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When Hayek Abandoned Mises

Written by Gary North on November 4, 2014

In June 1960, I received in the mail two books: Frederick Hayek’s The Constitution of Liberty and Ludwig von Mises’s Human Action. I had ordered them from the Foundation for Economic Education. I paid $7.50 for Hayek’s book; I paid $10 for Mises’s book. In 1960, that was the equivalent in today’s money of about $140. That was a lot of money for someone who had just come home from his first year in college.

I marked the inside cover of both books: June 1960. Over the next two years, I got each author to autograph his book.

I began reading The Constitution of Liberty (1960) almost immediately. I did not read Human Action (1949) until the summer of 1963. I read it after I had read Murray Rothbard’s book, Man, Economy, and State (1962), which I also read in the summer of 1963.

In 1960, I regarded Hayek’s book as one of the most profound books I had ever read. In retrospect, it was the first profound book that I had ever read. I have reread it two times since then, and I still regard it as a profound book. It is also a deeply flawed book. Part I of the book, The Value of Freedom, is a defense the ideal of freedom. Part II, Freedom of the Law, is his attempt to outline the kind of political order that is necessary to sustain freedom. Part III, Freedom in the Welfare State, is probably the most profound defense of conceptual errors in the history of the libertarian movement.

When I reached Section 5 of Chapter 16, I came to these words:

There are all kinds of public amenities which it may be in the interest of all members of the community to provide by common effort, such as parks and museums, theaters and facilities for sports — though there are strong reasons why they should be provided by local rather than national authorities.

At that point, a yellow flag went up in my mind. Warning: danger ahead. The danger was not long in coming: the next few sentences in the paragraph.

(For the rest of my article, click the link.)

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9 thoughts on “When Hayek Abandoned Mises

  1. Gary, your books should also be reread. They are a revelation of God. This helps understand the word of God. Thank you.

  2. Gary North makes two fundamental mistakes.

    The first is in believing that libertarians are conservatives. They are not. They are fence-straddlers, hybrid middle-of-the-roaders, which is why someone like Hayek can conveniently tilt either to the left or the right and still remain a libertarian.

    Libertarians might rightly be called "mugwumps," an Algonquian Indian word used during the 19th century to designate politicians who would not take a definite stand on an issue, but straddled the fence instead. That led to the humorous definition of "mugwump": someone who sits on a fence with his mug on one side and his wump on the other.

    North's second mistake is equating Social Security with Medicare. Social Security is an investment plan, in which workers continually invest during their entire working lives. Medicare is a welfare benefit.

    You may legitimately argue that establishing the Social Security system was not a power authorized to the federal government by the Constitution, but that is a completely different issue from the mechanism of the system.

  3. The author Gary is well read, but I believe he takes too much leeway in his interpretations. To say Hayek defended 'Social Security' in its present form is a huge stretch.

  4. You claim to know what Dr. North "believes." There is nothing in his piece that says libertarians are conservatives.

    Your characterization of Social Security is wrong. The writer Laurence Vance recently summed up Social Security (see LewRockwell.com):

    Social Security is not a retirement account, an investment account, or a pension plan. It is a relic of the New Deal, the cornerstone of the welfare state, the first plank in the federal government’s effort to create a class of citizenry that is dependent on the government. Social Security is an intergenerational, income-transfer, wealth-redistribution welfare program. It should neither be “saved” nor “privatized.” Steps should be taken to wean Americans off the program and abolish it.

  5. "North's second mistake is equating Social Security with Medicare.

    Not a mistake, they are both welfare benefits.

    "Social Security is an investment plan, in which workers continually invest during their entire working lives."

    Only a moron would believe that. There is no "invest". Nothing is invested. The Social Security money comes in each year, and gets spent each year. Everything you paid into Social Security is long gone, spent. The government hopes that someone will be around to pay in by the time you are waiting for your Social Security check.

    "You may legitimately argue that establishing the Social Security system was not a power authorized to the federal government by the Constitution, but that is a completely different issue from the mechanism of the system."

    You have zero understanding of the mechanism of the system.

  6. Social Security is nothing more than a Ponzi scheme

  7. Phillip the Bruce says:

    Hayek defended the concept of Social Security. The form is an unimportant detail.

  8. As if Reps have it all right ? they don't. They have morphed into panderers just like Dems and they too have a lot to regain in trust . We shall see how they react ? and why has Boehner done nothing except go along with Obamas many horrific policies when has has the purse strings? He has shown zero leadership.

    I am NOT saying the Libertarians have it all right either , but the REPs have proven they are almost worthless against a tyrrant like Obama and our system is seriously flawed ! So the REPs are not the holy grail as you seem to think ?

  9. It all ha to be considered in the context of the time frame in which it was written. And everything has changed so vastly sine the 40s and 50s you cannot make blanket statements without going slightly out of bounds of the original intent and meaning of the time? Even Keynes would be shocked at what has developed in the name of logic and reason ? Besides, a windfall for old people is very different than generations of people living on the system which did not happen back in those days. So Gary is not really comparing apples and apples, nor does he point out how congress has robbed the coffers and created massive debt with SS? No doubt the system is seriously broken and the debt can never be repaid so there will have to be a reset one day. And that is unavoidable and will be a very bad day ! But it is coming along with the loss of USD as world trade currency. We ain't seen nothing yet , but we will !