Channeling Hayek’s Words of Wisdom
Last year, we celebrated 50 years of Friedrich Hayek’s Nobel Memorial Prize in Economic Sciences. We also marked 80 years since the great Austrian economist published his global bestseller, The Road to Serfdom. The book came out during the rise of Clement Atlee in the United Kingdom and of Juan Peron in Argentina. Just as Hayek predicted, implementing socialistic policies of government growth soon diminished their people’s freedoms and ruined their economies.
The Rise and Fall of Socialism
Britain’s Labor Party nationalized all key industries. The government took away their citizens’ healthcare and retirement choices. In just half a lifetime, the birthplace of modern capitalism and the 19th-century global economic superpower went into a sharp decline. Living standards in the United Kingdom were forecast to go down to those in Albania, the most backward communist country in Europe.
The sad experiment with democratic socialism was 34 years old when the British people voted for Margaret Thatcher. She started a new capitalist revolution as the Conservative Party’s Prime Minister in 1979. Allegedly, the Iron Lady placed The Road to Serfdom on the table at her first cabinet meeting with the words: “This is what we believe.” A year later, America elected Ronald Reagan, whose reforms unleashed free enterprise to restore our prosperity. Hayek was blessed to have witnessed the collapse of the Soviet Union and the triumph of his ideas.
History Does Not Repeat, But It Rhymes
The Argentinians suffered for another 44 years. In 2023, they finally abandoned their road to serfdom and elected a libertarian president. Javier Milei campaigned with a chainsaw, a symbol of his dedication to Hayek’s principles of limited government and free enterprise. In America, the early 2020s were reminiscent of the late 1970s, when socialistic policies had generated rapid inflation and economic stagnation. Voters had to take it upon themselves to stop this decline.
A year after the rise of Milei, Trump was elected by the American people to restore our greatness. Some see his return to the White House as the second coming of Reagan. In his first few weeks, President Trump went all in, using Elon Musk’s Department of Government Efficiency as a flamethrower to annihilate unconstitutional bureaucratic agencies and unchain American entrepreneurs, innovators, and wealth creators.
We Are All Hayekians Now
In his book, The Fatal Conceit, Hayek explains: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” Mic drop! This is the quote that Trump should use in his eulogy to the administrative state. To achieve America’s full potential, we need to humble our political elites and unchain our entrepreneurial men and women.
It’s not that the swamp residents are inherently evil. But even if their efforts are selfless, guided by an intention to serve the common good and not in the pursuit of power, wealth, or prestige, they will inevitably backfire. The complexity of real-world economic systems (unlike our textbook models) vastly exceeds the ability of any central planner to evaluate all relevant data and predict the consequences of all their actions.
The Pretense of Knowledge
When Hayek accepted his Nobel Prize, he gave a lecture. His topic of choice: The Pretense of Knowledge. This is what he said: “To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.”
Three decades before that, in his famous article, The Use of Knowledge in Society, Hayek examined the fundamental economic problem that we must solve to secure beneficial and efficient utilization of our scarce resources.
Even today, many are still misled to see it as a matter of optimization, using complex mathematics to determine the allocation of inputs and outputs based on statistical information in an attempt to maximize social welfare. That, explains Hayek, is a naïve and dangerous approach to the economy.
The data for such economic calculus can never be given to a single mind or a group of experts. The real task is one of providing opportunities for all individuals to utilize huge amounts of widely diffused information. The tragedy of all economic planners (and the much bigger tragedy of the people in their countries) is that they do not understand the nature of knowledge needed for their schemes to succeed. Unorganized knowledge of unique circumstances of time and place is scattered among billions of individuals.
The Beauty of the Free Enterprise System
For a rational economic order to evolve, people must be free to use the resources known to them (in an ever-changing environment) for ends whose relative importance is also known only by them.
The problem is how to secure the most efficient use of knowledge not given to anyone in its totality. Fortunately for mankind, we have stumbled upon a mechanism that allows us to do just that.
We have all learned to use the price system even though most individuals do not understand and do not care to find out how it emerged or how it works. The market mechanism has evolved without design, it has no man-made purpose, and there’s no benevolent expert in charge of it. Yet it solves problems that no bureaucratic agency can solve by rulemaking.
The unplanned use of this simple tool in the pursuit of personal goals created conditions for a global division of labor and generated amazing prosperity for billions of people.
The beauty of the free enterprise system is that it dispenses with the need for conscious control. The market is like a healthy human breathing. It works well even if you do not think about it. And you do not need an agency to “regulate” it. This is why DOGE may be the best thing that has happened to America since the Declaration of Independence. Godspeed, Mr. President!
About this Piece
Dr. Alex Tokarev, Associate Economics and Philosophy Professor at Northwood University, and Northwood alumna Kristin Tokarev co-authored the above piece for the March 2025 edition of When Free to Choose, Northwood’s signature publication dedicated to exploring the importance of free enterprise. Kristin Tokarev graduated from the DeVos Graduate School at Northwood University in 2023 and now works for Stossel TV with John Stossel, a high-profile American libertarian television presenter, author and pundit. Dr. Tokarev is the academic lead for the Fall 2025 Northwood University Freedom Seminar, which will focus on “The Road to Freedom.” This theme is inspired by Hayek’s bestseller, The Road to Serfdom. In the lead up to next fall’s Freedom Seminar, Northwood University will host the Free Market Road Show on April 14 in Midland, Michigan. Facilitated by the Austrian Economic Center, the Free Market Road Show provides high-quality analyses and engaging events that highlight the importance of individual liberty, free markets and constitutionally limited government — all values shared by Northwood University. Visit www.northwood.edu/freedom-seminar/ for more details about the Free Market Road Show and Northwood University Freedom Seminar. To subscribe to When Free to Choose at no cost, click here.