1. Writing in 1944, Hayek argues that totalitarianism in Germany as well as Russia has resulted from socialism.
2. Hayek tells us that individualism really means respect for the individual man quaman. 3. What important change to the meaning of “freedom” has contributed to the rise of socialism? It used to mean freedom from coercion; now it means freedom from necessity.
I. Review of Dewey a Social Science and Culture
∙ Lazzie fair economics, Dewey said that it is outdated, and we need a new liberalism that have the same liberal values, but by different means. Instead of pulling back the government you increase the role of government to
supervision of economic law.
o Capitalism can achieve where liberation for natural assessment.
o Scarcity look at society but distribution hasn’t been adequate that’s why some people have food, and some don’t.
Modern scarcity is socially caused; if it is caused by nature
there is nothing anyone can do about it but if it is caused by
social structure it can solved.
That will be the role of social science will tell society how they
will restructure, to develop a way that economic life can be
cooperative rather than competitive, where there can be
genuine social planning that random effects on the market
∙ Social Science – techniques of natural science; on the base of natural facts and data. Don't forget about the age old question of What is the focus of the ecological systems theory?
o Modern natural science depends on experiment or data.
o Natural science has made huge advances at understanding the world, which is what Dewey wants to show that we can use the natural
science way of figuring things out for society.
∙ Dewey wanted to use techniques on the analysis of society. Natural things are caused whereas humans act for reason. There are different.
∙ Conformation bias people then to see what they are looking for.
o Democrats see what they are looking for politically and confirm they theories.
∙ Free intelligence and social science that can solve problems. If economics can be a science, it can tell us about unemployment and inflation.
∙ Social engineering we can engineer society the same way we can engineer bridges. Dewey so comfortable that social science is just like natural science. If only the experts are in charge.
∙ People this worried about scarcity if that's the case then people can be freed upDon't forget about the age old question of Differentiate exothermic and endothermic reactions.
∙ Old scarcity led people to love hiding into materials too much. People can let that fear of scarcity go and can be free for cultural development and Don't forget about the age old question of Hylobatidae is what?
explorations; does not say what that cultural development is.
∙ Liberalism wants full development of individualism and social science and provides that security.
∙ Dewey was confident in social progress that he didn’t think about cultural progress. Dewey doesn’t treat the culture questions as controversial questions. He also does not treat the issue that there is a cultural science that could supplement a social science.
II. Introducing Hayek
∙ He is the leading exponent of classical liberalism. His point of view that classical liberalism is so far from being outdated that it hasn’t been properly understood.
∙ He says liberalism/capitalism is responsible for great economic development of the last few centuries and he thinks the problem with the 20th century is due abandonment of the free market, it was not properly understood because of the understanding of social science.
∙ Liberalism is the same of Individual Development.
o The key to understanding classical liberalism is individualism. The value of that liberalism holds is the individual development. The
individuals can be understood in themselves. He thinks of it as a We also discuss several other topics like What is the function of the cardiovascular system?
mistake to see individuals as parts of a larger community.
o Individuals choose not because of automatic causes.
o In the book, is communism and fascism have the same root of
socialism. Socialism was the dominant way of thinking in Europe.
There was a way of thinking society that the older liberals that believe in the value of individuals add up to explain certain social process,
they said that all of this can be manage by the state. Society and
economy can be organized by that state so all the conflict can be
o Capitalism encourages competitions which means winners and losers and the losers, have a question do they just take the lost or do they
understand and learn from their mistakes and becomes some new
o Hayek thinks that the totalitarianism ism, starts the war it would at least never would it become thinkable if there hadn’t already been this demotion of the individual by socialism. Society …rest on individual If you want to learn more check out What is texas individualism?
liberty, the ideas that was central especially in the people that live in
the U.S. the folks to the West understood the key to economic life and centrality in the value of the individual.
o So early liberalism agrees with Dewey, because early liberalism was freeing the individual from oppression. This meant individual
competition in the market place. But the problem with the socialist
thinkers, is that it thought this competition can be overcome,
individualism can be overcome, by somehow understanding society as If you want to learn more check out Who is benjamin franklin?
organism and seeing the individual as only piece of that organism.
o You must maintain a strong sense of individual liberty. And by
individual liberties he means:
Liberties of religion/economic/expression.
If you want freedom of religion you better own your own place
of worship, if you want freedom of speech you need your own
place to talk, if you want freedom of economic liberty you give
people their property.
III. Classical Liberalism
∙ Classical Liberalism is understanding individualism.
IV. Spontaneous Order
∙ The market is not some accidental thing, it is a critical social institution that will come up everywhere you have human interaction that doesn’t suppress the market (slaves); or a command economy where the jobs are assigned by the state.
∙ When people own their own stuff, it’s only natural they will trade and barter. If we understand this then a free market is the secret of economic growth of human needs and desires. You can take away the market and its manifest. If you suppress that market you will eliminate the plenty.
o If you only think about yourself, the market would work and we all
would be better off.
∙ The market place is ordered.
∙ The notion that some central authority in society can better plan things, it is supplied by the free notion of the market place. Hayek says that it is wrong. … He calls socialism the GREAT UTOPIA a perfect world.
o Hayek says that socialism describes a utopia but its not going to
happen because it is easy to understand why people are attracted to it
because you can have as much plenty without having to worry about
going out of business.
o Modern thinkers, in Hayek’s time, are so wedded to their analysis that they aren’t facing the facts that socialism don’t work. Even though it
might be a good thing in itself, they weren’t facing the fact that it
doesn’t work, and it will lead to totalitarianism like the Nazis.
1. According to Hayek, the key impersonal mechanism for transmitting economic information among individuals and thereby coordinating their economic activity is the price system.
2. Which of the following arguments does Hayek use against planning? There is no complete ethical code for all men; within limits, individuals should be allowed to flow their own values; no one person can comprehend the many different needs of different people.
3. According to Hayek, democracy is increasingly seen as inadequate because: it has set itself the impossible goal of central planning, which it cannot fulfill in areas where there is deep disagreement.
∙ Hayek anticipates what is going on in the U.S. today because 80 years ago it was going on in England. He says socialism, gets used in lots of different ways, there is a difference between the ends and the means. He will object to some of the ends and all of the means.
∙ He said when some people talk about socialism they are just talking about social justice, greater equality, and security for the individuals in society. ∙ Socialism tends to refer to certain means.
o Socialism on the Russian (Soviet) model, there is no private own
business everything will be own by the state. They will not own
money that is capital.
∙ The wealth is dedicated to making new wealth that’s what we call capitalism. You get to make a choice of how much you use to live off of and how much you use to invest to make more money.
∙ Capital is wealth or money used for the making off your own. Like you have to own your own land in order to make crops.
∙ Real ownership is making your own decisions.
∙ Hayek’s option: Regime of central planning is socialist idea: even if there is some difference of who has title to the factory: real ownership is deciding what you want to produce, whom you want to hire, where your wat to sell it etc.
∙ Model of central planning
∙ Model of free planning
o What can you sell that is going to bring in customers?
∙ Entrepreneurship how to sell things cheaper, or customer service. Small business looks for opportunities elsewhere better quality, better customer service; not necessarily cheaper.
∙ Everyone of us plan our economic future, every company has a business plan, and that is what it should be but if there is some central planning then it will suppress more planning. Because, you can have a plan for your future and if the state as a different plan for you involving other people you will not get a achieve what you want. If there isn’t central planning, then there is a lot more
room to develop. You make plan on the basis on what you have and what you need.
o Central planning is when the state plans everything for everyone. You are left with the choices that someone in the state think you should
have. The market is open, the alternate to central planning is when
crisis is not fixed but it is flexible. people are free to choose whatever
they want to do in the market. So, you can always change jobs. And
you figure out which way you are going live.
o The secret of a free market is an extension of individual liberty is
when the individual gets to make choices for themselves.
o There is plenty that modern society has comes from a result of that
individuals made to improve their own lives.
o He knows that there must be a legal system that stands behind the
market place. People make a contract to work you do the work you get
your pay, if you work and don’t get pay you go to work and get your
o The key to plenty is the key to both freedom and plenty come together. III. The Price System
∙ Prices convey a lot of information easily.
∙ Information about the availability of the product or the scarcity of the product. When something is scarce somebody who want to get rich some way will go look for a different way to give society. The price carries of available or
scarce something is. Ex: oil will go up until someone found a way on how to do things better or a new oil.
∙ No planner would know how much to produce. If you let people buy and sell freely the prices would solve itself because people would buy what they can afford, and producers would produce as much as they can.
IV. Individual Autonomy
∙ No universal system of values that can that can come down to all people about how live. The aptitude test is an example of social planning. You should know yourself and your talents, but it cannot get to the level of value.
∙ Planned economy makes constrained choices.
∙ Free economy gives a wideopen choice.
V. Democracy and Capitalism (continue tomorrow)
1. What Hayek call the great liberal principle of the Rule of Law ensures, he argues, that individuals can foresee how authority will use coercive power and thus can make their own plans
2. Which of the following does Hayek NOT say? No case can be made for reducing inequalities of opportunity that result from inherited property.
3. The most important guaranty of freedom is the system of private property.
I. Democracy and Capitalism
∙ There are critics of democracy, it is increasingly being seen as a problem. It is said that it is not working.
o Why is democracy not working? Because it is trying to do the impossible, centrally plan the economy. It is not that democracy doesn’t work when it is trying to do what it is supposed to do, but from Hayek’s point of view, democracy isn’t going to work if it is trying to something that no
government can rightly do and that is centrally planning the economy. o Hayek ask, “Why the government can’t do that?” Part of it has to do with these 2 questions:
What it means to plan?
The illogic of trying to make a central plan for the economy of all
Ex: if a group of people want to go on a trip and you don’t know
where to go; somebody has to decide where to go, if you are
going spend money and you don’t want to go.
∙ You want to know whether the government should plan the economy, if the things you like to do will be part of the economy; would you will like to live where you want to live or is someone else going to tell you where to live? Ex: the people that are really good with computers and central
plan want to grow that part of the economy, but the people in
other departments (ie. theater) the central plan would be that all
the resources are going to digital. The entertainment industry
would go down, because the plan does not account for them.
∙ The plan economy would be one set of programing for the night.
∙ Democracy is supposed to be freedom for the majority in the whole. (Trinidad election).
∙ What would happen if the government decide what we had to watch? Ex: Broadcast TV was that you turn on the TVs and you have
one channel the government give you it was FREE.
o Hayek says the difference is possibilities between different economies. His question is how the parties would find out these economic
questions? The parties are going to be polarized if the government
plays a big role in financing the economy, if the government is doing
anything more than just laying out the rules of economic competition
and providing some avenue for competition, that is when you are
going to see polarization.
∙ Whether there is social effect of market decisions then it is fair that the government can get involved.
II. Rule of Law there is no central government planning agency.
∙ Society has basic rules/laws that apply impartially.
o So, if society has a rule (Ex: the government can collect tax and the government can decide to withhold a little bit from everyone pay
check) that rule is a legit rule (according to Hayek) but it must be
applied to everyone.
o He says to set up rules that leads people choices.
Ex: The government builds roads supplies roads for where
people want to drive. The problem is if the government weren’t
putting in road but only railroads there are only a few stations
with railroads so your options are limited to where you are going.
o Hayek favors an economy where everyone is making their own
decisions on where they want to drive, work you own hours.
Public transportation is when everyone is moving the same
∙ He thinks government should not be playing a role on what … the free trade system is one where the government is not involved in the society is not an important play on the economy. Government decides on the basic rules on where the roads will be put down and it is put down so you can plan.
o If government stays out of it, it will be an easy prediction. When you can’t predict you invest less money into it.
Ex: games are played by playing around the rules that are
already made for the game.
∙ The government realized that business was moving their companies abroad so they wouldn’t have to pay their cooperate tax. That tax rate was lowered generally so people would keep or bring back their companies home. This would qualify of something where both parties will agree too because the tax was too high. What wouldn’t work is if the government is favoring companies or the West Coast to the East is choices that should not be made.
∙ Freedom of economy would work if people are doing a harm but paying a price for it, if both things are working the freedom of economy will work also. o When a manufacture makes a new product, but then they will be liable for the damage that the product could have done. The business person would figure out how much of risk is worth taking.
Ford make a cheap car where if someone ram into the back of
the car it would explode.
∙ The market isn’t working if there is no liability of that damages.
o When the banks made risky instruments in 2008 and various bankers made a lot of profit from the instruments and the whole economy went down but the government bailed them out and if they didn’t, we would have a better regulation of banking.
∙ Hayek wouldn’t think now the we would have to get rid of free market economy because he doesn’t know about the climate change issue. E would say that the environment is in a much better time that it was in the past. Also, when new cities start to submerge they tend to put out a lot of pollution into the atmosphere and eventually it solves itself out.
o If the effect is so much that it affects everywhere then there would have to be some large solution.
III. Economizing and Freedom
∙ The only time the market works is when people get the benefits of market place of what they bring, but they have to pay the consequences of what they do that isn’t any harm that they cause. Reaping the benefits, people readily take from the market, but paying for the harm the government deals with that.
∙ Economize the simple matter that you want to buy something cheaper and sell it at a higher price you are always calculating what you can afford or how much you have to work.
∙ Economic liberty provides liberty for the individual.
IV. Class and Equality. (continue on Monday)