Hayek on Power

Note: This morning, I gave my annual guest lecture to an economics class at the Naval Postgraduate School on “How Economists Helped End the Draft.” It was a blast. The students were all decked out in their military uniforms (Tuesday is uniform day). They were all Americans. I miss teaching there.

I’ve been watching my lectures that I did last February for the Peterson Academy. I just finished the 5^th of 10 and so far, I’m pleased. I hardly ever say “uh” and I present the content clearly and with some energy and personality.

The fourth lecture is devoted to 3 Austrian economists: Ludwig von Mises, Friedrich Hayek, and Israel Kirzner.

After going through Hayek’s brilliant essay titled “The Use of Knowledge in Society,” I turned briefly to his 1944 book, The Road to Serfdom. I highlighted his discussion of power.

I noted Hayek’s statement that the government’s power “is a power which is newly created and which in a competitive society nobody possesses.” This is one of his most important insights and it’s often lost sight of, even by some libertarians. When government takes over, it’s not simply a redistribution of existing power. It’s a creation of power where it had not existed.

Hayek makes another important point. The power a multimillionaire “who may be my neighbor and perhaps my employer” has over him “is very much less than that which the smallest fonctionnaire possesses who wields the coercive power of the state and on whose discretion it depends whether and how I am to be allowed to live or to work.”

I think of a case where I needed to cut a branch that was threatening my power line. The PG&E official told me that he couldn’t do it legally and that I would have to get permission from the Pacific Grove government if the branch was 4 inches in diameter or more. Eyeballing it from the ground, I estimated that it was 4 inches plus or minus 0.5 inch and decided to take the chance. On the Saturday of the Labor Day weekend, I went to an Orchard Supply hardware store in nearby Sand City to buy a saw. Why Sand City rather than Pacific Grove? Because then, if I had broken the law, no one would recognize me. I was relatively well known in Pacific Grove since I had coached girls’ basketball for many years, and the PG hardware store that I would have gone to was right across from City Hall.

Then, at 6:00 a.m. on Labor Day, I went outside and started sawing. I couldn’t quite get all the way through, but I couldn’t leave it. It might fall later on a kid going to school. So I persisted and finally it came crashing down. I took out my handy measuring tape and found that it was 3 and ¾ inches in diameter. Whew! What a relief!

Do you see how crazy the original set up was? Depending on some unknown bureaucrat who had more power over me than a major hardware store had?

And here’s a great quote from Hayek:

“[W]hoever controls all economic activity controls the means for all our ends and must therefore decide which are to be satisfied and which not.”

My late friend Roy Childs, in making Hayek’s point in talks, said it this way, with only some exaggeration: “When resources are allocated by government, political power becomes the only power worth having.”

And finally:

Hayek quotes the late University of Chicago economist Frank Knight’s memorable statement that “the probability of the people in power being individuals who would dislike the possession and exercise of power is on a level with the probability that an extremely tender-hearted person would get the job of whipping-master in a slave plantation.”

By the way, the Peterson Academy has a sale on right now. Hint, hint.