Understanding And Fixing The World: An Introduction to 1974 Nobel Laureate in Economics F.A. Hayek

hayekian
hayekian
Sep 5, 2018 · 30 min read

How the world evolved to its current state, how to make it better going forward and oh so much more is something that 1974 Nobel Laureate in economics F.A. Hayek already explained. This being the case, it is inevitable that leading thinkers eventually stumble upon Hayek, which is precisely what Matt Ridley (one of today’s most respected and well-connected intellectuals/authors) admits in the clip above. Unfortunately the vital insights that came together in Hayek and like-minded intellectuals’ minds remain dispersed among various scholarly books and thus somewhat inaccessible to the layperson and still way ahead of our times. This will surely change with time. Barring some civilization-ending nuclear/environmental disaster which is currently very likely to occur, someday Hayek and his great mentor Ludwig von Mises will be as familiar as Charles Darwin. I would like to think that if someone asked Hayek to provide a relatively simple 10 minute explanation of how the world works he’d come up with something similar to what follows bellow. I’m no Hayek so this summary of his evolutionary worldview will take at least three times as long.


Understanding how the world works is surprisingly easy. Everything that happens is a transformation of matter, and if these transformations are related to life, they require precise information. A simple evolutionary process is what creates the mechanisms that create/spread information and the resulting order/life they lead to. As Hayek summarizes:

“We understand now that all enduring structures above the level of the simplest atoms, and up to the brain and society, are the results of, and can be explained only in terms of, processes of selective evolution…”

Enduring structures” like living things and society are self-perpetuating orders that are in continuous cycles of wealth production and consumption. Production involves the transformation of matter to create wealth. And consumption transforms wealth in a way that sustains or expands living things and their internal parts/orders. For example, paramecium are single-celled life-forms that produce food by swimming around and swallowing small bacteria which they then consume by digesting and transforming them into the various nutrients needed to maintain and expand the paramecium’s internal order and thus life. A more complex multi-cellular animal like a human being is simply a collection of cells (which are themselves orders) which must be productive as a whole in order to consume the necessary wealth needed to nourish itself and the sub-orders/cells it is made out of. Easy, right? Today we not only have biological order, we have social order, what 19th century British evolutionary thinker Herbert Spencer referred to as the “Social Organism”. The ‘Social Organism’ is rapidly growing and increasing the rate at which it transforms the earth’s matter into human-usable wealth. Every year highly automated building-sized machinery in the mining industries scrape/mine less than 5 cubic miles of matter from the earth’s massive volume of 260 billion cubic miles. This matter is ‘collaboratively transformed’ or relocated by billions of people as trillions of dollars worth of wealth in terms of cars/buildings/refrigerators/products/etc. are produced thus increasing the word’s economic pie of wealth and social order. These continuous cycles of production/consumption which occur at the cellular/animal/socioeconomic level require precise knowledge/information. By focusing on how information arises, spreads, and guides these vital cycles of production/consumption which lead to order/life/society we can have a simple yet profound understanding of how the entire world works.


“processes of selective evolution”(Natural Selection) can be said to have evolved two mechanisms for creating the biological and social orders respectively. The biological order is created via ‘biological evolution’ with genes being like the sentences which store the information necessary to coordinate life/order. Genetic mutations lead to new genes/information and ‘natural selection’/competition does the inadvertent “designing” by selecting the better-adapted/“fitter” “enduring structures” which end up reproducing more and thus passing on more copies of the better-adapted/“fitter” genes/information/design on to latter generations.


The socioeconomic order is coordinated by ‘The Market Process’ and its various “parts” like trade, money, economic competition, the banking/finance industry, interest rates, legal structures (governments/religions) and more. Social orders (individuals or companies) are in cycles of production, trade, and consumption. If you are a freelancer you produce a product/service and trade it directly with society (customers) for money, and then trade the money back with society for the wealth you consume. If you work for a company, you produce your labor and trade it for money with your “employer” who combines it with the labor of others to produce a product/service which is then traded with society for the money from which your paycheck comes. Whether you are a freelancer, employee, or company, what is commonly referred to as sales revenue (your paycheck), is an estimate of the total amount of wealth produced. Costs, like employee wages which will be used by them to consume wealth, are an estimate of how much wealth is consumed from the economic pie. And profits, which are the difference between sales revenue (production) and costs (consumption) are an estimate of by how much additional wealth the economic pie has grown. A profitable order is an order (cell/person/company) that produces more than it consumes and is therefore self-sustaining/alive. The global economy or ‘Social Organism’ is really a vast collection of orders that are constantly trading with each other, each trade nourishing each participant with what it needs and thus taking each participant/order from an inferior to a superior state of well-being from its perspective, otherwise the trade would not occur. When Carl trades a dollar for a hamburger he values the hamburger more than the dollar and the restaurant values the dollar more than the hamburger so the action of trading takes place, which like all action which is not coerced, takes each participant from an inferior to superior state of well-being.

New/superior information arises and spreads through the minds of people/companies/orders as they are motivated to innovate and/or copy the innovations of competitors due to ‘economic competition’. Why are BMW, Ford, Toyota, and all companies/auto-manufacturers/orders constantly innovating and copying each other’s innovations thus continuously restructuring their respective social orders in superior ways as fast as humanly possible? Because the institution/right/concept of ‘private property’ gives everyone in their role as consumers the ‘freedom to trade’ their (life/order)-sustaining wealth for what they calculate to be best. This freedom to choose/trade is what forces everyone in our role as producers to compete, in other words, to discover how to produce something society values (our labor, a product/service) which we do by innovating and/or copying existing innovations. As cost-cutting ideas emerge leading prices to continuously fall, new profitable ideas arise and once again spread via competition in an endless cycle of knowledge generation/innovation. For example, computers were once very expensive, but once the price of making them came down enough, people easily realized that every home could have them, which gave birth to our computerized world and the Internet and all the great things that flow from it. The more wealth is produced, the more wealth has to be offered in exchange for labor as entrepreneurs/companies compete against each other for the labor they need which helps explain why the economic pie grows for everyone. So… ‘private property’ leads to the freedom to choose/trade, which can be seen as “turning on” ‘economic competition’ which is what turns then entire global social order into a vast distributed super-computer that is constantly discovering and spreading superior information and subsequent order.

Socialist/Communist countries are national MONOPOLIES that lack the innovative/competitive incentives in free/capitalist societies/orders. If a superior car is made by a company/order anywhere in the planet, every competitor MUST copy the innovation due to the individual’s freedom to trade with and thus nourish the superior company/order. Socialist/Communist/‘Public sector’/National bureaucracies get their wealth through taxation/compulsion so they have no incentive to be efficient and/or copy innovations. Central plans can’t work if people are free to not go along with them so they inevitably require compulsion/slavery. It is a criminal act in Communist/Socialist countries to start a business, it is also a criminal act to not pay taxes that sustain public sector bureaucracies like ‘public education’ so there is little incentive or wealth to sustain other/superior ideas or change. For example the NYC public(monopolistic) school bureaucracy consumes over $21,200 dollars per year to “educate” a K-12 student. Refusing to pay a single dollar that goes to this bureaucracy is obviously a criminal act. These two simple points help explain why Socialist/Communist countries like the former Soviet Union, North Korea and Cuba were/are always run-down/poorer, copying all their technology from the Capitalist world, and have police-states needed to keep everyone going along with the plans/ideology. The now-classic image below shows a Socialist/Communist/Monopolistic order (North Korea) vs. a free/competitive/Capitalist order (South Korea). Try to envision the dynamism of the capitalist/free world, ideas constantly emerging/spreading in minds in the South(even outside in other countries and moving to/from the country) and spreading. But the North?

Herbert Spencer beautifully highlights the differences between free/private sector orders and government/officialism created ones:

“How invariably officialism becomes corrupt every one knows. Exposed to no such antiseptic as free competition — not dependent for existence, as private unendowed organizations are, upon the maintenance of a vigorous vitality; all law-made agencies fall into an inert, over-fed state, from which to disease is a short step....Consider first how immediately every private enterprise is dependent upon the need for it; and how impossible it is for it to continue if there be no need. Daily are new trades and new companies established. If they subserve some existing public want, they take root and grow. If they do not, they die of inanition. It needs no act of Parliament, to put them down. As with all natural organizations, if there is no function to them, no nutrient comes to them, and they dwindle away. Moreover, not only do the new agencies disappear if they are superfluous, but the old ones cease to be when they have done their work. Unlike law-made instrumentalities…these private instrumentalities dissolve when they become needless.”

With our focus on how information/knowledge arises and coordinates life/order, we can see that a government regulation is essentially a “way” of doing things, it is information. But unlike information that arises in the private/competitive sector and is constantly improving as best as humanly possible due to economic competition, a government regulation is information that arises out of a few brains and is then forced upon the entire social order via the law and can only be changed via a painfully slow monopolistic/bureaucratic apparatus made up of economically ignorant politicians, lawyers, lobbyists and special interest groups who always lack the necessary knowledge and incentives to discover what is the best way to do something as times change. The more the government regulates, the more it paralyzes competitive knowledge discovery. As government regulations have increased in the health care sector, turning it into a sort of island of paralyzed top-down competition-less socialist central planning, so have costs. These increased costs have led the sector to grow from consuming just 1.6% of the American economic pie in 1960 to 4.2% in 1980 to a whopping 16% in 2006 and about 18% by 2017. The image below is yet another powerful “meme” that helps explain the regulatory paralysis/bureaucratization of the entire medical sector.

In image below one can see how the less regulated a sector is the better it functions ultimately because competitive information creation/spreading can work smoother.

The Software/IT sector is relatively unregulated, teenagers can work at Google and Microsoft and write the software that keeps planes in the sky or people alive via software in medical equipment, yet there is no American Association of Computer Programmers dictating what or where such knowledge can be obtained similar to how the government via the American Medical Association regulates/monopolizes/paralyzes the medical sector via the licensing of doctors, medical schools, insurance sector, etc. Thanks to this lack of monopolistic centralized decision making/regulating, education in the Software Development world is astounding. At places like www.freecodecamp.org thousands of people are going from 0 experience to highly-paid computer programmers in less than a year. It is all about information and order, and in the IT world millions of people are ordered efficiently via smooth competition and are highly productive thus most make good salaries. If the medical sector, or better yet, the entire world-wide economy was as deregulated and thus as competitive as the Software/IT sector, the rate of innovation and prosperity would skyrocket and I would guess that people who as of today have 5 years left to live might be able to beat dying of old age.


Finance/banking and interest rates are other important aspects of the ‘Market Process’. Besides the more obvious function of safeguarding savings and pooling the savings of many people to allow the execution of bigger projects which would have been impossible if entrepreneurs were limited to the few savings of friends and family, banking/finance and more specifically the phenomenon of ‘interest rates’ also play a nearly miraculous role. If we assume that the general interest rate is at 7%, we can divide minds into two categories. 1) Those that have inferior knowledge or business plans that can grow the economic pie by less than 7% and will be motivated to refrain from consumption by lending their savings to banks to effortlessly earn the 7% interest, and 2) those minds that have superior knowledge or business plans which can grow the economic pie by more than 7% and will be motivated to become borrowers of the previously saved funds and get to consume the wealth the savers had refrained from consuming as they implement the business plans they expect to yield a higher than 7% return on investment so that they can pay back the loans with interest and keep the rest as profit. Something amazing is happening here. As if by magic, interest rates motivate the accumulation of savings and the movement of saved wealth from minds that have inferior ideas to minds that have superior ideas thus giving a tremendous sort of ‘computational boost’ to those societies/orders that allow charging interest on loans. It is vitally important to keep in mind that living orders are in constant cycles of production/consumption, and that the production of wealth requires the consumption/use of existing wealth and that simply increasing the amount of money is obviously NOT the same thing as increasing the amount of unconsumed wealth/savings. If 1,000 men are to spend 12 months building/producing a factory, they must consume/use bricks, ladders, energy, the food/energy/transportation/shelter that they (as well as their dependents/family) will consume while they produce the factory. If the needed real wealth exists, because it had been previously produced and then remain unconsumed/SAVED, great, they will be able to consume/use it as they produce the factory. But if instead of real wealth/savings governments simply increase the amount money, while no corresponding real increase in wealth/savings exists in the real economy, a sort of downturn/bust/chaos in the economy will eventually happen. Just like grains of sand are cheap because there are many of them, and diamonds are expensive because they are rare, the same thing happens with the cost of borrowing/savings. The more people save, the more wealth remains unconsumed to be used by borrowers, the more money goes to the banks for lending, and the cheaper the loans will be as banks compete with each other for borrowers by offering lowered interest rates. If interest rates go down from say 7% to 2% it will now make sense to borrow at 2% to finance/nourish some project that has a return on investment of 7% and pocket the 5% difference as profit. This is an idea which would not have made sense to try when interest rates were at 7%. Since interest rates went down because a corresponding increase in unconsumed wealth/savings has occurred things will tend to workout. However, once again, what happens if interest rates go down from 7% to 2% NOT because people refrained from consumption thus increasing real savings/wealth, but because government added more money(‘credit expansion’) to the banking system thus “artificially lowering” interest rates, giving the illusion that more real wealth/savings exists in the economy when that has not been the case? What happens is that at the beginning we get more businesses starting or expanding(the boom phase), but eventually the prices of various things will suddenly get more expensive than they anticipated and cause many to fail (the bust). Imagine two wealthy couples each with a child who both want to go out on the same night (project)but there is only one baby-sitter(savings/wealth), no amount of money will allow both to execute their plans, what they need is more savings/wealth/baby-sitters. Something similar is what happens to the economy. We quote the great Ludwig von Mises:

“A lowering of the gross market rate of interest as brought about by credit expansion always has the effect of making some projects appear profitable which did not appear before.” (Mises, p. 558)

“However conditions may be, it is certain that no manipulations of the banks can provide the economic system with capital goods[baby-sitter/savings]. What is needed for a sound expansion of production is additional capital goods[savings/wealth], not money or fiduciary media. The boom is built on the sands of banknotes and deposits. It must collapse.” (Mises, p. 559)[my words]

Bottom line, governments via their central banks and money creation can’t help the economy and are the source of disastrous business cycles. Seen from above a society that saves is dynamic, bubbles of wealth emerge and can then be consumed as new ideas/businesses morph the social order in superior ways. Without such savings the social order must be stuck in existing patterns.


This simple economic insights related to banking/finance help us understand one of the reasons why the Islamic world has not progressed as fast as the Judeo-Christian one, AND how economic ignorance is at the root of antisemitism and the numerous disastrous repercussions it has which greatly affect us to this very day via the Israeli/Palestinian conflict and much that is related. The Islamic world has traditionally had strong prohibitions on charging interest so it inadvertently loses the aforementioned banking/finance benefits. For many centuries the Catholic Church too had strong prohibitions against charging interest which inadvertently provided incentives for Jews to be over-represented in banking/finance which was a great benefit to the European social order even though it brought Jews some real scorn/antisemitism due to massive economic ignorance.


By now we have a basic grasp of how the socioeconomic order works. Every person/company/order using profit/loss calculation to discover the most productive/profitable way of restructuring their local corner of the world and as they do so information is emerging, spreading, restructuring the social order into more productive/advanced states. Keep in mind how incredibly awesome ‘the market process’ is. Who designed such an amazing system?

Just like the human body is the result of the actions of some 30 trillion cells but obviously NOT the result of any conscious planning or designing by them (natural selection being the sort of inadvertent designer), the ‘Market Process’ too is the result of human action but NOT of conscious human planning or design. The Market Process shares this trait with language, it too is the result of human action, yet never designed or “invented” by some genius cavemen. The great economist Carl Menger asks:

“How can it be that institutions that serve the common welfare and are extremely significant for its development[The Market Process]come into being without a common will directed towards establishing them?”

F.A. Hayek beautifully answered that monumentally important question more or less as follows. If we envision mankind 20,000 years ago, we would see a sort of petri-dish of competing cultures(languages/concepts/rules/laws) that are being ‘naturally selected’ based on their ability to grow the groups that contain them relative to other groups. Customs/concepts/rules/religions/etc. that inadvertently cause their respective social orders to grow whether it’d be via conquest, successful defense, migration into, imitation, etc., expand their order and the very customs/concepts/ideologies/etc. which helped them thrive. Every rule/law has an effect in the productivity/growth/survival of a social order. Given that a society is likely to have dozens of such rules it is impossible to know the exact impact of any one of them when considering the overall competitiveness of a society/order. For simplicity’s sake let us focus on just one rule, what is the optimal punishment for theft? Let’s assume that in culture/tribe ‘A’ when a man steals he is killed which might deter many thefts but decreases the number of people in the group and all the productivity that this person might contribute in the future. In tribe ‘B’ they cut off a hand, in tribe ‘C’ they cut off a finger, and in tribe ‘D’ 10 lashes. Let’s assume that tribe A’s custom/rule of killing the thief actually proved to lead to a “fitter” social order. Perhaps it turns out that cutting off the hand led to an unproductive person that became a big drain on rest of tribe and a weak/useless fighter when it came to offense/defense so it was better if he was dead. And that cutting off a finger and lashes proved to not be enough of a deterrent which led to many thefts and retaliatory violence which turned out to be more costly than losing a member of the tribe. For simplicity’s sake let us assume that this was by far the most important custom/rule affecting the growth/fitness of the social order, and that because of this, tribe/culture ‘A’ eventually displaced the others so that its kill-thieves rule/custom survived while the other punishments disappeared. The kill-thieves rule, is the result of human action, yet not the result of conscious human planning or design with the reasoned or conscious goal of having a more competitive/fit social order. The real designing of this rule or cultural element was made, not by innate instinct or human reason, but by ‘natural selection’/competition/‘group selection’/‘cultural evolution’. This concept of cultural evolution allowed Hayek to identify a sort of ‘third dimension’ or mechanism for discovering/spreading knowledge which was neither instinctual (tied to our genetics/biology), nor the result of our reason. Omnipresence, the ability to be everywhere at all times is another concept that would provide a great benefit to religions that used it to describe their God (which happens to be yet another culturally evolved concept). Without God’s omnipresence you could get away with breaking the rules that give society order and only have to face the consequences brought upon you by fellow men. But if God is everywhere, watching your every move, you will be much more likely to follow those rules that give your society a productive social order. You might be able to steal and leech off of others and not get caught but God can see everything, not only is he everywhere all the time, he can even read your “impure” thoughts, so the idea of breaking the social rules that give society order are prevented from entering a brain before they can even lead to action. A similar case can be made for the concepts of sin/evil/etc.

With the above in mind and knowing that ‘private property’ is the simple concept/institution that leads to a chain-reaction of incentives which creates modern civilization, we can easily see that those tribes/orders whose customs/religions inadvertently became more peaceful and thus less violent, extended peace, friendship, trade to those outside the tribe, etc., in other words, those who tended to respect ‘private property’ more and more, would become more advanced/powerful, and as they grew, they would inadvertently spread the very customs (increasing respect for private property and commercial culture that emerges from it) and evolving economic system (market process) that allowed them to reach such relative heights. Once again the true sort of ‘designer’ or the market process was our old friend ‘natural selection’ acting on groups/cultures, inadvertently selecting those customs/ideologies/concepts as if they were genes.

We are now in a position to understand F.A. Hayek when he summarizes:

“Culture is neither natural nor artificial, neither genetically transmitted nor rationally designed. It is a tradition of learnt rules of conduct which have never been ‘invented’ and whose functions the acting individuals usually do not understand”

We have never designed our economic system. We were not intelligent enough for that. We have stumbled into it and it has carried us to unforeseen heights and given rise to ambitions which may yet lead us to destroy it.” (Hayek F. A., 1981, p. 164)

Hayek summarizes his ‘group selection’ and evolution of morals here(thanks José Manuel González!):


What about human “reason”? It too has far more to do with cultural evolution than most realize. Imagine the following cruel scenario. A baby is taken from his mother at birth and raised by plain-looking mechanical arms. No human being looks at him in the eyes implying there is a “self” behind them. He is never spoken to and thus never picks up a language which is crucial for thinking. For example, Mises writes:

Thought is bound up with speech. The thinker’s conceptual edifice is built on the elements of language. The human mind works only in language; it is by the Word that it first breaks through from the obscurity of uncertainty and the vagueness of instinct to such clarity as it can ever hope to attain. Thinking and that which is thought cannot be detached from the language to which they owe their origin.

Man can be seen as having a potentially very powerful computer/brain that has the potential for reasonable and logical thinking but what makes the computer truly useful is the operating system and software that is loaded on to it as it “grows up” and how that software interacts with the “internet”, in other words, the cultural/legal/linguistic concepts/traditions it absorbs. How would this unfortunate person “think” as an adult regardless of how powerful the brain and what it gets purely from genetics? Hayek writes:

“It may well be asked whether an individual who did not have the opportunity to tap such cultural tradition could be said even to have a mind”

My guess is that a bonobo/ape, raised among humans and taught some rudimentary sign language would act far more reasonably than this “culture-less” person. And again, which is the process that designs those things like language, religions, ‘the market process’ which are the result of human action but not of conscious planning or design? Hayek’s group selection.


Another important aspect of Hayek’s thinking is the fact that human beings are slightly smarter tribal apes whose nature and instincts were molded to survive in an often-times vicious tribal world. For most of our evolution, until about 20,000 years ago when the evolution of the market process began to accelerate, the vast majority of us lived in small tribes where tribal warfare was the optimal evolutionary strategy and one of the main reasons we are social and have evolved big brains to begin with. As Steven Pinker writes:

“… men go to war to get or keep women –not necessarily as a conscious goal of the warriors(though often it is exactly that), but as the ultimate payoff that allowed a willingness to fight to evolve. Access to women is the limiting factor on male’s reproductive success. Having two wives can double a man’s children, having three wives can triple it, and so on. The most common spoils of tribal warfare are women. Raiders kill the men, abduct the nubile women, gang-rape them, and allocate them as wives.” ( Steven Pinker’s “How the Mind Works” 1999, p. 510)

First you increase the economic pie available to your tribe/gene-pool by coordinating a raid and killing other men, and then you increase your reproductive success by raping the women and making them your wives. To be successful in war you need a strong sense of unity which translates itself into the strong nationalist/militaristic/patriotic tendencies we are so susceptible to and has the planet littered with nuclear weapons and “civilized” taxpayers believing we actually need them. The bond men make as co-warriors is likely stronger than male/female love. A female is easily replaceable (another raid, etc.) but the loss of that co-warrior that will help get the next female and/or defend you when you only get one chance at life is probably even more important. Just like natural selection has shaped us to enjoy sex due to the vital genetic payoff, it has also shaped us to enjoy war, killing, torturing and easily segregating ourselves into the in-group/us vs. out-group/them. As a Live Science article aptly titled “Humans Crave Violence Just Like Sex” discusses, mice have been found to love to fight and gain pleasure in a similar manner to how we love food and sex. Article mentions:

Scientists have known that mice and other animals are drawn to fights. Until now, they didn’t know how the brain was involved.

The new study, detailed online this week in the journal Psychopharmacology, reveals the same clusters of brain cells involved in other rewards are also behind the craving for violence.

“Aggression occurs among virtually all vertebrates and is necessary to get and keep important resources such as mates, territory and food,” said study team member Craig Kennedy, professor of special education and pediatrics at Vanderbilt University in Tennessee. “We have found that the reward pathway in the brain becomes engaged in response to an aggressive event and that dopamine is involved.” ……. “We learned from these experiments that an individual will intentionally seek out an aggressive encounter solely because they experience a rewarding sensation from it,” Kennedy said.

Given its importance, war/patriotism easily fills us with a great sense of purpose. England’s prime minister during WWII and national hero Winston Churchill shows us how inspiring, exciting and purposeful WWI was to him when he mentioned:

“I think a curse should rest on me — because I love this war. I know it’s smashing and shattering the lives of thousands every moment — and yet — I can’t help it — I enjoy every second of it.”

And in another occasion:

“My God! This is living History. Everything we are doing and saying is thrilling… Why I would not be out of this glorious delicious war for anything the world could give me…”

Towards the end of WWII, Russia’s Red Army is estimated to have raped over 2 million German women. The Allies/US weren’t much better. We had our own tribalistic/quisi-religious/ape-shit reasons for incinerating Japanese cities and needlessly nuking two of them. As our great ape/leader at the time, President Truman, wrote “The only language they seem to understand is the one we have been using to bombard them. When you have to deal with a beast you have to treat him as a beast” We shouldn’t be shocked when men murder and rape, the real miracle that has taken thousands of years of cultural evolution to create, are the modern cultural values we absorb that program us into respecting the body/property/thoughts of all human beings regardless of age, sex, and race.

Generally speaking mankind has been an orgy of tribalism, war, religious mysticism and oppression. The rapid evolution of the market process and technological progress it has brought us, especially in the last 100 years, has made our wars increasingly disastrous and it is a statistical certainty that unless a basic understanding of how economic freedom and human nature really work spread fast enough we will destroy civilization. Hayek was not very optimistic. (23 secs)

The horrific mindset of top military leaders/apes is perfectly captured in Daniel Ellsberg’s great book “The Doomsday Machine: Confessions of a Nuclear War Planner”. Ellsberg writes:

Bernie Shriver who pressed the development of our ICBMs[Intercontinental Ballistic Missiles] asked Lemay[Curtis Lemay, top US military leader, largely responsible for the bombing of Japan in WWII] .. “What is your requirement for a large warhead, that is, what is the largest yield you need, what would be large enough” , Lemay answered, “one bomb for Russia” *

In a wonderful discussion of Ellsberg’s book, famed intellectual Noam Chomsky summarizes:

“The things that I learned in the book were hair-raising. For example, I learned… that during the Eisenhower period and basically carried on, there was one war plan, and the war plan was that if there was a confrontation with the Russians in Berlin,whatever, maybe a small confrontation, then immediately we wipe out every city in China… There was no alternative plan, that was the plan… A war could be set off just by inadvertence. There is case after case…where we came extremely close to war just by inadvertence. Sometimes reckless actions on the part of leaders, but sometimes just accidents that happen…When the first early warning system was established to detect incoming misiles…It turns out this new sophisticated system…In the first day of operation it detected a Russian missile attack with 99.9% certainty…That kind of thing happens over and over and the war plans are setup so that if somebody acts on that 99% a billion people die…Page after page of the book contains graphic example of this kind of, you can only call it insanity” — Chomsky

Let that sink in. “One bomb for Russia”, one bomb that can destroy a sizable chunk of the planet, and whose environmental effect will surely affect all life on the planet. And over some minor scuffle in Berlin, the incineration of hundreds of millions of Chinese and a probable terrestrial life-ending environmental catastrophe. Companies like Microsoft, Google and Toyota hire people from every nationality and ethnicity and all produce/trade/interact/cooperate peacefully. The idea of a “Russian” employee or competitor attacking an “American” one is just absurd, yet our tribalistic governments are sort of cultural relics sustained by massive economic ignorance and ethnocentrism.

The upper echelons of the US military is packed with apes who see the world similarly. For example, during the Vietnam War, President Nixon mentioned to then Secretary of State Henry Kissinger that “I’d rather use the nuclear bomb” and “The only place where you and I disagree … is with regard to the bombing…You’re so goddamned concerned about the civilians and I don’t give a damn. I don’t care.” For 15 years during the Cold War the “secret” nuclear missile launch codes for American nukes was 00000000. In 2014, 34 nuclear missile launch officers have been implicated in a cheating scandal and have been stripped of their certification. It is already incredibly dangerous that a monopolistic and thus inevitably inefficient, tribal-minded bureaucracy like the US military has nuclear weapons. As technological progress continues to accelerate, it is just a matter of time before any disgruntled group can manufacture a device as damaging as a nuke, or cause enough havoc in a few major cities to cause devastating disruptions to global trade which can be just as damaging to the social order as if entire cities are wiped out.

A basic understanding of the never-ending cycle of production and consumption that all life and social orders must be involved in easily shows how horrific military spending/consumption is. Every year over one trillion dollars worth of civilian wealth in terms of homes, cars, energy, medicines, food, etc., (an amount similar to the entire productive output of Mexico which has the world’s 15th largest economy at $1.04 trillion GDP), is consumed by the millions of people employed by the United States national security bureaucracy and its associated contractors as they produce push-ups, military drills, nukes, and other weapons of destruction. In 2015, the world’s ten biggest corporations as measured by the amount of research and development spending they undertook, companies like Amazon, Google, Microsoft, Volkswagen and six others, consumed about 109 billion dollars as they sustained some of the brightest and most productive people in the world. The US National Security bureaucracy consumes that much wealth in less than 1.5 months. Perhaps even more startling is the fact that for the year 2012 the entire planet’s top 2,000 R&D-spending companies spent about 700 billion in R&D which is still 300 billion less than what our National Security spending was at the time. This happens every year! It might very well be the case that the USA’s National Security related yearly consumption of wealth is similar to that which is consumed in corporate R&D by the entire planet, which is not only a gigantic detriment to the taxpayers who have to forego the enjoyment of a trillion dollars worth of wealth which is then used to sustain all the people associated with the bureaucracy, it also greatly slows down mankind’s technological progress. If military spending/consumption actually led to economic growth, the always-backward-and-poor former Soviet Union and today’s North Korea, with their relatively large militarizes would be prosperous, yet simple economic logic easily helps explain why they were not so. If military spending/consumption is obviously bad for the economy, then all-out war is even more so. How can having even more people stop producing civilian/useful goods (homes, cars, energy, medicines, etc.) and thus reduce the economic pie, to increase the amount of weapons which are then used to destroy lives and infrastructure and wealth possibly be good??!! Although understandably difficult to believe, prominent economists like 2008 Nobel Laureate in economics Paul Krugman lack a basic understanding of the cycle of production and consumption and thus foolishly believe that war and military spending, even in the absurd case when it is not done to actually prevent an invasion, is actually good for the economy. While giving advice on how to improve the slumping economy he mentioned:

“Think about WWII…it brought us out[of the great depression]. If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat…this slump would be over in 18 months,”

Krugman, believing that all we need for prosperity is some “stimulus” or incentive to “create jobs” and “economic activity” via buying and selling, completely overlooks the vital fact that whatever “activity” takes place in the economy must be coordinated in a way that produces more real/civilian wealth than it consumes, otherwise you are just obviously reducing the economic pie, and military spending and even more so war is the most destructive thing one can do. Below is Krugman in perhaps the most economically ignorant and disastrous TV segment ever where he mentions the above and more.

Krugman’s ignorance of such basic concepts is shared by many mainstream economists, especially perhaps the most famous mainstream economist of all, John Maynard Keynes. Keynes too is utterly ignorant of the vital fact that economic activity must be coordinated in a way that produces more than it consumes. He writes:

“…activity of one kind or another is the only possible means of making the wheels of economic progress and of the production of wealth go round again.”

No! Can’t be “ one kind or another”! It must be activity that is part of a finely coordinate profitable order! One that produces more than it consumes! Keynes also preached that just adding more money to banks to lower interest rates created the type of savings which “are just as genuine as any other savings”.


In summary: Just like natural selection evolved mechanisms to turn otherwise solitary cells into multi-cellular organisms, it has been doing the same thing with us. Cells had to evolve mechanism to control rapid/uncontrolled cell-division like cell-suicide/apoptosis, these mechanisms are still being perfected thus we get “cancers”(uncontrolled/‘uncivilized’ cellular growth). We easily revert to our intuitive ‘us vs. them’, tribalistic, ‘uncivilized’ big-government/‘anti-private-property’ ways leading to disaster. It is as if natural selection is inadvertently pushing us, rewarding us, for being peaceful, tolerant, for respecting private, but our nature and quite understandable general ignorance of economics keeps launching us towards disaster. Which brings us to our final section.


A final bit of Hayekian/Misesian wisdom we will conclude with was their never-ending patience, tolerance, focus on intellectual error and thus economic education. Hayek and Mises were far too wise to blame the world’s problems on “bad guys”, pre-darwinian concepts of “evil” or “madmen”. They were deeply aware that at the core of mankind’s problems was mostly economic ignorance. Ignorance of the emergence of the market process/Capitalism. Mises:

“The problems involved are purely intellectual and must be dealt with as such. It is disastrous to shift them to the moral sphere and to dispose of supporters of opposite ideologies by calling them villains. It is vain to insist that what we are aiming at is good and what our adversaries want is bad. The question to be solved is precisely what is to be considered as good and what as bad. The rigid dogmatism peculiar to religious groups and to Marxism results only in irreconcilable conflict. It condemns beforehand all dissenters as evildoers, it calls into question their good faith, it asks them to surrender unconditionally. No social cooperation is possible where such an attitude prevails.”

Hayek dedicated his best-selling 1944 classic book “The Road to Serfdom” “To the socialists of all parties”. Hayek tells us:

“When I stressed that is genuine intellectual error that we have to fight, what I meant to bring out is that we ought to remain aware that our opponents are often high-minded idealists whose harmful teachings are inspired by very noble ideals. It seems to me that the worst mistake a fighter for our ideals can make is to ascribe to our opponents dishonest or immoral aims… I am indeed profoundly convinced that there is much less difference between us and our opponents on the ultimate values to be achieved than is commonly believed, and that the differences between us are chiefly intellectual differences. We at least believe that we have attained an understanding of the forces which have shaped civilisation which our opponents lack. Yet if we have not yet convinced them, the reason must be that our arguments are not yet quite good enough, that we have not yet made explicit some of the foundations on which our conclusions rest. Our chief task therefore must still be to improve the argument on which our case for a free society rests.”

Hayek again:

“Most people are still unwilling to face the most alarming lesson of modern history: that the greatest crimes of our time have been committed by governments that had the enthusiastic support of millions of people who were guided by moral impulses. It is simply not true that Hitler or Mussolini, Lenin or Stalin, appealed only to the worst instincts of their people: they also appealed to some of the feelings which also dominate contemporary democracies.” (Hayek F. A., 1976, p. 134)

Again:

“It is necessary to realize that the sources of many of the most harmful agents in this world are often not evil men but high-minded idealists, and that in particular the foundations of totalitarian barbarism have been laid by honourable and well-meaning scholars who never recognized the offspring they produced.” (Hayek F. A., 1973, p. 70)

As wonderful as numerous scientific breakthroughs, technological innovations or entire fields of study might be, such knowledge is incomparable to understanding basic economics thus having familiarity with the vital role that ‘private property’/privatization and economic freedom and competition play. This body of knowledge is by far the most important thing mankind has discovered. The very last 3 sentences from Mises’ great treatise “Human Action” stress that:

“The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.”

A few pages earlier Mises provides the formula for prosperity:

“Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man’s human existence…All present-day political issues concern problems commonly called economic. All arguments advanced in contemporary discussion of social and public affairs deal with fundamental matters of…economics. Everybody’s mind is preoccupied with economic doctrines…Everybody thinks of economics whether he is aware of it or not. In joining a political party and in casting his ballot, the citizen implicitly takes a stand upon essential economic theories…As conditions are today, nothing can be more important to every intelligent man than economics. His own fate and that of his progeny is at stake…all reasonable men are called upon to familiarize themselves with the teachings of economics. This is, in our age, the primary civic duty. Whether we like it or not, it is a fact that economics cannot remain an esoteric branch of knowledge accessible only to small groups of scholars and specialists. Economics deals with society’s fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen.”


Was this essay useful? Please remember to clap and share, and above all, be a “friend of mankind” :

“The solution to the present problem of massive, overwhelming poverty is nothing other than the science of economics. As should be increasingly clear, economics is a science which can make possible the construction of a social and political system in which human success is a feature of normal, everyday life everywhere. It is truly the humanitarian science, and only those who have studied it well and who are prepared to implement its teachings deserve to be called friends of mankind. The most important charity which true friends of mankind can pursue is to disseminate knowledge of this vital subject as widely and as deeply as they know how.” — George Reisman

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