WHAT COULD KARL SMITH BE THINKING?

According to economist Karl Smith, one of the things that Hayek explains in his Road to Serfdom is why “there is nothing fundamentally wrong with communal ownership of the means of production.”

And, yes, you did read that right.

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6 Responses to WHAT COULD KARL SMITH BE THINKING?

  1. It’s incredible how he misinterprets the passage he quotes. It’s as if he never heard of Hayek’s “knowledge problem”, or the socialist calculation debate in general. He doesn’t take it as a criticism of socialism, rather a reaffirmation of its possibility.

  2. Karl Smith says:

    Jonathan,

    They key point – one that seems wildly missed by so many current Hayek fans – is that Socialism as Hayek used it is about the planning and direction of resources.

    This is entirely separate and distinct from the ownership of resources. Indeed, in our society most resources are directed by professionals who do not own them. This is what the entire subject of corporate governance is concerned with.

    Even more to the point this is clearly as Hayek points out a practical problem. That is, it is simply not possible to do this in an efficient, effective and liberal manner. That is different from saying that we shouldn’t redistribute income as a matter of principle.

  3. Greg Ransom says:

    Karl, as Hayek argues in _Law, Legislation & Liberty_ these actually are NOT separate issues. The considerations that Hayek assembles in _Road to Serfdom_ also show that a redistribution of resources cannot be done in a principled manner, and that the political system will devolve into a system where resource distribution is used to bribe and reward privileged groups in order to acquire and maintain power.

    Karl writes,

    “Even more to the point this is clearly as Hayek points out a practical problem. That is, it is simply not possible to do this in an efficient, effective and liberal manner. That is different from saying that we shouldn’t redistribute income as a matter of principle.”

    Note also that Mises original argument against socialist calculation explains why calculation via prices requires property rights — the knowledge problem is NOT separate and distinct from the issue of the ownership of recourses.

    And I should remind you that core aspects of the academic literature on “corporate governance” derive in a direct genealogy from the literature on socialist calculation and the knowledge problem pioneered by Mises and Hayek.

  4. Greg Ransom says:

    This really isn’t so. What is required is multiple independent economic actors — and Hayek clearly argues that this is only possible where there are distinct owners with secure property rights following consistent rules. In other words, these issues aren’t at all independent.

    I really think you need to read Hayek again, and read some serious academic Hayek, not simply his popular political track from 1944. If you’ve read more Hayek than that, I don’t know what to say.

    Karl writes,

    “Socialism as Hayek used it is about the planning and direction of resources.

    This is entirely separate and distinct from the ownership of resources.”

  5. Luis Da Silva says:

    In my view there is plenty of confusion and sleight of hand in Smith’s reading of Hayek.

    He uses an artificial distinction between principle and practice to say that according to Hayek communal ownership of the means of production is OK, but unworkable. Hayek demonstrates that forced redistribution is inimical to the liberal principles supposedly held by socialists – this shows that forced redistribution of capital wealth is inconsistent with liberal principles and thus wrong IN PRINCIPLE.

    But I find even more outrageous Karl Smith’s implication that in Hayek’s view “in principle it would be okay to completely redistribute all capital wealth”.

    It is at least misleading to refer to the widely distributed ownership of today’s corporations, which has arisen from voluntary transactions among many individuals, each serving their own ends, as an indication that communal ownership ‘is OK’, and then proceed to say that it is okay to ‘completely redistribute (a process that is NOT voluntary but necessarily forced) all capital wealth’ – even more so, to attribute this view to Hayek.

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