Constitution of Liberty Part II… Please Click Here and scroll to the bottom of the page to add a comment.

This is the 2nd part of my discussion of Frederick Hayek’s  The Constitution of Liberty Chapter 5, and the book’s remarkable foresight concerning the current assault on free markets and liberty.


The Great Man himself

The Great Man himself


So continuing on from my previous post, how else does this dissertation on individual responsibility tie in with current events?  In one word-entrepreneurialism.  How about the current legislation on “tax cuts” for those not paying taxes, and the inverse relationship taxes have on motivation and risk assumption?

Regarding motivation, Hayek says:  “Yet there can be no doubt that the discovery of a better use of things or of one’s own capacities is one of the greatest contributions that an individual can make in our society…  Whoever leaves to others the task of finding some useful means of employing his [own] capacities must be content with a smaller reward.”

Besides this wonderful argument for entrepreneurialism, there are additional parallels.   How about the continual debate between conservatives and liberals on risk assumption and its relationship to success?  (Or failure!)  And how about those who believe the successful should be punished by making them responsible for those unwilling to risk the consequences of their own decisions?  (Class warfare and income redistribution.)  This is another great tie between Hayek’s ideas in The Constitution of Liberty and our current dilemma.  In other words, he says there are no guarantees in life, and government picking winners and losers in the marketplace is highly destructive.

This is a can of worms that has been opened in our recent political climate with regards to the debacle of GSEs (govt. sponsored enterprises: Fannie Mae etc.) and their unintended consequences of an unsustainable real estate bubble based on a home ownership entitlement for all regardless of credit.  This trend towards the government “insertion” of  individuals into a higher demographic without their earning it cancels out the oftentimes unpleasant but necessary results of risk assumption.  These consequences are what’s called “moral hazard”:  meaning the government mandated reduction of risk caused by bailing out losers in the marketplace. Whether it be the Treasury bailing out defaulting homeowners, or the Treasury bailing out corporate  holders of Mortgage Backed Securites (MBS) at above market prices:  it’s all the same.   The result of market manipulation by the government never changes when people are not allowed to reap the rewards, or suffer the consequences of their decisions and assumption of risk.

The new president and congress is taking us down disappointing and uncharted territory.   Free market conservatives must impress upon their entitlement-centered liberal friends the wisdom of Frederick Hayek’s not only historic but continuously relevant ideas.

For those interested in further review of Frederick Hayek’s works, I recommend these sites.

Comments con and pro from readers most welcome!


Welcome to the grand opening of the Liberty Through Knowledge blog. The Constitution of Liberty Part I

“The greatest tyranny has the smallest beginnings.  From precedents overlooked, from [remonstrances] despised, from grievances treated with ridicule, from powerless men oppressed with impunity, and overbearing men tolerated with complaisance, springs the tyrannical usage which generations of wise and good men may hereafter perceive and lament and resist in vain.”

The Times of London, Aug. 11, 1846.

Welcome the grand opening of the blog Liberty Though Knowledge


In this blog I will be discussing some of the great free market thinkers throughout history:  From Adam Smith through Milton Friedman.  Specifically this blog will be addressing the remarkable prescience these individuals had on not only the conundrums of their own time, but on the current political assault on liberty and the free marketplace.

My first entry on the Liberty Through Knowledge blog is a discussion of Frederick Hayek’s book The Constitution of Liberty.   Specifically Chapter 5- Responsibility and Freedom

This chapter is a great reflection of our current state of affairs!  In Hayek’s description of the slide of 1950s society towards socialism, his discussion centers on the need for personal responsibility and its relationship to a free society.   Although written in the 1950s, it specifically addresses our current mortgage crisis, spawned by the recievers of Fannie Mae campaign contributions: Barney Frank, and Chris Dodd (The President was one of the top three receivers when he was a U.S. Senator), The Community Reinvestment Act (CRA), The Assoc. for Community Organizations for Reform Now (ACORN), and generally coercive actions and regulations by Congressional Committees towards home lending institutions to grant mortgages to those without the wherewithal to keep up payments.  An altruistic intent to a large extent, but as usual the road to hell is paved with good intentions.

In this chapter, Hayek emphatically states that a free society can’t function unless individuals accept that their position and success is directly attributable to their personal choices, regardless of luck or the lack of it.  Everything from an individual dishonestly signing a mortgage agreement to the above politicians and their proxies such as ACORN coercing banks to lend to un-creditworthy customers through the CRA, are harbingers of this country’s slide away from personal responsibility and its inseparable relationship to liberty.

Frighteningly today, many American’s desire for liberty is coming into question; just as it apparently did during the writing of this book, as liberty does not guarantee happiness or success. Hayek goes on to explain that those who insist their lives are dependent on circumstances outside of their control are those who tend to be afraid of (or even hostile to!) liberty itself.  He continues by explaining that this fear of liberty therefore leads to a predisposition towards governmental largess in areas from income redistribution to outright legalized moralizing.  A great current example is House Democrats’ motif that everyone be given the “right” to own a home.  Or how about the President’s government guarantee of General Motor’s warrantees?  (Now the govt. is going to fix your muffler for you.)  These current examples illustrate that:  We as conservatives believe that liberty means freedom from governmental coercion.  Liberals believe that liberty means freedom from all want or need.

This avoidance of individual responsibility also stems, according to Hayek, from something deeper than a fear of freedom (e.g. failure to succeed).  Hayek describes this avoidance of personal decision making as universal determinism, a concept originating in the 1800s.    All this term represents is the false belief that the general state of affairs in one’s life is determined by external events, or fate if you will.  (“Oh well, everything’s out of my control, why should I bother to try to improve my standard of living.”)  Basically, what this boils down to is: do we have free will and do our decisions have concrete consequences on our personal circumstances? (By the way, Judeo/Christian theology says we do.)

My next entry will finish the discussion of the Constitution of Liberty, Chapter 5, and it’s relevance to our modern times.

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