Okay, I've read Hayek on Social Security in The Constitution of Liberty and I simply have no idea what Greg Ransom is talking about. I see nothing fallacious about what Levine and Zernike have written, and in the context of The Constitution of Liberty I find this story about Hayek, Social Security, and Charles Koch all the more fascinating and relevant.
My read on Hayek is that he sees a role for a bare minimum level of social insurance, but that he is wholly opposed to Social Security, Medicare, and the national health systems of Europe. The entire chapter is dedicated to contrasting these programs with the bare minimum insurance to provide for what he calls "extreme need", which he would accept. I have no idea what Greg could possibly have in mind when he says the terrible things about Levine and Zernike that he did, and he really does owe both of them an apology. I can't find a single thing they wrote that Hayek didn't express in The Constitution of Liberty.
"Though a redistribution of incomes was never the avowed initial purpose of the apparatus of social security, it has now become the actual and admitted aim everywhere. No system of monopolistic compulsory insurance has resisted this transformation into something quite different, an instrument for the compulsory redistribution of income. The ethics of such a system, in which it is not a majority of givers who determine what should be given to the unfortunate few, but a majority of takers who decide what they will take from a wealthier minority, will occupy us in the next chapter. At the moment we are concerned only with the process by which an apparatus originally meant to relieve poverty is generally being turned into a tool of egalitarian redistribution. It is as a means of socializing income, of creating a sort of household state which allocates benefits in money or in kind to those who are thought to be most deserving, that the welfare state has for many become the substitute for old-fashioned socialism. Seen as an alternative to the now discredited method of directly steering production, the technique of the welfare state, which attempts to bring about a "just distribution" by handing out income in such proportions and forms as it sees fit, is indeed merely a new method of pursuing the old aims of socialism."
And on the way Social Security benefits are paid, Hayek writes,
"This is all part of the endeavor to persuade the public through concealment, to accept a new method of income distribution, which the managers of the new machine seem from the beginning to have regarded merely as a transitional half-measure which must be developed into an apparatus expressly aimed at redistribution. This development can be prevented only if, from the outset, the distinction is clearly made between benefits for which the recipient has fully paid, to which he has therefore a moral as well as a legal right, and those based on need and therefore dependent on proof of need."
Levine and Zernike refer to this passage (accurately):
"In this connection we must note still another peculiarity of the unitary state machine of social security: its power to use funds raised by compulsory means to make propaganda for an extension of this compulsory system. The fundamental absurdity of a majority taxing itself in order to maintain a propaganda organization aimed at persuading the same majority to go further than it is yet willing should be obvious."
He concludes this thought with:
"Such subsidized propaganda , which is conducted by a single tax-maintained organization, can in no way be compared with competitive advertising. It confers on the organization a power over minds that is in the same class with the powers of a totalitarian state which has the monopoly of the means of supplying information".
He also writes:
"Though in a formal sense the existing social security systems have been created by democratic decisions, one may well doubt whether the majority of the beneficiaries would really approve of them if they were fully aware of what they involved."
He also calls it "a tool of politics, a play ball for vote-catching demagogues"
And as for that Austrian public health care he was getting: "There are so many serious problems raised by the nationalization of medicine that we cannot mention even all the more important ones". He's mostly referring to single payer type stuff here, and I have issues with single payer too. But the point is it's precisely such a system that he had to be cajoled away from by Charles Koch. That's what's so ironic about it. I don't think single payer is wise, but if I had reason to believe I couldn't get a certain degree of medical care outside of a European country that provides that benefit, I might resist leaving too! And perhaps that would be hypocritical of me. But my case wouldn't be remarkable because I'm not giant of the libertarian movement that's written extensive criticisms of this stuff!
This is particularly good too:
"There can be no principle of justice in a free society that confers a right to "non-deterrent" or "non-discretionary" support irrespective of proved need. If such claims have been introduced under the disguise of "social insurance" and through an admitted deception of the public - a deception which is a source of pride to its authors - they have certainly nothing to do with the principle of equality under the law".
And this is a nice conclusion:
"It has been well said that, while we used to suffer from social evils we now suffer from the remedies for them."
Hayek clearly and unequivocally supports a minimal level of social insurance, but I could fine nothing but scorn for the currently operating social security and public health insurance systems. He likened their public relations arms to totalitarian propaganda. He said they were fulfilling the agenda of socialism. He went through what would be necessary to end them. He challenged the idea that they represented any notion of equality under the law. He called it the tool of demagogues. Nothing in the chapter on Social Security in The Constitution of Liberty suggests that anything Levine and Zernike said was wrong. The man claimed quite clearly that he did not like Social Security and he did not like public health insurance programs. Period.
This is not the first time people have questioned Ransom's grasp of Hayek either (see here and here, and lots of the convos on Coordination Problem). I advise my readers to take what he says with a grain of salt from now on. Read that chapter in The Constitution of Liberty. Levine and Zernike don't deserve the terrible treatment that Ransom gave them, and they seem to understand Hayek a lot better than he does on this point.