The Road to Serfdom
Cass Sunstein has a new paper on Hayek's famous essay, "Why I Am Not a Conservative." Sunstein takes Hayek's self-description too seriously (see also his Substack post here). Hayek, he argues, was not really a conservative* because conservatives are too willing to use coercion in defense of traditional values, too suspicious of change, and insufficiently committed to pluralism. Hayekian liberalism, by contrast, is supposedly built around freedom and limits to coercion, spontaneous order, and tolerance.
The problem is that Sunstein accepts uncritically Hayek's definition of freedom and coercion. Hayek worried enormously about coercion by the state, but much less about the coercive power exercised through property relations, unemployment, and the dependence of labor on capital. If workers are disciplined by unemployment or if financial markets constrain what elected governments can do, these pressures appear as impersonal market outcomes rather than as exercises of power. Once coercion is defined that way, the conclusion is almost built in. Government intervention threatens liberty, while market relations embody it. No surprise there.
This is one reason why it is misleading to describe Hayek simply as a classical liberal. Hayek was one of the central architects of neoliberalism. Neoliberalism certainly borrowed the rhetoric of classical liberalism -- and tried to claim Adam Smith as a precursor (like Arrow and many General Equilibrium authors, btw)* -- but its theoretical foundations were quite different. Classical political economy did not possess the marginalist conception of markets as mechanisms that generate an optimal allocation of resources (understood here as suggesting that factors of production are fully utilized, that is, full employment and normal capacity utilization). Neoliberalism rests instead on the post-classical idea that markets are the privileged mechanism of social coordination. Hayek's emphasis on dispersed knowledge is simply one influential version of that argument.
And this distinction matters politically. If economic freedom is treated as the foundation of all other freedoms, then democratic attempts to regulate capital, redistribute income, strengthen unions, control capital flows, or guarantee full employment can themselves be represented as attacks on liberty. Political coercion can then be justified in the name of defending economic freedom. And Hayek certainly did, in his defense of both the Pinochet regime and the apartheid regime in South Africa, qualified as it might have been.
This helps explain something that often appears paradoxical about contemporary libertarians, like Javier Milei, who openly places himself in the Hayekian tradition. Milei combines an almost obsessive rhetoric of liberty with a willingness to repress protest and with a political discourse tolerant of Argentina's authoritarian and genocidal past. There is less contradiction here than one might think. If the liberty that matters most is the liberty of markets and property, then coercion directed against those who interfere with the market order can be presented as a defense of freedom. Hayek himself made the hierarchy quite explicit when he argued that a dictatorship could in some circumstances be more liberal than a democratic government. Democracy was valuable, but it was not ultimate. The preservation of the market order came first.**
Keynes' liberalism points in almost exactly the opposite direction. Keynes remained a liberal, but in the New Liberal tradition associated politically with the Asquith Liberals, and New Liberals like Leonard Hobhouse. He did not identify liberty with laissez-faire. Mass unemployment, insecurity, financial power, and extreme economic dependence could undermine the actual exercise of political freedom. Certain economic freedoms could therefore legitimately be restricted -- through public investment, regulation, capital controls, full-employment policies -- in order to preserve a liberal political order.
The contrast can be stated very simply. Hayek (and Friedman too) argued that political freedom depends on economic freedom. Keynes effectively reversed the relation, and argued that political freedom may require limits on economic freedom.
This is also where Keynesian liberalism connects naturally with Franklin Roosevelt's Four Freedoms. Freedom of speech and freedom of worship belong to the traditional liberal concern with civil and political rights. But freedom from want makes the Keynes' liberal argument explicit. Formal political liberty means much less if people lack the material conditions necessary to exercise it. If you are hungry, unemployed, or economically dependent, your political freedom may exist formally while being severely constrained substantively.
That is the issue Sunstein largely misses. The interesting question is not whether Hayek was really a liberal or a conservative. He was a neoliberal, obviously (a term that is absent from his analysis; Mirowski suggests that neoliberals avoid using the term. Perhaps there is something to that). The relevant question is which freedoms take priority when freedoms conflict. Neoliberalism places market freedom first and is therefore willing, when necessary, to restrict democratic freedom in order to preserve it. Keynesian and New Deal liberalism reverse that ordering. Markets may have to be constrained so that political liberty remains meaningful.
* There has been a brouhaha over Chiara Cordelli's entry on Capitalism for The Stanford Encyclopaedia of Philosophy. I can see why some economists -- like Jesús Fernández-Villaverde -- have been critical of her use of the concept of equilibrium in Hayek and Friedman's view of the system. However, at the end I think Cordelli's views are vindicated. I responded to some of these critiques here and here. A longer post is probably required to deal with all the issues.
** I should note that Hayek's critique of the negative effects of welfare states owes quite a bit to Carl Schmitt, who had close connections to the Nazi government, and has been an important source for American conservatism, as noted by William Scheuerman. Both associate the welfare state with the destruction of legal generality, and with a tendency towards authoritarian governments. Hayek explicitly invokes this Schmittian formulation, as noted by Scheuerman (see figure above from The Road to Serfdom). Government becomes involved everywhere in social and economic life, and society simultaneously penetrates the state.
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