When surveying the vast wreckage of the 2008 financial crisis, many classical liberals worry that the most profound damage done was to the rule of law in America. Though it is difficult to pin down the concept with great precision, the core of the rule of law is simple: we have a government of laws, not men. Our officials must follow rules that have been publicly and clearly set forth in advance rather than acting on their own caprice, and they are not welcome to simply make up rules as they go along and declare their conduct lawful in retrospect. Without adherence to this precept, government’s actions can have no basis for legitimacy.
If we closely scrutinize what the Treasury Department, Federal Reserve, and other agencies of the federal government did in response to the recent financial crisis, there is no avoiding that they made a mockery of the rule of law. Indeed, as Lawrence H. White puts it, “The approach of Federal Reserve and Treasury officials during this crisis, unfortunately, has been to consider every possible remedy but applying the rule of law.”
Friedrich Hayek, born into a noble family in Austria, lived a fascinating life. Educated in Austria, he moved to the London School of Economics in 1931. In 1950, he accepted a position at the University of Chicago on the Committee on Social Thought (after the free market economics department refused to extend an offer to the future Nobel Laureate). And then in 1962, he returned to Europe, first in Freiburg and then in Salzburg.
But in 1923, in the middle of the hyperinflation in Germany and Austria, Hayek travelled to New York City to work with a NYU economics professor. But when the professor left to write a book, Hayek was on his own and struggled for resources. Over at Austrian Information, they have excerpts from Hayek’s letters that he sent home during his stay in New York. They are fascinating, especially given their European cultural criticism of capitalist New York from this free market thinker. For example:
Questioning the effectiveness of the Center for Disease Control and Prevention has become the national pastime ever since two nurses in Dallas became infected with Ebola after following CDC protocols. Yet, one overriding fact rarely sees the light of day: CDC does not deliver medical care, none at all, and rarely ever sees or touches it. It is a data collection and analysis agency that makes recommendations to those who actually live with and treat the diseases.
CDCs legitimacy comes from its claimed abstract scientific expertise. President Barack Obama defended CDCs recommendation against state quarantine efforts to control the disease by insisting “We don’t just react based on our fears. We react based on facts and judgment and making smart decisions.” We rely on the “best science.”
I am presently reading this biography of Friedrich Hayek by Alan Ebenstein. The book is not an intellectual biography, but more focused on the events of Hayek’s life – which is where I have biggest gaps in my knowledge of Hayek. One interesting aspect of Hayek’s early years, that I had not known, is that he was a poor student. Ebenstein writes: He showed little interest in any subject except biology. Once, at age fourteen, having failed Latin, Greek, and mathematics, he was required to repeat a grade. . . . He would generally “swot up in a few weeks before the…
In a series of decisions on campaign finance legislation, the Roberts Court has made it clear that Congress cannot solve the enduring political issues of undue or unequal influence in politics by restricting speech. Now that legislatures are aware this option is no longer on the table, they are under more pressure to find other solutions. Importantly, Congress could constrain undue influence by legislating through rules of general applicability.
Under a regime of generality, Congress would disable itself from handing out money, lucrative projects, or regulatory relief to designated individuals or small groups. Such strictures would make corruption less likely and indeed eliminate the kind of influence which seems most undue. Decisions that that can be framed in terms of general rules are more likely to be aimed at the public good than at the provision of favors.
In fact, Congress recently moved toward legislating through general rules by eliminating earmarks.
Judge Stephen Williams has provided an excellent description of some of the Hayekian advantages of international competition. Here I discus how sound legal policy can protect and intensify such competition. First, I want to suggest a few more points about the virtues of international competition.
1. Military Competition. As war has demanded ever better financing and technology, the connection between the flourishing of a nation’s citizens and its success in war has increased. Great Britain beat the continental powers in the eighteenth and nineteenth centuries in no small measure because her limited and democratic government gave lenders confidence that they would be repaid. As a result of the greater capacity to borrow Britain was able to muster greater military force in a crisis.
Today technological progress and military might are ever more connected: the robots conceived today will be the soldiers of tomorrow. The United States’ technological superiority is intimately connected to its open society and an educational system that favors creativity over rote learning. Authoritarian nations are at some disadvantage in replicating the decentralized structures that promote rapid technological progress.
This advantage for the West and the United States should make us wary of entering into agreements to limit the deployment of technologically advanced weapons like drones.
2. Competition from In-Migration of Firms and Individuals. The capacity of the United States to attract immigrants shows the relative power of its social norms. Indeed, its growth from a relatively small nation of a few million people at the founding to the third most populous nation of the world is the most persuasive evidence of its greatness.
My colleague at the University of San Diego, Matt Zwolinski, has done some great work on libertarianism. He is the founder of the Bleeding Heart Libertarian Blog and has been doing work on drawing out what might be termed left wing conclusions from liberarianism. Back in the day, when I used to work on libertarian theory, I was very interested in this side of things, often wondering whether unjust actions by the government might justify transfers to the poor. Matt recently wrote a piece seeking to explore the justifications of a guaranteed minimum income, and now he has written a follow…
Over at Crooked Timber, Corey Robin has been criticizing Friedrich Hayek for supporting Chilean dictator Augusto Pinochet. I don’t know much about the Hayek-Pinochet connection, nor to be honest have I read all the way through Robin’s various posts on the subject. Some significant libertarians, such as Mario Rizzo, have criticized Hayek for his mistake in this connection.
But a review of Robin’s description of Hayek’s academic writing on the subject of emergencies does not provide much credibility to Robin. He writes:
Hayek complied with the dictator’s request. He had his secretary send a draft of what eventually became chapter 17—“A Model Constitution”—of the third volume of Law, Legislation and Liberty. That chapter includes a section on “Emergency Powers,” which defends temporary dictatorships when “the long-run preservation” of a free society is threatened. “Long run” is an elastic phrase, and by free society Hayek doesn’t mean liberal democracy. He has something more particular and peculiar in mind: “that the coercive powers of government are restricted to the enforcement of universal rules of just conduct, and cannot be used for the achievement of particular purposes.” That last phrase is doing a lot of the work here: Hayek believed, for example, that the effort to secure a specific distribution of wealth constituted the pursuit of a particular purpose. So the threats to a free society might not simply come from international or civil war. Nor must they be imminent. As other parts of the text make clear, those threats could just as likely come from creeping social democracy at home. If the visions of Gunnar Myrdal and John Kenneth Galbraith were realized, Hayek writes, it would produce “a wholly rigid economic structure which…only the force of some dictatorial power could break.”
Perhaps Robin has quite a bit more support for his conclusions elsewhere, but the evidence he is presenting here is weak and misleading.
In the section on Emergency Powers in Chapter 17, Hayek makes clear that the legislature should control the granting of emergency powers and should retain the power to restrict or eliminate them at any time. So the emergency powers are to be controlled by legislature, not by the executive.
This past Friday was the 20th anniversary of the death of Friedrich Hayek. I can still remember the moment I learned of Hayek’s death, which occurred in my first of teaching. Hayek is by far the most important intellectual influence on me. When I became persuaded of libertarian or classical liberal ideas, I read widely in the libertarian canon. While I was greatly influenced by Friedman, Nozick, Mises, and Rand, it was Hayek whose academic work inspired me most to undertake the decision to spend a lifetime learning about such matters. The first book I read by Hayek, The Constitution of…