Free Market Masters - Friedrich Hayek

Friedrich Hayek was one of the most influential economic and political theorists of the 20th century. In economics two of his most important contributions were to explain how the market price system addresses the problem of economic coordination more effectively than central planning by government; and to understand the role of competition in markets as a process of trial and error discovery. Professor Mark Pennington from the Department of Political Economy, Kings College London explores his legacy.

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[chinnappakunjira]

This is by far the most apt and concise summary of Hayek's principles. Thank you.

[DeniseSPSP]

One of the best books I have in my private Mises library: 'Theory&History

[enpafe]

Phenomenal! Hayek's belief in God sprouted his resolution that man simply cannot get it all right the first time and is incapable of understanding the complexities of the different areas of life.

[dr.floydmillen]

Hayek's influence on Margaret Thatcher was phenomenal. My book "Thatcherism Hayek & the Political Economics of the Conservative Party" looks at this

[peterohman]

Hayek didn’t think a combination of government and free market was better. We are seeing his shortcomings in mid 2024.

[rainerlippert]

Thank you for this video!
However, one question arises to me: What does “free market” mean?
In my opinion, free means "not restricted", i.e. what is happening in the market should not be restricted.
But what does that mean?

* The central planning
In the socialist countries the market was restricted, but not directly by central planning.
With the central planning it was determined what should be produced to what extent, how many apartments should be built in what size and in what time periods, what should be exported to what extent and what should be imported to what extent, how many study places should be offered in which course of study, how many hairdressers should offer their services, how many roads should be built in what size, etc.

* The free operation of the market is not important to the place of planning
All this is also planned in the capitalist countries, even if not from a central point.
The difference between the two systems was without question how the planning was carried out, but in relation to the market it was the use of the market.

* The market does not steer, the market does not think
The market cannot control anything - the market does not think, the market does not steer. Everything that is offered, how and to what extent, and everything that is bought and how, is determined by people. Nowadays algorithms support both sides, but these were programmed for certain interest groups, but they do not have (yet) their own interests.

* The market is the place of value creation and should reflect the economic situation
The market is the place of value creation and it shows what can be sold to what extent under the given social and natural conditions, how and to what extent.
All political requirements, e.g. catalytic converters, pollutant emission limits, CO2 taxes, etc. are not determined by the market, but by people.
The market shows what can be sold under such specifications at what price and thus also what can be used, how and to what extent under the respective conditions and is thus bought.

* The market is free because it can properly reflect the economic situation
“Free market” can therefore only mean that the reflecting function of the respective social and natural conditions must not be restricted. However, that cannot mean that any decisions should be left to the market - the market cannot decide anything.

* The market is free when it can reflect the economic situation undisturbed
“Free market” can therefore only mean that the reflecting function of the respective social and natural conditions must not be restricted. However, that cannot mean that any decisions should be left to the market - the market cannot decide anything.

* Under Socialism, the market could not properly reflect the economic situation
In the socialist countries, the market was severely restricted in its reflective function. That was not because of the central planning.

* The problem with Marx's Labor Theory of Value
This was due to the fact that the market was not used to realistically reflect the effects of the planning: Marx's Labor Theory of Values was the basis of the economy.
According to this, the goods produced are considered to have a value and the funds were put into circulation relating to these allegedly produced "values".
Since a considerable proportion of the goods produced could not be sold, the so-called “non-seller”, money was put into circulation that was not matched by any real goods.
In this way the mirroring function of the market became more and more restricted as the prices were fixed - in this way the market was restricted.

* In principle, the location of the planning is not important
In principle, it would have made no difference whether it had been noticed at a central point or in the car companies that profits were increasing (without restricting the market, prices could have been raised, but not by the market, but by people).
However, only in principle, since some comrades would probably also have stipulated at a central point that car production may not be increased in favor of other projects.
But with a “free market” this situation would have been correctly reflected by the higher prices.
Because of the restricted market the prices were fixed, the money supply was increased in a detrimental way.

* The main problem of the shortage economy
But this resulted in a comprehensive economy of shortages. This made it impossible to identify what could be produced or used and how efficiently, and the system collapsed.

[TheMysteryprop]

Very good information. I can't help wonder why the role of marketing isn't brought into conisderation... the success of these practices in creating or driving demand for a given commodity by manipulating the desires of the group ( or "herd" as expressed by Edward Bernays) has an impact on the actual free choosing of the individuals participating in the market.

[vaiyaktikasolarbeam]

6:25 while others.... poor shop have to be taken as bad example😅

[rogggggerful]

The extreme inequality we have now favors extreme monopolies, the wealthy billionaires absorb all the money from the lower classes, store it away in fiscal heavens and so the money is not reinvested. Middle class people on the other hand reinvest almost all the money and so the businnes cycle continues. So, unless you tax away the extreme inequality we have now, you wont have prosperity, this is just 1+1. You have either a middle class economy or you have a billionaires and poor people economy, you cant have both. The "free market"-mantra is just pure ideology, not factual in the real world