Hayek's Fatal Conceit

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I have written extensively on Hayek, see here and here. As they seem to corroberate my findings, I found the below excerpts and the article, from which they were taken, very interesting.

As an evolutionist critiquing the field of economics, I felt like a disciplinary outsider until I encountered the work of Friedrich Hayek. The Austrian economist was himself critical of Walrasian general equilibrium theory and proposed a radical alternative: Economic systems are a form of distributed intelligence that evolved by cultural group selection. They work without having been designed by anyone.

That was my area of expertise. I had to admire Hayek as a pioneer, especially since group selection was a heresy and the study of human cultural evolution was in its infancy when he wrote. Nevertheless, both topics have advanced by leaps and bounds since then and do not support his view that economic systems work best in the absence of regulations. Instead, cultural group selection theory points to a middle road between laissez faire and centralized planning that is rich with possibilities.

Some neat insights from this article:

Hayek's ignorance of the mixed nature of the economy in a free society

Hayek advocated the market not on grounds of optimality, but by default. The alternative, central planning, could not work, and moreover any substantial degree of government intervention in the economy, he feared, was bound to be a threat to liberal values. Remember, when he wrote Road to Serfdom, he was not thinking about Nordic social democracy, he was writing under the shadow of Hitler and Stalin.

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Hayek fails to see: spontaneous order is not confined to the economy, but shapes political outcomes and is affected by politics

What distinguished Hayek was his claim that evolutionary reasoning demonstrated the superiority of substantially unregulated markets.

But this exercise in social Darwinism at the system level need not run along the lines that Hayek chose. Another great conservative thinker, Talcott Parsons, in 1964, had advanced the idea that among ways of organizing society there are “evolutionary universals,” that is, systems that emerge frequently in a variety of environments and persist over long periods once “hit upon” by a population. These are societal analogues to complex biological characteristics such as vision, which are such good ideas that they evolve independently in many species, and are [...] seldom abandoned as a result of evolutionary processes.

Parson’s list of the ‘evolutionary universals’ includes markets and money but it also includes “authority of office…backed by coercive force” as “the most effective large scale administrative organization that man has invented, and there is no direct substitute for it.” For Parsons, states as well as markets, pass the test of evolutionary success.

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Hayek does not appreciate that economic activity is political by nature, and hence markets do not offer an alternative to politics

... Hayek stressed: information is scarce, and what one person knows another does not. A result of this situation – called ‘asymmetric information’ – is that it is impossible to write an enforceable contract to cover all of the aspects of the exchange that matter to someone affected. Perhaps surprisingly, what seems a detail – the contract is incomplete – turns the standard economic model on its head.