Hayek on the Market Economy and the Limits of State Action

Abstract

Abstract In the work of F. A. Hayek we find the most systematic and comprehensive twentieth-century statement of the classical liberal conception of the role and limits of the State. As a classical liberal conception, Hayek’s account of the State and its relations with the market economy is to be contrasted, not only with social-democratic and liberal-interventionist perspectives, but also with conservative doctrines of the functions of the State. For Hayek, as for Kant, Adam Smith, and others in the classical liberal intellectual tradition, the functions of the State are strictly limited. They do not include the promotion of any specific moral ideal or the preservation of a particular culture (as they do for conservatives1) any more than they comprehend the socialist imposition on society of a preferred pattern of distribution of income or wealth. The chief task of the State is the protection and enhancement of individual freedom. It is because he believes that the market economy is an indispensable condition of individual freedom that Hayek, along with other contemporary classical liberals, sees the principal economic functions of the State as having to do with the maintenance and improvement of the institutions which sustain market processes. Hayek’s life-work has been the project of renewing the foundations and repairing the ramifications of this classical liberal conception of the State.