F. Hayek, Government intervention is fine if in accordance with the principles of free economy

True, there are good reasons why all governmental concern with economic matters is suspect and why, in particular, there is a strong presumption against government’s actively participating in economic efforts. But these arguments are quite different from the general argument for economic freedom. They rest on the fact that the great majority of governmental measures which have been advocated in this field are, in fact, inexpedient, either because they will fail or because their costs will outweigh the advantages.

This means that, so long as they are compatible with the rule of law, they cannot be rejected out of hand as government intervention but must be examined in each instance from the viewpoint of expediency.

The habitual appeal to the principle of non-interference in the fight against all ill-considered or harmful measures has had the effect of blurring the fundamental distinction between the kinds of measures which are and those which are not compatible with a free system. And the opponents of free enterprise have been only too ready to help this confusion by insisting that the desirability or undesirability of a particular measure could never be a matter of principle but is always one of expediency.

In other words, it is the character rather than the volume of government activity that is important. A functioning market economy presupposes certain activities on the part of the state; there are some other such activities by which its functioning will be assisted; and it can tolerate many more, provided that they are of the kind which is compatible with a functioning market.

But there are those which run counter to the very principle on which a free system rests and which must therefore be altogether excluded if such a system is to work. In consequence, a government that is comparatively inactive but does the wrong things may do much more to cripple the forces of a market economy than one that is more concerned with economic affairs but confi nes itself to actions which assist the spontaneous forces of the economy.


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