Why Couldn’t Hayek Have Been Even Awesomer?
This morning Matthew Yglesias somewhat strangely faults F. A. Hayek for not being sufficiently brilliant, I guess. He quotes The Road to Serfdom as follows:
Nor can certain harmful effects of deforestation, or of some methods of farming, or of the smoke and noise of factories, be confined to the owner of the property in question or to those who are willing to submit to the damage for an agreed compensation. In such instances we must find some substitute for the regulation by the price mechanism. But the fact that we have to resort to the substitution of direct regulation by authority where the conditions for the proper working of competition cannot be created, does not prove that we should suppress competition where it can be made to function.
Which is accurate. Hayek really did write this. Yglesias then complains:
Of course the correct free market riposte to this proposal is that we can create a price mechanism. So instead of having the guys in the EPA building try to tinker with everyone’s factories, we could establish a legislative ceiling on the quantity of greenhouse gas emissions we’re willing to tolerate and then allocate permits to do it. That way the price mechanism—à la “the use of knowledge in society”—will be able to uncover the most economically efficient way of undertaking the reductions. But I guess Big Government Hayek doesn’t think that will work.
Hayek wrote The Road to Serfdom in 1940-43. Ronald Coase — a Nobel laureate and another incredibly prolific economist — published “The Problem of Social Cost” in 1960. This was the article that first gave a theoretical framework for pollution pricing systems. It was a highly original idea at the time.
All of which raises a question, I guess: Why couldn’t Friedrich Hayek also have had the career of Ronald Coase? Why couldn’t Michelangelo also have been Caravaggio? Why couldn’t Dickens also have been Thackeray? Anyway, the sheer fact that Hayek didn’t predict the next twenty years of economic thought and put perhaps its best idea into a book destined for a popular audience during World War II just goes to show that… well, I’m not really sure what it goes to show.
More seriously, Yglesias is concerned as follows:
[T]here’s simply no support anywhere in the classical liberal tradition for the idea that an unrestricted right to pollute the air is part of “free markets” or any coherent conception of liberty or property rights. And yet opposition to carbon pricing and emissions regulations has become an article of faith across the American right. Some of that is political opportunism, some of it is ignorance, but a lot of it is the impact of corporate cash, especially from the extractive industries.
The first sentence is of course correct. No argument at all. Polluting my air is as objectionable in principle as any other assault on my person or property.
But carbon pricing systems just aren’t going to be popular in a tough economy, and everyone knows that carbon pricing in only one country is a joke — assume any scenario you like, and strict carbon limits in the United States alone won’t make an appreciable difference. Indeed, until China and India are squarely onboard, I’m honestly not sure what we can do.
Either of these objections is a much more plausible reason for the failure of cap and trade than our flagging devotion to Hayek, or evil corporate money, or even ignorance. (Though that last one may prove an exception; in all I’m pretty sold on the power of ignorance.)