Frederich Hayek (1899-1992) was one of the most profound and influential thinkers of the 20th century. His most famous book is The Road to Serfdom, which though first published in 1944, is currently the #1 bestseller at That this book is so widely read and so widely ignored by the leaders of the West defines the economic malaise currently disabling the enlightened spaces of the planet. Hayek’s most profound book, the one that looks most analytically at the role of the state versus that of the individual, is The Constitution of Liberty; it first appeared 50 years ago.

Both are virtually compulsory for anyone who wants to understand the end result of the welfare state and who also wishes to find an exit short of catastrophe. If you are too lazy or busy to read Hayek’s books there is a relatively short essay that encapsulates his thinking on the economic structure of society and the tension between liberty and equality. Individualism: True and False was a lecture given in 1945 and published the following year in a collection of Hayek’s essays titled Individualism and Economic Order. It was recently reissued by the Mises Institute.  Individualism: True and False is the first of these essays.

Hayek starts by defining “individualism”. He distinguishes his sense of the word from that used by Rousseau and the Encyclopedists which he feels means (or leads to) collectivism. Hayek believes that true individualism is a theory of society. “Individualism postulates…the existence of isolated or self contained individuals, instead of starting from men whose whole nature and character is determined by their existence in society.” Nations, in his view, stumble accidentally on systems that may form the very basis of human organization, but which are not the result of design. Free men create things “which are greater than their individual minds can ever comprehend.” Hayek derived this apprehension from Josiah Tucker, Adam Smith, Adam Ferguson, and Edmund Burke. Smith and Burke were particularly important in shaping his thought.

This view contrasts diametrically to those who wrought the French revolution and whose heirs are the social designers of today. “[D]esign theories necessarily lead to the conclusion that social processes can be made to serve human ends only if they are subjected to the control of individual reason, and thus (they) lead directly to socialism, true individualism believes on the contrary that, if left free, men will often achieve more than individual reason could design or foresee.” This statement encapsulates the debate which animates our current politics, no matter how inelegantly framed, over the role of the government in the design and direction society in general and the economy in particular. Along with Adam Smith, Hayek was more concerned with a system under which man could do as little harm when at his worst, rather than what he could do when at his best. This is analogous to primum non nocere in medicine.

Hayek, along with Smith and Burke and unlike their French contemporaries, wants a system that grants freedom to all rather than to just the “good and the wise”. The reason for this preference is that the good and wise, no matter how wise, can never know enough to manage any complex system. Any one man or even a group of men can only know a sliver of the whole of society. This is Hayek’s crucial point; the one he returns to throughout his career.

A man “cannot (italics in the original) know more than a tiny part of the whole of society…all a man’s mind can effectively comprehend are the facts of the narrow circle of which he is the center…nobody can know who knows best…The fundamental assumption…is the unlimited variety of human gifts and skills and the consequent ignorance of any single individual of most of what is known to all the other members of society taken together.” These are the reasons why central planning fails. No matter how earnest or well intentioned the planners, they cannot know more than an infinitesimal of that required to successfully plan any enterprise of consequence.

The presence of 40 “Czars” in the White House and the “success” of their charge is a perfect example of Hayek’s assertion of individual ignorance.

He goes on to say his “argument does not assume that all men are equal in their natural endowments and capacities but only that no man is qualified to pass final judgment on the capacities which another possess or is to be allowed to exercise.” He then remarks that only because men are unequal can we treat them equally. If they were all the same we would have to treat them unequally to successfully organize society. But as they are not equal society can be successfully arranged by letting people freely follow their inclinations. “There is all the difference in the world between treating people equally and attempting to make them equal. While the first is a condition of a free society, the second means as De Tocqueville described it ‘a new form of servitude’.”

If all were equal we would have to coerce people into occupations or tasks for which they were no more qualified than anyone else. As people are unequal we can let their talents dictate their activities.

The tension between liberty and equality (if one means equality of outcomes) is the basis of Hayek’s masterpiece The Constitution of Liberty. In more than 400 pages of tightly reasoned prose he scrutinizes individual liberty and the role of the state in its application. He defines liberty as the absence of coercion. Coercion may only be exercised by the state. He examines the conditions under which such coercion is justifiable. He shows how liberty and equality of outcome are opposites – the more you have of one the less of the other. Thus the state should be careful in the application of its coercive power. Especially as it never has the knowledge necessary to gracefully manage any complex system.