The Road to Serfdom at 75: Part II

Hayek’s proposals for resisting collectivism

In the last 10 days, I gave two talks ― one to the Runnymede Society chapter at the University of Victoria and one at the Université de Sherbrooke ― on Friedrich Hakey’s The Road to Serfdom. In yesterday’s post and in this one, I reproduce my notes for these talks. Yesterday’s post covered the context in which The Road to Serfdom was written and presented Hayek’s criticism of collectivism. This one reviews some of his proposed solutions. The page numbers refer to the 50th Anniversary Edition, which is the one I have in my possession.


What, then, is the alternative to collectivism? It is, naturally, individualism. Individualism, Hayek insists, is not selfishness. It is, rather, the “recognition of the individual as the ultimate judge of his ends, the belief that as far as possible his own views ought to govern his actions”. (66) The sovereignty of individual belief over individual action is, indeed, a burden as much as a right. Hayek reminds us “[t]hat life and health, beauty and virtue, honor and peace of mind, can often be preserved only at considerable material cost”, and “that we all are sometimes not prepared to make the material sacrifices necessary to protect those higher values”. (107) Individualism insists on “the right of choice, [which] inevitably also carries the risk and the responsibility of that right”. (112) But the alternative to making choices, however unpleasant, for ourselves is that others will make them for us.

Note that, from the insistence on the primacy of the individual follows naturally what Hayek calls “[t]he fundamental principle that in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion”. (21) Hayek is especially well known for his insistence on the importance of this principle in the economic realm, but it applies much more broadly, as we shall see. Between collectivism and individualism as fundamental organizing principles of society, between “the order governed by the impersonal discipline of the market or that directed by the will of a few individuals”, (219) Hayek sees no middle ground, no possibility of compromise. The methods of collectivism are such that individual liberty cannot be preserved once they are being thoroughly applied, regardless of the purpose to which they are put. From that, it follows “[t]hat democratic socialism, the great utopia of the last few generations, is not only unachievable, but that to strive for it produces something so utterly different that few of those who now wish it would be prepared to accept the consequences”. (36) It is the ruthless, rather than the sincere democrats, who are able and willing to impose their values on the rest of society.

So what is to be done to secure this fundamental principle, and the supremacy of the individual on which it rests? I will focus on Hayek’s suggestions in three areas: the law, not only because this is my area of expertise, but also because Hayek’s first degree was, in fact, in law, and he deserves to be much better appreciated than he is as a legal philosopher; the economy, because after all Hayek is usually thought of as an economist (though he was much more than that), and a Nobel Memorial Prize winning one at that; and the relationship between the individual and society, because, I think that this, if anything, even more important both to Hayek himself, and especially to us as readers in an age where the preoccupations of collectivism are, ostensibly, not only or even primarily, economic.


Let me begin, then, with the law. Hayek sees its function as that of “creating conditions under which the knowledge and initiative of individuals are given the best scope so that they can plan most successfully”. (40; emphasis Hayek’s.) A sound legal framework is what enables competition and markets to serve “as a means of co-ordinating human efforts” (41) and so to provide for the needs and wants of individuals. Hayek is no anarchist; he is not, like Thoreau, saying that that government is best which governs not at all. (Indeed, he claims, in The Road to Serfdom, that “[i]n no system that could be rationally defended would the state just do nothing. An effective competitive system needs an intelligently designed and continuously adjusted legal framework as much as any other.” (45) (In Law, Legislation and Liberty, Hayek’s views on the design of legal frameworks change quite dramatically.)

But government, if it is to respect the ability of individuals to be masters of their own lives, must not only create and sustain a legal framework, but also bind itself by rules. In other words―in words that are of central importance to Hayek―we need the Rule of Law. As Hayek defines this phrase, it “means that government in all its actions is bound by rules fixed and announced beforehand―rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of that knowledge”. (80) In this way, “the government is prevented from stultifying individual efforts by ad hoc action”. (81)

This means that the law must consist of “formal rules which do not aim at the wants and needs of particular people”, (81; emphasis Hayek’s) and are not meant to produce substantive justice, whether defined in terms of equality or of some conception of merit. An attempt to produce rules―whether laws or administrative rulings―aiming at modifying the lot of particular people means that the law “ceases to be a mere instrument to be used by the people and becomes instead an instrument used by the lawgiver upon the people and for his ends”. (85) Laws that are qualified “by reference to what is ‘fair’ or ‘reasonable’”, (86) which can only be applied on a case-by-case basis, are antithetical to the Rule of Law; they result in “increasing arbitrariness and uncertainty of, and consequent disrespect for, the law and the judicature, which in these circumstances could not but become an instrument of policy”. (87)

Relatedly, “the discretion left to the executive organs wielding coercive power should be reduced as much as possible”, (81) which has the added benefit of enabling democratic control over the exercise of this coercive power. Such control, Hayek argues, is only possible when the executive works towards ends determined by a democratic process―that is, ends on which political consensus can exist, rather than being manufactured by the executive itself―and in accordance with standards compliance with which can actually be assessed. In the absence of such standards, there is no Rule of Law, even if the executive is ostensibly authorized to act by vague and broad delegations of power. (91)

It is important to note that Hayek’s rejection of the pursuit of substantive equality by means of laws targeting particular groups or authorizing discretionary administrative decision-making does not proceed from a lack of interest in rights, or indeed equality. On the contrary, he endorses a substantive conception of the Rule of Law, which incorporates “limitations of the powers of legislation [that] imply the recognition of the inalienable right of the individual”. (93) He also warns that state control of the economy will be used “to pursue a policy of ruthless discrimination against national minorities” (96) or against otherwise unpopular groups or persons.


This brings me to the realm of economics. The Road to Serfdom emphasizes the importance of competition between producers―including both firms and workers. Competition is preferable to allocation of resources according to some pre-defined plan, or to the views of government decision-maker, “not only because it is in most circumstances the most efficient method known but even more because it is the only method by which our activities can be adjusted to each other without coercive or arbitrary intervention of authority”. (41) The world is so complex that no planner, whether an individual or a government agency, can embrace the whole picture of the resources available to a society, the needs and desires of individuals, the ideas they are generating.

Being left to pursue their interests and opportunities within a general framework of rules, individuals and firms will create more, not only in terms of material wealth, but also of innovation and opportunity, than if they worked at the direction of government. A bureaucracy attempting to direct them simply could not anticipate what possibilities might arise, and what prospects its orders might foreclose. It is worth pointing out that Hayek sees a role for regulation, whether to protect the rights of workers or even the environment. At least in The Road to Serfdom―his views on this become more uncompromising later―Hayek claims that “preservation of competition [is not] incompatible with an extensive system of social services―so long as the organization of these services is not designed in such a way as to make competition ineffective over wide fields”, (43) and they are, instead “provided for all outside of and supplementary to the market system”. (133)

On the other side―as consumers―a competitive economy leaves us choices that regulation or government control would take away. Hayek explains that “[o]ur freedom of choice in a competitive society rests on the fact that, if one person refuses to satisfy our wishes, we can turn to another. But if we face a monopolist we are at his mercy. And an authority directing the whole economic system would be the most powerful monopolist conceivable.” (102) While the market does not always provide us with as many opportunities as we would like, it at least leave us the choice of how to direct our limited resources, instead of leaving us dependent on others’ views “of what we ought to like or dislike” (103) or how we ought to value the different aims that we would like to pursue. (99) The market does not distribute wealth and resources “according to some absolute and universal standard of right”―which in any case does not exist―, but nor does it make distribution subject to “the will of a few persons”. (112) In a market economy, “who is to get what … depends at least partly on the ability and enterprise of the people concerned and partly on unforeseeable circumstances”. (112-113) 


I turn, finally, to the question of the relationship of the free individual to a free polity. The commitment to individualism imposes significant burdens on both―or rather, on both the individual as a private agent and on the same individual as a citizen and member of a political community.

In politics, we must learn to recognize the reality of the constraints and limitations within which we make our choices: in particular, of economic constraints. We must accept that they are not the product of some sinister will, but of forces no less real for being impersonal. Hayek explains and warns that

[a] complex civilization like ours is necessarily based on the individual’s adjusting himself to changes whose cause and nature he cannot understand: why he should have more or less, why he should have to move to another occupation, why some things he wants should become more difficult to get than others, will always be connected with such a multitude of circumstances that no single mind will be able to grasp them; or, even worse, those affected will put all the blame on an obvious immediate and avoidable cause, while the more complex interrelationships which determine the change remain inevitably hidden from them. (223)

We must understand that while “[i]t may sound noble to say, ‘Damn economics, let us build up a decent world’”, this “is, in fact, merely irresponsible”. (230) The attempt to build up a decent world risks empowering the demagogues offering easy solutions that solve nothing, and destroy what we already have.

To resist them, we need also to accept that ends do not justify all means; that collectivist and a fortiori dictatorial instruments cannot be put in the service of the right ideals, or entrusted to the right people, without either corrupting them or being seized by the more ruthless and corrupt; that “power itself” is “the archdevil”, (159) and that power concentrated in the hands of the state “is … infinitely heightened” (159) in comparison with that wielded by private actors. Once again, the echoes of The Lord of Rings are unmistakable.

We need, moreover, to firmly reject “the presumption of any group of people to claim the right to determine what people ought to think or believe”. (180) Perhaps most controversially for our time, Hayek cautions against a loss of “belief in Western civilization” and “a readiness to break all cultural ties with the past and to stake everything on the success of a particular experiment”. (203) (It would perhaps not be superfluous to note that Hayek would later write an essay called “Why I Am Not a Conservative”; he always considered himself a liberal―in the European, not the American, sense of the word.)

Last but not least, we ought to remember that morality is not measured by the intensity of our “indignation about the inequities of the existing social order” (230) but “by standards [of] individual conduct, and on the seriousness with which we uphold moral principles against the expediencies and exigencies of social machinery”. (231) We are acting morally, in other words, not when we are engaged in virtue-signalling or being “unselfish at someone else’s expense”, or indeed “being unselfish if we have no choice”, (231) but when we choose to put our own self-interest on the line for our principles. On this point, it is worth emphasizing that voting, in particular, is no test of individual morality, since it requires no “sacrifice of those of [those] values [one] rates lower to those [one] puts higher”. (233)

It is in our private conduct that we ought to be unselfish, concerned with equality, and generally do what we think is right. We must recall, Hayek says, that “[r]esponsibility, not to a superior, but to one’s conscience, the awareness of a duty not exacted by compulsion, the necessity to decide which of the things one values are to be sacrificed to others, and to bear the consequences of one’s own decision, are the very essence of any morals which deserve the name”. (231-32) We ought also to practice actively those “individualist virtues” to which I already referred: willingness to stand up for our opinions also ability to respect for those who disagree with us; magnanimity not to punch down and courage not to kiss up; good humour and presumption of good faith. We need, in other―Abraham Lincoln’s―words, to act “with malice toward none, with charity for all, with firmness in the right as God gives us to see the right”. Importantly, Hayek reminds us that “these individualist virtues are at the same time eminently social virtues”, (163) in that they make a society where they are practiced a much more pleasant place to live than one where they are forgotten.

Firmness in the right as we are given to see the right is perhaps an especially important theme for Hayek, though unlike Lincoln, he writes of individual conscience as what gives us to see the right. He insists on the importance of “readiness to do what one thinks right … at the sacrifice of one’s own desires and perhaps in the face of hostile public opinion”, (232) “to back one’s own conviction against a majority”. (233) Related to this is the imperative to hold on to the “old meaning” of the word “truth” as “something to be found, with the individual conscience as the sole arbiter of whether in any particular instance the evidence (or the standing of those proclaiming it) warrants a belief”, (178-79) and not whatever the authorities want us to believe for the sake of maintaining social cohesion.

As an academic, I especially want to highlight the need to stand up to the tendency to put “the disciplines dealing directly with human affairs and therefore most immediately affecting political views, such as history, law, or economics”, in the service of “the vindication of the official views” rather than a search for truth. (176) We must not allow law schools, or history departments, to be made into “factories of the official myths which the rulers use to guide the minds and wills of their subjects”. (176) As Hayek wrote all these years ago, “contempt for intellectual liberty is not a thing which arises only once the totalitarian system is established but one which can be found everywhere among intellectuals who have embraced a collectivist faith”. (179) Runnymede is fighting the good fight in opposition to this contempt.


Let me conclude with a warning and an exhortation. The warning is that reading The Road to Serfdom will not fill you with joy. It is dispiriting to see just how much Hayek’s warnings about the dangers of collectivism are still applicable today, three quarters of a century after he wrote. It would be much easier to think of whatever problems we are facing in our time as temporary aberrations rather than as avatars of a long, perhaps a permanent, dark streak in human nature, which is what their persistence suggests they are.

But the exhortation is to pick up The Road to Serfdom regardless and, having read it, to do what you can to push back against the trends that it describes. As Hayek says, “[i]t is because nearly everybody wants it that we are moving in this direction. There are no objective facts which make it inevitable.” (7) As Gandalf points out in The Lord of the Rings, “all who live to see [evil] times” wish them away, “[b]ut that is not for them to decide. All we have to decide is what to do with the time that is given us.”

A Reasonable Opinion

The Supreme Court delivered an interesting decision in Halifax (Regional Municipality) v. Canada (Public Works and Government Services), 2012 SCC 29, yesterday. On the surface, it is a rather dull, or at least purely technical, case about the proper method of assessing the value of land occupied by a historical monument. But it has much broader implications, because it is a useful reminder of the way in which courts ought to approach discretionary decision-making by the government, something of which the government of the day is very fond.

The case concerns the application of Payment in Lieu of Taxes Act, which authorizes the Minister of Public Works and Government Services to make “payments in lieu of [municipal] taxes” to municipalities in which federal property is situated. Federal property is constitutionally exempt from provincial (and hence municipal) taxation, but as a matter of fairness, Parliament authorizes payments to municipalities that are meant to replace municipal taxes that would otherwise be levied on most federal property. Nonetheless, the statute confers a great deal of discretion on the Minister: he decides whether to make payments; the amount of the payment is calculated using the taxation rate which would be applicable “in the Minister’s opinion” if the property were taxable; and the value to which this rate is applied is also one which “in the Minister’s opinion” would be assessed if the property were taxable.

 Justice Cromwell, writing for a unanimous Court, summarizes the case very effectively at par. 5:

The Minister … decided that a national historic site is effectively valueless if it does not support economically beneficial uses. He therefore concluded that roughly 40 acres of the [Halifax] Citadel site are worth ten dollars. This conclusion, in my view, is unreasonable for two reasons. First, the property value is to be the value which, in the Minister’s opinion, the local assessment authority would apply to the property … However, in valuing the property the Minister adopted an approach which the record discloses no example of a Canadian assessment authority using, and which significantly differs from the approaches that the record suggests assessment authorities in provinces across the country do use.  The Minister’s opinion that the value he arrived at “would be attributable by an assessment authority” has no basis in and is contrary to the evidence.  Second, the Minister’s decision is inconsistent with the Act’s purpose.  The Act permits payments for national historic sites. To decide that these sites have no value for taxation purposes except to the extent that they could support commercial uses negates the very purpose of their inclusion in the PILT scheme.  For these two reasons the Minister’s decision was unreasonable.

So, the Supreme Court reminds us – and, more importantly, the federal government, – the exercise of discretionary powers is judicially reviewable, and even though the standard of review is reasonableness, it is a meaningful review. The phrase “in the Minister’s opinion” which Parliament uses seems to confer a very wide discretion on the Minister. But this discretion has to be exercised on the basis of evidence and in a logical way. The Minister cannot act on a whim or just because a certain decision suits him better than its contrary. Nor can he act in a way that frustrates the purpose of the legislation he is applying.

None of this is exactly new – these themes go back at least to Justice Rand’s judgment in Roncarelli v. Duplessis, [1959] S.C.R. 121, for example his famous statement that “[i]n public regulation … there is no such thing as absolute and untrammelled “discretion”, that is that action can be taken on any ground or for any reason that can be suggested to the mind of the administrator” (p. 140). But the reminder is timely. Recent federal legislation has taken to delegating considerable powers to the executive, and also, it seems, to trying to insulate executive action from review, by adding discretion-conferring catchphrases such as “in the Minister’s opinion” to already-existing grants of discretionary power. As the Supreme Court’s latest decision shows, however, delegation and conferral of apparent discretion does not free the executive to do whatever it pleases.