Thoughts on economics and liberty

Tag: F.A.Hayek

Hayek’s direct attempt to wean away the Germans from Hitler

Continuing the theme I raised in this blog post on Hayek's heroic attempt to establish global freedom, I also found a reference in Chandran Kukathas’s essay, “Hayek and liberalism” (from The Cambridge Companion to Hayek) to a rather interesting fact.  

Hayek had offered to BBC his help in putting out propaganda in Nazi Germany to wean the Germans away from the collectivism to which they had fallen prey. 

I’ve explored this through google books and extracted a few notes, for this blog post.

These actions of Hayek provide evidence of two key things: (a) that the liberal must always engage with his society, and aim to change bad ideas; (b) that in providing such advice to a society, its own history and culture must be cited extensively.

There are surely many strands of thought in each society’s history that help promote freedom and good ideas (for instance, in the case of India we have many good examples: Raja Ram Mohun Roy, Vivekananda, Rabindranath Tagore, Gandhi, Rajaji and Masani).

I believe this advice from Hayek has particular relevance for FTI.

Background

Less than a week after the declaration of war following the German invasion of Poland. On September 9, 1939 Hayek wrote to Mr. F. W. Ogilvie of the BBC offering to help with its propaganda broadcasts into Germany. Enclosed was an additional memorandum (dated September 1939) entitled “Some Notes on Propaganda in Germany.” Hayek also wrote to the Director General of the Ministry of Information, again enclosing his memorandum on propaganda in Germany, and to the Minister of Information, Lord Macmillan, offering his services as a propagandist.
 
Hayek would wait until December for his answer from the Ministry of Information. The letter from the Ministry thanked him for his proposals but failed to ask for his assistance.
 

Extract: “Some Notes on Propaganda in Germany” (1939) – By F.A. Hayek

 
Without attempting to be systematic or exhaustive I propose to outline here certain suggestions concerning propaganda in Germany. The main purpose of those notes is to show why, to be effective, such propaganda must be based on the most intimate knowledge of German psychology and conditions in Germany. At the same tim­­­e it should always be remembered that there has existed in Germany for a long tune a certain gulf which separated the Jewish and socialist intelligentsia from the rest of the community; and that in consequence the typical refugee may not always be the most reliable guide on these matters.
 
1 .      Political. Effective propaganda must be prepared frankly to explain and defend the principles of liberal democracy and to show how these principles have consistently guided the policy of the Western Democracies. One of the main difficulties here is that many concepts and expressions which in English have a familiar and time honoured ring will, if translated into German, sound meaningless and empty phrases, while others, which in English are worn commonplaces, will in German have all the attraction and freshness of a new idea. While, for instance, the words liberty or militarism, or their equivalents mean little or nothing to the average German and are more likely to be misunderstood, it would be most effective to explain the fundamental liberal principle “to tolerate everything but intolerance”—and of course exceedingly appropriate to make the Germans understand the causes of the present conflict.
 
The main asset of any propaganda directly aimed against the political principles of the Hitler regime would however be that it would not be difficult to show that it is Great Britain and France which now stand for all the principles which were dear to the great German poets and thinkers whose names are still sacred in Germany although their relevant writings are largely unknown. Here as in other respects it is of the greatest importance that so far as possible German sources should be quoted to explain the ideals for which Great Britain and France are fighting. There is a wealth of material in the writings of the German classics which, if skilfully selected, could be used to the greatest effect. …There are also certain analogies from recent history of which in this connection much greater use should be made.
 
2.       Historical. The extent to which the political views not only of the more intelligent Germans but even of the ordinary citizen of Germany are based on the distorted view of history on which they have been brought up during the past sixty years, can hardly be exaggerated: even in so far as the common people are concerned, the long run effect of any propaganda will depend on now far it succeeds in dispelling the main misconceptions in this respect; and the influence which we can hope to exert in the long run on the more intelligent classes and their belief in the justice of their cause, which in the end will surely be decisive, will depend perhaps primarily on the extent to which we succeed in correcting this distorted view of historical events by which they arc guided.
 
If such ‘historical instruction’ is to have a chance of success it is absolutely essential that all historical references should be scrupulously and even pedantically correct, that, in so far as is at all possible, German sources should be used and quoted literally; and, of course, that under no circumstances different versions of the same historical events must be allowed to be used.
 
But while they are to some extent anxious to know the facts and while nothing is more apt to shake them in their beliefs than incontrovertible evidence in this respect, they are of course profoundly suspicious of any information from foreign sources and will often be able to check some of the facts presented to them. One single fact convincingly established and, so far as possible, proved from German sources, will count more than many more indefinite allegations.
 
3.       Fads about the Nazi Regime. The preparation of … a full and truthful account of events inside Germany during the Nazi Regime will be of the greatest importance not only for propaganda inside Germany during the war but equally for propaganda in the neutral countries (and even Great Britain and France) and perhaps later in occupied territory and among prisoners of war. And it will be absolutely invaluable when once the problem arises of finally extirpating Nazism in Germany after the war.
 
I believe that the task of producing such a handbook of recent German history should be entrusted to a small committee consisting largely of (non-Jewish) German scholars including the one or two persons who have already produced fairly reliable accounts of these events. It might be desirable to invite a few neutral scholars of notoriously pro-German leanings (such as, e.g., Sven Hedin) to sit in and control the proceedings. The question under whose auspices such a publication should appear will have to be very carefully considered. Once such a handbook is compiled it should be produced in tens of thousands of copies of small size and on thin paper so that all possible channels, including in particular the organisations of the German opposition, could be used to get as many copies as possible into Germany.
 
4.       To whom propaganda to be mainly addressed. It must not be objected that these methods are too ‘academic’ to be effective propaganda, With the type of mind of those with whom we can hope to have any success we cannot be too pedantically exact and circumstantial with respect to fact. I should even, in the historical propaganda, freely give references to German sources and recommend German hooks.
 
Of course there must be no lengthy disquisition. What I have in mind are mainly broadcasts of fifteen to twenty minutes duration (if that medium remains available) or printed material which takes about the same time to read and in which the contents of the “handbook” are broadcast piecemeal.
 
In general it seems important not to place too much reliance on propaganda directly aimed at the broad masses. In Germany as in every other country ideas only take root if they gradually filter through from above. The persons at which to aim would be mainly the leading circles outside the Nazi organisations. particularly the army, the industrialists, and the civil service.
 
In so far as the possible effects of propaganda on the intelligent classes outside the Nazi party are concerned it would be much more effective, and much more true; to stress the communist tendencies in the Nazi movement and to underline its kinship with Bolshevism.
 
Here it will not be enough to tell the Germans the truth. It will be essential to prove to them how and why they have been deliberately misled by the official teaching of history. This again can and must be done from German sources.
 
It cannot be sufficiently emphasised that this kind of propaganda should in form and character be altogether different from the German propaganda and rather aim to emphasise its sober, dispassionate, and matter-of-fact nature.
 
MISSING PAGE HERE ON GOOGLE BOOKS
[Here he is talking about using non-Jews on the radio. Importance of having someone whom the people naturally trust.]
not to forget that even anti-Nazis are to a certain degree anti-Semite and are exceedingly quick in recognizing a Jewish accent. The recent broadcasts by some French stations specially directed to Austrians have almost certainly been deprived of all effects and have perhaps even done harm by being spoken by a person with a pronounced Jewish accent. The same, I believe, is or was true, though to a lesser extent, of the press review broadcast by the BBC in German in the late evening.
 
In conclusion I should like to point out that much more use might be made of certain passages in Hitler’s speeches and writings, such as the passage in Mein Kampf which was recently quoted in the correspondence column of the Times and of which I give the original at the foot of this page.
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The Mont Pelerin Society: Hayek’s heroic attempt to establish freedom

I’m learning quite a few new things through accidental ‘clicks’ on internet links. Even though I’m desperately short of time at the moment, I’m posting a short extract from Chandran Kukathas’s essay, “Hayek and liberalism” from The Cambridge Companion to Hayek that explains Hayek's heroic attempt to re-integrate post-War Germany with the rest of the world through what became the Mont Pelerin Society.

(That Hayek motivated the establishment of the Institute for Econmic Affairs in England, is another story! Clearly, he was very concerned about bringing genuine freedom to the world.) [Also see my related blog post: here]
 

HAYEK and the MONT PELERIN SOCIETY

Hayek … took up the task of finding practical means of reintegrating Germany into European cultural life. His Cambridge paper was sent out to a number of academics and public figures, seeking comments on his proposals for the reintegration of Germany. Moreover, he raised the idea of establishing an international society to the furtherance of this end.
 
The difficulty of persuading others to join in such an endeavor at the time should not be underestimated. Michael Polanyi, for example, wrote back expressing his unwillingness to meet other Germans – saying that he could forgive but not forget. And Hayek was well aware of the suspicion with which Germany and Germans had come to be regarded – as he makes clear in a review published in March 1945, “Is There a German nation?” The review begins: “Difficult as it is for the ordinary man to believe that all he has heard of the Germans can be true, it becomes almost impossible for those who have direct acquaintance with a particular side of German life.” And once again Hayek argued that most Germans approved of little in Hitler’s program but were taken in by appeals to nationalist sentiment, and that the problem this has created can be remedied only by a concerted effort on the part of Europeans to put “the common house in order.”
 
Whatever the difficulties, Hayek set about trying to organize an international society of liberal-minded intellectuals. He was able eventually to raise the money to fund a meeting of sympathetic scholars in April 1947 – a meeting that saw the founding of the Mont Pelerin Society. But a great deal of Hayek’s energies between the publication of The Road to Serfdom in 1944 and the formation of the Mont Pelerin Society were spent working toward or arguing for the reintegration of German scholarship – and particularly historical scholarship – into the intellectual life of Europe.
 
Hayek’s writings and activities in this period covering the rise and fall of Nazi Germany are important because they reveal how much his efforts as a political theorist emerge out of the worries and fears of an active public intellectual. Especially revealing is his “Memorandum on the Proposed Foundation of an International Academy for Political Philosophy tentatively called ‘The Acton –Tocqueville Society.’” Dated 1945, it sets out Hayek’s basic proposals to bring German scholars and German cultural life back into the fold, to fight “totalitarianism,’’ and to preserve the liberal tradition. The tone of the memorandum is one of anxious urgency, as is made clear in the opening paragraph:
 
In large parts of the European Continent the former common civilization is in danger of immediate disintegration. In the rest of the Western World, where it still seems secure, many of the basic values on which it is founded are already threatened. Even among those who are aware of these dangers there exists an uncertainty of aim and a lack of assured basic convictions which makes their isolated endeavours to stem the tide largely ineffective. The most sinister sign is a widespread fatalism, a readiness to treat as inevitable tendencies that are merely the results of human decisions, and a belief that our wishes can have no power to avert the fate which an inexorable law of historical development has decreed for us. If we are not to drift into a state which nobody wants, there is clearly urgent need for a common effort at reconsideration of our moral and political values, a sorting out of those which must in all circumstances be preserved and never sacrificed or endangered for some other “advances,’’ and a deliberate effort to make people aware of the values which they take for granted as the air they breathe and which may yet be endangered if no deliberate effort is made to preserve them.
 
Throughout the memorandum Hayek expresses his concern that, even after victory in war, the situation is precarious because totalitarian ideas have gained a foothold and a mighty effort is still needed to combat their influence. This comes out even more clearly in a second memorandum, probably written in 1946, entitled “The Prospects of Freedom.” Here he quotes the words of “a great man whom we have recently lost,” Lord Keynes, who had written of the power of ideas, observing that “the world is ruled by little else,” and that “it is ideas and not vested interests, which are dangerous for good and evil.” Hayek was entirely in agreement with Keynes on this point, and this also helps account for his eagerness to get on with the task of developing alternatives to totalitarian ideas – particularly since there was always a lengthy “interval between the time when ideas are given currency and the time when they govern action.”
 
So it is out of his anxiety and fears about the future of Europe and modern civilization, and a conviction that that future depended upon the salvaging of a tradition of humane values whose vitality had been sapped by war and the influence of totalitarianism, that Hayek’s liberal social and political philosophy emerges.
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Keynes the incompetent economist

Apart from being a very devious and perverted person (see this blog post) who misrepresented other economists and took credit for things that others had done, he was simply wrong. He was a VERY BAD ECONOMIST.

Indeed, after the Philips curve controversy in the 1970s, the resurgence of the Chicago school (Keynesians were operating primarily from Harvard and the London School of Economics), and Lucas's work on rational expectations that explored the micro-economic foundations of the economy, Keynes was basically dumped from most advanced course work in the major universities.

But he seems to re-emerge from the corners in the kitchen, just like a cockroach comes out when the house owner (government in this case, with the GFC) makes a mess.

Nevertheless it is important that we continue to disprove the theses of these failed economists. Marx's theses must be disproved because the academia continues to be full of old fogies who blindly teach Marx. Similarly there are Keynesians across the world, particularly in the government, whose ideas must be disproved, since they will revert to bad form at the slightest opportunity ("opportunity" that they would have created themselves through bad policy). The fight for freedom is not easy. It can only be won if its detractors are continuously challenged, else their ghosts will emerge in each generation to haunt us. 

And so it is important that we continue to disprove Keynes's theses. 

Surya has very kindly suggested that I read Henry Hazlitt's book, Failure of the New Economics, and I surely will.
Thanks, Surya. Your insights always appreciated. I would be most pleased to publish your analysis of Hazlitt's key arguments (or even a set of relevant extracts). We must try to condense and distil relevant information for the general public, for they are busy in their daily lives and have little time to breathe, leave alone read massive tomes. 

In the meanwhile, below is a short video by Hayek (on Keynes) and an extract from Murray Rothbard – to keep you thinking, and to prove that Keynes was basically incompetent as an economist. I'll put out more stuff in the coming days/weeks. My main task in the next two days is to finish my next article for Freedom First.

(Btw, through the link provided inside this video – on Youtube – I've discovered a treasure trove with leads to many interesting things. These days one thing leads to another, and yet another. These are the times when mankind's ignorance should dissipate rapidly – if only we put in the effort to acquire the knowledge we need to ensure our freedom and prosperity). 

Hayek on Keynes

 
Note what Hayek says about why he did not critique the General Theory:
 
Interviewer: Why do you think that the general theory which came out in thirty six and with which you disagreed, any many other economists, why did it have such an enormous influence
 
Hayek: Well I wish I knew. I was puzzled by it at the time, in fact I did not believe it would succeed, so much so that while I'd spent a year analysing in great detail his earlier book the Treatise on Money and then only to hear from him by the time the second part of my criticism was published "oh I no longer believe in all that" I did not want to invest more effort in criticising the general theory who's success is still a puzzle to me because it reverted to a very primitive idea which had been clearly refuted in the nineteenth century that there is a single relation between the demand – aggregate demand for final products and employment, so much so that Leslie Steven in the eighteen eighties had pointed out the test of a good economist is that he does not make that particular mistake. Well Keynes revived it and gave a plausible explanation and, I should add that he did not succeed while he lived, but when he died he was suddenly raised to sainthood.
 
Interviewer: But Keynes might not have approved of the Keynesianism which came to dominate policy.
 
Hayek: Well I am sure he wouldn't, in fact I can positively say so. The very last time I saw him, about six weeks before his death, I was meeting him at the.. I was still having dining rights at Kings College and I was there for a weekend and talked to him after dinner and asked him whether he wasn't alarmed by what his pupils, naming two who I won't name now, were doing agitating for more expansion when in fact the danger clearly was inflation he completely agreed with me, and assured me, "my theory was frightfully important in the nineteen thirties when the question was of combating deflation. Trust me if inflation ever becomes a danger I am going to turn public opinion around [like this]". Six weeks later he was dead and couldn't do it. I think he would have been fighting the inflationary policy. [My comment: Hayek was being VERY naive on this]
 
Addendum: Also read
  • F. H. Knight, "Unemployment: And Mr. Keynes's Revolution in Economic Theory", The Canadian Journal of Economics and Political Science, Vol. 3, No. 1 (Feb., 1937), pp. 100-123 [JSTOR]
  • "Hayek on Keynes" – a blog post by Don Bourdeaux.
  • Y = C+I+G+(X-M)
And now for an extract from Keynes, the Man By Murray N. Rothbard
 
In The General Theory, Keynes set forth a unique politico-economic sociology, dividing the population of each country into several rigidly separated economic classes, each with its own behavioral laws and characteristics, each carrying its own implicit moral evaluation. First, there is the mass of consumers: dumb, robotic, their behavior fixed and totally determined by external forces. In Keynes’s assertion, the main force is a rigid proportion of their total income, namely, their determined “consumption function.” Second, there is a subset of consumers, an eternal problem for mankind: the insufferably bourgeois savers, those who practice the solid puritan virtues of thrift and farsightedness, those whom Keynes, the would-be aristocrat, despised all of his life. All previous economists, certainly including Keynes’s forbears Smith, Ricardo, and Marshall, had lauded thrifty savers as building up long-term capital and therefore as re­sponsible for enormous long-term improvements in consumers’ standard of living. But Keynes, in a feat of prestidigitation, severed the evident link between savings and investment, claiming instead that the two are unrelated. In fact, he wrote, savings are a drag on the system; they “leak out” of the spending stream, thereby causing recession and unemployment. Hence Keynes, like Mandeville in the early eighteenth century, was able to condemn thrift and savings; he had finally gotten his revenge on the bourgeoisie.
 
By also severing interest returns from the price of time or from the real economy and by making it only a monetary phenomenon, Keynes was able to advocate, as a linchpin of his basic political program, the “euthanasia of the rentier” class: that is, the state’s expanding the quantity of money enough so as to drive down the rate of interest to zero, thereby at last wiping out the hated creditors. It should be noted that Keynes did not want to wipe out investment: on the contrary, he maintained that savings and investment were separate phe­nomena. Thus, he could advocate driving down the rate of the interest to zero as a means of maximizing investment while minimizing (if not eradicating) savings.
 
Since he claimed that interest was purely a monetary phenomenon, Keynes could then also sever the existence of an interest rate from the scarcity of capital. Indeed, he believed that capital is not really scarce at all. Thus, Keynes stated that his preferred society “would mean the euthanasia of the rentier, and consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital.” But capital is not really scarce: “Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital.” Therefore, “we might aim in practice . . . at an increase in the volume of capital until it ceases to be scarce, so that the functionless investor [the rentier] will no longer receive a bonus.” Keynes made it clear that he looked forward to a gradual annihilation of the “functionless” rentier, rather than to any sort of sudden upheaval (Keynes 1936: 375–76; see also Hazlitt [1959] 1973: 379–84).[1]
 
Keynes then came to the third economic class, to whom he was somewhat better disposed: the investors. In contrast to the passive and robotic consumers, investors are not determined by an external mathematical function. On the con­trary, they are brimful of free will and active dynamism. They are also not an evil drag on the economic machinery, as are the savers. They are important contributors to everyone’s welfare. But, alas, there is a hitch. Even though dynamic and full of free will, investors are erratic creatures of their own moods and whims. They are, in short, productive but irrational. They are driven by psychological moods and “animal spirits.” When investors are feeling their oats and their animal spirits are high, they invest heavily, but too much; overly optimistic, they spend too much and bring about inflation. But Keynes, especially in The General Theory, was not really interested in inflation; he was concerned about unemployment and recession, caused, in his starkly superficial view, by pessimistic moods, loss of animal spirits, and hence underinvestment.
 
The capitalist system is, accordingly, in a state of inherent macro-instability. Perhaps the market economy does well enough on the micro-, supply-and-demand level. But in the macro-world, it is afloat with no rudder; there is no internal mechanism to keep its aggregate spending from being either too low or too high, hence causing recession and unemployment or inflation.
 
Interestingly enough, Keynes came to this interpretation of the business cycle as a good Marshallian. Ricardo and his followers of the Currency school correctly believed that business cycles are generated by expansions and contractions of bank credit and the money supply, as generated by a central bank, whereas their opponents in the Banking school believed that expansions of bank money and credit were merely passive effects of booms and busts and that the real cause of business cycles was fluctuation in business speculation and expectations of profit—an explanation very close to Pigou’s later theory of psychological mood swings and to Keynes’s focus on animal spirits. John Stuart Mill had been a faithful Ricardian except in this one crucial area. Following his father, Mill had adopted the Banking school’s causal theory of business cycles, which was then adopted by Marshall (Trescott 1987; Penman 1989: 88–89).
 
To develop a way out, Keynes presented a fourth class of society. Unlike the robotic and ignorant consumers, this group is described as full of free will, activism, and knowledge of economic affairs. And unlike the hapless investors, they are not irrational folk, subject to mood swings and animal spirits; on the contrary, they are supremely rational as well as knowledgeable, able to plan best for society in the present as well as in the future. This class, this deus ex machina external to the market, is of course the state apparatus, as headed by its natural ruling elite and guided by the modern, scientific version of Platonic philosopher-kings. In short, government leaders, guided firmly and wisely by Keynesian economists and social scientists (naturally headed by the great man himself), would save the day. In the politics and sociology of The General Theory, all the threads of Keynes’s life and thought are neatly tied up.
 
And so the state, led by its Keynesian mentors, is to run the economy, to control the consumers by adjusting taxes and lowering the rate of interest toward zero, and, in particular, to engage in “a somewhat comprehensive socialisation of investment.” Keynes contended that this would not mean total state Socialism, pointing out that
 
it is not the ownership of the instruments of production which it is important for the State to assume. If the State is able to determine the aggregate amount of resources devoted to augmenting the instruments and the basic rate of reward to those who own them, it will have accomplished all that is necessary. (Keynes 1936: 378)
 
Yes, let the state control investment completely, its amount and rate of return in addition to the rate of interest; then Keynes would allow private individuals to retain formal ownership so that, within the overall matrix of state control and dominion, they could still retain “a wide field for the exercise of private initiative and responsibility.” As Hazlitt puts it:
 
Investment is a key decision in the operation of any economic system. And government investment is a form of socialism. Only confusion of thought, or deliberate duplicity, would deny this. For socialism, as any dictionary would tell the Keynesians, means the ownership and control of the means of production by government. Under the system proposed by Keynes, the government would control all investment in the means of production and would own the part it had itself directly invested. It is at best mere muddleheadedness, therefore, to present the Keynesian nostrums as a free enterprise or “individualistic” alternative to socialism. (Hazlitt [1959] 1973: 388; cf. Brunner 1987: 30, 38)
 
There was a system that had become prominent and fashionable in Europe during the 1920s and 1930s that was precisely marked by this desired Keynesian feature: private ownership, subject to comprehensive government control and planning. This was, of course, fascism. Where did Keynes stand on overt fascism? From the scattered information now available, it should come as no surprise that Keynes was an enthusiastic advocate of the “enterprising spirit” of Sir Oswald Mosley, the founder and leader of British fascism, in calling for a comprehensive “national economic plan” in late 1930. By 1933, VirginiaWoolf was writing to a close friend that she feared Keynes was in the process of converting her to “a form of fascism.” In the same year, in calling for national self-sufficiency through state control, Keynes opined that “Mussolini, perhaps, is acquiring wisdom teeth” (Keynes 1930b, 1933: 766; Johnson and Johnson 1978: 22; on the relationship between Keynes and Mosley, see Skidelsky 1975: 241, 305–6; Mosley 1968: 178, 207, 237–38, 253; Cross 1963: 35–36).
 
But the most convincing evidence of Keynes’s strong fascist bent was the special foreword he prepared for the German edition of The General Theory. This German translation, published in late 1936, included a special introduction for the benefit of Keynes’s German readers and for the Nazi regime under which it was published. Not surprisingly, Harrod’s idolatrous Life of Keynes makes no mention of this introduction, although it was included two decades later in volume seven of the Collected Writings along with forewords to the Japanese and French editions. The German introduction, which has scarcely received the benefit of extensive commentary by Keynesian exegetes, includes the following statements by Keynes: “Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under conditions of free competition and a lance measure of laissez-faire.” (Keynes 1973 [1936]: xxvi: cf. Martin 1971: 200–5; Hazlitt [1959] 1973: 277; Brunner 1987: 38ff.; Hayek 1967: 346)
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Is the current form of democracy the best?

Ramesh's comment (here) prompted a quick review of the concept of democracy. In that process I discovered this video (below) of Hayek's short talk at Stanford which is truly worth listening to. Note that this short talk is best understood in the context of Hayek's lecture on freedom and democracy. He also speaks about free banking in this short talk, but that's a different topic which I've discussed elsewhere. (I recommend listening to this short talk, below, very carefully, even twice!)

Even the best democracies today have defects which can  be resolved by the limited democracy that Hayek talks about. 

Why does a free society need democracy? For that I'd recommend the brief comments of von Mises in this essay. Democracy also saves lives. Do read and understand Prof. Rummel's work on how even our current (defective) democracies have significantly reduced wars and violence. And, as Adam Smith pointed out, democracy prevents famine.

I'm however, currently more interested in FTI working within the confines of the existing democratic model in India, because, as I show in BFN, even the current system in India can yield enormously better outcomes. Once that project is achieved, I think some more thought should be given to improving the model on the broad lines suggested by Hayek.

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