Economic Theory

Does liberty need a constitution?

Does liberty need a constitution? Or, what might at first glance sound even more paradoxical, does it need a framework of rules for a free society to be established and to flourish? F. A. Hayek’s The Constitution of Liberty addressed precisely this question, which has been fundamental for classical liberalism ever since its very inception.

The book was published a few months after Hayek’s 60th birthday and is sometimes perceived as his most profound treatise on social philosophy in his entire career. I am in agreement with this notion. Already in 1935 when debating collectivist economic planning, he distanced himself from ‘complete laissez faire in the old sense’ and proposed instead to start a search for ‘the most appropriate permanent framework’ for competition, which had been ‘sadly neglected by economists’ over the preceding decades.

Very similar statements are contained in chapters 1 and 3 of The Road to Serfdom, as well as in Hayek’s two presentations to the Mont Pèlerin Society in April 1947. In the mid-1940s he wrote to Henry Simons and Walter Eucken that he was intending to conceive a ‘positive complement’ to his previously expressed critique of socialism and interventionism: whereas, until then, Hayek had expressed what he opposed, his positive programme would be about what he actively proposed. By 1953 such plans started to take shape.

What is the basic outline of the book? After an introduction in which Hayek explained that, although he still regarded himself ‘as mainly an economist’, he had realised that at that point of time the task of an economist should be ‘the recognition of principles that lie outside the scope of technical economics or of any other single discipline’ (p.3). And indeed, the treatise is not about ‘technical economics’ and it has a truly interdisciplinary character.

Its 24 chapters are divided into three parts: ‘The Value of Freedom’, ‘Freedom and the Law’, and ‘Freedom in the Welfare State’, the level of abstraction declining in the course of the book. In Part I, Hayek established his conceptual basis, by defining meticulously not only his notion of liberty, but also of progress, reason, tradition, responsibility, equality, value and merit. In Part II, both historically and theoretically, he argued for the absolute indispensability of the Rule of Law: rules being the only liberal way to circumscribe one individual’s sphere of liberty vis-à-vis those of his fellow citizens. In Part III, Hayek applied the principles of the first two parts on various fields of economic policy, ranging from trade unions, social security, taxation and redistribution, money, housing, natural resources to education and research. Probably the most controversial sections have become the ones addressing social security, where, after weighing different arguments, he proposed a programme for ‘limited security’, as opposed to the welfare state’s ‘absolute security’ utopia. His programme included ‘equal minimum income for all’ (p. 259) as well as, intriguingly for today’s debates in the US, compulsory health insurance, within which the citizens can decide which of the competing agencies they would insure with (p. 286). This general idea is already contained in chapter 9, ‘Security and Freedom’, of The Road to Serfdom.

Even though it was not a bestseller due to its academic character and style, The Constitution of Liberty received some prominent reviews by close acquaintances of Hayek such as Henry Hazlitt, Jacob Viner, Lionel Robbins and Ludwig von Mises. Although they were generally positive, they did criticise some important issues, with Mises being rather harsh precisely on Part III.

Hayek’s impressive treatise shows to me that, even if liberals often agree on fundamental principles, there are different possible ways of applying these principles to the policy issues of the real world. One debate within the liberal community was directly invoked by the famous postscript ‘Why I Am Not a Conservative’. This has ignited debates, for example, about the political tradition of Margaret Thatcher. Was she to be seen as a Tory or rather, in Hayek’s opinion, as a Whig? This debate, to my knowledge, was unfortunately never resolved in a definitive manner.

This article was originally pubished in the Spring 2014 issue of EA Magazine.