Tuesday, June 29, 2010

Friedrich von Hayek . . . Collectivist?

The Austrian School economist Friedrich von Hayek a collectivist? What next? Pope Benedict XVI a Satanist? The Dalai Lama the secret leader of the local Hell's Angels? Come on!

No, really. Today we received our copy of Contra Keynes and Cambridge: Essays, Correspondence in "The Collected Works of F. A. Hayek." We purchased it from the used book exchange, abebooks.com, because we couldn't find a copy of von Hayek's 1930 critique of John Maynard Keynes's A Treatise on Money on the internet, and the critique is included in this book.

We were already aware that von Hayek believed Keynes to be too collectivist. This, of course, begs the question — how much collectivism is acceptable? How about individualism? Why not act in accordance with humanity's unique political nature and act in a manner consistent with humanity's individual and social nature?

It came as something of a surprise, then, to discover that von Hayek missed the most collectivist statement in the entire Keynesian Kanon. It occurs at the very beginning of the first volume of A Treatise on Money, on page 4 of the edition in our library:
It is a peculiar characteristic of money contracts that it is the State or Community not only which enforces delivery, but also which decides what it is that must be delivered as a lawful or customary discharge of a contract which has been concluded in terms of the money-of-account. The State, therefore, comes in first of all as the authority of law which enforces the payment of the thing which corresponds to the name or description in the contract. But it comes in doubly when, in addition, it claims the right to determine and declare what thing corresponds to the name, and to vary its declaration from time to time — when, that is to say, it claims the right to re-edit the dictionary. This right is claimed by all modern States and has been so claimed for some four thousand years at least. It is when this stage in the evolution of Money has been reached that Knapp's Chartalism — the doctrine that money is peculiarly a creation of the State — is fully realized. (John Maynard Keynes, A Treatise on Money, Volume I: The Pure Theory of Money. New York: Harcourt, Brace and Company, 1930, 4.)
How could von Hayek miss the implications of this breathtaking declaration of State absolutism? State absolutism? Absolutely! What else would you call the alleged power to change reality by "re-editing the dictionary"?

Instead, von Hayek stated, "Book I gives a description and classification of the different kinds of money which in many respects is excellent. Where it gives rise to doubts or objections, the points of difference are not of sufficient consequence to make it necessary to give them space which will be much more urgently needed later on." (Friedrich von Hayek, "Reflections on the Pure Theory of Money of Mr. J. M. Keynes," Contra Keynes and Cambridge. Indianapolis, Indiana: Liberty Fund, Inc., 1995, 123.)

Von Hayek's clear statement that he sees no real problem with Keynes's stunningly collectivist definition of money reveals where the essential problem lies. By mis- or redefining money from "anything that serves as the medium of exchange and can be used in settlement of a debt," to "peculiarly a creation of the State," both Keynes and von Hayek accept the effective abolition of private property. This is accomplished by separating money — whether current money ("currency") or any other form, including barter — from the present value of existing and future marketable goods and services. By abolishing private property, the groundwork is laid for the creation and maintenance of the most perfect totalitarian collectivist State ever imagined.

Say . . . who was that guy in the yellow bed sheet with the embroidered skull and crossbones who just zipped by on that Harley?

#30#

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