Frederick Hayek

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Friedrich August von Hayek (1899.05.08 – 1992.03.23) was an Anglo-Austrian economist and philosopher best known for his defense of classical liberalism. Hayek shared the 1974 Nobel Economic Prize with Gunnar Myrdal for his "pioneering work in the theory of money and economic fluctuations and [...] penetrating analysis of the interdependence of economic, social and institutional phenomena". Blah blah, he showed why Socialism fails: the dispersed knowledge problem -- that the people on the bottom know more than the people on the top about the specifics of issues, so the more you have to push up the chain for decision making, the more errors and delays will be introduced.

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Road to Serfdom - F.A. Hayek pointed out in Road to Serfdom that Marxist socialism and fascism had similar roots. He wrote: "There is a great deal of truth in the often heard statement that Fascism and Nazism are a sort of middle-class socialism-only that in Italy and Germany the supporters of these new movements were economically hardly a middle class any longer. It was to a large extent a revolt of a new under-privileged class against the labor aristocracy which the industrial labor movement had created. There can be little doubt that no single economic factor has contributed more to help these movements than the envy of the unsuccessful professional man, the university trained engineer or lawyer, and of the "white collared proletariat" in general, of the engine driver or compositor and other members of the strongest trade unions whose income was many times theirs. Nor can there be much doubt that in terms of money income the average member of the rank and file of the Nazi movement in its early years was poorer than the average trade unionist or member of the older socialist party-a circumstance which only gained poignancy from the fact that the former had often seen better days and were frequently still living in surroundings which were the result of this past."

Dispersed Knowledge -
There was an economics battle between Keynes and Hayek fought generations ago. But History proved Hayek the winner: things he predicted came true. Keynes scored a few microeconomic points, but history broke his macroeconomics models: the boom economy after WWI, stagflation in the 1970's, Japan's lost decades and the failure of Abenomics, China and Russia's growth after abandoning command economies, all proved Keynes wrong. And Hayek won the noble prize for explaining why: Dispersed Knowledge. If the leaders don't know more than everyone else combined, then the more decisions you make from the top, the less efficient those decisions will be, and planned economics will underperform ones where the decisions can be made closer to the problem.


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