Remembering Why Hayek Mattered

tugwellThere’s nothing like reading Rex Tugwell to remind you why Friedrich Hayek won the Nobel Prize in Economics.

Rexford Guy Tugwell was an incredibly important figure in the New Deal era. A Columbia University agriculture economist, Tugwell was comfortably interdisciplinary and at home as a public intellectual. He was a prominent member of Franklin D. Roosevelt’s informal “brain trust” of advisors and became the chief architect of the Agriculture Adjustment Administration (which managed all of America’s agricultural production in accord with federal quotas) and the Resettlement Administration (which relocated unemployed rural workers to newly constructed suburban towns), both of which were struck down by the federal courts. He spent the postwar years lobbying for the creation of a world government and the replacement for the U.S. Constitution with a more up-to-date plan and writing memoirs (to which the Columbia faculty awarded the prestigious Bancroft Prize).

And Tugwell was very much a man of his time. Like many others in the 1930s, he looked at the developments of the previous few decades and saw the singularity approaching. For current technologists, the singularity will arrive with artificial intelligence and nanotechnology, transforming society and humans themselves in a world beyond scarcity. For the technocrats of the first decades of the twentieth century, the world was being transformed by corporations, mechanization, and scientific management. Frederick Taylor’s time management, Tugwell was convinced, laid the basis for profound increases in economic efficiency. Mechanization had lowered the time and cost of producing goods to a point where the only real economic problem was how to manage the surplus. Massive corporations had detached the profit motive from economic activity. Thorstein Veblen had concluded that the only work left for the “captains of industry” was the artificial manipulation of supply and demand; the engineers and technicians, by contrast, cared only about producing needed goods in an efficient manner. Businessmen worried about price and profit. The actual workers, guided by the technicians, cared only about serving the needs of the public.

Tugwell drew what he thought was the obvious conclusion – the Soviet Union was on the right track. The surprise was not that the Soviet system worked without prices and competition. The surprise was that the “anachronistic” system of decentralized competition and profitmaking “could operate at all” at this late stage of human development. Most liberals, he thought, could now see the promise held by “the institutions of the new Russia of the Soviets,” but few in 1932 yet appreciated what was required. “If we are to plan,” the nation would need “fundamental changes of attitude, new disciplines, revised legal structures, [and] unaccustomed limitations on activity.” It would mean the literal “abolition of ‘business.’”

As a practical matter, the corporations were already run by planners, who insured that rubber found its way to the tire plants which in turn fed the automobile assembly lines which sent finished cars out into the countryside. It was but a short, but significant, step to displace the stockholders, the financiers and entrepreneurs – in sum, the irrational “speculators” and “adventurers” – and to knit all the corporate planners together into a national government bureaucracy. Businessmen “have only a rudimentary conception of industry as a social function”; their spirit was one of “vast gambling operations.” The “disciplined aspects of production” had nothing to do with businessmen. That was properly the realm of civil servants “devoted to disinterested thinking” and “a planned public interest.” Rather than emerging and competing willy-nilly, new industries “will have to be foreseen, to be argued for, to seem probably desirable features of the whole economy before they can be entered upon.”

The “future is becoming visible in Russia,” but the “vested interests” were getting in the way. Tugwell could see how things would play out, but we should not expect the necessary changes to be adopted “all at once.” “Little by little, however, we may be driven the whole length of this road.” The destination: “Civilized industry” and a “new world.”

It was this vision – the vision that informed the First New Deal of FDR’s initial term of office – that made Hayek so crucial. For a popular audience, Hayek pointed out that Tugwell’s road led to serfdom, not civilization. For a more specialized audience, Hayek demonstrated that the price system was crucial to the efficient production and distribution of goods. When the bloom was still on the Soviet rose, economic crisis seemed to call into question “the ancient paradox of business – conflict to produce order,” and the presidential brain trust was convinced that the prices and profits should be replaced by bureaucratic planning, cogent analysis was desperately need to explain why market economies (what Tugwell dismissed as “laissez faire”) were valuable and how spontaneous order was possible. Hayek was not alone in responding to figures like Tugwell, but reading Tugwell and Hayek together is a useful reminder of how smart people can head off in the wrong direction and how the evident virtues of technicians can be misconstrued. And why Hayek was not just a propagandist for the rich.

Keith E. Whittington is the William Nelson Cromwell Professor of Politics at Princeton University and is the author of Constitutional Interpretation: Textual Meaning, Original Intent, and Judicial Review (Kansas, 1999) and Political Foundations of Judicial Supremacy: The Presidency, the Supreme Court, and Constitutional Leadership in U.S. History (Princeton, 2007). He is the co-author (with Howard Gillman and Mark Graber) of American Constitutionalism (Oxford, 2013).

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Comments

  1. Eddie Butters says

    Some time should have been spent by the author editing his last paragraph in an otherwise fairly well written and eminently informative reminder of “how smart people can (indeed) head off in the wrong direction”.

  2. gabe says

    Nice essay!
    It would be perfect if we were to make one slight edit:

    “a useful reminder of how {smart} “ideologically influenced” people can head off in the wrong direction and how the evident virtues of technicians can be misconstrued.”

    Being that dumb and obtuse when evidence to the contrary was apparent can not be smart!
    After all, look at what the “smartest” diplomats, healthcare experts and financial planners of today’s regime has wrought.
    Not too smart to this ole boy!!!

    • says

      Perhaps the issue is not really one of the presence or absence of smarts. Perhaps it is more a matter of a psychological quirk that begins with a misperception and ends in hubris and disaster. I would suggest that such a quirk is the belief that what is desirable is universally objective (e.g. all normal people want “equality”) and that realization of these desires is prevented by a few misguided or unsavory beliefs, propagated by people of low character.

      The idea that serious problems are due to one or two easily identifiable causes is common in human affairs, affecting a vast spectrum of human endeavor. It is quite common in healthcare, in which people think that this vitamin or that supplement will prevent cancer, or that a new pill will make simply erase the effects of age and disease with no chance of undesirable side effects. Dreamers likewise think racial discord would disappear “if only…” and that systemic problems of poverty, violence and human misery require a simple epiphany, in which the masses recognize their irrational prejudices and submit to the wisdom of the anointed. Just as many people believe that illness is the result of a single pathogen or dietary deficiency, so too do others believe that social, political and economic problems are the result of a few prejudices or venal interests.

      In fact, disease is an inescapable and permanent consequence of biological complexity and the ability to adapt. The same is true with social, political and economic problems. (As an aside, Chesterton referred to the “medical mistake” in which he argued that political problems were not analogous to medical ones because, while there is little controversy as to what constitutes health, there is no consensus as to what is a desirable society.) Our present government seems in thrall to this fallacious and ultimately futile model. It thinks that grievances in foreign affairs will yield to smart diplomats pointing out the “unhelpful” attitudes of belligerents; it thinks that “glitches” in the health care system can be fixed by enlightened tweaks–an exception here, an accommodation there, a delay now and then; that people that oppose the progressive agenda because of its infringements on liberty need to realize that such opposition is based on selfishness and foolish romances of individuality; and mostly, that people oppose the expansion of government because they are just too ignorant to realize just how wonderful big government is . Some, not all, big government proponents are like the patient who believes that the medicine they are taking can’t possibly have any adverse effects, because it makes them feel good for a while; or the heroin junkie who doesn’t care about the adverse effects because he needs to feel better now.

      Here is the basic fact that our current government and its academic and media sycophants ignore: just as medical science will never vanquish all disease (it has in fact created some diseases, like nephrogenic systemic fibrosis) there are some, very many in fact, problems that are beyond the ability of big government to fix, but for which big government can do unconscionable damage in the effort. Social, and economic problems are much less likely to result from a lack of smart, well-meaning people to solve them as they are to result from too many people who are not as smart as they think they are.

  3. gabe says

    Z:
    Another great post!

    1) “(As an aside, Chesterton referred to the “medical mistake” in which he argued that political problems were not analogous to medical ones because, while there is little controversy as to what constitutes health, there is no consensus as to what is a desirable society”
    2) ” Social, and economic problems are much less likely to result from a lack of smart, well-meaning people to solve them as they are to result from too many people who are not as smart as they think they are.”

    seems like #1 and #2 are reflective of the same problem. At least an honest doctor will refer to his calling as the “medical arts” – one wishes that Progressives (and yes some conservatives) would be so forthcoming.

    You are correct, it ain’t about smarts but rather the assumption of “smarts.”

    take care
    gabe

  4. Kevin R. Hardwick says

    I guess we have to specify which book by Hayek we are talking about. The Road to Serfdom, which is what most readers today remember Hayek for writing, was written in England for an English audience, and can be construed as a response to Tugwell only indirectly. So when Professor Whittington writes that for Hayek Tugwell’s path leads to serfdom, he is not wrong, but he is misleading, since for most readers the connection is to a book that was not written for an American audience, was not written in engagement with American arguments, nor written as a response to or analysis of developments in America. The book certainly can be read profitably by American audiences, and read to speak to American arguments, and read to inform analysis of American developments. But to do that is to remove the book from the original context within which it was written.

    • gabe says

      Kevin:

      All of this is true – but would you not also say that it does in fact address the policy preferences of Tugwell in addition to the suspect policy preferences of the British left?

      although I take it that you are approving of Hayek. I have enjoyed everything of his that I have read and think that he speaks quite adequately to the deficiencies of the left’s economic policy prescriptions (perhaps, I should say “proscriptions).

      (Again thanks for Original compromise – “I’m luvin it” as ronnie MacDonald says).

      take care
      gabe

      • Kevin R. Hardwick says

        Gabe,

        As I read Hayek, in Road to Serfdom he is concerned to intervene in an argument among British intellectuals concerning the nature of fascism, and its relationship to communism. Tugwell, for all of his flaws, did not have a dog in that fight.

        It’s been a while since I last read it, so I am perhaps mistaken. But my recollection is pretty strong that the primary argument has to do with the origins of fascism as a species of totalitarianism and central planning, and that the arguments for which we remember him today are subordinate to his original audience and purpose in writing.

        I do not think there is anything wrong in reading a book for purposes other than the author originally wrote, and of course the book rapidly acquired popularity in the US when U Chicago published it in 1944. Americans read the book from the start to bolster criticism of the New Deal. But still, that’s not what Hayek thought he was doing when he wrote the book, and to my eye, if we care about close textual reading, that matters.

        • gabe says

          Kevin:

          Fair enough. One should give some respect to the intent of an author and what he perceived to be the object in mind at the time of writing.
          ” Tugwell, for all of his flaws, did not have a dog in that fight.”
          Yet, history seems to make either fools or geniuses of many an actor (not your or I of course). It appears that the good Mr Tugwell did indeed have a dog in that fight as evidence revealed in the Venona Papers and other documents released since post-Soviet Russia have revealed.
          In this case perhaps Hayek has been revealed by history rather than by himself to be more perceptive and on point than intended.

          take care
          gabe

          • Kevin R. Hardwick says

            Gabe,

            You misunderstand me (I think, anyway). Various leftists in Britain in 1942 and 1943 argued that fascism was best understood as a natural evolution of capitalism. Hayek wrote the Road to Serfdom in order to argue that Fascism should properly be understood as being a natural outgrowth of socialism. Tugwell was not involved in this argument one way or another. He had no dog in the argument over how best to understand the origins of fascism.

            In the course of making his argument about how best to understand the origins of fascism, Hayek articulated with real elegance why centrally planned economies are anti-liberal. Those are the arguments for which we read him today.

  5. R Richard Schweitzer says

    Why Hayek mattered:

    Better yet, why Hayek *matters*:

    Hayek’s scholarship and articulation has emphasized the difficulties of “planning” that arise from the dysfunctions of adequate information, its distributions, and its interpretations.

    Management requires planning. “Managed” government requires planning. Tugwell, and all the others of that circle (including the famous junketeer’s to the USSR) were firm advocates of government by a managerial class, providing the planning necessary for a managed government; basically a Gosplan for the United States.

    Of course, the kind of planning envisaged (and still envisaged to this day) requires the imposition of conditions and determinations of relationships; to which Hayek addressed his initial analysis of potential results in “The Road to Serfdom.”

    But more importantly, as we observe the growth and reach of the federal Administrative State, which requires management, and the increasing trends toward government by objectives, as an “enterprise organization,” conducted by a “managerial class,” we might well profit by reviewing what proved to be false and disastrous in the perceptions of that group of which Tugwell was a member.

    A popular encapsulation of that group, it’s formation, planning inculcations, activities and failures (some destructive) can be found in Amity Shlaes’s “The Forgotten Man.”

    No one has yet disproved Hayek’s basic thesis of the dispersion of information, the dynamics within the social orders, and the factors of individual and group motivations which make attempts at planning, not only dysfunctional, but potentially disastrous.

    Nonetheless, here in the United States the trend is toward a managerial state. The trend may break due to a fragmentation or “overload” of the constitutionally delineated mechanisms of government (fiscal initially, others to follow).

    • Kevin R. Hardwick says

      Richard,

      This is all true. But in the context of 1932 and 1933, it was not completely crazy to advocate for central planning. Misguided, in retrospect, but not crazy. That’s an easy call for us to make, hindsight being 20/20. But much less obvious at the time.

      There have been two moments in US history, both blessedly brief, in which the US has been a genuine and thorough going centrally planned economy. One of these periods was 1917-1919, prior to the new deal. The other was 1941-1945, after. In both cases the US government directly planned and managed entire fundamental sectors of the economy–transportation, manufacturing, agriculture. Both of them were extremely effective, given the purposes for which the government assumed these powers. Both times, the government assumed these powers utilizing the war powers of the US executive.

      In 1932, in his Commonwealth Club address, Roosevelt signaled his intent, if elected, to treat the emergency of the depression as an emergency akin to war, and to request war powers as if the country were at war to do whatever was necessary. The model was directly and explicitly that of the First World War.

      There is no question that FDR shared the broader progressive faith in managerial planning. He made that clear, among other places, in the same speech. But given the extraordinary success of government economic planning in WWI, and given the depth of the emergency in 1932, the thought that planning might provide the answer was not some act of malevolent inspiration. It was rather obvious, as indeed was evident given how many others, including many who by no stretch of the imagination can be construed as socialists or communists, arrived at precisely the same conclusion.

      As an aside, FDR initiated what has ever since been a basic rhetorical move for American executives. Anytime they want to expand federal government authority over some new facet of American public life, they declare war on it. For that, we can thank FDR.

      • R Richard Schweitzer says

        Kevin,

        While the **motivations** for the floundering attempts at “planning,” which actually began somewhat before 1932, but became extreme from 1933 – 1939, may not have been “crazy,” the attempts themselves and the types of “planning” produced certainly were. The residues (marketing authorities, milk boards, e.g.) still with us certainly are.

        The important thing is that we shall have learned that, regardless of motivations, “planning” is fraught with inherent dysfunctions and potential for disasters.

        Of course, looking back at the Wilsonian ideology, the entire purpose of taking the United States into the European war was to establish the concept of the federal government as “The State,” a body of authority to achieve objectives through centralized planning and direction.

        However, the view that the “planning” for the objectives of war, beginning in 1940 (selective service, e.g.) was “governmental” is a bit narrow. The actual managerial functions occurred in, from, and by the industrial complex; and the management of credit and currency, while responsive to the political, was commercially (the banking system) managed.

        As posted elsewhere, we are today back with the same type of major global issues as in 1933, principally large-scale unemployment affecting masses of people and their social organizations. Once again, globally and domestically, “management” (regulations, programs, etc.) is being brought forward as a response; and the history of its dysfunctions (and the reasons for them) need to be revived and reviewed.

        Despite popular misconception, the alternative has never been between capitalism (which is a condition resulting from specific forms of human interactions – such as markets) and socialism as a system for the control and determination of production and distribution of goods and services.

        The alternatives have always been (particularly upon examination of installations of “National Socialism”and the Russian experiment) between “managed society”- with its required managerial impositions of conditions and determinations of relationships – and Capitalism, which results from the freedom of human interactions in seeking individual and group interests and separately determining the nature of their relationships.

        • Kevin R. Hardwick says

          Richard,

          You write: “Of course, looking back at the Wilsonian ideology, the entire purpose of taking the United States into the European war was to establish the concept of the federal government as “The State,” a body of authority to achieve objectives through centralized planning and direction.”

          I have relied on George Herrings volume in the Oxford History of the US, From Colony to Superpower: US Foreign Relations Since 1776, for my understanding of the process by which the US entered WW I. According to Herring, the primary cause of US entry into the war was the long standing US policy of acting to defend neutral carrying rights.

          Can you clarify how to reconcile your understanding with that of Herring (who I think I can reasonably state represents the conventional consensus understanding of the event among historians of US diplomacy)? Conventional wisdom is not always correct. What am I missing?

          Thanks . . .
          Kevin

  6. gabe says

    Kevin:

    there is a good deal of truth in what you say.
    ” In both cases the US government directly planned and managed entire fundamental sectors of the economy–transportation, manufacturing, agriculture. Both of them were extremely effective, given the purposes for which the government assumed these powers.”

    FDR and his “planners did attempt to manage the economy. However, after experiencing significant shortfalls in output as well as a lack of personnel, many industries were able to convince the Feds that they would be best left alone. consequently, much of the tethers were taken off industry and they were then free to plan as they saw fit. Was this typical market based planning – No!; but it was also quite clearly not “planning” in the sense or the detail that the Feds had wanted.
    This would include such things as profit levels, resource allocation (which was a disaster for the Feds and only improved when industry was free to control this). Funny, we have a major debate regarding healthcare today. It had its origins in wartime wage and price controls – in order to attract workers under the Feds wage controls, companies began to provide health insurance to workers to get around wage limits. I could add a few more but……
    I think in many ways, it is fair to say the the WWII effort was successful in spite of government intervention – yet we did win, there is that?

    As to your earlier point regarding Hayek and his response to British socialism / fascism, I see the error of my thinking.

    take care
    gabe

  7. johnt says

    Politics offers the egotist a venue for his schemes, the intrusion of his frustrated desires for control. It follows and is an extension of these lusts that the State is the agent of dominance that he craves. Whether it works or not is really beside the point, failure never deters the statist, it causes no second thoughts because success and growth never matter.
    We are going through something like this right now, stumbling incompetence, massive spending, and the growing monolith in Washington. Results, they’re secondary.

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