Hayek's Slippery Slope, the Stability of the Mixed Economy and the Dynamics of Rent Seeking

André Azevedo Alves,John Meadowcroft

doi:10.1111/1467-9248.12043

André Azevedo Alves, John Meadowcroft

Open Access

https://doi.org/10.1111/1467-9248.12043

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Abstract

F. A. Hayek's The Road to Serfdom continues to provoke intense scholarly debate focused on the validity of Hayek's central claim that a mixed economy is inherently unstable and economic intervention will inexorably lead to totalitarianism if pursued for a sustained period. This article presents empirical evidence which shows conclusively that it is the mixed economy that has proved remarkably stable, whereas laissez-faire and totalitarian regimes have proved inherently unstable. It is argued that this empirical outcome can be explained by the dynamics of rent seeking and Hayek's failure to anticipate that the state could control more than half of national income without requiring a totalitarian apparatus to control and direct production and consumption. The implications of the failure of Hayek's argument for our conceptualisation of freedom and power in the context of the modern democratic state and our understanding of the relationship between economic and political freedom are considered.

Highlights

In his 1944 book The Road to Serfdom, F
Hayek’s The Road to Serfdom continues to provoke intense scholarly debate focused on the validity of Hayek’s central claim that a mixed economy is inherently unstable and economic intervention will inexorably lead to totalitarianism if pursued for a sustained period
Hayek famously argued that a mixed economy is inherently unstable; if pursued for a sustained period economic intervention will inexorably lead to totalitarianism

Summary

Introduction

In his 1944 book The Road to Serfdom, F. Totalitarianism is understood by Hayek as an unplanned and unintended outcome that comes about as a consequence of a process set in motion by well-intended, but illadvised, acts of government intervention in the economy Commentators of the both the left and right have interpreted the Hayekian slippery slope argument as implying that any intervention in the workings of the free market economy threatens to lead to a descent into totalitarianism. Polanyi – curiously influenced by the intellectual context of early twentieth century Vienna – put forth a substantially different analysis of the market economy and of the role of the state, but there are striking rhetorical similarities with Hayek and with Popper While it would be beyond the scope of this paper to explore these similarities in depth, given the parallels between the works of Hayek, Popper and Polanyi it is certainly possible that Hayek’s arguments about the underlying threats to the free society may have been at least partly shaped by the Austro-Hungarian intellectual milieu at that time. The predominance of this view among well-meaning British intellectuals in the final years of the war was a powerful motivation for Hayek to write The Road to Serfdom (Caldwell, 2007)

The reality of the stability of the mixed economy

Findings

Conclusion