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
much larger agricultural workforce than markets alone would
require. The primary tools of this misguided policy are subsidies
and controls. Price supports and other farm subsidies amount to
‘compulsory transfers of income from the urban to the agricultural
population.’ More dangerous, in terms of direct coercion,
are efforts to control prices and production. Current agricultural
policy, to be successful, requires authoritative decisions as to ‘who
is to produce, how much, and what.’ Such a policy leaves little
room for individual freedom and leads towards ‘a totalitarian
control of all economic activity’ (362; cf. 360, 361–2).
How might government properly address the genuine and
important problems faced by agricultural workers? In Hayek’s
view, no planning is needed in this area. Generally economic
markets should be allowed to take their course. Only the pressure
of prices, by producing ‘the necessary reduction in the agricultural
population’ and encouraging the adoption of new agricultural
techniques, can ‘lower cost and make the survival of the
suitable units possible.’ Beyond this, there are two specific functions
that government ought to perform. First, it should gradually
improve legal institutions with a view to making markets work
more effectively. Here Hayek takes note of the benefits derived
in medieval Europe from the consolidation of dispersed holdings
and in England from enclosures of the commons. His point is that
legal changes might still be required to bring ‘appropriate units
of enterprise under single control’ and to foster ‘group collaboration.’
Achieving this result might require ‘compulsory expropriation,’
but with proper safeguards. Second, government ought to
provide a variety of services to agricultural workers, especially
informing them about the benefits of technological innovations
(see 360, 364–5).
Natural resource policy
The latter half of Chapter 23 addresses indirectly this enduring
question: how is humankind to regard ‘a free gift of nature’?
With some exceptions, Hayek views nature’s gifts as an available
supply or ‘resource’ to be used in fostering economic progress.
Much government policy, by contrast, is premised on the idea
that natural resources have a special standing, such that they must
be preserved and protected from exploitation by private enterprise,
even with far-reaching controls that greatly limit individual
freedom. Hayek replies that a natural resource should be treated
the same way as other resources, such as ‘man-made equipment
or human capacities,’ that might be invested in productive activity
(367, 373–4).
Hayek points out that some natural resources are diminished
by use and are eventually used up, while others can be so managed
as to yield a durable stream of benefits. In either case, however, he
has no objection to exhausting a natural resource, if that appears
to be the best strategy to maximise income. The market offers
better foresight in these matters than government planning; and
one lesson of advancing technology has been that new and unanticipated
resources will emerge to replace existing ones (368–70,
374).
Most of the arguments for ‘government control of private
activity in the interest of conservation of natural resources’ are, in
Hayek’s view, invalid. He recognises an exception, however, where
the aim is not income maximisation, but providing recreational
opportunities and preserving natural beauty or sites of historical
or scientific interest. Such amenities render a service to the public
at large, providing advantages for which the individual beneficiary
cannot be charged a price. Also, they usually require large tracts
174
175