Wednesday, February 12, 2014

More on Cassel and Socialism: Hayek Quotes Cassel on Planning in "Freedom and the Economic System"

Hayek quoted Cassel to support his argument. He wrote that "Professor Gustav Cassel states his apprehension there with a clarity which leaves nothing to be desired. He writes:"
Planned Economy will always tend to develop into Dictatorship . . . [because] experience has shown that representative bodies are unable to fulfill all the multitudinous functions connected with economic leadership without becoming more and more involved in the struggle between competing interests with the consequence of a moral decay ending in party - if not individual - corruption. The parliamentary system can be saved only by wise and deliberate restrictions of the function of parliament. Economic dictatorship is much more dangerous than people believe. Once authoritative control has been established, it will not alwyas be possible to limit it to the economic domain. ("Freedom and the Economic System", Socialism and War, 192)
Hayek quotes from "From Protectionism through Planned Economy to Dictatorship", written in 1934. A keyword search in Individualism and Economic Order reveal only a passing reference about Cassel's work on interest. Elsewhere, Hayek references Cassel in regard to monetary theory and the business cycle, but I find no obvious alliance in the socialist calculation debate. 

One modern Austrian, Jesús Huerta de Soto, derides Cassel for his comments about the viability of socialism, but the socialism that Cassel referred to was a poor representation of the system. In theorizing about a socialist economy, he wrote "Our socialist economy must thus essentially be based on the free exchange of personal services and means of satisfying personal wants." (133) He goes on to say that the economy needs money and that workers do not receive equal wages. Later in the book he refers to the entrepreneur and the lack of appreciation for him by socialists, as I mentioned in the previous post. There is a semantic problem here. Cassel's use of the word "socialism" is a loose one. If, as de Soto suggests, Cassel’s work was foundational for later proponents of planning, they were not reading his work very closely. For now, this snapshot of intellectual history remains murky.

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