Thursday, August 02, 2012

Hayek On Social Justice

Here are a few insightful and interesting quotations that I think are relevant to understanding "social justice" from Hayek's The Mirage of Social Justice:
. . . the importance for the functioning of the market order of particular prices or wages, and therefore of the incomes of the different groups and individuals, is not due chiefly to the effects of the prices on all of those who receive them, but to the effects of the prices on those for whom they act as signals to change the direction of their efforts.  Their function is not so much to reward people for what they have done as to tell them what in their own as well as in general interest they ought to do. [pp. 71-72]
It is not good intentions or needs but doing what in fact most benefits others, irrespective of motive, which will secure the best reward. [p. 72] 
The most common attempts to give meaning to the concept of 'social justice' resort to egalitarian considerations and argue that every departure from equality of material benefits enjoyed has to be justified by some recognizable common interest which they differences serve.  This is based on a specious analogy with the situation in which some human agency has to distribute rewards, in which case indeed justice would require that theses reward be determined in accordance with some recognizable rule of general applicability.  But earnings in a market system, though people tend to regard them as rewards, do not serve such a function.  Their rationale (if one may use this term for a role which was not designed but developed because it assisted human endeavour without people understanding how), is rather to indicate to people what they ought to do if the order is to be maintained on which they all rely.  The prices which must be paid in a market economy for different kinds of labour and other factors of production if individual efforts are to match, although they will be affected by effort, diligence, skill, need, etc., cannot conform to any one of these magnitudes; and considerations of justice just do not make sense with respect to the determination of a magnitude which does not depend on anyone's will or desire, but on circumstances which nobody know in their totality. [p. 80] 
I think it is very important to understand that the prices that emerge in the world of voluntary exchange (or, we might say, in The Political Order of a Free People) are signals that can be useful  with respect to choices about future individual human actions as well as future social interactions.  The world of human action is dynamic and evolving, and the prices that emerge with the market process are signals that help people figure out effective ways of adapting to ever changing conditions.  Thus government actions in the name of social justice will amount to introducing force into the political order in a way which necessarily interrupts the function of prices as such signals.

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