only distract from the essential wor9 )ein" done )y owners and their ins(rers . 0 donBt 9now anythin" a)o(t the

to'ic3 and e$en if 0 did3 0 wo(ld not want to steal from some to "i$e to others to realize my 'olitical 'riorities.P 8i9e dictators and f_hrers3 'oliticians always come to the scene of a nat(ral disaster carryin" a wad of cash. !illiam Anderson doc(ments that this scam really too9 off d(rin" the Clinton 'residency3 )(t these days "o$ernment sits thro("h e$ery nat(ral disaster with )ated )reath3 ho'in" for a chance to do what it does )est. "ra) 'ower and hand o(t other 'eo'leBs money to friends of the state. As for the act(al re)(ildin"3 it is done )y 'ri$ate enter'rise3 and in a timely and efficient manner. 0t is the social means #to (se ?''enheimerBs 'hrase7 that re)(ilds and restores3 not

The )i""est )arrier to all social coo'eration is somethin" far more costly than nat(ral disasters and e$en "reat criminals com)ined. "o$ernment itself . 0t daily
the state. well as wars and trade )arriers.

interferes with the 'ath of 'ro"ress thro("h ta@es3 re"(lations3 distortions s(ch as s()sidies and 'rice controls3 as

0t is hel'f(l to thin9 of the way free enter'rise res'onds to

"o$ernment. itBs the way society res'onds to a nat(ral disaster. Ues3 some 'eo'le "et rich off "o$ernment. B(t ta9en as a whole3 it is a disastro(s cost on society that m(st )e o$ercome. <o$ernment is not 'rod(cti$e. 0t is not creati$e. 0t does not )rin" )lessin"s. <o$ernment s'endin" drains reso(rces from society3 ta9in" from those in whose hands it has the hi"hest $al(e and '(ttin" into the hands of 'eo'le who ser$e the state. De"(lation forestalls choice. Ta@ation loots from 'eo'le the reward of wor9 and 'rod(cti$e endea$or. Most destr(cti$e of all is war 3 and yet it is war that 'eo'le are most li9ely to credit
with )rin"in" 'ros'erity. B(t as Mises says3 P!ar 'ros'erity is li9e the 'ros'erity that an earth;(a9e or a 'la"(e )rin"s. The earth;(a9e means "ood )(siness for constr(ction wor9ers3 and cholera im'ro$es the )(siness of 'hysicians3 'harmacists3 and (nderta9ersJ )(t no one has for that reason yet so("ht to cele)rate earth;(a9es and cholera as stim(lators of the 'rod(cti$e forces in the "eneral interest.P ?f co(rse he wrote that in 1111. Today3 0Bm s(re we wo(ld ha$e no 'ro)lem findin" 'eo'le who say s(ch 're'ostero(s thin"s. A(strians are (ni;(e in

ha$in" "reat clarity a)o(t the dama"e ca(sed )y "o$ernment. And yet sometimes e$en A(strians ha$e a tendency to (nderestimate the 'ower of free enter'rise to
o$ercome o)stacles to ser$e the world and )rin" 'ros'erity to the m(ltit(des. 0 do()t that e$en the most ardent fan of free mar9ets wo(ld ha$e ima"ined that e@6Ded China co(ld )e transformed in s(ch a short 'eriod of time3 that astern (ro'e wo(ld (nder"o a total ('hea$al toward 'ros'erity in a mere ten years3 that +ew Uor9 co(ld so ;(ic9ly )o(nce )ac9 after 16113 that the reco$ery after the dot com )(st wo(ld )e so ra'id. !e sho(ld ne$er for"et3 in the midst of all o(r warnin"s a)o(t "o$ernment 'ower3 that "o$ernment is dee'ly incom'etent3

and la("ha)ly so. As lo$ers of li)erty3 it is essential that we constantly warn a)o(t the dan"ers 'resented )y the state. B(t it is also o(r Ao) to constantly say3 in as many ways as we can3 that it does not ha$e to )e this way. The state is not the fo(ndation of society3 it is not the so(rce of o(r sec(rity3 it does not )rin" a)o(t 'ros'erity3 and it does not 'rotect (s. <o$ernment instead stands o(tside of society and li$es off its 'roceeds3 and does so for
its own )enefit and not that of society. To (nderstand this and im'art this messa"e to the c(rrent "eneration of st(dents that )enefits so enormo(sly from the )lessin"s wro("ht )y the mar9et is s(rely a tas9 worthy of all o(r efforts. 0f yo( can (nderstand how a small comm(nity can reco$er from a h(rricane

witho(t the aid of "o$ernment3 or if yo( can (nderstand how a ma"nificently 'rod(cti$e "lo)al economy can "row and thri$e and 'ro$ide for )illions 3 witho(t the aid of a "lo)al state3 then yo( (nderstand a $ery critical 'oint. 0t is this. society and all its wor9s can thri$e witho(t central mana"ement )y a coerci$e a''arat(s. 0f 'eo'le ha$e li)erty3 'ro'erty3 and law3 they ha$e the )asis of what it ta9es to ma9e a ci$ilization. Anythin" that com'romises those instit(tions is a force for de6 ci$ilization. Embracing the free market is vital to progress and creativity @oudreau*, !? Bo(drea(@ is 'rofessor of economics at <eor"e Mason Eni$ersity. He ser$ed as chairman from A("(st 2001 and ste''ed down in A("(st 2001. #&onald3 %A Sim'le D(le for a Com'le@ !orld*3 Caf` Haye93 March 1G3 200/3 htt'.55cafehaye9.com5200/50H5aMsim'leMr(leMf.html, Callahan& 0 admit that my 'ro'osed sol(tion for many '()lic6'olicy 'ro)lems is to say %8et the mar9et handle it.* B(t this res'onse is neither nai$e nor lazy. 0tBs realistic. 0t reflects my (nderstandin" that almost any 'ro)lem yo( name : re)(ildin" the Katrina6ra$a"ed <(lf Coast3 'ro$idin" e@cellent ed(cation for children3 red(cin" traffic con"estion on hi"hways : is most li9ely to )e dealt with efficiently3 fairly and effecti$ely )y the mar9et rather than )y "o$ernment. Sayin" %8et the mar9et handle it* is to reAect a one6size6fits6all3 centralized r(le of e@'erts. 0t is to endorse an (nfathoma)ly com'le@ arran"ement for dealin" with the iss(e at hand. Decommendin" the mar9et o$er "o$ernment inter$ention is to reco"nize that neither he who recommends the mar9et nor anyone else 'ossesses s(fficient information and 9nowled"e to determine3 or e$en to foresee3 what 'artic(lar methods are )est for dealin" with the 'ro)lem. To recommend the mar9et3 in fact3 is to recommend lettin" millions of creati$e 'eo'le 3 each with different 'ers'ecti$es and different )its of 9nowled"e and insi"hts3 each $ol(ntarily contri)(te his own ideas

and efforts toward dealin" with the 'ro)lem. 0t is to recommend not a sin"le sol(tion )(t3 instead3 a decentralized 'rocess that calls forth many com'etin" e@'eriments and3 then3 disco$ers the sol(tions that wor9 )est (nder the circ(mstances. To recommend the mar9et is to (nderstand3 or at least to coo'erate with3 the wisdom of Cames B(chananBs im'ortant insi"ht that % order is defined in the 'rocess of its emer"ence .* 0t is to (nderstand3 at some le$el3 -ernon SmithBs awareness that %ecolo"ical rationality* is "reater than indi$id(al or %constr(cti$ist* rationality. This 'rocess is fle@i)le and it enco(ra"es creati$ity. 0t also denies to anyone the 'ower to (nilaterally im'ose his own $ision on others. 0n )rief3 to ad$ise %8et the mar9et handle it* is a shorthand way of sayin"3 %0 ha$e no sim'listic 'lan for dealin" with this 'ro)lemJ indeed3 0 reAect all sim'listic 'lans. ?nly a com'etiti$e3 decentralized instit(tion interlaced with de'enda)le feed)ac9 loo's : the mar9et : can )e relied ('on to disco$er and im'lement a s(fficiently detailed way to handle the 'ro)lem in ;(estion.* +one of this is to say that "ettin" the "o$ernment o(t of the way is s(fficient to create 'eace and 'ros'erity. Mar9ets re;(ire a r(le of law to ens(re that3 amon" other )lessin"s3 'ro'erty ri"hts are sec(re and e@chan"ea)le. At their )est3 "o$ernments can hel' to 'rotect o(r ri"hts. Mar9ets also re;(ire a c(lt(re in which commerce flo(rishes. Enfort(nately3 no reci'e e@ists to create the le"al instit(tions and commercial c(lt(re re;(ired )y ca'italism . 0f these
'rere;(isites are a)sent3 there can )e no mar9et to handle any 'ro)lem. So sayin" %8et the mar9et handle it* is not the same as sayin" %All will )e A(st dandy if only the "o$ernment "ets o(t of the way.* B(t when these

'rere;(isite instit(tions are mostly in 'lace3 as they are in the Enited States and other de$elo'ed co(ntries3 mar9ets are amazin"ly creati$e and relia)le . Callin" on mar9ets to deal with 'ro)lems is then the wisest co(rse. Alas3 tho("h3 foolishness fre;(ently tri(m'hs o$er wisdom. Peo'le too often s(''ose that lar"e social 'ro)lems can )e sol$ed only )y decidin" ahead of time which 'artic(lar "ro(' of 'eo'le and 'roced(res hold the 9ey to the sol(tion. !hile declarin" %8et the "o$ernment handle it* comes across as a sol(tion3 itBs no s(ch thin" . 0nstead3 it is merely a si"n of a sim'le and )aseless faith : a sim'le and )aseless faith that 'eo'le
in$ested with 'ower will not a)(se itJ that 'olitical a''ointees 'ossess or will find )etter answers than will millions of 'eo'le '(rs(in" sol(tions in their own ways3 and sta9in" their own reso(rces and re'(tations on their effortsJ that only those [sol(tionsB that are s'elled o(t in stat(tes and re"(lations and that ha$e officials 'aid to im'lement them are tr(e sol(tions. So yes3 show me a 'ro)lem and 0Bll li9ely res'ond %8et the mar9et

handle it.* 0Bll res'ond this way )eca(se 0 9now that not only is my own mea"er 9nowled"e and effort ne$er (' to the tas9 of sol$in" )i" 'ro)lems )(t that not e$en the insteins or Kr("mans or B(shes amon"st (s can 9now the )est sol(tion to any social 'ro)lem. Sol(tions to com'le@ social 'ro)lems re;(ire as many creati$e minds as 'ossi)le : and this is 'recisely what the mar9et deli$ers. Haye9 was ri"ht 66 es'ecially in the twenty6first cent(ry 66 astern (ro'e 'ro$es. @oettke, 2< American economist of the A(strian School. He is c(rrently (ni$ersity 'rofessor of economics at <eor"e Mason Eni$ersity3 the BBTT Professor for the St(dy of Ca'italism3 $ice 'resident for research3 and research director for the <lo)al Pros'erity 0nitiati$e at the Mercat(s Center3 and the de'(ty director of the Cames M. B(chanan Center for Political conomy. #Peter3 %Haye9Os The Doad to Serfdom re$isited. <o$ernment fail(re in3* astern conomic Co(rnal3 11123 ProX(est3 Callahan7 Haye9Os The Doad to Serfdom is as rele$ant today as when it was '()lished fifty years a"o3 'erha's more so. At the time of '()lication it constit(ted a warnin" to the li)eral democratic !est that the road to totalitarianism was not 'a$ed )y re$ol(tionary )andits3 )(t instead )y hi"h ideals. Today3 we are witnessin" the colla'se of the state socialist system3 and the attem't to transit the 'ath to 'olitical democracy and economic 'ros'erity. !e will not find an answer to these 'ro)lems )y readin" Haye9Os "reat )oo9. !hat we will find3 howe$er3 is a set of analytical tools and insi"hts that we can em'loy to address the 'ro)lems of o(r modern world. 0n this

re"ard3 we are left )y Haye9 #17 a refined statement of the Misesian 'ro'osition concernin" the im'ossi)ility of economic calc(lation in the a)sence of 'ri$ate 'ro'erty3 and #27 an e@amination of the or"anizational lo"ic of instit(tions desi"ned to re'lace the 'ri$ate 'ro'erty system in allocatin" scarce reso(rces. The stren"th of

Haye9Os analysis was to show that this lo"ic was not a f(nction of the form of "o$ernment which ins'ired the s()stit(tion of collecti$e decision6ma9in" for the 'ri$ate choices on the mar9et. !hether democratic or a(thoritarian in le"itimation3 the instit(tional incenti$es 'rod(ced a lo"ical 'ress(re toward totalitarianism. 0n astern and Central (ro'e and the former So$iet Enion this lo"ic is mis(nderstood when the intellect(al elites insist that democratic 'olitics )eheld (' as the re$ol(tionary $al(e of 11K13 and not economic freedom. That there can )e no meanin"f(l 'olitical freedom witho(t a lar"e de"ree of economic freedom was the core 'olitical6 'hiloso'hical claim of The Doad to Serfdom3 a claim deri$ed from an analytical ar"(ment concernin" the nat(re of the 'lannerOs tas9. 0t will indeed )e a hollow $ictory if the re$ol(tions of 11K1 end (' )y sim'ly reAectin" the totalitarian r(le of the Comm(nist Party only to em)ar9 ('on a 'rocess of m(lti6'arty sanctioned dictatorshi' in the ;(est to control the 'rocess of transition . Already most of astern and Central (ro'e ha$e failed to incor'orate the constit(tional lessons of li)eral democracy. !e are in a constit(tional moment3 )(t it still does not a''ear that the Pdemocratic fetishP that Haye9 warned a)o(t has s()sided. Moreo$er3 we ha$e to con$ey forcef(lly to the 'eo'le in the former
Comm(nist Bloc co(ntries #and o(r own7 that not all forms of democratic r(le are e;(ally effecti$e with re"ard to safe"(ardin" the mar9et economy. Enless Pena)lin"P instit(tions are esta)lished and the

s'ontaneo(s adA(stments of mar9ets are 'ermitted to "(ide economic decision ma9in"3 the 'o$erty of one terri)le 'eriod will only )e re'laced )y the contin(ed 'o$erty and disa''ointment of a 'eo'le who ha$e end(red so m(ch already.

Alt Sol$es V Peace

rejecting centrali)ed and coercive solutions allo#s us to accept our responsibility for problems / spurring global peace and prosperity 3r $u#art, 2% #&r. Mary C. D(wart3 Senior Scientist at a maAor 'harmace(tical firm and a former Assistant Professor of S(r"ery at St. 8o(is Eni$ersity Medical School3Healin" ?(r !orld. The ?ther Piece of the P(zzle3 '.16H7 H(man9ind is 'oised on the )rin9 of an e$ol(tionary lea'. 0n the last few decades3 we ha$e )ecome increasin"ly aware of the so(rce of o(r inner 'eace and enrichment . &e'endin" on o(r 'ersonal )ac9"ro(nd3 we e@'ress this "reat disco$ery differently. The 'ractical3 down6to6 earth indi$id(als amon" (s Pta9e res'onsi)ility for o(r li$esP as descri)ed in !ayne !. &yerOs Uo(r rroneo(s \ones. Those of (s with a meta'hysical o(tloo9 Pcreate o(r own reality P as
Shirley Mac8aine did in ?(t on a 8im). The s'irit(al amon" (s 9now that Pthe 9in"dom of <od is withinP and follow The Doad 8ess Tra$eled #M. Scott Pec97. Sometimes we sim'ly Pfind o(rsel$esP thro("h the 'ower of lo$e as Dichard Bach did in The Brid"e Across 4ore$er. Eltimately3 o(r inner harmony and a)(ndance de'end on how we react to o(r o(ter world.

The creation of 'eace and 'lenty in o(r o(ter world 3 howe$er3 fre;(ently seems ho'elessly )eyond o(r control . 0n the 'ast cent(ry3 weO$e s(''orted wides'read social reform. +e$ertheless3 'eo'le are still star$in" in a world ca'a)le of feedin" all. 0n o(r own co(ntry3 homelessness and 'o$erty are on the rise . -iolence is no lon"er limited to o$erseas wars. o(r streets3 e$en o(r schools3 are no lon"er safe. The en$ironment that n(rt(res (s is ra$a"ed and ra'ed. !hen we ac9nowled"e how o(r reactions contri)(te to o(r inner state3 we "ain control. ?(r hel'lessness dissol$es when we sto' )lamin" others for feelin"s we create . 0n o(r o(ter world3 the same r(les a''ly. Today3 as a society3 as a nation3 as a collecti$e conscio(sness3 PweP once a"ain feel hel'less3 )lamin" selfish others for the worldOs woes. ?(r nationOs laws3 reflectin" a com'osite of o(r indi$id(al )eliefs3 attem't to control selfish others at "(n'oint3 if necessary. Stri$in" for a )etter world )y foc(sin" on others instead of o(rsel$es totally misses the mar9. !hen others resist the choices we ha$e made for them3 conflicts escalate and $oracio(sly cons(me reso(rces. A warrin" world is a 'oor one. Attem'tin" to control others3 e$en for their own "ood3 has other (ndesira)le effects. Peo'le who are a)le to create intimacy in their 'ersonal relationshi's 9now that yo( canOt h(rry lo$e. Tryin" to control or mani'(late those close to (s creates resentment and an"er. Attem'tin" to
control others in o(r city3 state3 nation3 and world is A(st as destr(cti$e to the (ni$ersal lo$e we want the world to manifest. 4orcin" 'eo'le to )e more P(nselfishP creates animosity instead of "ood will. Tryin" to control selfish others is a c(re worse than the disease. !e rea' as we sow.

0n tryin" to control others3 we find o(rsel$es controlled. !e 'oint fin"ers at the dictators3 the Comm(nists3 the 'oliticians3 and the international
cartels. !e are )lithely (naware that o(r desire to control selfish others creates and s(stains them. 8i9e a stone thrown in a ;(iet 'ond3 o(r desire to control o(r nei"h)ors ri''les o(tward3 affectin" the 'olitical co(rse of o(r comm(nity3 state3 nation3 and world. Uet we 9now not what we do. !e attem't to )end o(r nei"h)ors to o(r will3 sincere in o(r )elief that we are )ene$olently 'rotectin" the world from their folly and short6si"htedness.

!e see9 control to create 'eace and 'ros'erity3 not realizin" that this is the $ery means )y which war and 'o$erty are 'ro'a"ated . 0n fi"htin" for o(r dream witho(t awareness3 we )ecome the instr(ments of its destr(ction. 0f we co(ld only see the 'attern^ 0n see9in" to control

others3 we )eha$e as we once did as children3 e@chan"in" o(r dime for fi$e 'ennies3 all the while )elie$in" that we were enrichin" o(rsel$es. !hen a concerned ad(lt tried to enli"hten (s3 we first ref(sed to )elie$e the tr(th. ?nce awareness dawned3 we co(ld no lon"er )e fooled3 nor was la)orio(s deli)eration necessary for e$ery transaction. ?nce we (nderstood how to co(nt money3 we a(tomatically 9new if we )enefited from s(ch a trade. Similarly3

when the fact and folly of controllin" others first come to o(r attention3 weOre s(r'rised and f(ll of denial. 0 certainly was^ !hen we care a)o(t the state of o(r world3 howe$er3 we donOt
sto' there. 0 tr(st yo( are concerned eno("h to 'erse$ere and to consider serio(sly the shift in conscio(sness this

?nce we ha$e the co(ra"e to acce't res'onsi)ility for o(r 'art of the 'ro)lem3 we a(tomatically )ecome 'art of the sol(tion 3 inde'endent of what others do. !e honor their non6a""ressi$e choices #e$en if they are selfish7 and sto' tryin" to control
)oo9 'ro'oses.

them. 0n doin" so3 we dismantle their most effecti$e means of controllin" (s . ?thers only
i"nite the flames of war and 'o$erty. !e feed the flames or star$e them. +ot (nderstandin" their nat(re3 weO$e fanned the s'ar9s instead of smotherin" them. +ot (nderstandin" o(r contri)(tion to the ra"in" inferno3 we des'air that a world f(ll of selfish others co(ld e$er e@'erience (ni$ersal har6mony and a)(ndance. +othin" co(ld )e f(rther from the tr(th^ !ides'read 'eace and 'lenty can )e created within o(r lifetime.

!hen we (nderstand how to sto' f(elin" the flames of war and 'o$erty3 we can manifest o(r dream. $ejecting the monopoly on aggression #ill transform global society and foster peace 3r $u#art, 2% #&r. Mary C. D(wart3 Senior Scientist at a maAor 'harmace(tical firm and a former Assistant Professor of S(r"ery at St. 8o(is Eni$ersity Medical School3 Healin" ?(r !orld. The ?ther Piece of the P(zzle3 htt'.55www.r(wart.com5Healin"5r(wartMall.html7
0f we each wor9 on the 'iece of the '(zzle that a''eals to (s most3 the final 'ict(re will reflect the com'osite of o(r

0n a world stee'ed in a""ression3 non6a""ression may seem li9e an (nattaina)le ideal. 8etOs remem)er that a scant 200 years a"o the world of monarchs moc9ed o(r
dreams. The Best Teacher

fo(nders3 who claimed that a nation co(ld thri$e witho(t a 9in". A short time later3 all of (ro'e )e"an followin" o(r e@am'le. History certainly demonstrated that the idealists had the more 'ractical 'hiloso'hy^ +otice that these

The yo(n" Enited States sim'ly li$ed its ideals. At the time3 o(r co(ntry was closer to 'racticin" non6a""ression than its contem'oraries were. Americans3 for the most 'art3 honored their nei"h)orOs choice. They did not3
nations did not ha$e to )e forced to ado't the American way. -ision 8i9e o(r co(ntryOs fo(nders3 we

howe$er3 9now the 'ower of the other 'iece of the '(zzle. ri"htin" wron"s to ma9e $ictims whole once a"ain. Howe$er3 e$en 'artial non6a""ression was so fr(itf(l that other co(ntries so("ht to imitate o(r nation. Creatin" the

donOt need to choose )etween the ideal and the 'ractical. Since the means (sed dictate the ends attained3 only non6a""ression can "i$e (s a 'eacef(l and 'ros'ero(s world. Since a""ression res(lts in 'o$erty and strife3 it is neither ideal nor 'ractical. +on6a""ression will e$ent(ally )ecome the norm )eca(se than9f(lly it is )oth
ideal and 'ractical. Selfish others do not stand in o(r way. 0ndeed3 non6a""ression will inf(se the earth 'recisely )eca(se each of (s is a selfish other.

ach of (s see9s indi$id(al ha''iness with e$ery tho("ht3 word3 and deed. C(st as in the com'(ter "ames3 we are learnin" that non6a""ression #T0T 4?D TAT7 is a win6win strate"y for e$eryone e$en the s'ecial interest "ro('s . !hat Aoy to realize we neednOt s'end time and effort tryin" to control others at "(n'oint to create a world of 'eace and 'lenty^ !hat Aoy to realize that we li$e in a win6win world^ !e need not choose )etween o(r welfare and that of othersJ )oth are ser$ed )y the 'ractice of non6 a""ression. !e need not choose )etween the indi$id(al and the common "oodJ )oth )enefit from non6
a""ression. !e need not choose )etween the en$ironment and o(r standard of li$in"J )oth are )alanced with non6 a""ression.

!e may ha$e created a world of war and 'o$erty 3 )(t )eca(se it is o(r creation3 we ha$e the 'ower to chan"e it. !hen we are steadfast in o(r ref(sal to (se a""ression to control o(r nei"h)ors3 the 'ower )ro9ers and s'ecial interest "ro('s lose their control o$er (s. +o lon"er will we '(t the "(ns of "o$ernment at the dis'osal of the 'owerf(l . !hen we ref(se to )e tem'ted )y the ser'ent3 we cannot )e thrown from the "arden^ !hen we forsa9e a""ression3 we set the sta"e for coo'eration and the inno$ati$e creation of wealth . S9illed wor9ers cannot demand artificially

hi"h wa"es when am)itio(s3 (ns9illed wor9ers can ne"otiate trainin" wa"es to learn their trades. m'loyers cannot e@'loit em'loyees when the a)sence of licensin" laws "i$es em'loyees a chance to start a )(siness of their own. !itho(t mono'oly )y a""ression3 ser$ice 'ro$iders m(st 'lease c(stomers or lose them to inno$ators who will '(t

By creatin" wealth non6a""ressi$ely3 em'loyers and em'loyees learn that when they ta9e care of each other3 there is more 'rofit to share . Ser$ice 'ro$iders
the c(stomer first. learn that they rea' 'rofit for themsel$es )y ta9in" care of their c(stomers. As the !ealth Pie "rows3 so does the realization that )y doin" (nto others3 we do (nto o(rsel$es. !ith a society of "reater wealth and awareness3

the few who cannot create eno("h wealth for themsel$es can )e am'ly 'ro$ided for . !hen we do not force others to )e charita)le3 "i$in" comes a)o(t nat(rally. Some 'eo'le in o(r society
may still thin9 that a""ression ser$es them. They mi"ht manifest this )elief )y stealin"3 defra(din"3 ra'in"3 or 9illin" their nei"h)ors.

The most com'assionate act we can 'erform is to allow a""ressors

to rea' as they sow3 to e@'erience the conse;(ences of their actions3 to ri"ht their wron"s. 0n this
way3 these indi$id(als (ndo the harm they ha$e done to themsel$es as well as to others. !e ha$e no need to '(nish s(ch indi$id(als3 only to heal them and those they ha$e harmed. 0f yo( ha$e read this far3 yo( 'ro)a)ly share this $ision3 at least in 'art. 4ew 'eo'le see thin"s in e@actly the same way. This is as it sho(ld )e. As we wor9 to"ether3 com'arin" inter'retations and strate"ies3 we will come closer to $is(alizin" e$ery as'ect of o(r (ltimate dream a world of (ni$ersal 'eace and 'lenty. Clarity is the necessary first ste' to settin" an

e@am'le. The )ad news is that war and 'o$erty are ca(sed lar"ely )y o(r dri$e to control o(r nei"h)ors. The "ood news is that what we ha$e done3 we can (ndo. !e are in control.
?nce o(r $ision is clear3 we can chan"e o(r )eha$ior to match it. !e can honor o(r nei"h)orOs choice )y ref(sin" to s(''ort laws that threaten first6stri9e force or fra(d a"ainst others. !e can enco(ra"e reforms that s()stit(te restit(tion instead of '(nishment for a""ressors.

Alt Sol$es V S'ontaneo(s ?rder

Embracing the free market is critical to revitali)e the economy -- rational planning can never understand the specifics of the economy Cro#ley, 1. Mana"in" &irector of the Macdonald68a(rier 0nstit(te3 a national '()lic 'olicy thin9 tan9 )ased in ?ttawa. He was also the fo(ndin" President of the Atlantic 0nstit(te for Mar9et St(dies #A0MS73 a '()lic 'olicy thin9 tan9 )ased in Atlantic Canada. #Brian 8ee3 %The Man !ho Chan"ed $eryoneOs 8ife*3 The Macdonald68a(rier 0nstit(te3 20123 http4,,### macdonaldlaurier ca,files,pdf,5ayek-Commentary-6ay.!1. pdf, Callahan& T? D HAB080TAT TH C8ASS0CA8 80B DA8 !?D8& -0 !3 A&AM SM0THBS 4AM?ES 0MA< V A+ P0+-0S0B8 HA+&P <E0&0+< E+D <E8AT & MADK TS T? TH B + 40T ?4 S?C0 TU AS A !H?8 V + & & D STAT M +T. +oninter$entionism had lost its hold on the ima"ination of intellect(als3 Haye9 concl(ded3 )eca(se they la)ored (nder the mista9en im'ression that h(man reason had somehow desi"ned society and its maAor instit(tions3 s(ch as the mar9et . !hat reason had desi"ned3
reason co(ld reAect3 reno$ate3 re'lace. Haye9 )lamed the classical <ree9s for what he considered this dama"in" intellect(al conf(sion3 for it was they who di$ided the world into two cate"ories. The nat(ral and the artificial.


classical li)eral tradition V which incl(des not only the A(strian economists )(t "iants of the !estern
4athers of the American re'()lic V famo(s 'hrase of Adam SmithOs contem'orary3 Adam 4er"(son3 P the

intellect(al tradition s(ch as Adam Smith3 &a$id H(me3 dm(nd B(r9e3 Ale@is de Toc;(e$ille3 and the 4o(ndin"

saw a $ital third cate"ory of manmade instit(tions3 which is3 in the 'rod(ct of h(man action3 )(t not of h(man desi"n.P 4or"ed )y millennia of trial and error3 and )orn o(t of circ(mstances of which we can at )est )e only dimly aware3 these h(man instit(tions were not the 'rod(ct of some desi"nin" intelli"ence . 8an"(a"e3 social traditions3 the common law3 money3 and 're6eminently3 the freely f(nctionin" economy were A(st some of the o(tcomes of the acc(m(lated e@'erience of h(man )ein"s 'ittin" their wits a"ainst nat(re and social circ(mstance . They re'resent a distillation of what h(man
e@'erience has fo(nd wor9s to satisfy o(r $ario(s needs. Beca(se they arise from a m(ltit(de of circ(mstances and infl(ences too di$erse and too o)sc(re to )e 9nown in their totality3 they offer a rational "(ide to h(man action that

this e$ol(tionist acco(nt of h(man societyOs "rowth challen"ed the notion that a h(man will m(st )e )ehind the remar9a)le social order that lets (s achie$e o(r "oals and that allows other 'eo'le to )eha$e toward (s in (sef(lly 'redicta)le ways. 0f this a(thoritarian $ision of the ori"ins of
indi$id(al h(man reason see9s to s(''lant at its 'eril. At its core3 social order were correct3 then the order we 9now wo(ld sim'ly )e the choice of some h(man a(thority. 0f )(t a choice3 it co(ld )e redesi"ned to achie$e an o(tcome more 'leasin" for one reason or another. 0n contrast3

Haye9 offered a $ision of social order that was not desi"ned3 )(t rather Ps'ontaneo(s.P 0n a s'ontaneo(s order3 li9e the a)stract order that was its 'redecessor in Haye9Os tho("ht3 'eo'le '(rs(e their own "oals within the framewor9 of r(les that facilitate coo'eration with others . S'ontaneo(s order adds a f(rther dimension. The r(les themsel$es3 )eca(se of their e$ol(tionary 'edi"ree3 allow the emer"ence of a far richer and more com'le@ le$el of coo'eration than r(les in$ented )y cle$er 'eo'le. C(st as the attem'ts to Pin$entP a (ni$ersal lan"(a"e3 s(ch as
s'eranto3 always seem a 'ale and inade;(ate imitation of the com'le@ities and reso(rces of a lan"(a"e refined and enriched )y millennia of h(man e@'erience3 so3 too3 in$ented moral codes and 'lanned economies red(ce the

+o one 9nows all the circ(mstances that "i$e rise to the r(les that "o$ern the economy3 no more than anyone 9nows what all those r(les3 s'o9en and (ns'o9en3 mi"ht )e . A tiny 'ractical
com'le@ity of h(man relations to what the desi"nin" mind can com'rehend.

e@am'le of the s'ontaneo(s order at wor9 occ(rred at two nei"h)orin" colle"es in the American Midwest. ?ne desi"ned its cam'(s in accordance with rational 'rinci'les "(ided )y the desi"nerOs esthetics. A 'leasin" set of 'athways was laid o(t connectin" the )(ildin"s3 "i$in" a wonderf(l sense of symmetry from the air. The other colle"e3 fo(nded o$er 120 years a"o3 waits for st(dents to determine (sef(l new 'athsJ it then 'a$es o$er the well6 trodden ro(tes. The second colle"e is not nearly as 'leasin" to loo9 at from the air3 )(t its 'attern is act(ally )etter

s(ited to those who (se it3 while in the first colle"e3 ("ly 'athways were in any case soon worn in its "rassy lawns as st(dents im'osed their will on the 'lannerOs $ision. 0n economic terms3 the s'ontaneo(s order

)ecame the cornerstone of Haye9Os defence of free mar9ets )eca(se it offered a 'owerf(l e@'lanation of how the contendin" forces of )illions of h(mans '(rs(in" their own li$es co(ld nonetheless find their acti$ities )eneficently co6ordinated. The free flow of information contained in 'rices im'ersonally "(idin" all forms of economic acti$ity witho(t the need for a(thoritarian inter$ention )y "o$ernment. The
centrality of s'ontaneo(s order in his tho("ht '(ts the lie to the ar"(ment that Haye9 was somehow a radical e@'onent of total non6in$ol$ement of "o$ernment in the economy. His critics ha$e often felt that they only had to show that mar9ets co(ld not e@ist witho(t "o$ernment Pinter$entionP V s(ch as the law of contract and co(rts to enforce 'ro'erty laws V to discredit non6inter$ention as a mytholo"y. Haye9Os ar"(ment3 howe$er3 was ;(ite different. The economy "rows o(t of a com'le@ interaction )etween r(les e$ol$ed o(t

of dee' h(man e@'erience on the one hand and the ener"ies of h(man desire and in"en(ity on the other. Th(s3 while "o$ernment enforcement of e$ol$ed r(les is indis'ensa)le to the o'eration of the economy3 he ar"(ed that attem'ts to s()stit(te newly in$ented )(rea(cratic schemes in their 'lace was the Pconstr(cti$ist fallacy.P Howe$er rational their 'lans may so(nd3 "o$ernment 'lanners sim'ly donOt 9now eno("h to in$ent new instit(tions that can 'rod(ce )etter res(lts than the acc(m(lated3 if often (ns'o9en3 wisdom of h(manity. The true solution is to recogni)e the scope of our o#n ignorance and endorse a process of constant e*perimentation that dra#s on the vie#s and actions of millions of people -- this is preferable to centrali)ed political approaches Emmott, % #Bill3 inde'endent writer3 s'ea9er and cons(ltant on international affairs3 20.21 -ision. Twentieth6Cent(ry 8essons for the Twenty6first Cent(ry7 Those 'oints a)o(t science and reli"ion are worth 9ee'in" in mind for the ne@t time someone says that we are li$in" in a P9nowled"e economy3 P a 'hrase that has )een es'ecially common d(rin" the 'ast decade. To )e told this is dist(r)in" for two reasons. first3 )eca(se it is o(tdated3 in that the economic and social shift of em'hasis from man'ower to )rain'ower has )een "oin" on for more than a cent(ryJ )(t second3 )eca(se it is so ina''ro'riate. Sir Aohn Maddo@Os ar"(ment with re"ard to
science also a''lies more widely. the most im'ortant 9nowled"e that has )een "ained is of the sco'e of o(r i"norance. Perha's most of all3 this a''lies to economics. &e'ressions ha$e )een created

)y o$erconfident economists and their followers3 as ha$e inflations3 hy'erinflations and (nem'loyment. The notion that economics is a science3 in the sense that it can acc(rately ma' h(man )eha$ior and then 'redict and mana"e the conse;(ences of a "i$en action3 is scorned in the common s'eech of most 'oliticians and many economists . Uet the actions of those same 'oliticians and economists when in "o$ernment3 )oth in the ca'italist and the comm(nist worlds3 ha$e often )elied that scorn. <o$ernments r(n their economies as tho("h they co(ld )e certain a)o(t the o(tcomes3 and ha$e mostly )een 'ro$ed wron". !hat economists and all
other 'olicyma9ers need most is h(mility6the same sort of h(mility that3 in the rest of h(manity3 lies )ehind the resilience of reli"io(s o)ser$ance. Calls to (to'ia are dan"ero(s3 )(t so are ass(m'tions of omniscience in the face of social3 economic and 'olitical com'le@ity. That3 in t(rn3 is the case for the 'hiloso'hy of li)eralism.

the )elief in tolerance3 freedom and e@'erimentation rather than in the im'osition of sol(tions from a)o$e. The li)eral 'res(m'tion in fa$or of the mar9et3 of ca'italism and indeed of freedom itself> is dri$en )y intellect(al h(mility. the acce'tance that a 'rocess of constant e@'erimentation3 in$ol$in" the freely e@'ressed $iews and actions of millions of 'eo'le3 is li9ely to 'rod(ce a )etter3 more ada'ta)le o(tcome than one in$ol$in" a committee of economists3 'oliticians3 )(rea(crats3 )(sinessmen or e$en Ao(rnalists3 drawin" (' a "rand )l(e'rint. This 'res(m'tion is h(m)le )eca(se it ac9nowled"es the e@tent of o(r i"norance. 8i)eralism in$ol$es3 or sho(ld in$ol$e3 an awareness that science cannot ha$e all the answers 3 and
that technolo"ical chan"e will not ine$ita)ly ma9e thin"s )etter. H(m)ly3 it sho(ld realize that there is no one ri"ht way to mana"e an or"anization3 and no one ri"ht way to arran"e social relationshi's3 whate$er a sociolo"ist or

'sycholo"ist may claim. A)o$e all3 the h(m)le li)eral has to )e aware of a 'arado@. that when we thin9 we ha$e come (' with a series of sol(tions to 'olitical or 'ractical 'ro)lems3 the thin" that sho(ld scare (s most is the idea that someone mi"ht )e a)le to assem)le the 'ower act(ally to im'lement them all. 4amo(sly3 8ord Acton3 a nineteenth6cent(ry li)eral3 o)ser$ed that P'ower tends to corr('t and a)sol(te 'ower corr('ts

a)sol(tely.P !hat is "enerally remem)ered is the second half of that 'hrase3 es'ecially as the twentieth
cent(ry had so many cases of the horror of a)sol(te 'ower. B(t the first half is3 if anythin"3 more im'ortant. And the 'oint it contains3 that holders of 'ower will3 sometimes conscio(sly3 sometimes (nconscio(sly3 e@'loit

it for their own ends3 lies )ehind the li)eralOs s(s'icion not only of "o$ernment6e$en in democracies6)(t also
of )i" )(siness3 trade (nions3 'ress(re "ro('s and all others who acc(m(late 'ower. Man is not 'erfecti)le3 )(t neither is "o$ernment or any other )i" "ro('. That is one of the )i""est reasons why3 alon" with the A(stified o'timism a)o(t economic3 social and scientific 'ossi)ilities which we sho(ld ta9e with (s into first decades of the twentyfirst cent(ry3 we m(st 9ee' )y (s that winema9erOs 'aranoia. Thin"s can "o wron"3 not A(st )eca(se

)eca(se of the many acts of man that3 deli)erately or in error3 threaten o(r li)erties and o(r freedom of choice3 that are lia)le
of the acts of chance or <od that $e@ the $itic(lt(ralist3 )(t also thro("h false claims of certainty to send (s in new and dan"ero(s directions3 e$en in the most mat(re democracies. 4ran9 Ba(mOs merald City of ?z was shown to )e f(ll of h(m)(" and false claims of certainty. 0n the end3 the fact that many s(ch h(m)("s were e@'osed towards the end of the twentieth cent(ry3 and that li)eralism then )e"an to s'read its infl(ence more widely3 is a "ood fo(ndation for o'timism a)o(t the twenty6first cent(ry3 The h(nt for h(m)("s is one of the )asic '(r'oses of Ao(rnalism3 the ;(intessentially 'aranoid 'rofession. The

h(nt m(st "o on. :pontaneous order provides more complete kno#ledge -- and it(s selfcorrecting Mar9s K26 AB from Uale3 MA in 8aw from ?@ford3 a meme)er of the Society of Sec(rity Analysts #Cohn3 PTwo Kinds of ?rder.P 11K2. htt'.55www."oo"le.com5(rlL saNtTrctNAT;NTesrcNsTso(rceNwe)TcdN2HT$edN0C4 X4AAC?BXT(rlNhtt'ZHA Z24Z24m@.nth(.ed(.twZ24Wcshwan"Z24teachin"6economics Z24econ/1G1Z24econ/1G16116?rderZ2220andZ2220D(leZ24econ/1G16116H6 ?rderZ24Haye9ZH&KindsZ2220ofZ2220?rderZ2220in Z2220Society.docTeiN\iYiT/S@C0iI1XTK'?m<CAT(s"NA4XAC+4eA1?t6 <KU ;-Kz@Cl<H;112PeB"Tsi"2NG"y'&<?oXe&d4Ac'm8M'""755T& The e@am'les 0 wish to disc(ss 6 the mar9et3 science3 lan"(a"e3 and the str(ct(res of li)eral societies 6 all show common feat(res. 1. They all ma9e (se of constr(cti$e rationalism in limited areas. 0t is $ery diffic(lt to thin9 of '(re6)red e@am'les of either 9ind of rationalism. 2. The systems in$ol$ed are so com'le@ that it is inconcei$a)le that any indi$id(al co(ld 9now all the facts which are rele$ant to their f(nctionin". H. Conse;(ently these s'ontaneo(s orders ha$e e$ol$ed decentralised mechanisms for transmittin" information which o$ercome the limitations of indi$id(al 9nowled"e. The de$elo'ment of s(ch mechanisms is a necessary condition for the formation of com'le@ s'ontaneo(s orders. I. A framewor9 of r(les is re;(ired if the information transmission mechanism of a s'ontaneo(s order is to f(nction and the order to s(r$i$e. These r(les are 'artly e@'licit and 'artly tacit3 and may in some cases )e reinforced )y a commonly acce'ted system of $al(es. 2. By their $ery nat(re3 s'ontaneo(s orders e$ol$e di$erse mechanisms for correctin" errors or im'erfections. These self6 correctin" mechanisms3 which in some ways resem)le One"ati$e feed)ac9 loo'sO in mechanical or electrical systems or homeostatic mechanisms in )iolo"ical systems3 o'erate at many le$els in a s'ontaneo(s order3 in ways which are scarcely 'ossi)le in a made order. The classic e@am'le of an e$ol$ed or s'ontaneo(s order is a mar9et economy. As Haye9 '(ts it6 O!e ha$e ne$er desi"ned o(r economic system. !e were not intelli"ent eno("h for thatO. #8883 0003 '. 1/I7. A mar9et economy is one in which many indi$id(als or or"anisations may
'lan their detailed acti$ities )y (sin" a constr(cti$e rationalistic a''roach3 )(t which in its totality forms a com'le@ order whose details are not 9nown to any)ody. This com'le@ order f(nctions effecti$ely )eca(se

of one sin"(lar fact. the mar9et 'rices o)tainin" (nder com'etition transmit

information thro("ho(t the whole system. 0t is this information3 transmitted thro("h 'rices3 which ena)les each 'art of the system to res'ond to the rest and to 'lan its own detailed acti$ities. Brder that is created spontaneously and organically is more effective than action induced through government coercion Counkins, .!!!6 Professor of Acco(ntancy and B(siness Administration at !heelin" Ces(it Eni$ersity in !est -ir"inia3 #&r. dward !. %Ci$il Society. The Dealm of 4reedom3* +o /H3 /610620003 http4,,### +uebecoislibre org,!!!?1!-11 htm7 !hereas the state3 or 'olitical society3 is )ased on coercionSthat men flo(rish3 and from ci$il society that 'ros'erity3 'ro"ress3 and $irt(e flow.755 8 aawe donBt endorse "endered lan"(a"e !hereas the state3 or 'olitical society3 is )ased on coercion3 ci$il society is )ased on $ol(ntary 'artici'ation. The state is the instit(tionalization of force with res'ect to its financin" #e.".3 ta@ation73 the allowa)le acti$ities of its citizens #e.".3 re"(lation73 or the forced 'artici'ation of indi$id(als #e.".3 com'(lsory military ser$ice7. 0n 'olitical society3 someone else ma9es decisions a)o(t yo(r life. 0n ci$il society3 yo( ma9e those decisions. Ci$il society is the s'here of coo'eration3 com'etition3 and tr(e charity . Ci$il Society &a$id Boaz in 8i)ertarianism. A Primer3 o)ser$es that ci$il society is made (' of all the nat(ral and $ol(ntary associations in society incl(din" families3 ch(rches3 cl()s3 fraternal societies3
nei"h)orhood "ro('s3 charities3 self6hel' "ro('s3 trade associations3 (nions3 sole6'ro'rietorshi'3 'artnershi's3 cor'orations3 etc. ach association within ci$il society is created to achie$e a s'ecific

'(r'ose3 )(t ci$il society as a whole has no intended '(r'ose V it is the (ndesi"ned3 s'ontaneo(sly emer"in" res(lt of all of the $ol(ntary3 '(r'osi$e associations. ?rder in ci$il society res(lts as the (nintended )y'rod(ct of the $ol(ntary and m(t(ally )eneficial associations amon" the indi$id(als in that society . Comm(nities emer"e as indi$id(als $ol(ntarily relate to one another in an indefinite n(m)er of ways. A man needs to associate with others in order to flo(rish and f(lfill his needs and desires. 0t follows that ci$il society is com'rised of associations witho(t )ein" collecti$ist and is indi$id(alistic witho(t )ein" atomistic. Ci$il society3 the realm of freedom3 is )ased on "i$in" the widest 'ossi)le discretion to the indi$id(al so that he has so$erei"nty o$er his own life in the '(rs(it of his ha''iness3 as lon" as he res'ects the e;(al ri"hts of others. 0t follows that 'olitical society sho(ld e@ist only to 're$ent force3 fra(d3 and misre'resentation. As the state "rows3 ci$il society wanes. 0t is in ci$il society that men flo(rish3 and from ci$il society that 'ros'erity3 'ro"ress3 and $irt(e flow.

7. 7ff 7rgs

7. -erm
The market is a continuous discovery process that creates an infinite number of opportunities -- government intervention short-circuits innovation and gro#th Crane, 2?- President of the Cato 0nstit(te # dward H.3 -ital S'eeches of the &ay3 %Ci$il Society $. Political Society3* G6126111/3 $ol. /23 no. 113 '.21G755 8 0 a"ree with Milton 4riedman when he says that the tr(e le$el of ta@ation of the American 'eo'le is really the le$el of "o$ernment s'endin". That is3 the )(rden on those of (s in the 'ri$ate sector is determined )y the amo(nt of reso(rces e@tracted )y the '()lic sector. !hether the e@tractions come in the form of ta@es3 )orrowin"3 or inflation is (ltimately less im'ortant than the fact that reso(rces are )ein" e@tracted from the 'ri$ate3 'rod(cti$e3 Ao) 6 creatin" 'art of society. 6And3 of co(rse36s'endin"Os6on1y6'art6ofthe6)(rden6the 'ri$ate6 sector s(ffers6at6the6)ehest6of the6'()lic6sector. De"(lations ta9e from the American economy an estimated F200 )illion a year in com'liance costs alone. And that s'ea9s nothin" of the o''ort(nity costs to the economy. Beca(se itOs im'ortant to 9ee' in mind that the essence of a mar9et economy is that its a contin(o(s disco$ery 'rocess. To the e@tent that "o$ernment 'rescri)es alternati$e entre'rene(rial a''roaches thro("h re"(lations3 the disco$ery 'rocess is short circ(ited and the economy s(ffers. And that s(fferin" is com'o(nded )eca(se each new disco$ery creates an almost infinite n(m)er of o''ort(nities for other entre'rene(rs to (se the new disco$ery in their own res'ecti$e acti$itie s . 8et me "i$e yo( A(st one e@am'le. Bac9 in the 11G0s there was a theory that the interstate tr(c9in" ind(stry needed to )e dere"(lated 6 that it had ca't(red the re"(lators and cartelized the ind(stry. !e were told that if tr(c9in" rates were dere"(lated more forms wo(ld enter the ind(stry and 'rices wo(ld "o down. That is3 in fact3 what ha''ened. !hat we werenOt told3 and what was "enerally not antici'ated3 is that the "reater sa$in"s 6 on the order of tens of )illions of dollars a year 6 came from the PA(st6in6time in$entoryP re$ol(tion. The "reater fle@i)ility that dere"(lation 'ro$ided allowed for a radical downsizin" of in$entories for most )(sinesses and3 therefore3 m(ch lower in$entory carryin" costs. The idea that "o$ernment re"(lators can im'ro$e on the mar9et'lace reflects what the late +o)el la(reate 4. A. Haye9 called the P fatal conceit . P H(mility is a $irt(e one doesnOt often find in "o$ernment 'lanners. 7ny permutation that maintains some level of centrali)ed planning #ill inevitably fail -- individual liberty must be treated as the highest end and never be sacrificed B(3riscoll, 2< #<erald P. Cr.3 &irector of Policy Analysis at Citicor' and a Senior 4ellow at the Cato 0nstit(te3 CAT? Policy De'ort3 %The Meanin" of Haye93* 261611123 www.cato.or"55'()s5'olicyMre'ort5'r6nd6"d.html3 AMayar7 classical li)eralismOs conflict with central 'lannin" was not o$er the shared "oal of enhancin" the well6)ein" of the "reatest 'ossi)le n(m)er of 'eo'le )(t o$er the way to achie$e that "oal. Haye9Os thesis in The Doad to Serfdom is that one inter$ention ine$ita)ly leads to another. The (nintended conse;(ences of each mar9et inter$ention are economic distortions3 which "enerate f(rther inter$entions to correct them. That inter$entionist dynamic leads society down the road to serfdom .
0n 'erha's the )est cha'ter of The Doad to Serfdom3 Haye9 details P!hy the !orst <et on To'P in totalitarian societies. The cha'ter )e"ins with a ;(otation from 8ord Acton. PPower tends to corr('t3 and a)sol(te 'ower corr('ts a)sol(tely.P Haye9 then ela)orates the Actonian insi"ht. There are stron" reasons for )elie$in" that what to (s a''ear the worst feat(res of the e@istin" totalitarian systems are not accidental )y6'rod(cts )(t 'henomena

Haye9 is )est 9nown for his most widely read wor93 The Doad to Serfdom3 which was written to e@'lain to a literate3 )(t nontechnical3 readershi' how the road to 'olitical hell is 'a$ed with the )est intentions. As he made clear3

C(st as the democratic statesman who sets o(t to 'lan economic life will soon )e confronted with the alternati$e of either ass(min" dictatorial 'owers or a)andonin" his 'lans3 so the totalitarian dictator wo(ld soon ha$e to choose )etween disre"ard of ordinary morals and fail(re . 0t is for
which totalitarianism is certain sooner or later to 'rod(ce. this reason that the (nscr('(lo(s and (ninhi)ited are li9ely to )e more s(ccessf(l in a society tendin" toward totalitarianism. !ho does not see this has not yet "ras'ed the f(ll width of the "(lf

which se'arates totalitarianism from a li)eral re"ime3 the (tter difference )etween the whole
moral atmos'here (nder collecti$ism and the essentially indi$id(alist !estern ci$ilization. Decall that that was written in 11II at the hei"ht of the nai$e leftist faith in collecti$ist economic 'olicy. Haye9 dedicated his )oo9 to the PSocialists of All Parties3P ne$er attri)(tin" malice or )ad moti$es to them3 only sheer intellect(al error. He demonstrated3 ne$ertheless3 how attem'ts to do "ood can 'rod(ce "reat harm. The thesis is the co(nter'art of Adam SmithOs famo(s dict(m that self6interested )eha$ior can )e the so(rce of "reat societal "ood. #And )oth men owe m(ch to Montes;(ie(.7 Haye9 ar"(ed that3 in the inter$entionist dynamic3 li)erty

is lost 'iecemeal3 one freedom at a time3 always in the name of necessity and e@ 'ediency. Haye9 echoed the words of 8ord Acton. P8i)erty is not the means to a hi"her 'olitical end. 0t is itself the hi"hest 'olitical end .P ?r3 as Haye9 later am'lified ActonOs insi"ht3 That freedom can )e 'reser$ed only if it is treated as a s('reme 'rinci'le which m(st not )e sacrificed for 'artic(lar ad$anta"es was f(lly (nderstood )y the leadin" li)eral thin9ers of the nineteenth cent(ry3 one of whom =BenAamin Constant> e$en descri)ed li)eralism as Pthe system
of 'rinci'les.P S(ch is the chief )(rden of their warnin"s concernin" Pwhat is seen and what is not seen in 'olitical economyP =4rederic Bastiat> and a)o(t the P'ra"matism that contrary to the intentions of its re'resentati$es ine@ora)ly leads to socialismP =Carl Men"er>.

7 society based on spontaneous order is mutually e*clusive #ith the plan(s centrali)ed planning B(3riscoll, 2< #<erald P. Cr.3 &irector of Policy Analysis at Citicor' and a Senior 4ellow at the Cato 0nstit(te3 CAT? Policy De'ort3 %The Meanin" of Haye93* 261611123 www.cato.or"55'()s5'olicyMre'ort5'r6nd6"d.html7
0n all his wor93 Haye9 foc(sed on the self6orderin" forces in society. Haye9Os fellow +o)el la(reate Kenneth Arrow has s(""ested that Pthe notion that thro("h the wor9in"s of an entire system effects may

)e $ery different from3 and e$en o''osed to3 intentions is s(rely the most im'ortant intellect(al contri)(tion that economic tho("ht has made to the "eneral (nderstandin" of social 'rocesses.P The Arro$ian form(lation echoes Adam SmithOs o)ser$ation that3
as a conse;(ence of the interaction of conflictin" interests3 man is Pled )y an in$isi)le hand to 'romote an end which was no 'art of his intention.P The classic Haye9ian statement $is(alizes economics as analyzin" Pthe res(lts of h(man action )(t not of h(man desi"n.P The economic conce'tion of society is an affront to the conceit of those who wo(ld im'ose order from a)o$e. conomic forces defy the will of a(thoritarians see9in"

to mold social o(tcomes. H(man )ein"s res'ond to each "o$ernment inter$ention )y rearran"in" their li$es so as to minimize its disr('ti$e effects. The res(ltin" o(tcome may th(s )e different from and e$en o''osed to the intention of the inter$ention. @am'les a)o(nd. A 'olicy of moderate inflation to stim(late economic "rowth time and a"ain de"enerates into ra'id inflation and economic sta"nation . Attem'ts to alter trade 'atterns e@acer)ate the 'ro)lems addressed )y the 'olicy . A H06year6old 'olicy to hel' the 'oor has "reatly increased their n(m)er and lar"ely redistri)(ted income within the middle class . The list "oes on. 0n The Constit(tion of 8i)erty3 Haye9
incl(ded a cha'ter3 P!hy 0 Am +ot a Conser$ati$e3P in which he ar"(ed the case for classical li)eralism. the 'olicy that lea$es 'eo'le alone in the )edroom as well as the )oardroom. !hat is deli"htf(l a)o(t Haye9 is that3 as he a"ed3 he )ecame more radical. !e cele)rate this e$enin" a clear6si"hted man3 as well as the end(rin" ;(ality of his intellect(ally radical wor93 4riedrich Haye9.

7. "ree 6arket "ails / Competition

Social and economic interactions are too com'le@ for 'olicyma9ers to (nderstand or 'lan acc(rately 66 e@cessi$e faith in 'olitics conceals h(man 'otential to coo'erate effecti$ely. @arry ><6 Professor of 'olitical and social theory at the Eni$ersity of B(c9in"ham. #+orman3 P0n &efense of the 0n$isi)le Hand.P Cato 0nstit(te. S'rin"5S(mmer 11K2. www.cato.or"5'()s5Ao(rnal5cA2n15cA2n16G.'df755T&
0n economics the 'oint of the 0n$isi)le Hand theorem is to show how there can )e order witho(t a desi"nin" mind and witho(t anyone intendin" s'ecifically to 'rod(ce s(ch an order. Haye9Bs famo(s o)ser$ation that

the social sciences sho(ld )e concerned with the in$esti"ation of 'henomena that are %the res(lt of h(man action3 )(t not of h(man desi"n* 2 shows there are %nat(ral* 'rocesses at wor9 that3 if left (ndist(r)ed3 will 'rod(ce an order infinitely more com'le@ than that which emanates from deli)erate h(man will . This is )eca(se no one mind can ha$e access to that dis'ersed 9nowled"e which is a feat(re of a nat(ral system. To thin9 this is 'ossi)le is3 accordin" to Haye93 to )e a $ictim of the %syno'tic del(sion.* As Haye9 has )een at 'ains to 'oint o(t3 a self6correctin" economic system is not the only e@am'le
of a nat(ral social 'rocessJ le"al systems and lan"(a"es3 for e@am'le3 dis'lay similar 'ro'erties. SenBs ?)Aection to S'ontaneo(s ?rder Sen thin9s that this is rather an %(n'rofo(nd* tho("ht3B / He s(''orts this contention )y "i$in" a tri$ial e@am'le ofan action:crossin" the street:from which certain res(lts occ(rred that were not s'ecifically desi"nedJ for e@am'le3 crossin" the street led to a 'assin" car )ein" delayed.

This is ;(ite disin"en(o(s3 for the fascinatin" thin" a)o(t 0n$isi)le Hand theories is that they 'rod(ce s(r'risin" and (ntri $ial res(lts3 The ty'ical modern intellect(al is a $ictim of the syno'tic del(sion. 0t is inconcei$a)le to him that a mar9et can coordinate in the a)sence of a central h(man a"ency3 or that A(d"es3 [ I 4. A. Haye93 %Com'etition as a &isco$ery
Proced(re3* in +ew St(dies in Philoso'hy3 Politics3 conomics and the History of 0deas #8ondonJ Do(tled"e and Ke"an Pa(l3 11GK73 ''. 1G1:10. %See Haye93 St(dies in Philoso'hy3 Politics and conomics #8ondonJ Do(tled"e and

in a case6)y6case manner3 accidentally "enerate a more 'redicta)le le"al order than that 'rod(ced )y a le"islat(re. Uet it is these 'rocesses that are orderly and the h(man will that is ca'ricio(s. The most that Sen
Ke"anPa(l3 11/G73 ''. 1/:1023 %Sen. %Profit Moti$e3* '. H. 1H1CAT? C?ED+A8 concedes to the mar9et is that it is a''ro'riate only for those matters o$er which 'eo'leBs interests con$er"e3 )(t that it is ;(ite irrele$ant for those areas where there is a conflict of interests. 0n one sense3 Sen is (tterin" a ta(tolo"y. mar9et relationshi's are con$er"ent ones and3 where there are irreconcila)le conflicts3 tradin" is im'ossi)le. howe$er3

The interestin" 'oint a)o(t the familiar instit(tions of mar9et society 3 is that they ena)le indi$id(als to find o(t those areas where coo'eration and "ains from trade are 'ossi)le. !e cannot 9now what coordination can ta9e 'lace (ntil we allow 'eo'le to e@ercise their %nat(ral 'ro'ensity to tr(c93 )arter and e@chan"e.* The dan"er of o$erem'hasizin" the conflict(al side ofh(man relationshi's is that it licenses %'olitics* to dominate menBs li$es3 and 'olitics has an almost irre$ersi)le tendency to conceal the o''ort(nities for a"reement amon" 'eo'le. Even if competition has negative effects, market forces still solve better than the aff 'inston, .k66 fellow at the A 06Broo9in"s Coint Center for De"(latory St(dies and a senior fellow at the Broo9in"s 0nstit(tion #Clifford3 %<o$ernment 4ail(re in Er)an Trans'ortation.*3 A 06Broo9in"s Coint Center for De"(latory St(dies3 +o$em)er3 htt'.55'a'ers.ssrn.com5solH5'a'ers.cfmLa)stractMidN221GKK755 M The traditional theoretical A(stification for "o$ernment mana"ement and o'eration of transit is that a 'ri$ate transit mar9et wo(ld res(lt in destr(cti$e com'etition .12 P()lic transit

a"encies co(ld ma@imize social net6)enefits )y settin" tra$elersB fares e;(al to the mar"inal cost of their tri's and 'ro$idin" ser$ice3 s(ch as fre;(ency and ro(te co$era"e3 where additional )enefits to tra$elers e;(al the additional

costs.1/ <o$ernment ownershi' and mana"ement of roads is

A(stified on the "ro(nds that roads are

#for the most 'art7 '()lic "oods that re;(ire enormo(s in$estments. <i$en con"estion and 'a$ement wear3 the '()lic hi"hway a(thority co(ld ma@imize social net6)enefits )y char"in" (sers for the 'artic(lar costs they inc(r and )y ma9in" in$estments where mar"inal )enefits e;(al mar"inal costs. 8ar"e

'()lic transit deficits3 low transit load factors3 and se$ere hi"hway con"estion3 howe$er3 s(""est that the E.S. '()lic sector is not settin" (r)an trans'ortation 'rices and ser$ice to ma@imize net )enefits. !inston and Shirley #111K7 e@'lore this matter
em'irically )y estimatin" the net )enefits from two 'olicies. re'lacin" c(rrent transit 'rices and ser$ice fre;(ency with mar"inal cost transit fares and o'timal ser$ice fre;(ency and settin" mar"inal cost a(tomo)ile con"estion tolls.1G #The tolls3 which can )e assessed with c(rrent technolo"y that does not disr('t motoristsB Ao(rneys or in$ade their 'ri$acy3 acco(nt for tra$elersB $al(e of time and $ary with the le$el of con"estion thro("ho(t the day.7 Policy sim(lations are )ased on an e;(ili)ri(m model of (r)an trans'ortation 'ricin" and ser$ice where (r)an comm(ters choose amon" alternati$e modes #a(to3 )(s3 rail3 ta@i3 or car'ool7 and de'art(re times. The effects of the 'ricin" and ser$ice 'olicies on cons(mer )enefits and "o$ernment )alances are shown in ta)le 2.1K The net

)enefits from im'lementin" only the 'ricin" com'onents of this 'olicy total nearly FK )illion a year. Beca(se o'timal 'ricin" means m(ch hi"her fares and tolls3 tra$elers themsel$es lose F1/
)illion.11 B(t these 'ri$ate losses are more than offset )y the red(ced '()lic transit deficits and acc(m(lated toll re$en(es that )rin" the (r)an trans'ortation )(d"et into )alance. 0t is3 of co(rse3 ;(estiona)le whether the a$era"e citizen will see )enefits in 'olicies that increase his costs3 e$en as they lower '()lic deficits. B(t $oters are demonstra)ly inclined to s(''ort elected officials who red(ce "o$ernment s'endin" #Peltzman #111273 !inston and Crandall #111I773 so tra$elers wearin" their hats as ta@'ayers wo(ld li9ely $ote for their enli"htened self6interest at the )allot )o@. 0n fact3 the )enefits noted in ta)le 2 are (nderstated )eca(se they do not acco(nt for the cost of raisin" '()lic f(nds #e@cess )(rden7 to co$er the transit deficit.

7. "ree 6arket "ails / =ob Creation

The "o$ernment canBt create Ao)s 66 they emer"e from the acti$ity of the 'ri$ate sector. 1ing 1!6 Ph& in economics from M0T3 former senior economist for 4reddie Mac3 and adA(nct scholar at the Cato 0nstit(te. #Arnold3 PThe ra of @'ert 4ail(re.P Cato. Se'tem)er5?cto)er 2010.www.cato.or"5'()s5'olicyMre'ort5$H2n25c'H2n261.html
A Ao) is created when the s9ills of a wor9er match the needs of an em'loyer. 0 li9e to ill(strate this idea (sin" an ima"inary "ame in which yo( draw from two dec9s of cards3 one of which contains wor9ers and one of which contains occ('ations. 4or e@am'le3 s(''ose that yo( drew PArnold Klin"P from the dec9 of wor9ers and yo( drew PfishermanP from the dec9 of occ('ations. That wo(ld not )e a "ood match3 )eca(se my 'rod(cti$ity as a fisherman wo(ld )e zero. Uo( co(ld do worse : my mar"inal 'rod(ct as an oral s(r"eon wo(ld )e ne"ati$e. Howe$er3 yo( co(ld do )etter if yo( were to draw an occ('ation card that said Pfinancial modelerP or Peconomics teacher.P ?ne h(ndred years a"o3 if yo( had 'layed this "ame3 yo( had a "ood chance of findin" a match A(st )y 'ic9in" randomly. Most Ao)s re;(ired man(al la)or3 and for most 'eo'le man(al la)or was the most 'rod(cti$e (se of their wor9in" ho(rs.

TodayOs wor9 force is more hi"hly ed(cated and more differentiated. As a res(lt3 the tas9 of creatin" Ao)s re;(ires m(ch more 9nowled"e than it did in the 'ast. A +ew &eal 'ro"ram li9e the P()lic !or9s Administration or the Ci$ilian Conser$ation Cor's wo(ld not ha$e m(ch a''eal for a recent law school "rad(ate or laid6off financial 'rofessional. Prod(ction today is more ro(nda)o(t than it was 20 years a"o. ?nly a minority of the la)or force is en"a"ed in acti$ities that directly create o(t'(t. 0nstead3 a ty'ical wor9er today is 'rod(cin" what <eor"e Mason Eni$ersity economist <arett Cones calls Por"anizational ca'ital.P This incl(des mana"ement information systems3 internal trainin"3 mar9etin" comm(nications3 ris9 mana"ement3 and other f(nctions that ma9e )(sinesses more effecti$e. !hen 'rod(ction was less ro(nda)o(t3 there was a ti"ht relationshi' )etween
o(t'(t and em'loyment. !hen a firm needed to 'rod(ce more st(ff3 it hired more wor9ers. Today3 additional demand can often )e satisfied with little or no additional em'loyment. Con$ersely3 the decision to hire de'ends on how mana"ement e$al(ates the 'otential "ain from addin" new ca'a)ilities a"ainst the ris9s of carryin" additional costs. The looser relationshi' )etween o(t'(t and em'loyment is im'licit in the 'hrase PAo)less reco$ery.P So


does the economy create Ao)sL

There is a sense in which no)ody 9nows the answer. 0n his essay3 P03

a sin"le 'erson on the face of this earth 9nows how to ma9e a 'encil. Pencils emer"e from a com'le@3 decentralized 'rocess. The same is tr(e of Ao)s. !hat the iss(e of Ao) creation ill(strates is the 'ro)lem of treatin" "o$ernment e@'erts as res'onsi)le for a 'ro)lem that cannot )e sol$ed )y a sin"le 'erson or a sin"le or"anization. conomic acti$ity consists of 'atterns of trade and s'ecialization. The creation of these 'atterns is a 'rocess too com'le@ and s()tle for "o$ernment e@'erts to )e a)le to mana"e. The iss(e also ill(strates the way h()ris dri$es o(t tr(e e@'ertise. The $ast maAority of economists wo(ld say that we ha$e $ery little idea how m(ch em'loyment is created )y additional "o$ernment s'endin". Howe$er3 the economists who recei$e the most media attention and who o)tain the
Pencil3P 8eonard Dead famo(sly wrote that not most 'owerf(l 'ositions in !ashin"ton are those who claim to ha$e the most 'recise 9nowled"e of Pm(lti'liers.P

7. "ree 6arket "ails / 6onopolies

Any mono'olies that res(lt from the alternati$e are 'refera)le 66 the stat(s ;(o "(arantees massi$e mar9et inter$ention that ens(res fail(re. -aul !8- director of the Social Philoso'hy and Policy Center and 'rofessor of 'olitical science at Bowlin" <reen State Eni$ersity # llen3 PHaye9 on Mono'oly And Antitr(st 0n the Cr(ci)9le of Enited States -. Microsoft.P +UE Co(rnal of 8aw T 8i)ety. 1251250I. htt'$H5"ro('s5'()lic5bny(MlawMwe)siteMMAo(rnalsMMAo(r nalMofMlawMandMli)erty5doc(ments5doc(ments5ecmM'roM0/0KK1.'df755T& <o$ernment %'ri$ile"e* that 'recl(des others from enterin" the mono'olistBs mar9et is o)Aectiona)le3 )(t mar9et circ(mstances that ad$anta"e some )(t not others3 are not. +either is it o)Aectiona)le for a %)i" firm* to dominate its mar9et and f(nction as a 'rice leader3 since there is no way of determinin" the o'tim(m size of a firm other than )y lettin" the com'etiti$e 'rocess o'erate (nhindered . An effecti$e com'etitor may or may not enter the fray3 )(t there is no way that "o$ernment can im'ro$e on the sit(ation3 for the %most effecti$e size of the indi$id(al firm is . . . one of the (n9nowns to )e disco$ered )y the mar9et 'rocess . . .* /1 So )i"ness itself is not a 'ro)lem3 (nless "o$ernment itself creates s'ecial3 artificial ad$anta"es to )i"ness thro("h ta@ 'olicy3 the law of cor'orations3 tariffs3 ind(strial 'atents3 or )(rea(cratic h(rdles that lar"e firms can s(rmo(nt with "reater facility than small firms. S(ch artificial ad$anta"es to )i"ness sho(ld )e dismantled. ?ther "o$ernment assistance to mono'olies:in trans'ort 3 '()lic (tilities3 la)or3 a"ric(lt(re3 and finance:are li9ewise harmf(l3 and sho(ld )e a)andoned. Haye9 e$en wonders whether mono'oly wo(ld )e s(ch a 'ercei$ed %serio(s 'ro)lem* if "o$ernment had not a)etted mono'oly. Th(s3 he '(ts a hi"her 'remi(m on "o$ernments ceasin" to aid mono'oly )y discriminatory r(les that ad$anta"e )i"ness3 than on "o$ernment tryin" to red(ce the 'ri$ate 'ower of firms o$er the mar9et cond(ct of others 3
altho("h the latter he still ta9es to )e a 'ro'er f(nction of the law.

7. 0nnovation :olves :ynoptic 3elusion

6odern innovations don(t change our ability to comprehend economics or society -- kno#ledge is too #idely dispersed 'illiams 226 Ph& from Manchester Eni$ersity #<areth3 PHaye9Os Criti;(e of Constr(cti$ism. A 8i)eratarian A''raisal.P 8i)eratarian Alliance. 1111'()s5econn5econn0K2.'df7 0t co(ld )e ar"(ed3 contrary to Haye93 that modern comm(nications and information 'rocessin" systems can aid the 'rocess of acc(m(lation3 di"estion3 and dis'ersal of 9nowled"e3 th(s ena)lin" effecti$e central 'lannin". Howe$er the force of this ar"(ment is limited3 for3 as Haye9 notes3 with re"ard the (se of com'(ters3 %howe$er "reat their 'ower of di"estin" facts fed into them3 they do not hel' (s in ascertainin" these facts*. 1/ As we will see in cha'ter two Haye9 considers information #incl(din" s()Aecti$e indi$id(al 'references7 to )e widely dis'ersed thro("ho(t society3 and ra'idly chan"in" in nat(re. 0n this comment ('on the $al(e of com'(ters he is s(""estin" that they do not ser$e to o$ercome the lo"istical diffic(lties in$ol$ed in contin(o(sly "atherin" ra'idly chan"in" and widely dis'ersed information. 0t is reasona)le to assert that s(ch is the nat(re of the 9nowled"e to )e collected that ad$ances in comm(nications technolo"y are (nli9ely to )e a)le to o$ercome these lo"istical diffic(lties. This o)ser$ation is cr(cial to Haye9Bs criti;(e of constr(cti$ism since it demonstrates that the ad$ance of h(man 9nowled"e a)o(t the world in which we li$e does nothin" #or at least $ery little7 to rectify the 'ro)lems which fr(strate s(ccessf(l central 'lannin". !hile technolo"ical ad$ances co(ld offer some )enefit to the collection of information they are not a)le to satisfy the e'istemolo"ical re;(irements necessary for central 'lannin".

7. 6ar*,3ialectical 6aterialism
6ar* is #rong -- his theory can(t function -- #e can(t kno# everything :ciabarra, .!!! Political theorist and co6editor3 with Mimi Deisel <ladstein3 of 4eminist 0nter'retations of Ayn Dand. His wor9 has foc(sed on to'ics incl(din" ?)Aecti$ism3 li)ertarianism #'artic(larly the wor9 of 4riedrich Haye9 and M(rray Doth)ard73 and dialectics. #Chris Matthew3 %T?TA8 4D &?M. T?!AD& A &0A8 CT0CA8 80B DTAD0A+0SM* e@cer't3 &ecem)er 13 20003 htt'.55www.ny(.ed(5'roAects5scia)arra5totalfrdm5tfhaye96l.htm , Callahan& &es'ite this commonality3 Haye9 and Mar@ 'art com'any in their assessments of the f(t(re. Altho("h Haye9Os a''roach has its inherent 'ro)lems3 his wor9 'ro$ides an effecti$e indictment of Mar@ism3 not only as a statist 'olitical ideolo"y3 )(t also as a theoretical 'roAect. Mar@
B(t he historicized these limitations3 s(""estin" that

reco"nized what 0 ha$e called the Pe'istemic strict(resP 66 or limitations on h(man 9nowled"e 66 that (to'ians face.

history itself wo(ld resol$e the 'ro)lem of h(man i"norance. This Mar@ian $ision of comm(nism has two essential flaws . #17 0t 'res(mes "od6li9e 'lannin" and control 3 and a mastery of the many so'histicated n(ances3 tacit 'ractices3 and (nintended conse;(ences of social action. B(t no h(man )ein" and no "ro(' of h(man )ein"s can 'ossi)ly tri(m'h o$er these s'ontaneo(s factorsJ they are 'artially constit(ti$e of what we mean )y Psociality.P Those who attem't to )(ild a road from earth to hea$en are more li9ely to wind (' in hell. #27 0t 'res(mes a total "ras' of history. $erythin" that is has a 'ast and contains within it the seeds of many 'ossi)le f(t(res. !hile Mar@ists are correct to ac9nowled"e that st(dyin" what is m(st necessarily entail an (nderstandin" of how it came to )e3 they often attem't to st(dy the 'resent as if from an ima"ined f(t(re. !hen Mar@ists s(""est that history itself can lead to a tri(m'h o$er h(man i"norance3 they act(ally im'ly 'ri$ile"ed access to total 9nowled"e of f(t(re social conditions. This is not merely ille"itimateJ it is inherently (to'ian and 'rofo(ndly (ndialectical insofar as it is (n)o(nded )y the conte@t that e@ists. 0t is this 9ind of totalism that a dialectical method re'(diates. At root3 the desire for s(ch omniscience is a distortion of the "en(inely h(man need for efficacy. 0t is )ased on what Haye9 calls a Psyno'tic del(sion3P a )elief that one can li$e in a world in which e$ery action 'rod(ces consistent and 'redicta)le o(tcomes. S(ch a ;(est for total 9nowled"e is e;(ally a ;(est for totalitarian control. To the e@tent that Mar@ism has )een a )eacon for those tryin" to act(alize s(ch an im'ossi)ility3 it has f(eled a reactionary3 rather than a 'ro"ressi$e3 social a"enda 66 the a""randizement of the state3 the o''ression of indi$id(al ri"hts3 and the fra"mentation of "ro('s
in '(rs(it of 'olitical 'ower.

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