Manhattan Institute organises annual Hayek Lecture.
The 2012 winner was John Taylor. Here is his speech on the occasion titled as Road to recovery (based on Hayek’s famed book – road to serfdom).
Taylor connects his rule based policies to Hayek’s freedomm ideas which also relied on consistent rules:
Few thinkers of the past century understood the importance of economic freedom better than the Austrian economist Friedrich Hayek did. As we confront our current situation, Hayek’s work has much to tell us, especially about policy rules, the rule of law, and the importance of predictability—topics that he discussed in his classic The Road to Serfdom (1944) and in greater detail in The Constitution of Liberty(1960). But his work in these areas goes beyond economics into fundamental issues of freedom and the role of government. That’s why reading Hayek is more important than ever.
As Hayek would insist, we need to be careful about what we mean by economic freedom. The basic idea is that people are free to decide what to produce, what to buy, where to work, and how to help others. The American vision, as I explain in my book First Principles, held that people would make these choices within a policy framework that was predictable and based on the rule of law, with strong incentives emanating from a reliance on markets and a limited role for government. Historically, America adhered to these principles more than most countries did, a major reason why the nation prospered and so many people came to these shores.
But we haven’t always followed the principles consistently.
What follows is how US policies have not followed rules in certain times. Whenever rules have followed, results have been good and when discretion has followed, results have been bad. Much of this is based on Taylor’s earlier research on the topic.
In the end he says:
Is today’s departure from economic freedom any less serious than the assault on freedom that Hayek wrote about in The Road to Serfdom? Am I exaggerating when I say that the future of American prosperity—or even global prosperity—is at stake?
While central planning may not be the right term for it, consider the 2010 health-care law, which gave the federal government the power to mandate the terms of everyone’s health-insurance package and which created an Independent Payment Advisory Board to determine the price, quantity, and quality of the medical services—from number of MRIs to the necessary accuracy of CT scans—that a medical professional provides. Is that so different from the way centrally planned economies determine the price, quantity, and quality of livestock, wheat, or steel that can be produced? Or consider monetary policy. A few years ago, I coined the term “mondustrial policy” to describe the Fed’s practice of quantitative easing, which combined industrial policy (discretionary assistance to certain firms and industries) with monetary policy (printing money to finance that assistance). Since then, the Fed has purchased $1.25 trillion of mortgage-backed securities. In fiscal year 2011, it purchased 77 percent of the newly issued federal debt, long after panic conditions had subsided.
Hayek argued that inflationary monetary policy undermines economic freedom, in part because it hits the elderly and the poor particularly hard, rationalizing more discretionary interventions. Though the inflation problem is less severe now than in the 1970s—at least so far—the impact of the Fed’s multiyear, zero-percent interest-rate policy resembles that of the Great Inflation era: it significantly cuts real incomes for those who have saved over a lifetime for retirement.
By moving away from the basic principles of economic freedom, government policy has caused our recent economic malaise. It should be no consolation that some of our friends in Europe are facing worse economic struggles, often because they moved even further away from those principles. The good news is that a change in government policy will alleviate the problems and help restore economic prosperity. Understanding Hayek’s work, written during similar circumstances, will help us greatly as we undertake that difficult task.
The debate on “Hayek’s true ideas” expected to continue forever…
