23. Hayek on the Psychology of Socialism and Freedom

CHAPTER 23

Hayek on the Psychology of Socialism and Freedom*

INTRODUCTION (BY HERBERT STEIN)

Nineteen eighty-four is the eighty-fifth anniversary of the birth of Friedrich Hayek, Nobel laureate and one of this century’s great economists. This year is also the fortieth anniversary of Hayek’s best-known book, The Road to Serfdom.

The Road to Serfdom was published at a critical time. The 1930s had been a decade of exceptionally rapid increase of the economic role of government in the Western democracies, including the United States and Britain. In 1944, as the war was coming to an end, the common, expectation was that this trend would be resumed in the postwar period. The usual term for the postwar economic environment was “postwar planning,” meaning planning by government.

During the 1930s there had been little objective intellectual resistance to the movement toward increasing government controls. In the United States resistance came from Republicans, Southern Democrats, and business organizations and could be dismissed as partisan, nostalgic, or self-interested.

Hayek’s book was the opening—and the most important—shot in the intellectual resistance to the trend toward government control. Hayek argued that military victory over the Nazis and Fascists would not permanently ensure the triumph of freedom. The repulsive features of the Nazi and Fascist regimes were not the results of peculiarly German and Italian characteristics. Rather they were the results of carrying out fully the implications of a socialist way of thinking that was already present in Britain and the United States. He warned that unless we rejected that way of thinking we could follow along the same road to serfdom.

The book was an immediate sensation. It had an enormous popular audience, partly through a condensation in the Reader’s Digest, and has been translated into some sixteen languages.

If we are not now on the road to serfdom—and we do not seem to be—some of the credit for that must go to Friedrich Hayek. In salute to him we publish the following article by a distinguished student of Hayek’s work, Professor Leland Yeager of the University of Virginia.

HAYEK ON THE PSYCHOLOGY OF SOCIALISM AND FREEDOM

Now, forty years after its publication, is a good time to reconsider Friedrich Hayek’s The Road to Serfdom (1944). George Orwell’s 1984 also deserves mention, since Orwell had written a kind review of Hayek’s book before writing his own.¹

Someone reading a book again after a long interval is likely to receive a rather different message. This fact illustrates the thesis that Hayek develops in The Sensory Order (published in 1952 but derived from a paper drafted over thirty years earlier). I’d like to explain my point, and also hail Hayek’s inadequately remembered work in psychology, by first surveying that book. A further link between his books of 1944 and 1952 is that Hayek often deployed psychological insights in The Road to Serfdom to explain, for example, why certain wrong ideas nevertheless have wide appeal. Fully appreciating Hayek’s work in economics and political science requires knowing of his interest in psychology.

HAYEK’S PSYCHOLOGICAL DOCTRINES

Although The Sensory Order does not stress the connection, Hayek’s psychological doctrines do mesh well with his methodology in economics and his approach to practical affairs. A sharp distinction between theory and fact or between theory and practice is not tenable. All our actions, all our observations of fact, even all our supposedly ultimate or irreducible sense perceptions are shot through with theory. Even at the level closest to bare fact, theory is indispensable to making sense out of the world and even to perceiving it.

We never perceive unique properties of individual objects but only properties that objects have in common. Perception always involves interpretation ascribing impulses received to one or more classes. This classification is at least rudimentary theory. The qualities we attribute to experienced objects belong, actually, to the relations by which we classify them.

Examples may help. When I hear a sound or see a patch of red, neither simply exists as a distinct part of objective reality impressing itself on my nervous system. Rather, my nervous system selects certain aspects of reality accessible to my sense organs, classifies them, and organizes them into my perception of the sound or the red patch. Far from playing a purely passive role, my nervous system impresses order or character onto my perceptions and thus shapes and in a way even creates them.

What aspects of reality can affect my sense organs and how its effects shape themselves into perceptions depend on the state of those organs, of my nervous system, and indeed of my entire body. The role of the physical body is obvious. Unlike a dog, I cannot perceive certain smells or high-pitched sounds. Unlike me, the dog cannot recognize and so cannot perceive words in a conversation or on a printed page.

Biological processes and natural selection have presumably shaped organisms in such ways that their perceptions possess an order corresponding to whatever order may exist in the world. Organisms that frequently confused hot and cold, small and large, near and far, up and down, hunger and satiety, wolf and bush would be less likely to survive and reproduce than ones whose perceptions corresponded better to reality. Among higher organisms, actions conforming to principles of logic would have greater survival value than actions clashing with logic.

We see some possible truth, then, in Immanuel Kant’s contention that human beings can have knowledge prior to experience. Quibbling, we might narrow that contention down. People do not have any a priori knowledge in an articulated form. What they more plausibly have are predispositions to behave as if they had certain knowledge and predispositions to recognize and become able to articulate it.

In Hayek’s interpretation, experience is involved in knowledge, after all, but it is not restricted to experience obtained by the individual organism itself. Rather, it includes the experience of the species and its ancestors as embodied, through biology and natural selection, in each individual’s genetic and physiological makeup. The individual human being inherits the experience of his ancestors not only through biological but also through cultural processes, notably through language. Language increases his capacity for discrimination in dealing with new experience. Language is itself the product of interwoven biological and cultural evolution.

Still another type of experience besides his own direct current experience helps shape the individual’s current perceptions. His own past experience does so by having affected physical and chemical conditions within his body, such as nerve connections governing the travel of impulses to and from the brain. People do not first have sensations that are then preserved by memory. Rather, it is as a result of physiological memory that physiological impulses received are converted into sensations.

We need not go into what Hayek says further about physiology and about what experiments do or would tend either to support or to refute his theory. It is worth mentioning, though, that while Hayek (like almost all scientists) is a mechanist as opposed to a vitalist, he is no reductionist. He does not believe that the life sciences and social sciences can be “reduced” to physics and chemistry in such a way as to recommend banishing the language of seeing, hearing, thinking, consciousness, purposes, intentions, decisions, and actions and requiring all propositions about such matters to be phrased exclusively in physical and chemical terms instead.

Hayek argues, in short, that the individual’s cognitive apparatus, shaped by his biological and cultural inheritances and by his own past experiences, brings a predisposition to each new situation to perceive it and organize its aspects in particular ways. No such thing operates as raw, pure, unfiltered perception. Rather, the observer largely shapes what he perceives.

Knowledge does indeed have an a priori aspect then (though its nature and sources are not quite what Kant had supposed). It is not true that all we know must be subject to confirmation or contradiction by sense experience, that is, by current or future sense experience. At least part of what we know at any moment about the external world is implicit in the means through which we can obtain experience.

Many observations tend to support or illustrate Hayek’s theory, or at least to provide illuminating parallels. George Stigler and Gary Becker (1977), in a well-known methodological article, tacitly accept something like the theory. They warn against hastily chalking up a change in a person’s behavior to a change in his tastes. They recommend postulating a stable basic structure of tastes within which the accumulation of experience may alter the response even to otherwise unchanged circumstances. A person may respond differently than before to a given set of opportunities, including perhaps prices, if in the interval he has acquired, for example, more “music appreciation capital.”

When one uses a foreign language, particularly over the telephone, what he hears—not just understands, but even hears—depends on how well he knows the language, that is, on his previous experience.

Hayek’s theory, along with Leon Festinger’s theory of cognitive dissonance, helps explain why many people cannot recognize the worst source of cruelty, predation, and mortal peril in the world today and instead dump the blame onto those Western statesmen who do identify the evil and call for adequate defense. Those theories also help explain why certain economists who trumpet their supposed empirical orientation nevertheless cannot see which of their favorite postulates are falsified by facts and cannot see how substantial or how slight the results are that their favorite methods have yielded. Admittedly, it may be I, not the people I am criticizing, who is wrong; but then my errors would still illustrate the central point that the experiences and the mind set one brings to a cognitive situation affect not only one’s interpretation of it but even what one can see.

Many writers have presumably been criticized, as I have, for views they had not expressed. Their readers evidently could not perceive, unfiltered, what they were saying. Rather, the readers classified the material in their own preexisting pigeonholes. They then reacted to what their filing systems accommodated, not just to any bare substance of what had been said.

The message that a reader draws from a book follows partly from the experiences he brings to it, including his past reading. That is why a book reread after a long interval may make a different impression than before.

THE ROAD TO SERFDOM

That is how The Road to Serfdom has affected me. The book’s central message is, of course, hard to miss: Socialism, in the sense of collective ownership of the means of production and central direction of economic life, entails loss of personal freedom. What came more strongly to my attention is Hayek’s concern with political institutions and incentives and also with linkages of ideas. Since I had also been sensitized in the meanwhile to Hayek’s interest in psychology, the same is true of his many psychological insights.

These, in The Road to Serfdom, are insights of “literary” psychology (“thymology,” as Ludwig von Mises called it) rather than of the technical discipline. Hayek stresses the influence of beliefs and attitudes and explores reasons why people hold them.

Specialists tend to be enthusiastic for central planning because they tacitly assume that the planners will, like themselves, be intelligent persons having sensible scales of values and so understanding the special importance of each particular specialist’s favorite goal. (Examples might be education, environmental protection, high technology, mass transportation, or more nearly equal distribution of income and wealth.) Accordingly, an apparent consensus in favor of planning is likely to be spurious, for the different enthusiasts will have different visions of the plan to adopt.

What “gives the demand for planning its strongest impetus,” says Hayek, is “the resentment of the frustrated specialist” (1944/1956, p. 55). No single economic factor has contributed more to help Fascist and National Socialist movements “than the envy of the unsuccessful professional man, the university-trained engineer or lawyer, and of the ‘white-collared proletariat’ in general, of the engine driver or compositor and other members of the strongest trade unions whose income was many times theirs” (p. 116).

Another source of discontent with the market economy is a vague resentment at often having to pay a material cost to serve higher values—“life and health, beauty and virtue, honor and peace of mind.” People resent “having the higher values of life brought into the cash nexus’.” At bottom, and without realizing it, what they resent is the economic problem—the inexorable fact of scarcity and the need to make choices (pp. 97-98)

Hayek describes the attitude, cultivated in the Germany that eventually put Hitler in power, that something disreputable attaches to taking economic risks and making profit: “to employ a hundred people is represented as exploitation but to command the same number as honorable” (pp. 130-131).

In a complex civilization with a developed market economy, many people will not understand why they must adjust to changes of unknown source and nature, as by shifting occupations, or why some things they desire should become harder to obtain than in the past. They do not understand that “the only alternative to submission to the impersonal and seemingly irrational forces of the market is submission to an equally uncontrollable and therefore arbitrary power of other men” (p. 205).

One famous piece of Hayek’s psychologizing is his chapter on “Why the Worst Get on Top.” In a system in which achieving wealth and position depends less than it does in a market economy on satisfying the wants of one’s fellows through voluntary transactions, ambitious people have more scope for pandering to popular resentments and prejudices and to the vanity and power-hunger of their superiors. Opportunities for the unscrupulous, ruthless, and uninhibited (including people not inhibited by concern for truth) will be relatively greater. Hayek (p. 152) quotes Frank Knight: “the probability of the people in power being individuals who would dislike the possession and exercise of power is on a level with the probability that an extremely tender-hearted person would get the job of whipping-master in a slave plantation.”

It helps describe The Road to Serfdom to compare it with a book published in Switzerland four years later whose author repeatedly cites Hayek: Walter Adolf Jöhr (1948), Ist ein freiheitlicher Sozialismus möglich? (Is Socialism with Freedom Possible?). Hayek’s is the longer book, though both are short (248 pages plus introductions versus 137 pages). Jöhr sticks more closely to systematic analysis of what economic and other aspects of society are or are not likely to be compatible with one another; he aims rather narrowly at answering the question posed. His answer turns out “No.” He cites, and rejects, published efforts to reconcile socialism and freedom by redefining one or both terms. He explains why a centrally directed economy would destroy economic freedoms, why economic and other freedoms cannot be sharply separated, and why political and cultural freedoms would therefore suffer also. He shows why losses of some freedoms are unlikely to be outweighed by gains of others. Decentralized socialism and partial socialism would have difficulties of their own and would experience pressures to evolve toward fuller-fledged socialism.

The two books are complementary. Hayek covers much the same ground as Jöhr, but in a looser, more discursive, less narrowly analytical way; he argues more by piling up plausible insights. He also ranges more widely. He diagnoses more trends and draws more parallels. He points out, for example, that the rise of fascism and Nazism was not a reaction against socialist trends but rather their extension.

The intensity of the moral emotions behind a movement like that of National Socialism or communism can probably be compared only to those of the great religious movements of history. Once you admit that the individual is merely a means to serve the ends of the higher entity called society or the nation, most of those features of totalitarian regimes which horrify us follow of necessity... . When German philosophers again and again represent the striving for personal happiness as itself immoral and only the fulfilment of an imposed duty as praiseworthy, they are perfectly sincere, however difficult this may be to understand for those who have been brought up in a different tradition. (Hayek 1944/1956, p. 149)

Besides delving into psychology, Hayek goes further than Jöhr into the history and interconnections of ideas. He makes more allusions to people, events, and literature. He considers the allegedly inexorable decline of competition and the supposed necessity of planning for that reason. He describes the positive accomplishments of a price system. Anticipating chapter 6 of his The Constitution of Liberty (1960), he presents the case for allowing market incentives to guide the allocation of resources, effort, and risk-bearing rather than trying to make the distribution of income correspond somehow to judgments of moral merit.

The Road to Serfdom foreshadows many of Hayek’s later writings and could serve as an introduction and summary. Over his lifetime his work shows continuity. In his writings, as I know them, he has had to reverse himself on remarkably little. This is not to say that he is stuck in a rut, reciting earlier formulations—not at all. His thought has developed, but largely through his deepening of earlier insights and extending them to new fields. With regard to the degree of economic intervention he favors, he has evolved if anything in a laissez-faire direction, as illustrated by his proposals for taking even the monetary system out of the clutches of government.

The Road to Serfdom explains the perverse consequences of government measures to shelter individual sectors of the economy against the adverse impact of change. Already in 1944, Hayek had begun to grasp some points later elaborated by Mancur Olson in his The Rise and Decline of Nations (1982). The longer a society enjoys peace and stability, the better organized economic interest groups become and the more successful in lobbying the government for special privilege and for protection against domestic and foreign competition. Economies become sclerotic, with adverse consequences for productivity, growth, and macroeconomic performance. Olson was able to explain much recent economic history with this simple insight.

Hayek had already explained how anticompetitive restrictions impose all the more of the burden of change on occupations outside the favored ones.

In consequence, instead of prices, wages, and individual incomes, it is now employment and production which have become subject to violent fluctuations.... Few catchwords have done so much harm as the ideal of a “stabilization” of particular prices (or wages), which, while securing the income of some, makes the position of the rest more and more precarious. (1944/1956, p. 129; cf p. 45).

Hayek’s warning that socialism endangers freedom is widely recognized as valid nowadays. Already in the foreword to his 1956 edition, Hayek recognized that “hot socialism is probably a thing of the past” and that a “hodge-podge of ill-assembled and often inconsistent ideals” labeled the Welfare State had “largely replaced socialism as the goal of the reformers” (p. ix). Few prominent English-speaking economists actually advocate socialism any longer. Exceptions like J. K. Galbraith and Robert Lekach-man do come to mind, but it is not clear—not to me, anyway—just what they mean by socialism. Politicians still advocating socialism in developed countries, like Francois Mitterrand in France, no longer mean full-fledged socialism, but rather a welfare state, with redistributionist measures and only limited nationalization of industry. Hayek is right: hot socialism is dead.

I do not say that people now reject socialism because they have directly absorbed Hayek’s message. Rather, his arguments have been in the air and have worked indirectly. Experience at first or second or nth hand has oozed into people’s consciousness. In the forty years since 1944, the world has observed socialism in Soviet-bloc and third world countries. But it has not seen personal freedom coexisting with full-fledged socialism. As Hayek wrote already in 1944, “‘liberal socialism’ as most people in the Western world imagine it is purely theoretical, while the practice of socialism is everywhere totalitarian” (p. 141). Failure to observe freedom under socialism is no mere accident.

If we in the developed countries eventually wind up socialist after all, we will have done so unintentionally. Especially in his later writings (Hayek 1978 and 1979), Hayek has foreseen how this might happen. The irresponsibility flourishing in democratic politics could accommodate excessive demands for special governmental favor and protection against competition, hamper enterprise, swell government budgets and deficits, bring debt monetization and price inflation, and bring counterproductive attempts to fight inflation with direct controls. Capitalism could seem to have failed, and opportunistic politicians would offer governmental remedies. Actually, what would have failed would be the inflation-prone, intervention-ridden economy and the political system responsible for those ills.

Hayek (1973/1979) has recognized such dangers and has recommended political reforms. Already in The Road to Serfdom he anticipated his later and fuller diagnoses of flaws in the political system. He explained the nature of democracy and why one should not make a fetish of it (pp. 70-71), the impossibility of working out a coherent economic plan democratically (pp. 61—68), and why planning is incompatible with the rule of law (pp. 72—87).

Will we still blunder into socialism and totalitarianism through the back door—through exploitation of government power by special-interest groups run amok, overburdening of government, rigidification of the economy, inflation and stagflation and misconceived measures against them, slowdown of productivity growth, and, in general, a botch from which demagogues and power-seekers can make hay? Our chief hope is that we will combine and absorb the teachings of F.A. Hayek and of the public-choice school, led by James Buchanan, and put them into practice before the opportunity runs out.

REFERENCES

Hayek, F.A. The Sensory Order. London: Routledge & Kegan Paul, 1952.

———. The Road to Serfdom. 1944. Chicago: University of Chicago Press, Phoenix Books, 1956.

———. The Constitution of Liberty. Chicago: University of Chicago Press, 1960.

———. New Studies in Philosophy, Politics, Economics, and the History of Ideas. Chicago: University of Chicago Press, 1978.

———. The Political Order of a Free People. Vol. 3 of Law, Legislation, and Liberty.

1973. Chicago: University of Chicago Press, 1979.

———..A Tiger by the Tail. Compiled by Sudha R. Shenoy. San Francisco: Cato

Institute, 1979.

Jöhr, Walter A. Ist ein Freiheitlicher Sozialismus Möglich? Bern: Francke, 1948.

Olson, Mancur. The Rise and Decline of Nations. New Haven, Conn.: Yale University Press, 1982.

Stigler, George, and Gary Becker. “De Gustibus Non Est Disputandum.”American Economic Review 67 (March 1977): pp. 76—90.

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*From AEIEconomist (November 1984): 1-5.

¹Hayek mentions Orwell’s review in a new foreword to The Road to Serfdom (Hayek 1944/1956, p. viii n.).