Note the scare quotes Hayek uses! The full quote reads: "'Emergencies' have always been the pretext on which the safeguards of individual liberty have been eroded -- and once they are suspended it is not difficult for anyone who has assumed such emergency powers to see to it that the emergency persists." (Hayek, Law, Legislation and Liberty, Vol. 3, 1979, 124, emphasis added). I added the emphasis, just as I am stressing the scare quotes, for a simple reason -- in my reading of the history of political economy that are two glaring errors that are committed -- Romance on the one hand, and Cynicism on the other. Romance lead us astray by framing political leaders as saintly geniuses, whereas Cynicism leads us astray by framing the system as completely corrupt and devoid of any
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Note the scare quotes Hayek uses! The full quote reads: "'Emergencies' have always been the pretext on which the safeguards of individual liberty have been eroded -- and once they are suspended it is not difficult for anyone who has assumed such emergency powers to see to it that the emergency persists." (Hayek, Law, Legislation and Liberty, Vol. 3, 1979, 124, emphasis added).
I added the emphasis, just as I am stressing the scare quotes, for a simple reason -- in my reading of the history of political economy that are two glaring errors that are committed -- Romance on the one hand, and Cynicism on the other. Romance lead us astray by framing political leaders as saintly geniuses, whereas Cynicism leads us astray by framing the system as completely corrupt and devoid of any hope for improvement. Nothing in the Humean dictum that in designing institutions of government we should assume all men are knaves is either descriptive or hopeless. In fact, the hope in that dictum comes from the minimizing the loss function in the design from the possibility of knaves ascending to power. It is from constructing the institutional rules of our governance such that bad men can do least harm, rather than assuming that only the best and brightest among us will rise to leadership, or that whatever system of governance we talk about it will devolve into corruption and immorality.
The position I am attributing to Hayek is one of hope through constitutional construction. This is the same hope that James Buchanan had when he published Freedom in Constitutional Contract (1977) or The Economics and Ethics of Constitutional Order (1991). Between Romance and Cynicism resides Realism in political economy. That realism is grounded in the simple proposition that people are people. As Dennis Robertson's "What Do Economists Economize On?" (1956, 154) made the point succinctly yet entertainingly when he wrote:
What does the economist economize? ' 'Tis Love, 'tis love,' said the Duchess, 'that makes the world go round.' 'Somebody said,' whispered Alice, 'that it's done by everybody minding their own business.' 'Ah well,' replied the Duchess, 'it means much the same thing.' Not perhaps quite so nearly the same thing as Alice's contemporaries thought. But if we economists mind our own business, and do that business well, we can, I believe, contribute mightily to the economizing, that is to the full but thrifty utilization, of that scarce resource Love -- which we know, just as well as anybody else, to be the most precious thing in the world.
If for our explanations of governance and social progress we rely on love to motivate all involved, Robertson reasons, we will exhaust that most precious of resource post haste. Better not go in that Romantic direction. But the alternative is not toward the Cynic, but instead go with Realism.
Realism forces us to reason through the tricky incentives that actors face in making their decisions. Realism also forces us to place the theorist in the model itself. Why do theorists choose the theories that they do, why do they make the statements that they do. The old political science "law" that where you stand is a function of where you sit, is just as true for scientists and academics as it is for Senators and Congressmen.
The tricky thing about incentives is that they are not the same as motivation. Motivation implies personal knowledge and intent, incentives are as I said "tricky" -- they play havoc with our mental models, with the way we frame things, and with those "pesky" tacit presuppositions which we hold. And CDC or FDA public health official does not necessarily have to consciously know that the worst thing they could say would be to paint an overly optimistic account of disease or a treatment option (Type 2 error), they just frame this conversation in a way that biases toward priority granted to the concern with the pessimistic outcome. The burden of proof is on the optimist because the downside risk of a false positive is far worse from where they sit than a false negative (Type 1 error). In economic terms, this is easily translated into the language of the seen and the unseen -- we see the consequences of a false positive, we do not immediately see the consequences of a false negative -- so we bias the process of avoid false positives, and result in generating a higher cognitive barrier to persuading us that an error of false negatives is being committed. In other words, the entire system is biased to catch Type 2 errors, but in so doing it increases the incidence of Type 1 errors. That has serious consequences.
The Covid-19 discussion is actually a testing ground for much of these ideas. The "emergency" could in fact just a plain old emergency -- no scare quotes. It is a public health crisis -- a classic global externality. We have had those before, in fact, this was a major problem with the growth of cities in human history. Humans are disease carriers to other humans, so how do we learn to live better together than we ever could in isolation while protecting ourselves from the externalities that other humans represent? We evolved various institutions -- formal and more importantly informal -- to provide that safety. When a novel virus is introduced, it takes some time (and the experience of tragedy) for us to adapt and adjust behavior to minimize the costs and get back to realizing the benefits of extensive social cooperation.
What Hayek is concerned about in the above passage is not denying the existence of emergencies -- remember he lived through plenty existential threats to the liberal order and devoted his career to building an intellectually robust case based on the science of economics as he understood it, and the art of political economy as it was best practiced in the long tradition from Adam Smith to J. S. Mill that he inherited for what he called true radical liberalism. The question he is raising is how vulnerable is the liberal order to calls to suspend liberalism to address emergencies, and the turning of that real emergency into "emergencies" for the sake of political privilege and power. In essence, the second half of the passage is asking a Robert Higgs type question about the ratchet effect, once we relax the safeguards to individual liberty, can we expect to get them back. In Michael Greve's The Upside-down Constitution (2012), he argues that emergencies, especially war, will overturn any constitutional constraint and will not get turned back after the emergency. It is this abandonment of constitutional principle, Greve argues, that turns competitive federalism into cartel federalism and thus in effect mutes the checkmate countervailing force and sorting mechanism that was applauded about federalism.
In various writings over the past month and half, I have tried to apply and communicate some basic principles of economics and political economy to the crisis we are collectively experiencing. We must be sensitive to the tragic consequences to individuals, families and communities that have resulted due to Covid-19, not with respect to physical health, but mental health and financial health -- in short, to human well-being both in the present and in the foreseeable future. To give one brief indicator of the absurd reversal of fortune, we went from one of the best job reports in US history a month ago to a job report expected this week that will be the worst since the height of the Great Depression -- in 4 weeks. Public health officials and Politicians can say all they want that it does not compute to them to equate human health and welfare with economic costs, but it does compute it is just that their tacit presuppositions are not built to see that, and the incentives that they face are not such that updating their priors in that direction is automatic. Armed with that tool of reasoning, however, I believe those observing can build that knowledge into their own processing of information. We all must admit that the signal to noise ratio this past month from all sources has been more confusing than clarifying. Perhaps using simple economics to make sense of the senseless isn't simple-minded in the least, but instead the most sophisticated tool we have to raise our observational capacity.
So don't be Romantic, don't be Cynical -- just be a Realist, and see people as people, those fallible yet capable creatures that when given freedom from the oppression of servitude (Crown), dogma (Altar), violence (Sword), and poverty (Plough) they unleash their creative energies and lead to improvement in not only the material conditions of humanity but physical, spiritual and interpersonal. True radical liberalism is an emancipation doctrine, and seeks to cultivate a social system that exhibits neither discrimination nor dominion, and promises a social system that strives to minimize human suffering while maximizing the chances for human flourishing. We will need to get back to this agenda once we get past this emergency but not allowing it to become the type of 'emergency' Hayek warned about.
That will require a lot more work by liberal thinkers than we might have anticipated 6 weeks ago.