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Special Report
Recalling Hayek on Responsibility
The great bailout of 2008-09 is reaffirming our modern tendency to evade accountability for our own actions.
About a half century ago Friedrich Hayek, in The Constitution of Liberty, wrote that a free society depends more than any other on people being held responsible for their actions. In a free society individuals act according to their own plan — making their own decision about what they are going to produce, how much they will consume of items, whether to get married, or how many children to have.
There are two primary reasons that individuals who are free to make these choices must be held responsible for their action. The first is that being responsible will affect individual behavior in a positive fashion. If you are rewarded for making efficient use of resources and suffer the consequences of making bad choices, you are more likely to behave in a way that creates efficiencies and benefits society. If you don’t suffer the ill effects of wasting resources or making bad decisions, then you are more likely to behave in ways that result in a loss to society.
Second, if you are not responsible for your action, whoever is responsible will limit your freedom. If I am paying for my son’s car insurance, and am responsible for any damage he causes with his driving, I am going to limit when and where he can drive, and otherwise set conditions that he would rather not comply with. If the government is responsible for flood damage to your home, it will limit where you can build.
Unfortunately, Hayek’s words have been “little noted nor long remembered.” The response to the housing and financial crisis has not been to suggest that people should be responsible for their own behavior. In today’s America it would seem heartless to say that the person who has just lost his house to foreclosure made the wrong choice when signing a mortgage that required payments that were unrealistic. Instead we wish to blame the “predatory lenders.” No politician would say that the 56 year old whose 401K had melted down had underestimated the risk of holding such a large percentage of his investments in stocks. Instead every candidate for office declared that it was “corporate greed” that caused the stock market meltdown. Individual investors are not to be held responsible for their own investing strategy.
Once we give up responsibility for our actions we will have given up the freedom that is essential for a market economy, and a market economy is the only one that provides wealth for the masses. A simple analysis of the Index of Economic Freedom and per capita income across nations will confirm the intuition that liberty and wealth are inseparable, for liberty entails the ability to experiment while responsibility means rewarding the actions of those who create value for consumers while punishing those who use resources in a way that results in inefficiencies.
The great bailout of 2008-09 is reaffirming the tendency in modern America to shirk individual responsibility and moving us further to an interventionist state. Financial institutions that did not accept responsibility for overinvesting in mortgage-backed securities will be burdened by further government regulation, since taxpayers are now responsible for the actions of bank management. The same will be true of the auto companies. Taxpayers will now take responsibility for the actions of their management and unions. The natural result is the call by Steve Fraser in Salon for the creation of “a representative body of workers, consumers, environmentalists, suppliers and other interested parties to supervise the industry’s reorganization and retooling to produce, just as the president-elect says he wants, new green means of transportation — and not just cars.”
The central planning that Hayek and Ludwig von Mises warned would lead to economic stagnation will further intrude into the U.S. economy as long as we attempt to eliminate individual responsibility. More importantly we will lose that very freedom that the nation was founded upon. Rather than look to government to take responsibility for our actions, we must accept the outcomes that occur when we make mistakes. This does not mean we should not care about those who suffer losses. True compassion and freedom requires that individuals offer their support to those who have made errors that result in their personal economic misfortune. But Hayek’s statement that a fear of responsibility entails a fear of freedom should be at the forefront of any discussion of government attempt to absolve companies and individuals of the consequences of unsuccessful actions.
Letter to the Editor View all comments (45) | Leave a comment
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Jason | 1.7.09 @ 6:34AM
Accountability is DEAD in America. I fear this will lead to the death of America as we know it.
http://www.rightklik.net/
JP | 1.7.09 @ 6:51AM
This is spot on. There is no responsibility or accountability in America any longer, particularly in business.
Anyone who has studied economics on even a limited scale can tell you that unbridled capitalism--without accountability and responsibility--is equally as bad as a command or socialist economy.
aware| 1.7.09 @ 7:42AM
Alas, Von Mises and Hayek aren't even mentioned in college economics classes, nor in the halls of power, and even many conservatives don't know much about them or their theories . It is impossible to really understand the true causes of the "economic meltdown" without them.
Instead we have lunatics like Krugman(Nobel Prize winner in Economics[!!]), who in his latest column, if you can see past the insider jargon and ridiculous theoretical constructs, states that the government "stimulus" will work if it is massive enough and has the right combinations of "tax cuts and spending increases".
How the Hell can income be cut and spending increase?!? Bush economists (ditto Obama) all think like this, hence the insanity which rules today. There is nothing they will not sacrifice on the alter of their god the State, money, freedom, Constitution, rule of law, you name it.
Now the "sheeple"(really just tax payers and tax spenders, I refuse to dignify them with the name citizens) wait with bated breath for the soon to be perjurer in chief(he will swear to uphold the Constitution right before he proceeds to shred it) to hit the on button of the good times machine in a government basement somewhere. Maybe if we just click our heels together and say there's no place like home.
Personal responsibilities must go the way of sound economics(discarded) because it does not allow the ultimate control by the State. So we continue down the road to serfdom and slavery.
Luonne Dumak| 1.7.09 @ 8:28AM
Atlas Shruggrd!!
TBR| 1.7.09 @ 9:54AM
I find it painfully ironic that the Spectator has an article praising the foresight and principals of Hayek and Mises and yet this same publication has another article, published only the day before, slandering and misrepresenting the ONLY politician who is listening to these wise men. Ron Paul.
The American Spectator is a publication of unmitigated hypocrisy.
Marc Jeric| 1.7.09 @ 12:13PM
No wonder our socialists hate Ayn Rand - she hit them where they bleed! Atlas shrugged, indeed, and will continue so - until a new Reagan shows up, and not another Bush wimp.
Larry C. Roberts, MD, MA| 1.7.09 @ 1:03PM
Epicurus believed that the purpose of life is to maximize pleasure and minimize pain. Modern Americans are Epicurean to the core, especially in regard to avoiding pain. The inability to endure pain is the driving force behind the current orgy of government spending. Legislators know, much like the ancient Romans, that bread and circuses will alleviate the discomfort of economic malaise, and they will do anything, regardless of its irrationality, to prevent pain. C. S. Lewis eloquently addresses the very necessity of pain in "The Problem of Pain." Life could not exist without it, and the sooner we deal with it, the less of it we often experience. The government's economic policies are inevitably leading us into a crisis that will make the pain of a few thousand layoffs seem like a minor itch when compared to the intractable pain inflicted on us by the subsequent meltdown.
Deborah | 1.7.09 @ 5:10PM
Yes, we responsible citizens will have to pony up for those irresponsible ones, whether they be individuals, banks, corporations, GSE's, unions or politicians. Regular Americans are watching this and thinking, "geez, I guess crime pays."
DaveS| 1.7.09 @ 6:14PM
We have negative accountability, as we have overshot neutral accountability (which is what is generally meant by zero accountability.) Case-in-point: tax credits exceeding tax liabilities = welfare check (by another name, of course.) Would someone please tell me schools of economics are hatching these 'refund now'/'tax later' schemes so I can direct my gaze and those of my children elsewhere?
Alan Brooks| 1.7.09 @ 8:29PM
caveat:
pornographers & dope dealers are libertarians.
hint: there is no accountability because there is no morality.
Tripp| 1.7.09 @ 10:09PM
The American Spectator, like the American Conservative, is sometimes a magazine of seemed contradictions- heck, W. James Antle III is an editor for both! But look closer- one dislikes Ron Paul for being isolationist, while the other praises his paleo-conservatism. And yet both publications praise Hayek, Mises, Friedman,etc (well, I take that back, AmCon sometimes publishes some old right/ populist crap) but nevertheless for all you Ron Paul supporters like me out there -don't hate on any conservative/libertatrian publication, especially one as at the forefront of conservatism like the American Spectator, for God knows we need all the voices we can get to speak out for free markets, the gold standard, personal freedom, and other things conservatives hold dear.
That means you, TBR.
Alan Brooks| 1.7.09 @ 10:24PM
again, morality is as dead as accountability.
personal freedom?
when your teenager wants to party then maybe you take a somewhat dimmer view of personal freedom.
phesoge| 1.8.09 @ 10:29AM
Its not that there is no morality. Ron Paul is probably one of the most ethical politicians on the hill. Its the belief that the constitution was never designed to be so centrally strong, and the government isnt supposed to protect us from ourselves. Republicans now are a joke. None of em stand for the Austrian principles of Hayek. Just look at how many voted for the bail outs. Dr. Paul is a champion of true limited constitutional government, civil liberties, free markets, sound monetray policy, and a foregin policy that doesnt start ridiculous pre emptive wars. May I remnind you it was Gerorge W Bush that campaigned on the promise of a "humble foreign policy" and not engaging in nation building. What happened to that?
TBR| 1.8.09 @ 11:36AM
Alan Brooks says-
"pornographers & dope dealers are libertarians."
Yes, I'm sure that's true. As well as....house wives, husbands, Christians, entrepreneurs, economic scholars, doctors, nurses, school teachers, authors, sports players.... etc... etc...
Alan, you so perfectly summed up the stupid Republican sheep. You make brash generalizations with out really knowing what your talking about. You probably claim to have principals, yet it's easy to see that you really don't... because if you did, you'd realize that your GOP has abandoned principal, and adopted insanity, and emotional rhetoric as it's standard.
Libertarians have principal, Ron Paul has principal, you and the GOP obviously do not.
Michele San Pietro| 1.8.09 @ 5:59PM
Yes, it is high time the "Liberals" get punished for their wrongdoings. In the past eight years, it sounded as President Bush was guilty for everything, including bad weather. We should stop the Liberal madmen before it is too late.
Robert Rosencrans| 1.8.09 @ 6:33PM
Wonderful article!
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