Geoffrey Hodgson on Hayek, liberalism and social democracy

Those on the political left are generally not fans of Friedrich Hayek and the Austrian school of economics. So this short lecture by institutional economist Geoffrey Hodgson was something of a surprise. He demonstrates that in many ways, Hayek supported policies which would be described as social democratic, with state provision and regulation of all sorts of aspects of society and the economy, especially as a counter to the possibility of totalitarianism.

Hodgson makes clear where he agrees and disagrees with Hayek, not least on the definition of classical liberalism, and it makes for an interesting argument. He also touches on his own ideas on the role of institutions under capitalism.

The relevant part of the video with Hodgson’s talk starts at 3:15 and finishes at about 31:00.

5 thoughts on “Geoffrey Hodgson on Hayek, liberalism and social democracy

  1. Thanks for drawing my attention to this excellent lecture, whose quality is further enhanced by its brevity (most lectures are much too long).

    On listening to Hodgson only once so far and taking notes of his main arguments, I agree with every point that he is making.

    Let me add that Hayek created an uproar, especially among staunch classical liberals, libertarians and anarcho-capitalists like Hoppe, whom I heard delivering his Hoppe lecture in Bodrum/Turkey (YouTube title: “Hans Hermann Hoppe | The Hayek Myth (PFS 2012)”), when he published The Constitution of Liberty in 1979 (most quotes by Hodgson are likely taken from that formidable tome).

    The book is odd in that, while presenting his case for classical liberalism in the first part, the second part is a listing of mostly/many social democratic policies.

    This second part is practically unrelated to, unarticulated with the rest of Hayek’s life work. It lacks any originality as well as any organic connection with what Hayek’s original work stands for.

    In sum: Hayek’s oeuvre is through and though classically liberal and as such subject to the criticism that Hodgson makes, especially toward the end of his lecture.

    In analysing Hayek’s classical liberalism I conclude – similarly to Hodgson – Hayek arbitrarily restricts the concept of a spontaneous order to the economic sphere as conceived as part of a (fictitious) classically liberal community in which markets offer a categorical alternative to politics and the state; Hayek fails to understand that politics and the state too represent a spontaneous order (where rational action/planning and spontaneous outcomes interlock), and this wider spontaneous order critically determines the nature of liberty, not just a set of unalterable, soon rigid, soon wishy-washy liberal principles.

    Freedom is not a liberal project.

    • Thanks for this comment Georg. I admit that I have not read anything by Hayek, merely some critiques of his ideas, not least by Hodgson. You make some very interesting points and as I mentioned in the post, it is a surprise to me that Hayek ever supported policies that we would see as social democratic.

      • Nick, you write: “it is a surprise to me that Hayek ever supported policies that we would see as social democratic.”

        You’re fully entitled to being surprised.

        It turns out, I have no valid explanation for Hayek’s uncharacteristic and short-lived social democratic turnaround.

        I must admit, the below attempt by me at an explanation (published in one of the comments of the present thread) is utter nonsense:

        “To my knowledge, after 1959, Hayek has never returned to the “social liberalism” of The Constitution of Liberty (CL) [that is true — the following, however, is nonsense:], which seems to coincide with a phase in German political history, when die FDP (the liberal party of Germany) practically became a branch of the SPD (social democratic party), accepting social democratic policies and principles that are anathema to the liberal.”

        Social liberalism (SPD+FDP) emerged in the mid- to late 1960s [not in the early 1960s], largely induced by the fact that the CDU (conservatives, hitherto the natural coalition partner of the liberals) wanted to introduce legislation which would have marginalised the FDP, effectively squeezing the liberal party out of the parliament. At that point, the liberals turned toward the social democrats.

  2. When I refer to liberalism, I mean European liberalism largely in the tradition of classical liberalism, not liberalism in the American sense.

    To my knowledge, after 1959, Hayek has never returned to the “social liberalism” of The Constitution of Liberty (CL), which seems to coincide with a phase in German political history, when die FDP (the liberal party of Germany) practically became a branch of the SPD (social democratic party), accepting social democratic policies and principles that are anathema to the liberal. The term “social liberalism” denotes this coalition between SPD and FDP which was engaged in largely under a social demographic paradigm.

    Studying the timeline of Hayek’s publications after “The Constitution of Liberty”, all of which I have read carefully, you will not find a trace of the social liberalism presented in the second part of CL.

    To the contrary, “Law, Legislation, and Liberty”, the two compilations of his “Studien”, “Denationalisation of Money”, and “The Fatal Conceit” are written from an uncompromising classical liberal point of view.

    https://en.wikipedia.org/wiki/Friedrich_Hayek_bibliography

    All in all, the second part of CL marks a baffling outlier blip in Hayek’s intellectual career.

    To see what is fundamentally deficient in Hayek and which approach he should have taken instead, I recommend reading two masterpieces, one written by two Marxists, the other by left-leaning Stephen Holmes.

    My teacher at the University of Cambridge, John Sender, and Sheila Smith provide a masterful exercise in political economy in their “The Development of Capitalism in Africa”.

    In “Passion and Constraints”, Stephen Holmes shows how and why liberals from the earliest days of liberalism understood the need and benefits of the state.

    https://www.amazon.de/Passions-Constraint-Theory-Liberal-Democracy/dp/0226349691

  3. Pingback: Michael Hudson on the Austrian School of Economics | The Political Economy of Development

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.