Friedrich Hayek was one of the greatest Austrian economists of the twentieth century, and Murray Rothbard thought very highly of his work, especially his development of the Austrian theory of the business cycle. In addition, as I can testify from my own experience as his student, he was a great philosopher of the social sciences. Unfortunately, he did not completely support the free market. He favored a number of welfare state measures, such as social security and the government provision of so-called “public goods.”
This led Rothbard to criticize him. He was asked by the Volker Fund to comment on Hayek’s The Constitution of Liberty, and he recommended against its publication. One issue that especially troubled him was that opponents of the free market would say, “Even Hayek recognizes that we need social security, etc.” This has proved to be the case. In a memo to the Fund dated January 21, 1958, Rothbard said:
This then, is the face that F.A. Hayek will present to the world in his Constitution of Liberty. It is a face such that, if I were a young man first getting interested in political questions, and I should read this as the best product of the “extreme Right,” I would become a roaring leftist in no time, and so I believe would almost anyone. That is why I consider this such a dangerous book and why I believe that right-wingers should attack this book with great vigor when it appears, instead of what I am sure they will do: applaud it like so many trained seals. For (1) Hayek attacks laissez-faire and attacks or ignores the true libertarians, thus setting up the “even Hayek admits …” line; and (2) his argument is based on a deprecation or dismissal of both reason and justice, so that anyone interested in reason or justice would tend to oppose the whole book. And because of Hayek’s great prominence in the intellectual world, any failure by extreme right-wingers to attack the book with the implacable vigor it deserves will inordinately harm the right-wing cause that we all hold dear.
Such are the partisan biases that stem from Hayek’s lack of sound principle, and which vitiate, and more than offset, the various good passages and sections in the economic sections of the book.
This and other failures led Rothbard to condemn the book in harsh terms:
F.A. Hayek’s Constitution of Liberty is, surprisingly and distressingly, an extremely bad, and, I would even say, evil book. Since Hayek is universally regarded, by Right and Left alike, as the leading right-wing intellectual, this will also be an extremely dangerous book. The feeling one gets from reading it is the same sort of feeling I would have gotten if I had been a U.S. senator when Taft got up to support the Wagner public housing bill, or any of his other compromises: i.e., that this tears it. For when the supposed leader of one’s movement takes compromising and untenable positions, the opposition can always say: “but even Taft (Hayek) admits …” Hayek is the philosophic counterpart. The only tenable conclusion is that any Volker Fund or any other support for this book will be self-destructive in the highest degree.
In my letter of October 23, 1956, I criticized Hayek’s Claremont lectures, which summarized this book, and reference to the letter would be helpful. However, there I wrote that Hayek is a “composite of brilliant things, and very wrong things … a mosaic of confusion.” In the full-fledged book, the picture and impact change greatly; for the brilliant things fade dismally into the background, and all of Hayek’s care and elaboration go into the terribly wrong things. Indeed, this book is a fusion of bad tendencies in his previous books, but which there had been only minor flaws in the product; here the flaws are magnified and raised to the status of a philosophic system. In all the 400 pages, I found only chapters 1 and 10 as agreeable chapters, and all the rest a veritable morass of error and evasion, with almost nothing to relieve the tragedy.
Rothbard didn’t change his opinion of the book after it was published. As he mentioned in conversation with me, he was especially disturbed by the fact that Hayek said that the Supreme Court had gone too far in ruling that many of Franklin Roosevelt’s New Deal measures were unconstitutional. By the way, a historian I knew, but whose name I won’t mention, criticized the book on the same point. Characteristic of him, he cited from memory the page number of Hayek’s comment.
Ludwig von Mises also condemned The Constitution of Liberty for its political compromises with interventionism. In a review that originally appeared in Christian Economics in August 1960, Mises warned that interventionist measures of the sort Hayek favored could quickly lead to socialism. He compared Hayek’s program to the Communist Manifesto:
Unfortunately, the third part of Professor Hayek’s book is rather disappointing. Here the author tries to distinguish between socialism and the Welfare State. Socialism, he alleges, is on the decline; the Welfare State is supplanting it. And he thinks the Welfare State is, under certain conditions, compatible with liberty.
In fact, the Welfare State is merely a method for transforming the market economy step by step into socialism. The original plan of socialist action, developed by Karl Marx in 1848 in the Communist Manifesto, aimed at a gradual realization of socialism by a series of governmental measures. The ten most powerful of such measures were enumerated in the Manifesto. They are well known to everybody because they are the very measures that form the essence of the activities of the Welfare State, of Bismarck’s and the Kaiser Wilheim’s German Sozialpolitik as well as of the American New Deal and British Fabian Socialism. The Communist Manifesto calls the measures it suggests “economically insufficient and untenable,” but it stresses the fact that “in the course of the movement” they outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionizing the mode of production.
Later, Marx adopted a different method for the policies of his party. He abandoned the tactics of a gradual approach to the total state of socialism and advocated instead a violent revolutionary overthrow of the “bourgeois” system that at one stroke should “liquidate” the “exploiters” and establish “the dictatorship of the proletariat.” This is what Lenin did in 1917 in Russia and this is what the Communist International plans to achieve everywhere. What separates the Communists from the advocates of the Welfare State is not the ultimate goal of their endeavors, but the methods by means of which they want to attain a goal that is common to both of them. The difference of opinions that divides them is the same as that which distinguished the Marx of 1848 from the Marx of 1867, the year of the first publication of the first volume of Das Kapital.
We ought to study Hayek’s great works on economics with care; but, politically, we should remember the remark by the protagonist of Ibsen’s Brand: “The devil is compromise.”
