The Guardian boosts sales of Hayek
Last week, I was on Amazon and noticed that The Constitution of Liberty by Freidrich Hayek had a “bestseller” badge appended to it. Given that it was published 62 years ago, I wasn’t expecting that. Then I realised why: George Monbiot had given it some free publicity in The Guardian. Monbiot writes:
The founding father of neoliberalism is Friedrich Hayek. His frankly deranged tract The Constitution of Liberty enjoys almost biblical status among his disciples. Margaret Thatcher was perhaps the book’s most famous advocate, and Truss now carries the flame. It inveighs against the protection of the living world. Rather than seeking to protect the soil – the delicate ecosystem from which 99% of our calories are produced – Hayek says it makes sense to extract as much value as it can produce, exhaust it “once and for all”, then abandon the land. The role of soil is to create a “temporary contribution to our income”, which we can then invest in other moneymaking schemes. For “there is nothing in the preservation of natural resources as such which makes it a more desirable object of investment than man-made equipment”.
Unfortunately, Monbiot has misunderstood the section of The Constitution of Liberty from which he is quoting. Hayek is talking about whether businesspeople should use particular natural resources, and the effect of prices on these choices. He is describing how farmers (thinking commercially) might invest in improving the fertility of the land. If, however, the cost of this is too great, they might choose not to continue cultivating it rather than commercially farm it, especially if the geographic or climatic conditions of the land are not well suited to growing crops.
The book does not, as Monbiot claims, inveigh “against the protection of the living world”. A few paragraphs later, Hayek writes about how society should protect the environment, preferably through voluntary associations such as the National Trust, or government purchase of land to protect it for future generations. Hayek is a believer in small government, but is not doctrinaire about it.
Hayek’s main point is that resource depletion is influenced by the price mechanism - that is to say that as resources are used, they become more expensive, which changes behaviour. An example of how prices influence behaviour might be the way that, while there is oil and gas in the North Sea, much of it became too expensive to exploit relative to other energy sources. Now that there is a shortage of oil and gas due to events in Ukraine, and energy prices have increased, there is a renewed incentive to invest in the North Sea. In practice, as resources become more expensive, the market encourages people to find alternatives and also innovate so that we use them more efficiently.
Hayek, of course, wrote The Constitution of Liberty in the 1950s, prior to the creation of the modern environmental movement. He didn’t write much about environmental issues - “Environment” doesn’t even appear in the index of the sizeable intellectual biography of Hayek by Bruce Caldwell. Really, his contribution to thinking about the environment is not this small section in The Constitution of Liberty, but his more general thinking about how prices convey information in the “spontaneous order” of society.
Hayek’s ideas certainly influenced the business professor Julian Simon, who described Hayek as “arguably the greatest social scientist of the twentieth century”. Simon showed decisively that, contrary to popular belief, natural resources were not running out, through a famous bet against the “population bomb” author Paul Ehrlich. He bet in 1980 that by 1990 a set of natural resources (chosen by Ehrlich) would be cheaper, reflecting more years’ of supply being left. He won.