Politics

TGIF: Immigration and Liberty

by Sheldon Richman | Jun 2, 2023 | Economics, Featured Articles, Foreign Policy, Justice, Libertarianism, Politics, Sheldon Richman, TGIF

Forbidding freedom of movement to aspiring migrants strikes at the liberty not only of those individuals but also of citizens and legal residents of the United States. That’s the way it is with immigration. Indeed, that’s the way it is with freedom. The government can’t violate the freedom of some peaceful people without also violating the freedom of others.

Ilya Somin, who teaches law at George Mason University and is a constitutional scholar with the Cato Institute, makes this point in “Three Constitutional Issues Libertarians Should Make Their Own.” (The other two issues his title refers to are zoning and racial profiling.) Somin also wrote the book Free to Move: Foot Voting, Migration, and Political Freedom.

“Immigration restrictions,” he writes, “massively restrict liberty and degrade human welfare. By barring entry to hundreds of thousands of people who seek freedom and opportunity in the United States, the federal government massively restricts the liberty of would‐be immigrants and American citizens alike.”

The harm to aspiring migrants is obvious. People seeking to escape crushing poverty and/or oppression are denied the freedom to move to a safer and more productive place. They are condemned to deprivation, misery, and pain at the hands of the government and gangs. (The U.S. war on drug makers and merchants in Latin America is the big reason for this.) By what right are they condemned? “Legal” immigration is more of a theoretical fiction than a real thing. Somin writes:

In theory, they can join the “line” and wait to enter legally. But for most, that line is either decades‐long or nonexistent. And for the most part, these exclusions are based on arbitrary circumstances of parentage and place of birth, of a kind libertarians and others in the liberal political tradition consistently reject in other contexts.

He goes on: “Less widely appreciated, even by many libertarians, is the massive negative effect of immigration restrictions on the liberty of current American citizens.” We don’t usually think of immigration this way. (Political philosopher Chandran Kukathas does.) But every person represents an American’s opportunity for gains from trade, friendship, and more intimate relationships, all the things that promote flourishing. Immigration controls control Americans too. As Somin writes:

Immigration restrictions bar millions of Americans from engaging in economic and social transactions with potential immigrants. It closes off Americans from hiring immigrant workers, getting jobs at businesses founded by immigrants (who establish such enterprises at higher rates than native-born citizens), renting property to immigrants, and benefiting from scientific and economic innovations to which immigrants also contribute at higher rates than natives.

Those who lament the government-made mess at the border have never understood that constructive responses to the new potential employees, buyers, tenants, etc. would privately and spontaneously arise if border crossing was legal.

Somin adds that “No other current U.S. government policy restricts liberty more than immigration exclusion does—and that’s true even if we focus solely on the liberty of native‐born citizens, especially economic freedoms.”

The prevention of gains from trade has profound and negative consequences for the production of wealth. Somin: “Economists estimate that free migration throughout the world would double global domestic product. That’s an enormous chunk of lost wealth for immigrants and native‐born citizens alike.”

Think of the abundance of goods, the new things, and the low prices that we’re all missing out on! (See Bryan Caplan’s Open Borders for details.)

Somin also sees constitutional problems with the restrictions that he laments has been neglected by even most libertarian legal scholars (including himself), not to mention others, such as conservatives, who claim to be staunch constitutionalists. “It’s far from clear,” he writes, “that the original meaning of the Constitution even gives the federal government a general power to restrict immigration in the first place.”

Nothing in the text specifically grants Congress or the president such authority, and leading Founding Fathers—including James Madison—argued that no such power existed. It took more than a century for the Supreme Court to rule—in the 1889 Chinese Exclusion Case—that the federal government does in fact have this unenumerated power. And that decision is based on highly dubious reasoning and tinged with racism.

Somin does not foresee an imminent overturning of the ruling, but he would like to see assaults on “extensions of that ruling that have largely immunized immigration restrictions from constitutional constraints that apply to virtually every type of government policy.” For example:

Immigration detention and deportation proceed with far weaker due process protections than other severe deprivations of liberty. Due process is so lacking in the system that Immigration and Customs Enforcement and other agencies have detained and sometimes even deported thousands of American citizens before they figured out their error. Such detention with little or no due process would not be tolerated elsewhere.

But do “illegal” immigrants have rights supposedly protected by the Constitution? Somin replies: “A few constitutional rights are explicitly confined to U.S. citizens. But the vast majority are phrased as general constraints on government power, and protect citizens and noncitizens alike.” Thus, “[t]he exemption of immigration restrictions from many normal constitutional constraints on government power has no basis in the text or original meaning of the Constitution.”

So he wants an end to the many double standards. That “would curtail many of the worst abuses of the current migration regime, and perhaps set the stage for further progress. Even incremental improvement could make the difference between freedom and oppression for many thousands of people.”

Hear, hear!

TGIF: No One Has a Right to Make Immigration Policy

by Sheldon Richman | May 19, 2023 | Economics, Featured Articles, Justice, Libertarianism, Politics, Sheldon Richman, TGIF

Florida Gov. Ron DeSantis says “no one has a right to immigrate” to the United States. “We determine as Americans,” he says, “what type of immigration system benefits our country. When you’re doing immigration, it’s not for their benefit as foreigners. It’s for your benefit as Americans. So if there’s legal immigration that’s harming America, we shouldn’t do that either.”

I’d turn that around and say that no one, including a state legislature, has a right to forbid or restrict immigration, the peaceful movement of individuals from outside to inside America. That doesn’t mean that landowners cannot set rules for who enters their own property. That is not immigration policy.

We’re talking about a political concept. You can see this in DeSantis’s words “We determine as Americans.” Apart from immigration, “we” do not “determine as Americans” who can and cannot come to my home. I do that as the owner. Normally I need no one’s permission to invite or exclude. (It’s more complicated in the business context, where association can be legally required rather than forbidden.) But if the person I wish to invite lacks the government’s permission to be in the country, then it’s a different story. That’s not a natural limitation on a normal and natural right. It’s the result of a decision by a group of politicians, a decision that may well conflict with what many people want to do. How dare the politicians interfere?

DeSantis says that a good immigration policy should benefit the country, or “Americans.” It’s hard to miss the conservative collectivism in theory and elitism in practice. The collectivism lies in what appears to be decision-making not by individuals, but by a purported entity, namely, the “country.” What about dissenters? They don’t matter. What counts, presumably, is the Rousseauian general will. Dissenters must be forced to be “free” by going along with the majority. In theory the majority rules.

But the elitism lies in the fact that majorities don’t really rule. They pick the officeholders (although not the bureaucrats), but what happens next can hardly be called rule by the majority because what the majority may want on a given issue must pass through a very thick filter before it becomes enacted. That filter is administered by special interests inside and outside of the government that typically have preferences that can differ vastly from the majority of voters. To keep the people in the dark about this, those interests not only lie and propagandize, but they also obfuscate and use other tactics to make it difficult for the people to know what the government is really doing or to change it if they find out. (Charlotte Twight’s Dependent on D.C.: The Rise of Federal Control over the Lives of Ordinary Americans spells out the theory and history of this.)

The upshot is that DeSantis’s position — which is widely shared on the right and left– is incoherent. “America” does not and could not make immigration policy. Democracy is a facade that blocks our view of reality.

But even if “America” could make the policy, it would be unjust, not to mention self-defeating, to block or restrict immigration. No one, not even a majority of congressmen backed by a president, has the right to tell individuals, wherever they were born, that they cannot consensually enter other people’s property to live, rent, buy, work, or otherwise associate peacefully. Even if a lot of people band together, they can have no right to block free exchanges between Americans and foreigners. A group cannot have any rights that its individual members do not have. Zero multiplied by any number is still zero. So “America” has no right to keep immigrants out. The right to move about while respecting other people’s rights is universal, and anyone is innocent until charged and proven guilty. The Declaration of Independence speaks of rights that precede government as belonging not only to Americans but to all people. Those rights include the right to life, liberty, and the pursuit of happiness. What’s so hard to understand about that?

The idea that the country ought to control immigration should disturb advocates of individual liberty. According to classical liberal principles, a country is not a country club with a membership committee. Rather, it’s a free association where individuals and their associates may live and prosper in peace. And they are left in peace unless they harm other people’s bodies or steal or damage their belongings. If one of them wants to sell to, rent to, employ, or befriend someone whom others regard as an outsider, no one has a right to interfere.

If anyone does interfere, he’s not only interfering with the “outsider”, he’s also interfering with “insiders.” It can’t be otherwise, as political scientist Chandran Kukathas points out. Kukathas “put[s] freedom at the centre of the immigration question. At stake are the liberty of citizens and other residents of the free society and therefore the free society itself. To put it simply, immigration controls are controls on people. and it is not possible to control some people without controlling others. More to the point, it is not possible to control outsiders (aliens, foreigners, would-be immigrants) without controlling insiders as well…. The conclusion … is that if we value freedom–as we should–we ought to be wary of immigration control.”

Going further, Kukathas challenges the view that society is “made up of members“ and that it’s “some kind of unit comprised largely of people who belong together in some way, and whose belonging entitles them to determine who may or may not become a part of that unit, or indeed even enter the geographic space or territory it occupies.”

“The thought running through this book [Immigration and Freedom],” he writes, “is that membership is an ideal that is not only overrated but also dangerous from the perspective of freedom. It is at odds with the idea of people living together freely, for it subordinates that freedom to an altogether different ideal–one that elevates conformity and control over other, freer, ways of being. If we are to live freely, we must be able to relate to one another not as members but as humans.”

Where there are members, there must be nonmembers — which licenses the politicians to do unlimited mischief. The young century has taught this lesson well.

DeSantis and all others who think “America” can forbid or restrict immigration without violating the natural rights of both foreigners and Americans, or without reducing all our own well-being, are knowingly or unknowingly mistaken. Once again we’re being ruled by presumptuous social engineers, cheered on by unreflective supporters.

The FBI Vetoed the 2016 Presidential Election

by Jim Bovard | May 17, 2023 | Criminal Justice, Featured Articles, Foreign Policy, Politics

On Monday, Special Counsel John Durham released his final report on the FBI and Justice Department’s abuse of power during the 2016 presidential election. His 316-page report proves that federal law enforcement was weaponized to rig American politics by shielding Hillary Clinton’s campaign and persecuting Donald Trump’s campaign.

Durham’s report is only the latest in a long pattern of abuses by the FBI. In 1945, President Harry Truman noted in his diary, “We want no Gestapo or Secret Police. FBI is tending in that direction.” In the 1948 presidential campaign, Hoover brazenly championed Republican candidate Thomas Dewey, leaking allegations that Truman was part of a corrupt Kansas City political machine. In 1952, Hoover sought to undermine Democratic presidential candidate Adlai Stevenson by spreading rumors that he was a closet homosexual. In 1964, the FBI illegally wiretapped Republican presidential candidate Barry Goldwater’s presidential headquarters and plane and conducted background checks on his campaign staff seeking evidence of homosexual activity. In 1972, acting FBI chief Patrick Gray burned incriminating evidence from the White House in his fireplace shortly after the Watergate break-in by Nixon White House “plumbers;” he was forced to resign in 1973 for that ignition.

But those interventions were child’s play compared to the FBI’s role in the 2016 election. Hillary Clinton, the Democratic Party’s presumptive nominee for years before the primary, had used an insecure private email server to handle top-secret documents while she was Secretary of State from 2009 to 2013. The server, located in a bathroom of Clinton’s Chappaqua, New York, mansion, exposed emails with classified information to detection by foreign sources and others.

Clinton’s private email server was not publicly disclosed until she received a congressional subpoena in 2015. A few months later, the FBI Counterintelligence Division opened a criminal investigation examining the “potential unauthorized storage of classified information on an unauthorized system.” Attorney General Lynch swayed FBI chief Comey to mislead the public by denying that a criminal investigation involving Clinton had commenced; instead, it was referred to simply as a “matter.”

The FBI treated Clinton and her coterie like royalty worthy of endless deference, according to a 2018 report by the Justice Department Inspector General. The FBI agreed to destroy the laptops of top Clinton aides after a limited examination of their contents (including a promise not to examine any post-January 31, 2015, emails or content). When BleachBit software and hammers were used to destroy email evidence under congressional subpoena, the FBI treated it as a harmless error. A 2018 Inspector General report criticized FBI investigators for relying on “rapport building” with Team Hillary instead of using subpoenas to compel the discovery of key evidence.

FBI investigators shrugged off every brazen deceit they encountered from Hillary’s staffers. The 2018 Inspector General report revealed that key FBI agents in the investigations were raving partisans. “We’ll stop” Trump from becoming president, lead FBI investigator Peter Strzok texted his mistress/girlfriend, FBI lawyer Lisa Page, in August 2016. One FBI agent labeled Trump supporters as “retarded” and declared “I’m with her [Hillary Clinton]”. Another FBI employee texted that “Trump’s supporters are all poor to middle class, uneducated, lazy POS.”

The FBI delayed interviewing Clinton until the end of the investigation, after she had clinched the Democratic presidential nomination and just before the Democratic National Convention. Comey decided before Clinton was interviewed by FBI agents that she would not be charged with criminal wrongdoing. FBI agents at that interview found Clinton’s answers claiming she didn’t realize she was handling classified documents “strained credulity;” one agent said he filed her responses in the “bucket of hard to impossible to believe.’” The FBI planned to absolve her “absent a confession from Clinton,” the Inspector General noted. There was no recording or transcript of that final interview. Minimizing the evidence and disclosures maximized the arbitrary power of Comey and other FBI officials in a landmark political case.

Shortly after that interview, FBI chief James Comey publicly announced that “no charges are appropriate” because Hillary didn’t intend to violate federal law. But that law is a strict liability statute; “intent” is irrelevant to the criminal violation.

FBI racketeering repeatedly rescued Hillary Clinton. The Clinton Foundation raked in hundreds of million dollars of squirrely foreign contributions while she was Secretary of State and revving up her presidential campaign. The Durham report found that “senior FBI and Department officials placed restrictions on how [the Clinton Foundation investigation was] handled such that essentially no investigative activities occurred for months leading up to the election.” On top of that dereliction, “the FBI appears to have made no effort to investigate…the Clinton campaign’s purported acceptance of a [illegal] campaign contribution that was made by the FBI’s own long-term [confidential human source] on behalf of Insider-I and, ultimately, Foreign Government.”

A few weeks after an effective whitewash, “Clinton allegedly approved a proposal from one of her foreign policy advisors to tie Trump to Russia as a means of distracting the public from her use of a private email server,” according to the Durham report. CIA chief John Brennan briefed President Obama, Vice President Joe Biden, and other top officials on “alleged approval by Hillary Clinton on July 26, 2016 of a proposal…to vilify Donald Trump by stirring up a scandal claiming interference by Russian security services.” There is no evidence that Obama and his policymakers had any objections to Hillary’s vilification proposal (referred to as the “Clinton Plan” in Durham’s report).

FBI officials relied on the “Clinton Plan” to target the Trump campaign even though “No FBI personnel who were interviewed by the Office recalled Crossfire Hurricane personnel taking any action to vet the Clinton Plan intelligence,” the report noted. The Clinton campaign helped bankroll the notorious Steele dossier, which made sweeping, unsubstantiated, and salacious accusations against Trump. The FBI, which was apparently willing to pay any price to defeat Trump, offered former British spy Christopher Steele $1 million in cash if he could prove the charges in that dossier before the 2016 election. There was no proof—but that didn’t stop the FBI from using the dossier to get warrants to spy on Trump campaign officials from the Foreign Intelligence Surveillance Court. “The FBI discounted or willfully ignored material information that did not support the narrative of a collusive relationship between Trump and Russia,” the report noted. As FBI analysts began to recognize that the Steele dossier was a hoax, FBI bosses ordered “no more memorandums were to be written” analyzing its claims.

After the election, FBI officials devoted themselves to crippling Trump’s presidency with fabricated evidence that Russia massively intervened to help him win. Kevin Clinesmith, a top FBI lawyer, was convicted for falsifying evidence to secure a FISA warrant to unjustifiably target Trump campaign officials. A federal prosecutor declared that the “resulting harm is immeasurable” from Clinesmith’s action. But federal judge James Boasberg conducted a “pity party” at the sentencing, noting that Clinesmith “went from being an obscure government lawyer to standing in the eye of a media hurricane…Clinesmith has lost his job in government service—what has given his life much of its meaning.” Scorning the prosecutor’s recommendation for jail time, the judge gave Clinesmith a wrist slap—400 hours of community service and 12 months of probation.

Though the Durham report vivifies the extent of FBI meddling in the 2016 election, Americans remain in the dark about the full extent of the FBI’s efforts to rig the 2020 election. In December 2019, FBI agents came into possession of a laptop that Hunter Biden, the drug-addicted son of Democratic presidential candidate Joe Biden, had abandoned at a Delaware computer repair shop. That laptop’s hard drive was a treasure trove of crimes, including evidence that Hunter and other family members had collected millions in payments from foreign sources for providing access in Washington and other favors. That laptop provided ample warnings of how Joe Biden could be compromised by foreign powers. But FBI bosses blocked their agents from investigating its contents until after the 2020 election. Senator Charles Grassley (R-IA) reported that FBI agents examining the evidence on Hunter Biden “opened an assessment which was used by an FBI headquarters team to improperly discredit negative Hunter Biden information as disinformation and caused investigative activity to cease.”

When news finally leaked out about the Hunter Biden laptop in October 2020, 51 former intelligence officials effectively torpedoed the story by claiming that the laptop was a Russian disinformation ploy. Their letter was orchestrated by Biden presidential campaign advisor—and current Secretary of State—Anthony Blinken. The FBI knew that the laptop was bona fide but said nothing to undercut the falsehoods made by the former spooks. Twitter and other social media outlets suppressed information on the Hunter Biden laptop until after the election. Matt Taibbi and other Twitter Files investigators have provided a torrent of evidence of how the FBI censored Americans prior to the 2020 election, almost always muzzling conservative voices.

Special Counsel John Durham asserted that the FBI’s abuses in the Clinton and Trump investigations caused the agency “severe reputational harm.” But Congress just awarded the FBI a record budget, and that is the only “reputation” that matters inside the Beltway.

Democrats and other Biden allies are treating the Durham report as a nothing-burger. The Washington Post fretted that the Durham report “may fuel rather than end partisan debate about politicization within the Justice Department and FBI.” The FBI announced that it had taken “dozens of corrective actions” to prevent similar “missteps” in the future. Law professor Jonathan Turley scoffed that the FBI’s statement “is ample evidence of a lack of remorse by the FBI like a habitual offender giving a shrug in his court ‘allocution’ before a judge.”

When getting caught trying to steal an election is a mere “misstep,” it will happen again. How many years will it take until we learn all the details of how the FBI tampered with the 2020 election?

Unless Congress and federal courts rein in the FBI, there needs to be a change in inaugural festivities. Instead of invoking “the will of the people,” will future presidents candidly tout “the will of the FBI”? If that happened, a big swath of the Washington press corps would probably stand up and cheer for their favorite agency.

Bernie Sanders Is Angry About Wealth

by Trenton Hale | May 17, 2023 | Economics, Featured Articles, Politics

Bernie is at it again folks. Recently, the Democratic senator proposed that the government confiscate all the money that a person makes above $999 million. This came about from an interview with Chris Wallace discussing his new book, It’s OK to Be Angry About Capitalism.

This is nothing new for Bernie, as he is known for his criticisms about billionaires. In fact, he has called for abolishing the very concept of billionaires in the past. He argued on the campaign trail in 2019, “There should be no billionaires. We are going to tax their extreme wealth and invest in working people.”

The idea of taxation is conceptionally immoral. The idea of any group of people, including the government, coming along and saying, “Give us your money or we are going to throw you in jail or inflict violence on you,” is coercion. Yet, that is what the government engages in.

Apart from its immorality, taxation is a tool used to discourage production.

In his classic book, Economics in One Lesson, Henry Hazlitt demonstrates this in an extraordinary manner. If a corporation is allowed to lose every cent of the dollar it loses while only able to keep a portion of the dollar it gains, it makes it harder to adequately offset its years of losses against the years of gain. This restricts its ability to expand. It also deters people from entering the business. Hazlitt wrote:

“When a corporation loses a hundred cents of every dollar it loses, and is permitted to keep only fifty-two cents of every dollar it gains, and when it cannot adequately offset its years of losses against its years of gains, its policies are affected. It does not expand its operations, or it expands only those attended with a minimum of risk. People who recognize this situation are deterred from starting new enterprises.”

This leads to better-equipped factories and product improvements to come about much slower than they otherwise would.

Hazlitt also mentions that if someone was taxed at 50, 60, or 70 percent, then they will begin to ask themselves why they ought to work six-nine months of the year for the government and six-three months for themselves and their families. They’ll conclude that taking risks with their capital is foolish.

An article published by the Boston Review examined the potential effects of a wealth tax. To the surprise of no one, their findings are that its implementation would hurt the economy.

They concluded that a wealth tax could drive billionaires to other countries and denounce their United States citizenship. This way, they can enter a country that allows them to maintain more of their money that they have earned. While Sanders and Senator Elizabeth Warren have suggested an exit tax, it would be inefficient if they will earn more money elsewhere with the exit tax then in the United States.

Furthermore, they could avoid the exit tax is they were to lower “the assessed value of their assets for the single year in which they leave.”

This and other aspects are what would cause “the overall U.S. economy will be weaker, the country as a whole will be poorer, and Americans will have less access to innovative companies and high-paying jobs.”

A wealth tax on billionaires would also have unintended consequences on workers as well.

This policy would leave wealthy businesses with less money to invest, so their employees would have less capital to work with. This would result in lower wages for the workers than otherwise. This is why the Tax Policy Center estimates a wealth tax would cause 60% of the burden to fall on workers.

Unfortunately, fifteen European countries did not understand this and implemented their own wealth taxes. However, almost all of them abolished it because it was such a failure.

When France introduced their wealth tax between 1988 to 2006, about €200 billion was lost in capital flight every year. It has been estimated that the tax reduced GDP growth by 0.2 percent per annum while shifting the tax burden from wealthy taxpayers leaving France onto others.

Sweden, one of Bernie’s favorite countries, abolished their wealth tax in 2016 after many billionaires avoided it and the policy generated almost no economic growth in the country. They saw abolishing the tax as a step towards boosting low levels of investment, encourage entreprenurial activity, and increase employment.

Some will protest the claims made above by claiming that under President Dwight Eisenhower in the 1950s, the rich were taxed at 91% and the economy still had good economic growth. This has been spread by progressives like self-described Democratic Socialist Alexandria Ocasio-Cortez.

What AOC and others get wrong is that the 91% was their marginal tax rate. Their effective tax rate was much lower at just 46%, due to the use of deductions and other legal techniques to reduce one’s overall tax burden.

To our country’s credit, burdensome and prosperity destroying policies like a wealth tax have not gained mass popularity in the United States like in Europe. The intrusive socialism that Bernie Sanders stumps for was rejected by Democratic voters in 2016 and 2020, proving that Americans may not be as angry about capitalism as Bernie hopes.

TGIF: Ducking Hayek

by Sheldon Richman | May 12, 2023 | Economics, Featured Articles, Justice, Libertarianism, Politics, Sheldon Richman, TGIF

May 8 marked the 124th anniversary of the birth of F. A. Hayek, the 1974 Nobel-winning economist of the Austrian school. (He died in 1992.) That makes it a good time to acknowledge one of his many contributions, his epistemic case for the free and competitive market order. It’s well-suited to the information age.

One of Hayek’s best-known articles was published in 1945 in the American Economic Review: “The Use of Knowledge in Society” (reprinted in Individualism and Economic Order). He got right to the point:

What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic. That is, the answer to the question of what is the best use of the available means is implicit in our assumptions….

This, however, is emphatically not the economic problem which society faces…. The reason for this is that the “data” from which the economic calculus starts are never for the whole society “given” to a single mind … and can never be so given.

The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is … a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know.

This is an important matter of course. In a world of scarcity and incomplete knowledge, where much vital information is not “data” at all but unarticulated “knowing how,” we don’t want resources and labor services used in just any old way. Rather, we want them put to the best use in the eyes of diverse and fickle consumers — and at the lowest cost possible so can we have more goods and more choices. We also want inevitable errors in production to be readily discovered and corrected. Finally, in a division of labor we want coordination to be as easy as possible.

Can we have all that? Fortunately a solution is available.

Thus Hayek wrote:

Fundamentally, in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to coördinate the separate actions of different people in the same way as subjective values help the individual to coördinate the parts of his plan….

We must look at the price system as such a mechanism for communicating information if we want to understand its real function…. The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action…. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement.

He illustrated the point by describing how consumers and producers tend to economize on a material (he used tin) when the price goes up, even though only a few people know why the price has gone up. The price rise will encourage people to use less and or to use known substitutes and even discover substitutes. Others will be induced to search for new supplies of that material using new technology. Innovation will result. An economy run by politicians cannot approach this process.

What the price system accomplishes when left free is no mean feat. It makes longer and more prosperous lives possible for everyone. In a world of eight billion people, the unsexy price system is literally a lifesaver on a mass scale. Keep that in mind when politicians and activists call for interference with production and commerce.

We can’t acknowledge Hayek’s contribution without also paying tribute to his teacher Ludwig von Mises, which Hayek indeed did in other articles. For example, “Professor Mises’ [1920s critique of socialism] represents the starting point from which all the discussions of the economic problems of socialism, whether constructive or critical, which aspire to be taken seriously, must necessarily proceed.” Hayek, who had favored socialism before he met Mises, also wrote that Mises’s “central thesis could not be refuted.” (Hayek, “Socialist Calculation I: The Nature and History of the Problem,” in Individualism and Economic Order.)

Hayek was referring to Mises’s 1920 pathbreaking paper, “Economic Calculation in the Socialist Commonwealth,” and his 1922 book, Socialism: An Economic and Sociological Analysis. Mises’s fundamental point, which logically precedes Hayek’s later addition, was that without real, honest market prices for all inputs, the economic calculation required for rational and efficient mass production would be impossible. And, he went on, you can’t have honest market prices without private ownership and markets in resources and producer goods. (The Marxists sought the abolition of private property.) Flourishing and even life itself thus depend on prices and their prerequisites — prices that cannot be ascertained or even generated except in the market, where producers and consumers act according to their personal and often improvised preferences, make unpredictable discoveries about what circumstances they prefer, and choose among real, not hypothetical alternatives. Bureaucrats and economists cannot simulate this process, no matter how powerful their supercomputers are.

This critique was devasting to all forms of socialism (including fascism), and history has proved Mises and Hayek correct. Remember, socialism was supposed to be the all-around better way to deliver prosperity to all.

Many people who should know better pretend that Mises and Hayek never found these flaws in socialism. Shame on them. As for others who say they favor socialism, what’s concerning is not that they’ve heard Mises’s and Hayek’s critiques and answered them, but that they have never heard them at all! Enter the libertarians.