Stolen text: Hayek's The constitution of liberty, chapter 19

This is the beginning of Chapter 19, "Social security". I omit the lead-in quote from The Economist.

I've copied p 248-253 so far; initially I was only going to nick a couple of pages but it's all too good.

Analysis

A somewhat high falutin' word. Let me pick out one bit:

it produces the paradox that the same majority of the people whose assumed inability to choose wisely for themselves is made the pretext for administering a large part of their income for them is in its collective capacity called upon to determine how the individual incomes are to be spent

The paradox arises because, per the intro text, the original justification - having slipped past relief for the indigent poor to a more general scheme - was that a general compulsory scheme was needed because, knowing relief would be available, people would fail to save for themselves. And now, those self-same people who have been declared incapable of making sensible choices, are making the overall choices - via ballot - about the scheme.

The text

1. In the Western world some provision for those threatened by the extremes of indigence or starvation due to circumstances beyond their control has long been accepted as a duty of the community. The local arrangements which first supplied this need became inadequate when the growth of large cities and the increased mobility of men dissolved the old neighborhood ties; and (if the responsibility of the local authorities was not to produce obstacles to movement) these services had to be organized nationally and special agencies created to provide them. What we now know as public assistance or relief which in various forms is provided in all countries, is merely the old poor law adapted to modern conditions. The necessity of some such arrangement in an industrial society is unquestioned-be it only in the interest of those who require protection against acts of desperation on the part of the needy.

It is probably inevitable that this relief should not long be confined to those who themselves have not been able to provide against such needs (the "deserving poor," as they used to be called) and that the amount of relief now given in a comparatively wealthy society should be more than is absolutely necessary to keep alive and in health. We must also expect that the availability of this assistance will induce some to neglect such provision against emergencies as they would have been able to make on their own. It seems only logical, then, that those who will have a claim to assistance in circumstances for which they could have made provision should be required to make such provision themselves. Once it becomes the recognized duty of the public to provide for the extreme needs of old age, unemployment, sickness, etc., irrespective of whether the individuals could and ought to have made provision themselves, and particularly once help is assured to such an extent that it is apt to reduce individuals' efforts, it seems an obvious corol lary to compel them to insure (or otherwise provide) against those common hazards of life. The justification in this case is not that people should be coerced to do what is in their individual interest but that, by neglecting to make provision, they would become a charge to the public. Similarly, we require motorists to insure against third-party risks, not in their interest but in the interest of others who might be harmed by their action.

Finally, once the state requires everybody to make provisions of a kind which only some had made before, it seems reasonable enough that the state should also assist in the development of appropriate institutions. Since it is the action of the state which makes necessary the speeding-up of developments that would otherwise have proceeded more slowly, the cost of experimenting with and developing new types of institutions may be regarded as no less the responsibility of the public than the cost of research or the dissemination of knowledge in other fields that concern the public interest. The aid given out of the public purse for this purpose should be temporary in nature, a subsidy designed to assist in the acceleration of a development made necessary by a public decision and intended only for a transitional period, terminating when the existing institution has grown and developed to meet the new demand

Up to this point the justification for the whole apparatus of social security" can probably be accepted by the most consistent defenders of liberty. Though many may think it unwise to go so far, it cannot be said that this would be in conflict with the principles we have stated. Such a program as has been described would involve some coercion, but only coercion intended to forestall greater coercion of the individual in the interest of others, and the argument for it rests as much on the desire of individuals to protect them selves against the consequences of the extreme misery of their fellows as on any wish to force individuals to provide more effectively for their own needs.

2. It is only when the proponents of "social security" go a step further that the crucial issues arise. Even at the beginning stage of "social insurance" in Germany in the 1880's, individuals were not merely required to make provision against those risks which, if they did not, the state would have to provide for, but were compelled to obtain this protection through a unitary organization run by the government. Although the inspiration for the new type of organization came from the institutions created by the workers on their own initiative, particularly in England, and although where such institutions had also sprung up in Germany-notably in the field of sickness insurance-they were allowed to continue, it was decided that wherever new developments were necessary, as in the provision for old age, industrial accidents, disability, dependents, and unemployment, these should take the form of a unified organization which would be the sole provider of these services and to which all those to be protected had to belong.

"Social insurance" thus from the beginning meant not merely compulsory insurance but compulsory membership in a unitary organization controlled by the state. The chief justification for this decision, at one time widely contested but now usually accepted as irrevocable, was the presumed greater efficiency and administrative convenience (i.e., economy) of such a unitary organization. It was often claimed that this was the only way to assure sufficient provision at a single stroke for all those in need.

There is an element of truth in this argument, but it is not conclusive. It is probably true that, at any given moment, a unified organization designed by the best experts that authority can select will be the most efficient that can be created. But it is not likely to remain so for long if it is made the only starting point for all future developments and if those initially put in charge also become the sole judges of what changes are necessary. It is an error to believe that the best or cheapest way of doing anything can, in the long run, be secured by advance design rather than by the constant re-evaluation of available resources. The principle that all sheltered monopolies become inefficient in the course of time applies here as much as elsewhere.

True, if we want at any time to make sure that we achieve as quickly as we can all that is definitely known to be possible, the deliberate organization of all the resources to be devoted to that end is the best way. In the field of social security, to rely on the gradual evolution of suitable institutions would undoubtedly mean that some individual needs which a centralized organization would at once care for might for some time get inadequate attention. To the impatient reformer, who will be satisfied with nothing short of the immediate abolition of all avoidable evils, the creation of a single apparatus with full powers to do what can be done now appears therefore as the only appropriate method. In the long run, however, the price we have to pay for this, even in terms of the achievement in a particular field, may be very high. If we commit ourselves to a single comprehensive organization because its immediate coverage is greater, we may well prevent the evolution of other organizations whose eventual contribution to welfare might have been greater

If initially was chiefly efficiency that was stressed in support of the single compulsory organization, there were other considerations clearly also present in the minds of its advocates from the beginning. There are, in fact, two distinct, though connected, aims which a governmental organization with new method of pursuing the old alms of socialism. The reason why it has come to be so much more widely accepted than the older socialism is that t was at first regularly presented as though it were no more than an efficient method of providing for the specially needy. But the acceptance of this seemingly reasonable proposal for a welfare organization was then interpreted as a commitment to something very different. It was mainly through decisions that seemed to most people to concern minor technical issues, where the essential distinctions were often deliberately obscured by an assiduous and skillful propaganda, that the transformation was effected. It is essential that we become clearly aware of the line that separates a state of affairs in which the community accepts the duty of preventing destitution and of providing a minimum level of welfare from that in which assumes the power to deter mine the "just" position of everybody and allocates to each what it thinks he deserves. Freedom is critically threatened when the government is given exclusive powers to provide certain services powers which, in order to achieve its purpose it must use for the discretionary coercion of individuals.

3. The extreme complexity and consequent incomprehensibility of the social security systems create for democracy a serious problem. It is hardly an exaggeration to say that, though the development of the immense social security apparatus has been a chief factor in the transformation of our eco nomy, it is also the least understood. This is seen not only in the persisting belief that the individual beneficiary has a moral claim to the services, since he has paid for them, but also in the curious fact that major pieces of social security legislation are sometimes presented to the legislatures in a manner which leaves them no choice but to accept or reject them whole and which precludes any modifications by them. And it produces the paradox that the same majority of the people whose assumed inability to choose wisely for themselves is made the pretext for administering a large part of their income for them is in its collective capacity called upon to determine how the individual incomes are to be spent.

It is not only the lay members of the general public, however, to whom the intricacies of social security are largely a mystery. The ordinary economist or sociologist or lawyer is today nearly as ignorant of the details of that complex and ever changing system. As a result, the expert has come to dominate in this field as in others.

The new kind of expert, whom we also find in such fields as labor, agri culture, housing, and education, is an expert in a particular Institutional setup. The organizations we have created in these fields have grown so com plex that it takes more or less the whole of a person's time to master them. The institutional expert is not necessarily a person who knows all that is needed to enable him to judge the value of the institution, but frequently he is the only one who understands its organization fully and who therefore is indispensable. The reasons why he has become interested in and approves of the particular institution have often little to do with any expert qualifications. But, almost invariably, this new kind of expert has one distinguishing characterteristic: he is unhesitatingly in favor of the institutions on which he is expert. This is so not merely because only one who approves of the aims of the institution will have the interest and the patience to master the details, but even more because such an effort would hardly be worth the while of any body else: the views of anybody who is not prepared to accept the principles of the existing institutions are not likely to be taken seriously and will carry no weight in the discussions determining current policy.

It is a fact of considerable importance that, as a result of this development, in more and more fields of policy nearly all the recognized "experts" are, almost by definition, persons who are in favor of the principles under lying the policy. This is indeed one of the factors which tend to make so many contemporary developments self-accelerating. The politician who, in recommending some further development of current policies, claims that "all the experts favor it," is often perfectly honest, because only those who favor the development have become experts in this institutional sense, and the uncommitted economists or lawyers who oppose are not counted as experts. Once the apparatus is established, its future development will be shaped by what those who have chosen to serve it regard as its needs.

4. It is something of a paradox that the state should today advance its claims for the superiority of the exclusive single-track development by authority in a field that illustrates perhaps more clearly than any other how new institutions emerge not from design but by a gradual evolutionary process. Our modern conception of providing against risks by insurance is not the result of any one's ever having seen the need and devising a rational solution. We are so familiar with the operation of insurance that we are likely to imagine that any intelligent man, after a little reflection, would rapidly discover its principles. In fact, the way in which Insurance has evolved is the most telling common tary on the presumption of those who want to confine future evolution to a single channel enforced by authority. It has been well said that "no man ever aimed at creating marine insurance as social insurance was later created" and that we owe our present techniques to a gradual growth in which the success sive steps due to the uncounted contributions of anonymous or historical individuals have in the end created a work of such perfection that in com parison with the whole all the clever conceptions due to single creative intelligences must seem very primitive.

Are we really so confident that we have achieved the end of all wisdom that, in order to reach more quickly certain now visible goals, we can afford...

[end of p 253]

Refs

* Hayek’s The Constitutionof LibertyAn Account of Its Argument, Eugene F. Miller.