We hear that many in the Democratic Party today are warming up to the idea of socialism; and that many young adults now favor socialism over capitalism.
One of the strongest criticisms of socialism, in academic terms anyway, came from the 20th Century philosopher and economist Fredrich Hayek. In a nutshell, Hayek said that the problem with socialism, relative to free market capitalism, regards information. According to Hayek, free markets make good and efficient use of economic information, automatically – no one oversees the information flow, but it works out in a very good way. Whereby, in a socialistic economy controlled by a centralized government, human intervention gets in the way of information flow, and makes the overall economy very inefficient.
A New York Times article put it this way —
[Hayek] argued that most of the knowledge in a modern economy was local in nature, and hence unavailable to central planners. The brilliance of a market economy was that it allocated resources through the decentralized decisions of a myriad of buyers and sellers who interacted on the basis of their own particular knowledge. The market was a form of “spontaneous order,” which was far superior to planned societies based on the hubris of Cartesian rationalism.
A web site dedicated to this “knowledge problem” includes this summary of Hayek: » continue reading …
