HAYEK (1899-1992) ON GOVERNMENT

Chris Guest

No 237, Working Papers from University of Sydney, School of Economics

Abstract: Hayek's belief in freedom, and his idea of the market as an efficient means solving the knowledge problem, generate his view that the role of government must be confined to constructing a stable framework of the rule of law. All else is to be determined by the competitive market. However, a thorough examination of Hayek's policy position reveals another Hayek on government. This Hayek recognised the duty of government extended beyond policies which underpin and improve the competitive market. Hayek's exceptions to laissez faire were guided by considerations of social welfare, an appreciation of the failures of the competitive market, and changing ideas about policy. The presence of two views on government constitutes an inconsistency in Hayek's position. It also demonstrates the difficulty of designing a "constitution of liberty" which provides a workable policy framework.

Date: 1996-09
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