"Which of these three schools is correct? All of them--that is, any one of these- Don Boudreaux points out a misreading of Hayek by Paul Samuelson. Samuelson counters Hayek's critique of socialism with the example of Sweden and other Scandinavian countries. Boudreaux explains the problem with this example:
three financial-market excess demand configurations can trigger a depression. In
general, asset market prices and interest rates will react differently depending
on which disequilibrium is active."
"Hayek said that “the planning against which all our criticism is directed is solely the planning against competition – the planning which is to be substituted for competition.” So because Scandinavian countries emphatically do not plan in this way, Samuelson was mistaken to say that their socialism is of the sort that Hayek believed paved the road to serfdom. Those countries have reasonably free trade, only light regulation of capital markets and business, and strong private property rights. In short, all Scandinavia retains what for Hayek was the most significant protection against serfdom: competitive economies."
He goes on to point out the fact that the welfare state was not inherently problematic for Hayek's primary point on market competition. This is an extremely important point and it gets back to an earlier series of posts on calculation problems vs. incentive problems. Hayek's point was that the market is more efficient at using knowledge and calculating solutions than socialist planners. His concern was with planning that interfered with the calculation process specifically - not planning that achieved some other end such as a desired social justice outcome. That's not to say he loved other sorts of planning (i.e. - for social justice). It's simply to say that his primary academic objection to planning was grounded in it's interference with competition and the market process. And the Scandanavian countries do quite well on this front (as does, I should add, the ideal-type of Keynesian "planning"). Don't read past the initial post into the comments. This more nuanced point of Hayek's isn't really discussed in the comment section - it's mostly just mud-slinging at Samuelson.
- The Urban Institute library still isn't completely packed up yet (they're shutting the library down). As I was walking through it to get a cup of coffee I noticed a book by Erik Lundberg, also of the Stockholm School, called "Instability and Economic Growth". It appears to be an underconsumptionist presentation of macroeconomics as opposed to a business cycle theory. Obviously that was interesting to me, as it is the foundation of the Keynesian approach. Lundberg also developed the "sequence approach" to markets. I'm hoping to finish a lot of Garrison on the plane to Paris (a week and a half!). Perhaps I'll read Lundberg next.