The Eight-Lane Superhighway to Serfdom

Normally, I try to steer well clear of Hayekians. In contemporary discourse, Austrian Economics is the hobby horse of an extremist fringe of market fundamentalists: ferocious parrots with a one track mind centered on a single remedy to all economic ills.

Personally, I’m on the center-left, with a strong emphasis on “center”. I think the market works, except when it doesn’t, which is most of the time, so then government’s job is to do what it can to help it work better: an inexact science full of messy compromises and suboptimal outcomes that usually goes by the name of “democratic governance”.

So it’s a testament to the know-nothing extremism of the Chávez government that they’re making even a guy like me – temperamentally and ideologically ill-disposed to libertarianism – turn to Hayek for guidance. But the dysfunctions of the Venezuelan economy these days so closely follow the predictions of the Austrians, it would be intellectually dishonest to softball it.

Reading articles like this makes the reflection almost inevitable. In it, VenePirámides (copy-pasting El Nacional) discusses the Nth reason why chavismo can’t meet its house-building goals. It’s not just the cement bottleneck, it’s that there’s a steel rebar bottleneck too…y no está precisamente cabilla.

The nationalized steel sector is only producing about half of the steel rebars it would take to build 150,000 houses this year. Why? In part because Sidor is concentrating on making thicker rebars for large-scale infrastructure (like bridges), leaving smaller-diameter cabillas for the housing industry in the dust.

It’s the kind of fundamental misallignment between supply and demand that centrally planned economies can’t help but generate. If Sidor was allowed to set rebar prices, stepped up demand for housing rebars relative to infrastructure rebars would be a business opportunity. Steel-makers would see they’d make more money by switching production from one line to the other, and in time both markets would clear.

But with rebar prices set by administrative fiat, producers are cut off from the information they need to know how much of which product to make. There may be too much demand for rebars in the housing sector and not enough demand in the infrastructure sector, but none of it is reflected in rebar prices. So Sidor never gets the signal to switch from one to the other.

In Venezuela, the upshot has been to turn Community Councils into arbitrageurs: exploiting their privileged access to cabillas at the subsidized rate to turn around and sell them on at massive markup. As usual, the arbitrage margin gets captured by a rent-seeker with privileged access to political decision-makers. This “solution” shields the producer from any benefit associated with increased demand for its product, and so creates no incentives to actually step up residential cabilla production.

If this was just a problem in the rebar value chain, it’s imaginable that state planners could gather enough information to “get rebar prices right” – setting administrative prices that closely mirror the breakdown of supply-and-demand between different rebar subsectors. (But then, where would be the fun in that?)

The real problem comes when these kinds of misallignments become generalized: when there’s a problem with rebar prices and cement prices and PVC pipe prices and rooftile prices and copper wiring prices and ceramic tile prices and on and on and on, touching every input needed to make a house.

It’s one thing to have one misalligned price, but in a centrally planned economy every price is misalligned.

Hayek understood that, within the logic of central planning, every step you take to try to remedy the distortions that administratively-set prices engender will take the form of an encroachment on individual freedom. Worse, none will be effective in its attempt to overcome the endemic shortages that central planning makes inevitable, and so each encroachment becomes the foundation for the next.

In the first world, these insights have been delegitimated, in the public sphere, by attempts to apply them to centrist governments that sane people easily recognize as very far from the fascist tradition. Libertarian overstatement has turned Hayek’s name into a kind of dog-whistle for reactionaries.

And that’s unfortunate, because Hayek was right. Central planning really does create a dynamic that’s deeply inimical to liberty. Only a fanatic would say that’s now happening stateside; only a fool could fail to see it in Venezuela.

73 thoughts on “The Eight-Lane Superhighway to Serfdom

  1. A totem of the “center-left” is that it thinks it’s in some kind of political center, while regarding Hayek as an extremist, even while admiting that he’s right a lot of the time. Eisenhower also clled jhimslef a “middle-of-the-road Republican” to the guffaws of us dead-dog-Democrats. My parents would turn over in their graves if they knew that I extend the tolerance and open mind they taught me not only to foreigners and the unfortunate, but also (horrors!) to subhumans: businessmen and conservatives.

    It’s good you’re getting the idea about central planning – that is, leftist economics. A couple more years of enjoying the benefits of government wisdom, and you’ll be in the middle of a broader road – but one less travelled by.

    Nonetheless Warmly, and with admiration and hope,


    • Thanks! IMHO invocations of Hayek in the U.S. almost always confuse interventions designed to overcome market failures with interventions meant to dismantle the market mechanism: cap-and-trade gets treated as lying on the same road as fixing rebar prices – y’know, the one to Serfdom.

      It’s an extremely widespread category error. And it makes a nonsense of Hayek’s best insights.

    • One thing that “XXI century socialism” promised to solve (and the main difference with de XX century version) was central planning. These guys said that taking advantage of capitalism-produced/recently-introduced computers they would be able to create something like “The Matrix”, a program able to calculate all the prices in the economy, based on the number of working hours invested to produce every good and service.
      The XXI socialism´s planners, as Pirates of the Caribbean, already started to control prices, but the old fashioned way, without creating “The Matrix”, using the traditional gut feeling, because this “Matrix” is just a “neurofecaloma”, (BS in their central nervous system). So this is the same stupid XX century socialism that XXI version´s advocates already accepted as a failure: an eight-lane superhighway to serfdom

      • Yeah, I was particularly puzzled by this stupid belief in capitalist technology solving it all. Did you see how Heinz Dieterich becomes all excited about e-voting? He thinks “now we can vote on anything in the participatory democracy thanks to computers”. But then, in an interview, he says “well, some people may say it depends on who controls the computers”…but then he did not go further into that as the one government that is closest to his wet dream is the one controlling those computers.
        I develop software and I am shocked at how people misunderstand how easy or difficult it is to automate this or the other task.

        • Of stupid beliefs of capitalist technology we have also seen much of in the financial markets… so it is a contagious state of mind no doubt.

        • Dieterich, looking at venezuelan experiment, is claiming that he was “comprando kerosen”. It is amazing how this guy has been considered an “intelectual”. Now they are going to propose to wait for “quantum computers”!

      • Raul, when I was in grad school in about 1971 or so, my school here in Canada received a Polish economist–I no longer remember his name, but he was billed as a disciple of Oscar Lang, who presided over the Central School of Planning and Statistics in Communist Poland.

        The disciple gave a speech back then in which he said that computers would be able to overcome any information-deficits in “socialist” planning; very well targetted pricing was now quite possible, he said.

        That turned out badly, I believe.

          • I’ve always thought that the markets were the “super-computer” Dieterich dreamed of… Millions of minuscule decisiones signaling a huge output.


  2. Great article Francisco. I read The road to serfdom when I was 14 and even though I considered Hayek a bit too right wing for me (Im also center-left) I had to admit that many of the things he said were completely correct. At that moment Chavez had only been in power for about 2 years and I fortunately had not seen his predictions come true in my country. Now after 12 years of this pseudo communist nightmare I understand his teachings even more.

  3. As many intellectuals, Hayek always struck me as a great at pointing at the problem but with no clue whatsoever as to how to solve it. His diagnosis is right on the bat, his anarco-capitalistic notions are borderline insane.
    Unfortunately, many readers tend to jump to conclusions and infer that, because his diagnosis is right, then his proposals must me correct too, therefore forfeiting the very intellectual process Hayek himself said he championed.
    In that sense, I couldn’t agree more with your article and your POV. As we’ve been arguing for years, one of the biggest ideological wounds chavismo has inflicted on political discourse is (1) the creation of a mindset according to which, since his administration is riddled with incompetence, corruption and populism, ergo all “social discourse” approach will inevitably lead to the same; and (2) the establishment of the Libertarian Austrian school as an all-encompassing solution to each and everyone of our problems, a school of thought which has many merits but must be, as every school of thought, approached critically, not as a “final say” on the matter.
    Nowadays, in Venezuela you can’t challenge a single iota of “The road to serfdom” without being accused of upholding expropriations or Cadivi, and any proposal that remotely conveys the idea of having the State support or help develop a project is recieved with a snicker and brushed off as another corrupt money-making scheme.

        • I know what anarcho-capitalism is. Maybe I should’ve asked, “What in the world would lead you to believe Hayek was an anarcho-capitalist?”

          • Deep right-field…

            Some liberales criollos really baffle me: Rothbard refutes Hayek refuting VonMises refuting Rand refuting Smith plagiarising Hutcheson…

            It’s like the 1970s left-wingers!

          • Rothbard never refuted Hayek. Sure, there are nuances among them, but they all agree on general conclusions, that in general less government is better than more government and they all agree especially about inflationary monetary policy. Austrians are pretty unanimous about whether an economic policy is a good or bad one, the only real disagreement is about anarchist versus minarchist. And as of right now that not too important.

          • I meant “refuting Friedman”… But in any case, many liberales criollos go berserk if you mention someone from the canon upon which they normally don’t agree.

  4. We are not on the road to serfdom, we are there! So much that our citizens do not even know it! So much that what the “opposition” has to offer is only a better and improved serfdom.

  5. Economists, like others aspiring to describe reality, deal with reality.

    If reality is right-wing so be it… NOT! Because it is not. It’s reality. And for all their errors and blind spots (which they have, no description of reality is ultimately correct, science advances thus), Austrians dealt with market mechanisms as they are, not as they “should be”.

    Politicians deal with dreams. Of course they don’t like reality to chew up their dreams. Thus, the far-left, and some of the far-right hate for the conclusion the Austrians reached. For example: to right-wingers, if it’s not immigration it will be outsourcing. Take your pick.

    • Good point, Loro…

      Economics isn’t “left” or “right” any more than Physics is. Economists do not make moral judgments on what politicians and governments do. They just explain that if policy A is implemented, the probable result is B. It is up to the people and leaders to decide what is wise and just.

      • Guys, still you forget economics is NOT a natural science. Juan will perhaps be pissed off, but economists can be defined more as “politicians who can do the maths”. Still, unlike mathematicians who can prove things based on a closed set of principles, axioms, economists are doing nothing more than applying models, very basic simplifications of the world and performing some maths on top of that.

        Even we in computer science are aware the models we design and implement are just that, models, they are, maths here or there, actos de fe, which we try to adapt and improve. It is like a friend who, after studying computer science, told me he wanted to do his doctor’s degree in mathematics: I really want to prove it and not just believe just because it works so far.

        Economy is NOT like physics. Economics is a very necessary knowledge domain, but we should by this stage be aware of its limitations. It is just one step closer to reality than pure politics, but only so much.

        • Kepler,

          The difference is in degree, not in kind. Even Physics, is only a model of reality that is constantly being challenged and refined. As for not being a “natural” science, even in that, I would disagree. Many of the principles of economics are applicable to biological evolution and the science of animal behavior. There is no such thing as an “exact science”, with the possible exception, of Mathematics, which is arguably, not even a “science”.

          • You’re still missing the key distinction between interventions to correct market failures and interventions to disable the market mechanism. The theory of market failure wasn’t really well developed when Hayek was writing, but today it’s utterly uncontroversial.

            Contemporary Libertarians too often see no difference between the former and the latter – and so we get hysterical denunciations of the kind of health care reform George H.W. Bush favored as fascist assaults on liberty.

            It’s utter gobbledygook.

          • Economics is chaotic, in the sense that small divergences matter. It deals with highly complex, and aware systems made of human minds among others. Collecting all the information about the system is impossible, too. But reality it describes.

            Of course, Physics is an exact science. For very very simple systems where all the interactions are tightly controlled and well known, and “noise” or uncertainty does not induce chaos. That’s why all the other sciences, engineering and techniques with empirical laws and approaches exist.

            Austrians like Von Mises did not like mathematical models in economics, and of course concepts like information asymmetries and behavioral economics (where actors can act irrationally and in imitation) were not used by the founders of the Austrian school.

            However, market failures usually refers to an undesired result in an otherwise functioning market. We accept it that not everybody has ready access to yachts, but have a harder time accepting that for mortgages to buy a house, or surgery, or long-term employment with full benefits. Some are indispensable to continuing life, like medical attention and some are created expectations.

            Asymmetries and externalities, or natural monopolies on the other hand tend to be self-correcting or can be corrected if the State rather than intervening, arbitrates disputes and insures that the field is level, particularly AT THE ENTRANCE where States usually erect fearsome barriers OF ENTRY.

            There simply is no counting of the infinity of ways in which States privilege pre-existing businesses and prevent competitive offerings that can lower prices for consumers.

          • There is no such thing as market failure. I know it sounds controversial, but all “market failures” are really government control failures. Email me with any examples you have. I have good responses and I am a very kind when it comes to open debate.

          • Hi Tony,

            Could you please talk about information asymmetry in health care services? This has been identified as a market failure. What kind of government intervention could solve this problem and minimize signaling and perverse incentives?

          • The problem is that everyone has health insurance. That’s not the way it used to be before government started pushing these plans. Before that, prices were clear and open in order to keep prices down. Things started going down with the Flexner Report.

            As for externalities, those take care of themselves. Companies try to internalize positive externalities like when new baseball stadiums by parking lots around it. Companies are forced to internalize negative externalities with lawsuits. Pollution is a problem because government permit it instead of creating a market for it where companies would have to contract with us before they could pollute on our property.

          • There is not lawsuits in your anarcho-capitalists fantasy. But besides that, the problem with externalities is not that the market can deal with the effects, that it certainly can, but the presence of externalities makes the quantities of production of a particular good with externalities, socially sub-optimal….

          • There certainly would be lawsuits in an anarcho-capitalist society. There is a role for private courts.

            And how do you define “socially sub-optimal”? How do you know how much of something to make better than the market?

          • Tony,

            But health insurance is a market “solution”. How is it possible that a market solution is, at the same time, a problem for the market?

          • “How is it possible that a market solution is, at the same time, a problem for the market?” When not everyone has the income to afford it. If everyone had enough income for “the basics”, no one would ever be left out of the market of basics.

            In the case of insurance, another factor kicks in. Why would an insurance company have insurance plans for the poor, if the poor have no money to buy them? There’s no reason for them to do so, so they don’t. The problem does not arise from the market not being able to supply the goods, but from the poor not being part of the market to begin with (e.g., because of lack of income of the poor, or because of unfair government competition).

          • OK Torres,

            However, we are not talking about the purchasing power to buy an insurance. We are talking about perverse incentives generated from information asymmetry in health care services as a market failure. Even with universal coverage we´ll see the same problems of adverse selection.

          • “We are talking about perverse incentives generated from information asymmetry in health care services as a market failure. Even with universal coverage we´ll see the same problems of adverse selection.”

            Follow the money. The reason there are such perverse incentives is because the market is neither competitive nor inclusive. Consider the two types of coverage that you’re pointing to:

            perverse private, which makes a greater profit by lobbying in government offices (for tax breaks and subsidies and policy favors) because that’s where the money is, but would stop if the money for their business were not coming from the government but from consumers choosing them.

            perverse public, which gets misused and abused and wasteful from two sides, A) the consumer uses the services sub-optimally because the money is not hurting the consumer in his private pocket, and B) the government is sub-optimally allocating resources because it simply cannot centrally beat parallel processing.

            Paraphrasing from chavistas: the market fails porque no lo dejan trabajar…

          • Well, this is really by construction: If a particular price of a particular good (with externalities) does not fully reflect society’s value for that particular good (either because it has social benefits 0r costs), then given that the price is the only vehicle for information on resource allocation for the production of that particular good…the ammount of production of that particular good is socially sub-optimal…you end producin too much/little of that particular good…capisci?

            That is exactly the beauty if the theory of externalities, you don’t have to violate a single principle of the free market assumptions to allow for a role of the State…

          • Wanna talk about public goods? How do they deal with no-excludable goods over there in anarcho-capitaland?

          • You’re still not defining “socially sub-optimal”. The Soviet Union thought it knew exactly what people wanted and in what amounts, but it still needed to get prices from its more free market neighbors to build their economy. The real “information assymetry” comes about when you try to decide how to produce without taking into consideration scarcity and demand.

            As for public goods, what evidence is there that the public sector does it better than the private sector? We’re not arguing free markets versus perfect. Perfect doesn’t exist.

          • “then given that the price is the only vehicle for information on resource allocation for the production of that particular good”

            That’s an incorrect given. For example, the government via the news media, can be another vehicle of information on resource allocation without it intervening in the market, as can non-profit organizations, or even private citizens.

            The key for prices to be efficient information vehicles is to limit influencing factors other than free, competitive supply and free, inclusive demand. But being efficient information vehicles does not limit them to being the only ones. I envision a government that rather than directing market development in certain areas by making purchases, itself as if it were a consumer, it simply keep it citizens informed of needs that it forsees, and through the media increase demand for those developments. Also, regulation of goods and services should be done through policies and information, not price interventions, such as they do with lottery, cigarettes, and licor taxation (i.e., the conflict of interests of making money from the sale of items they wish wouldn’t sell so much).

          • Sigh!…must be professional deviation, but in economics my statement is really not controversial…social sub-optimality is defined in terms of a theoretical welfare function that if exists should comply with some basic properties….other than that, Max, you seem nice and everything, but you definitely are not grasping the economic dimension of the problem. The issue with public goods is that, in the limit, the free market equilibrium for public goods is the production of zero public goods…zilch

            I give up, for now…real work to do

          • “social sub-optimality is defined in terms of a theoretical welfare function that if exists should comply with some basic properties”

            In other words, some function that totally ignores scarcity.

            By the way, you claim that the free market would not produce public goods. Where is the evidence?

          • Omar,

            As Raul Aular noted with respect to physics and “ideal” conditions, your comment is with regard to “in the limit” of a free market, a non existent version of free market that is used for learning purposes, not for real world applications. Would it be fruitful to a discussion to use the same argumentation about non free market proposals and describe their failure at their limit? Don’t think so, because even in the most strict communism, free market principles are at play. So, please be clear, that we are not talking limits, so your statement is debatable if it is talking limits.

        • Raul, health insurance as we know it today was originally not part of the market. Not until the government started encouraging the overreaching plans that we have today did the insurance problem start. It used to be that people really only had catastrophic coverage and not coverage for everything like we have today. Before this system, the prices were clear and open.

          • Well,

            It seems to me that “si no te agarra el chingo, te agarra el sinnariz”
            That´s why market forces work well only where we have: perfect information, no government, infinite players, no barriers to entry, basically no human beings… let´s say: in our imagination!

          • That’s not true at all. That’s the lie that the interventionists have created. Barriers to entry are okay, capital can be gathered. You don’t need perfect information, investment is better than any other solution we have come up with. Infinite players? Why?

            Free markets work without all these things. This is why free market economies have surpassed any other form of economics. Nothing can compete with it.

          • Raul Aular, It almost sounds like you are arguing against the validity of a supply/price curve and a demand/price curve. Is that the case? Note that defenders of free market are not defenders of some ideology, just people who accept that if a market is working efficiently then supply/price curves and demand/price curves will be more close to perfect than any alternative, thus making it a better system for the two curves together to point to the near optimal price. Add to that the premise that free markets also take change into account more quickly than any alternative, and it’s you who needs to say, if not free markets, what?

          • Free markets? What are you calling free markets? Not the US, are you? Not Britain. Not Japan. Not China. Read some real history books and find out about how markets were bombed open…and just on one sideration.

            Central planning sucks, no doubt about that. Freer markets work better, as long as they exist. They always get screwed by reality, though.
            There has been no free market ever, that’s just a desideratum, nice to dream about…some time.

            This discussion is so pointless…it’s like talking to some Jehova witnesses.

          • It may be pointless to you, but history has shown that the freer the market, the more successful it has been. Is it any surprise that the US grew at its fastest pace during the Gilded Age and has not come close to that pace since the beginning progressive era?

          • Of course I accept (as a fact) market mechanisms. In fact, I think that they are anthropologically natural, markets are as natural as a mango tree.
            What I think does not exist is the “free market model”. This is an intellectual tool to help to understand market mechanisms. Is like studying classical physics in high school: you have to assume some “ideal” conditions (without friction forces, for instance) but nobody seriously pretends that the real world is going to work that way.
            You will find government intervention wherever you go; you will find friction forces wherever you go. In fact, it is easier to create a system without friction forces than creating a system without government intervention.

          • Tony,
            The United States was BOMBING its way to foreign markets, it was carrying out protectionistic policies for whatever it wanted.

            China is growing, it is using capitalism all the way, but it is also doing it on its way.
            Try to see what difficulty foreigners have to penetrate the Chinese market.
            It is always a war, it is always a negotiation where one claims to be for free opinion but at the same time is doing is not playing fair game.

            The only people who talk about “free markets” as reality are those who want others to open their markets to buy devices, machines in exchange for things the first definitely do not produce at all and some wallies who believe in Free Market as a catechism.
            Please, read about history of foreign policy by the US, Britain, France, etc and try several sources.

          • Kepler, you seem to be arguing against anyone ever coming up with a new system that has never been tried, despite sound principles. I’ll point out two things regarding that:

            1) No wonder you don’t like the unconditional cash distribution proposal. You rule it out right off the bat from the lack of historical example standpoint. Don’t worry, you’re not alone. Quico, for example, considers the latest latam tests with conditional cash transfers the most convincing arguments in favor of attempting such policies in Venezuela, but he also seems to shiver at the notion of trying things to which one cannot point elsewhere. I get it. I don’t agree with such a stance, but I get it.

            2) Unfortuneately, many in “el pueblo” are of the mindset that “not invented here” is equally undesireable. For this very reason is that something like unconditional cash transfers have an awesome chance in Venezuela. Not only was it an idea by a Venezuelan for Venezuela, so the pueblo would accept it, but it is also based on sound principles with relevant successes to which one can point worldwide, so the Quicos may consider it.

            The question is, will the Keplers consider it. From your statement, “This discussion is so pointless…it’s like talking to some Jehova witnesses” I gather the answer is no.

            But, accepting that you won’t consider this kind of proposal, let me ask you about yours. If you don’t believe in governments that abuse and misuse the power they can wield, why do you keep supporting government systems with the power to abuse and misuse the power, merely based on the hope that they don’t? You see, to me, one of the key benefits of unconditional cash distribution is taking such power away from the government. Yet, you seem to think that that is not what’s important. That so long as the government spends the oil money in the way you think is right, then it’s OK for a nation to have a system that allows a government to spend the oil money that way. You seem to think that if they mispend, it’s that particular government’s fault, not the system’s. That just because such a system worked elsewhere with a different government, then it would be OK to implement the same system in Venezuela; we just have to pick the right government (i.e., one that spends according to your principles).

            Honestly, if there were a way to guarantee that oil money would be spent in ways based on your principles, I may not even be supporting cash transfers. It’s because there is no way to guarantee that such power will only be used for good that I rather distribute that power throughout the population than let it concentrate in a few hands. Consider that for every successful example of what you recommend there is probably a counterexample government destroying their economy. “Read some real history books”…

          • Raul Aular, using your physics analogy, the “ideal” conditions are only for learning purposes. When it comes to sending a toy from earth to mercury and getting it to enter a very precise orbit at a very precise time, velocity and direction, it’s the having studied physics under the “ideal” conditions that is the basis for the applied physics to succeed.

            Of course we’ll find intervention everywhere. We’re talking about rules of thumb. We’re talking about avoiding intervention, the way in space travel they avoid the dust clouds. We’re not being purists. We’re being realists. As such we must first try to make sure that exchanges are based on the same understanding of interventionless markets (note how you were even giving me the impression that you did not agree with the supply/price and demand/price curves)! Then, with that sound basis, avoiding intervention to get as far as possible, in as little time, with as little energy as possible, like a spacecraft.

          • Raul, as I said, free markets do not require those conditions. And even though those problems do exist, they are much smaller than the problems associated with any other system. We are not arguing free markets versus perfect. We are arguing free markets versus some alternative that you have not mentioned.

          • Kepler, just because other countries have used protectionism (which I have not denied) does not mean that protectionism is the best system. We’re not arguing history, we’re arguing theory. So present some.

          • “For example, the government via the news media, can be another vehicle of information on resource allocation without it intervening in the market, as can non-profit organizations, or even private citizens.”

            But in the end, prices finally decide resource allocation. Other subjective factors such as public opinion (and public image!) might force a temporary lowering of prices from a single agent with a monopoly, and of course giving away A with money obtained from another source. But finally…

            And I would agree with unconditional transfers from natural resources, if they take the form of shares and dividends.

            And besides, Kepler, there might not be perfectly free markets, or perfectly free market societies. But there are areas in those countries and even in less “free” countries where the market is virtually free of obstructions by virtue of the government not having really caught up and not being really able to catch globalization. Like IT, computers and electronic gadgets. There, prices halve and power doubles. The story of regulated “markets” and regulated “labor markets” is quite another in these same countries. Mainly one of sad decline. There!

            Besides, barriers of entry in business (and to the purchase of goods) tend to be lowered by technical advances and competition. Unless the government intervenes, taxes and regulates enough that only a select few have the resources and connections to enter…

            In my world there is a place for government services. When they have the adjective “emergency” before their nominative and it’s truthful. And then, there should be no exclusion of private initiative there, either.

          • loroferoz, I was replying to Omar who stated, “then given that the price is the only vehicle for information on resource allocation for the production of that particular good”. Resource allocation for the production of goods and services is *not* exclusively decided on information obtained from prices, nor sales. Much of it has to do with risk and difficulty, and sometimes even emotions (usually smaller businesses, but even larger ones; ask Steven Jobs). Governments through media or policies, or people through blogs and protests, all can affect what business owners may perceive as future desireability of a product. That information is not contained in the price of sales, yet it affects the allocation of resources for production very much.

            As to shares and dividends, let’s look at those seperately.

            Dividends are paid out based on shares. Assuming one share per citizen, each citizen would receive exactly the same amount with equal frequency, so CT via dividends in this case would be the same as UCT. But there is a difference which make me prefer UCT, and that is the shares.

            Firstly, I’m hoping you are talking about shares representing ownership of the oil, and not of the businesses that do things with the oil. What the venezuelan State owns and needs to administer is the oil and the sale of it; it should not be part of the oil business beyond that sale. Let the private sector purchase the oil, and do what regulations allow them to with the oil. Anyone who wants in on that business should be free to buy shares of those businesses if they so choose, but the government should not be subsidizing shares in the oil business for anyone, nor competing against any of those businesses, let alone monopolizing them.

            Also, if the shares are of the oil-related business and not of the oil itself, then the business decisionmakers may –will– start making decisions that are more political or self-interested than they would in a business that is not guaranteed its shareholders, subsidized by the government, to boot.

            Another problem with shares is that there are different laws that regulate shares, so it lends itself to attempts by small groups to create or find loopholes in the laws to take advantage of their trade, regulations, rules, and especially payouts. By having UCT at the constitutional level, as I support, se presta menos a chanchuyos.

            A deal-breaker for me, is that shares are tradeable. This means that a citizen may opt to sell his share, and be left out of the future benefits of the share. Unacceptable. The sharks with shares experience would quickly find ways to get control of huge numbers of shares, creating a greater inequality than today. And if you make them untradeable, then you’re back to one share per citizen, so it’s the same as UCT. Inheritance issues also come into play, but I’ll just skip those.

            Finally, using the Keeping it Simple principle, cash is simpler than shares, *especially* for the poor, who already know how to deal with cash, so not just implementing it, but selling it, including for electoral purposes, cash beats out.

  6. Great post, unfortunately you named Hayek…

    [Sorry, spanish from here]: Dos problemitas: hablar de “distorsiones del mercado” sin mencionar cuáles, pero que podemos imaginar y que normalmente son originados por el Estado (como dijo Revel: “Si el capitalismo falla, es culpa del capitalismo, si el socialismo falla, cúlpese también al capitalismo”). Y dos, limitar a Hayek al papel de descubridor del agua tibia (la planificación central no funciona) ignorando su principal aporte (ahí les queda de tarea). Por otro lado, hablar sobre lo malo de la planificación central como si, por ejemplo, el control monetario y de tasas de interés impuestas por los Bancos Centrales (y otras muchas cosas consideradas”normales” por los “centro-algo”) no fuesen también planificación central.

    Por supuesto, de toda esta imagen distorsionada de Hayek, surgen tesis interesantísimas sobre él que le atribuyen querer la abolición del Estado (!?). El problema no es la planificación central entendida como se entendía hace 60 o más años, sino el intervencionismo a secas el cual incluye muchos temas queridos por quienes todavía creen que el Estado está para “corregir” los errores del mercado.

    Todo esto no es materia del presente post, pero no está de más, porque pódría pasar alguien y pensar que Hayek y la Escuela Austríaca “pegaron” por casualidad un análisis sobre planificación central y merecen “algún” tipo de reconocimiento por ello, y ya, no tienen más nada qué decir sobre más nada.

    • Oh, I fully expected it.

      El punto es sobre el rol de los precios como mecanismos de transmisión de información y como instrumentos de coordinación de la producción y el consumo. Esa vaina no es “agua tibia” – es un descubrimiento esencial, brillantemente expuesto.

      Y aunque no lo puedo saber a ciencia cierta, estoy seguro que Hayek diría que tener un precio mal alineado (la taza de interés) es menos malo que tener TODOS los precios mal alineados.

      • En todo caso ese descubrimiento lo hizo Mises décadas antes.

        Obviamente perder un dedo es menos malo que perder una mano, pero lo que cuenta son las consecuencias que genera la pérdida de ese dedo. Por ejemplo la fijación de las tasas de interés por parte del Banco Central para “estimular” la economía ( o para “enfriarla”) desencadenan una series de acciones por parte de los particulares imprevistas por los genios que juran que están estimulando o enfriando la economía. La crisis financiera que estalló en 2007 se fue incubando desde que la FED decidió en 2001 bajar las tasas de interés porque la economía estaba “estancada”, lo cual distorsionó el mercado de capitales… pero espera, claro, eso no fue culpa de la FED sino de la “falta de controles” que regía en el “mercado salvaje” lo que impidió “corregirlo” a tiempo.

        • Seguramente tu conoces la genealogía de estas ideas mejor que yo.

          El debate sobre la fijación de la tasa de interés ciertamente es interesante. Pero no es el debate que hay en Venezuela…y, tristemente, el debate que hay en Venezuela no es particularmente interesante, y ni siquiera es un debate, en realidad, dado que está saldado desde hace 60 años.

          Que sea necesario repetir estas cosas lo que da es pena: como tener que andar explicando muy bien muy bien que la tierra gira al rededor del sol y no vice versa…

          • El tema de las tasas de interés lo saco no porque sea pertinente o no para la realidad nacional (antes dije que mi comentario estaba off-topic) sino para relacionarlo con la planificación central, ésta no es solo control de precios sino también de otros aspectos de la economía como la fijación compulsiva de las tasas de interés por parte del Estado.

  7. “…the key distinction between interventions to correct market failures and interventions to disable the market mechanism.”

    Agreed, but those interventions to correct market failures may produce price distortions of their own, e.g. cap and trade schemes may lead to rising energy costs less easily calcuable than those imposed by a straight tax. Now clearly that sort of thing does not disable market mechanisms, but may rather retard them to some degree.

    • ‘an inexact science full of messy compromises and suboptimal outcomes that usually goes by the name of “democratic governance” ‘ it is

  8. The problem is always in confusion, with equal freedom as Arturo Uslar Pietri said:
    “No one can be free and equal. Why? Because if he had absolute freedom of all men would be monstrous inequality: not all men are equally strong, not all men are equally intelligent, not all men are equally suitable for many things. (…). So the equality and freedom are contradictory as the term. ”
    What he said is true if we consider Uslar equality as equality of outcome, equality is something that the government should promote but not getting into the market, but creating an environment where all can grow, ie education, health, security and defense , education and health being only necessary that the person can grow enough to then continue to grow without the state …

    The problem with XXI century socialism, is that you never are without the state, the state doesnt help you to grow, the state controls your life

  9. You may be kind of turned off by Hayek, but have you ever tried the works of Henry Hazlitt? I would recommend Economics in One Lesson. It’s short, sweet, and to the point. I would also recommend the Law by Frederic Bastiat. I think these two works give Austrian economics the best light, unlike us extremists who may not be so persuasive. Give it a shot, it can’t hurt and these are very short works that are available for free online.

    But maybe Chavez is all you need to lead you to distrust government. I don’t know of anyone besides socialist dictators who could turn people to free market advocates better.

  10. stupid bank regulations that provoked the crisis and stops us from getting out of it. The following summarizes my points of view.

    Basel killed the banks!

    “More perceived risk of default more capital, less perceived risk less capital” was established as the pillar of the bank regulations for the rich western developed countries. In doing so they capitulated and doomed themselves to become submerging countries, because:

    a. Bank crisis never occur where risks are perceived as high, besides cases of pure fraud, they always occur where the risk was wrongly perceived as low.

    b. Perceived risk of default is already considered when banks set the amounts they lend and the interest rates, and so this guarantees that the perception of the official risk-perceivers, the credit rating agencies, will be doubly considered, and, any information excessively considered, gets to be wrong even if perfect.

    c. Capital requirements based on perceived risk of default bears not one iota of relation with the banks fulfilling their societal purpose of capital allocation, on the contrary they attempt against the spirit of risk taking on which the forward movement of societies depend.

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