Principium Volume III, Book 12, Quote 1244 and 1245

1244. (1-31-2011) Strictly speaking, then, there are two reasons why all controls of prices and quantities are incompatible with a free system: one is that all such controls must be arbitrary, and the other is that it is impossible to exercise them in such a manner as to allow the market to function adequately. A free system can adapt itself to almost any set of data, almost any general prohibition or regulation, so long as the adjusting mechanism itself is kept functioning. And it is mainly changes in price that bring about the necessary adjustments. This means that, for it to function properly, it is not sufficient that the rules of law under which it operates be general rules, but their content must be such that the market will work tolerably well. The case for a free system is not that any system will work satisfactorily where coercion is confined by general rules, but that under it such rules can be given a form that will enable it (the free system)ATJ to work. If there is to be an efficient adjustment of the different activities in the market, certain minimum requirements must be met; the more important of these are, as we have seen, the prevention of violence and fraud, the protection of property and the enforcement of contracts, and the recognition of equal rights of all individuals to produce in whatever quantities and sell at whatever price they choose. Even when these basic conditions have been satisfied, the efficiency of the system will still depend on the particular content of the rules.

- Friedrich A. Hayek – The Constitution of Liberty, 1960

1245. (1-31-2011) (When considered in the economic sense.)ATJ Why, then, has there been such persistent pressure to do away with those limitations upon government that were erected for the protection of individual liberty? And if there is so much scope for improvement within the rule of law, why have the reformers striven so constantly to weaken and undermine it? (Consider the aims of socialism)ATJ The answer is that during the last few generations certain new aims of policy have emerged which cannot be achieved within the limits of the rule of law. A government which cannot use coercion except in the enforcement of general rules has no power to achieve particular aims that require means other than those explicitly entrusted to its care and, in particular, cannot determine the material position of particular people or enforce distributive or “social” justice. In order to achieve such aims, it would have to pursue a policy which is best described – since the word “planning” is so ambiguous – by the French word dirigisme, that is, a policy which determines for what specific purposes particular means are to be used.

- Friedrich A. Hayek – The Constitution of Liberty, 1960

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