Hayek's The Constitution of Liberty - Institute of Economic Affairs

h ay e k ’ s t h e c o n s t i t u t i o n o f l i b e r t y
s a f e g ua r d i n g p r o g r e s s
problems of urban life, so long as it is voluntary. The important
consideration is whether planning aims ‘to supplement and assist
the market or to suspend it and put central direction in its place.’
By relying on markets, voluntary planning can make ‘full use of
the dispersed knowledge of the prospects and possibilities of
development.’ To be sure, the price mechanism is sometimes an
imperfect guide, as in determining whether an urban property
owner’s actions have benefited or harmed his neighbours; but
generally it conveys information that is indispensable to voluntary
planning (341, 349–50, 352).
Hayek objects to some urban planning measures (rent restrictions,
public housing and subsidised housing) because they
subject segments of the population to arbitrary decisions and
make them dependent on authority for direction in their lives
(344). He regards some other measures, such as building regulations
and permits, as necessary and desirable, but warns that
they are frequently used ‘to impose harmful or wholly irrational
restrictions on development’ and also to ‘strengthen the quasimonopolistic
positions of local producers’ (355). Controlling land
use is one of the principal ways in which urban planners try to
channel economic growth. Planners might, for example, specify
where industry and commerce can be located or clear away slum
housing in the city’s centre so as to promote some alternative use
of the land.
Hayek does not reject land use planning as such, but recognises
that it can make matters worse by preventing evolutionary
solutions and by depriving individual owners of an interest
in putting their land to better use. In no case should planners
expropriate land below fair market value. As for clearing slums, a
market solution would be to charge slum properties for the costs
they impose on the rest of the city. The slums would probably
disappear and be replaced by commercial or industrial buildings.
Slum clearance is hard to justify, however, in terms of what is good
for the slum dwellers. The poor find it economically advantageous
to live in centrally located slums; and public housing is not a desirable
option. Subsidising people to remain in the city has the effect
of stimulating ‘the growth of cities beyond the point where it is
economically justifiable.’ Moreover, it deliberately creates ‘a class
dependent on the community for the provision of what they are
presumed to need.’ A logical next step for planners, in addressing
urban problems, would be to control who will be allowed to move
into a city. Their inclination, in any event, is to subject the whole
economy to ‘administrative despotism’ (347–8, 351, 354).
Agricultural policy
Agricultural policy in Western countries must face up to the
fact that a population’s food requirements, even if growing, can
be met by fewer farmers than ever before, owing to enormous
gains in agricultural productivity. Having too many agricultural
workers depresses average farm income and produces rural
poverty. Although agriculture is ‘peculiarly sluggish in its adaptation
to change,’ rural workers themselves have gradually dealt
with their plight by moving to other jobs, particularly in urban
industries. Governments should encourage and facilitate this
redistribution of workers by allowing the marginal land and
farms to be eliminated. With fewer workers supplying agricultural
products, average farm income would rise and might keep up with
the general increase in incomes. In fact, however, governments
have delayed the necessary adjustment by trying to maintain a
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