aff free market k 7wj

8/13/2019 Aff Free Market K 7WJ

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AFF


2/11

Alt Fails Free Market

The alt fails -- individuals cant always make rational calculations, and thefree market wont be able to sustain order without government oversight.oo!man "#- Professor of Philosophy at the University of Oregon (Colin, "Moralsand Markets: Liberal Deo!ra!y hro#gh De$ey and %ayek&" he 'o#rnal ofpe!#lative Philosophy& )*)*+& Proe!t M#se&.**D

heir !lai is that the p#rs#it of rightly #nderstood self-interest $ithin a free arketenvironent is on balan!e benefi!ial to so!iety&One proble, ho$ever, is that persons arenot al$ays going to be rational in the sense of #nderstanding $hat is best for the&/nother proble is that it ay not be possible for arkets to be !onsistently free ofgovernent interferen!es #nfairly privileging soe persons at the e0pense ofothers& $o big ass#ptions ade by invisible hand theoristsare that $e really !an !reatefree arkets and that $e really !an a!t rationally $ithin the& 1eoliberal theorist Milton2riedan !on!isely !apt#res both ass#ptions in his stateent of the invisible hand: "3oth parties to an e!onoi!

transa!tion benefit fro it, provided the transa!tion is bi-laterally vol#ntary and infored&"45 /ll of the$eight of the invisible hand arg#ent falls on the #ndefended ass#ption that the

provisos of vol#ntariness and inforation !an be f#lfilled $ith s#ffi!ient fre6#en!y&Despite the obvio#s probles $ith this ass#ption, there is an even oredebilitating proble fa!ing the syste of nat#ral liberty as e0po#nded by anyneoliberals& his proble !on!erns the ipla#sibility of any e!hanis that ightestablish, espe!ially $ith the for!e of nat#ral ne!essity, a harony bet$eenindivid#al and so!ial interests& #!h a e!hanis sees parti!#larly ipla#sible$here there is over$heling epiri!al eviden!e against the attrib#ted inevitability&7ationally p#rs#ed self-interest has in any free arket !onte0ts led toiiseration rather than enri!hent& he !oer!ive po$ers of governents that neoliberals are rightly$ary of are #nfort#nately also readily available to the onolith private enterprises in!reasingly !oloni8ing every!orner of o#r planet& Private agen!ies (ega!orporations. are #st as !apable as p#bli! agen!ies(egagovernents. of e0travagant vi!e&44 My !on!ern is not that soeties governents #nfairly privilege!orporations or that soeties irrational !orporate behavior es!apes governental !ontrol& 9ndeed these both

o!!#r and are a persisting threat to the s#!!essf#l f#n!tioning of the invisible hand& 7egardless of s#!h probles,the ore de!isive !on!ern is the possibility that the p#rs#it of rightly #nderstood(i&e&, infored. self-interest $ithin a s#itably free (i&e&, vol#ntary. arketenvironent ay too often !a#se iiseration rather than enri!hent& ven if $egrant the fantasti! provisos re6#ired by the invisible hand, there reains aproble: rational a!tors in free arkets still anage to ake treendo#s essesfor theselves and others & he great !lassi!al ;nd Page )


3/11

Alt Fails $ncom!lete nowledge

Abstaining from government intervention falls !rey to the same !roblemsof incom!lete knowledge that they claim the aff does -- creates cascadingand un!redictable economic conse%uences and !revents the free marketfrom functioning effectively.&'onnell, ((. P#r!hase College, U1> 3&/& !onoi!s ? %istory& (@yle, APlanningthe nd of Planning: Disintervention and the @no$ledge ProbleB, P#r!haseCollege, May 5+)), http:**$$$5&g!!&ed#*dept*e!on*/C*Papers5+)+-5+))*ODonnell5+-5+/C&pdf, Callahan.9nterventionis is distortive, disr#ptive,and potentially so!ially destr#!tive be!a#se itattepts to defy the !riti!iss and possibilities of !entrali8ed planning a!!ording tothe arket pro!ess vie$ of the dynai! arket& >et disintervention fa!es the saeprobles&Ehen disintervening, politi!al a!tors $ith ne!essarily liited inforation andkno$ledge #st soeho$ de!ide, not only $hat to liberali8e, b#t ho$ and $hen&9t isperhaps these latter !onsiderations $hi!h are the tr#ly !r#!ial eleents for s#!!essf#l disintervention& "Cr#de"disinterventionis ena!ted $itho#t #nderstanding the !ople0 intera!tions thato!!#r bet$een an intervention, other interventions, and the dynai! arketpro!ess ay very $ell lead to !as!ading negative #nintended !onse6#en!es &Dereg#lation in the one se!tor, lets say ho#sing, ight lead to bottlene!ks inanother !opleentary (or even seeingly disparate. se!tor, say in finan!e, $hi!hight !as!ade into other areas in #npredi!table $ays&o better assert this point 9 offer thefollo$ing: not all interventions are !reated e6#ally&9 say this to ephasi8e the fa!t that not alla!ts of governent interferen!e $ith the e!onoy !an be e6#ally harf#l, evena!!ording to the ost stringent anar!ho-libertarian standards& / pri!e floor that falls belo$ the!#rrent arket rate is not as harf#l as the pri!e !eiling that (attepts. to !#t thepri!e of a prod#!t in half fro its going arket rate&here also e0ists the possibilitythat there ay even be less obvio#s interventions that are #nintentionally

"benefi!ial" relative to others given the #n!oordinated nat#re of the interventionistsyste& Like$ise, even any free-arket e!onoists $o#ld agree that if a banking syste #st rest #pon a"lender of last resort" $ith its s#bse6#ent oral ha8ard, then soe reg#latory frae$ork preventing the to-be-e0pe!ted e0!essive risk-taking ay be #stified or ne!essary in the eantie, even if the longer-r#n

disinterventionist goal is a free arket banking syste&he i0ed e!onoy oftenalso !ontainsentire arkets b#ilt on the ba!ks of previo#sly distorted arket pro!esses& he$holly s#perfl#o#s arket pro!ess eerges $here opport#nities for profit $o#ldother$ise never have e0isted o#tside of the infl#en!e of interventionis (@ir8ner )FG.&9n the real $orld this !an ean entire ind#stries b#ilt on the shaky gro#nds ofgovernent intervention& ho#gh d#e to a la!k of #nen!#bered pri!e signals, fe$ if any ight be able toreali8e this&h#s there also e0ists the !han!e that by liberali8ing one se!tor, orreoving one !ontrol, that a large !ollapse ay be #nleashed and ba!kfire in thefa!e of the disinterventionists haring the politi!al !apital ne!essary to !ontin#e

$ith any ne!essary disinterventions&/ll this leaves the 6#estion of $hi!h ones are perhaps #stified inthe ean tie in order to prevent f#rther har by "holding ba!k" other interventionsH %o$ is a planner$ith their liited kno$ledge s#pposed to be able to tell the differen!eH Lastly ho$!an these t$o ans$ers e0plain in $hat order to disinterveneH he poli!y proble 9have presented- in the for of entren!hed and overlapping, #n!oordinated interventions - is one oforgani8ed !ople0ity& ven pres#pposing that the n#ber of interventions is set at point , $hat stillreains is a !ople0 series of interlo!king probles $ith no !lear sol#tion available to anyone g#iding the

disintervention& Of !o#rse 9 a des!ribing the kno$ledge proble, tra!ed along itsipli!ations for the possibility of (dis.interventionist !oordination&>et it #st also be
http://www2.gcc.edu/dept/econ/ASSC/Papers2010-2011/O'Donnell%20-%20ASSC.pdfhttp://www2.gcc.edu/dept/econ/ASSC/Papers2010-2011/O'Donnell%20-%20ASSC.pdfhttp://www2.gcc.edu/dept/econ/ASSC/Papers2010-2011/O'Donnell%20-%20ASSC.pdfhttp://www2.gcc.edu/dept/econ/ASSC/Papers2010-2011/O'Donnell%20-%20ASSC.pdf


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reebered that the kno$ledge proble is over!oe everyday by the arket pro!essa!ting thro#gh the pri!e syste& ven if the planners #nderstand this insight, they #st still asktheselves: "o in a i0ed e!onoy, even one !opletely distorted by rapant intervention, $hy !ant pie!eeal

disintervention of arkets be relied #pon to provide the intended res#ltsH"he disinterventionistplanner ay note that the arket tends to$ards self-!orre!tion, and that s#rely ifhe #st lets the arket $ork, then this proble $ill sort itself o#t on its o$n& Ehile a

free arket $o#ld have the e!hanis of the dis!overy pro!ess, g#ided by profit and loss, for reali8ing the ostso!ially benefi!ial ends fro available eans, interventionis la!ks this e!hanis in any tr#espontaneo#s for& 9f a disinterventionist plans to liberali8e s#!!essf#lly they #stde!ide at soe point $hat to disintervene, $hen (in $hat order., and ho$& Marketsare spontaneo#s orders la!king any !entrali8ed dire!tion, ade possible by theinstit#tional settings that shape their in!entive str#!t#res and g#ide the arketpro!ess to$ards so!ially benefi!ial ends& o $hereas the arket pro!ess en!o#rages de!entrali8edentreprene#rs to #tili8e their parti!#lar kno$ledge of the tie and pla!e to drive the arket to$ards self-!orre!tion

and satisfa!tion of !ons#ers $ants, the !oand e!onoy - and any de!ision aking in this veins#!h as (dis.interventionis - la!ks the instit#tions and in!entives re6#ired to drivea spontaneo#s pro!ess ebodying so!ietys dispersed kno$ledge& 9n a senten!e then,interventionis - and its irror - la!ks a spontaneo#s dis!overy pro!ess forsysteati!ally #n!overing and in!entivi8ing the !orre!tion of its past errors to thebenefit of so!iety& Disinterventionis as a poli!y ne!essarily !onfronts thekno$ledge proble,b#t this by itself is not eno#gh to sink the ainstrea "!r#de" disinterventionistposition& /fter all, arkets and the pri!e syste ro#tinely over!oe this proble everyday and do so rearkably

$ell& >et the ore spe!ifi! point 9 a arg#ing is that there is no tenden!y in pie!eealdisintervention to s#!!essf#lly liberali8e via !orre!tly dis!overing the proper order,rate, or even $hat and $here to disintervene&1e0t, 9 f#rther develop y arg#ent thatdisinterventionis !onfronts the kno$ledge proble, andthe !onne!ted arg#ent thatdisinterventionis la!ks a dis!overy pro!ed#re&

The alternative fails and wrecks the economy -- market!lace com!le)ityguarantees unforeseen conse%uences.&'onnell, ((. P#r!hase College, U1> 3&/& !onoi!s ? %istory& (@yle, APlanning

the nd of Planning: Disintervention and the @no$ledge ProbleB, P#r!haseCollege, May 5+)), http:**$$$5&g!!&ed#*dept*e!on*/C*Papers5+)+-5+))*ODonnell5+-5+/C&pdf, Callahan.%aving established y theoreti!al !riti6#e of disinterventionis and $hy it tends to$ards fail#re, 9 $ill brieflydes!ribe $hat this fail#re a!t#ally is or ay appear as& Of !o#rse, positively identifying soe per!eived negativeo#t!oe as the res#lt of disintervention is a !ople0 iss#e that ne!essarily treads a thin line bet$een arket andgovernent fail#re& 9f keeping in ind the dynai! arket pro!ess vie$point ho$ever, then arket fail#re is notpossible $herever free arkets e0ist& /s s#!h, any "probles" arrived at thro#gh the arket pro!ess, $hen#n!overed, a#toati!ally in!entivi8e entreprene#rs to find a sol#tion (@ir8ner 5+++!.& ho#gh that is not to say that

arkets are "perfe!t" by any eans& 9n fa!t, arket sol#tions ay take years, even de!ades, toarise&>et be!a#se these sol#tions, $hen they do o!!#r, are based on a pri!e syste refle!ting dispersedkno$ledge, they $ill be ore likely than governent intervention to provide so!ially optial o#t!oes& hen

$hat 9 a really $arning against are not teporary less-than-optial o#t!oes, b#ta !as!ading series of negative #nintended !onse6#en!es that $ill tend to$ards theselfdestr#!tion of the original disinterventionist goals in 6#estion&Partialdisintervention $ill generally tend to prod#!e greater negative #nintended!onse6#en!es, espe!ially if !opleentary se!tors of the !atalla0y still fa!e heavy intervention&3ottlene!ks in e!onoi! a!tivity are #st one potential negative #nintended!onse6#en!e that ight res#lt fro disintervention(9keda )I.& 9f all pri!e, 6#ality,and o#tp#t !ontrols $ere reoved fro !orn farers $hile negle!ting to reovethe !opleentary !ontrols on the far e6#ipent and fertili8er ind#stries, this$o#ld likely be probleati!&/gain, even if the ost benevolent of disinterventionist
http://www2.gcc.edu/dept/econ/ASSC/Papers2010-2011/O'Donnell%20-%20ASSC.pdfhttp://www2.gcc.edu/dept/econ/ASSC/Papers2010-2011/O'Donnell%20-%20ASSC.pdfhttp://www2.gcc.edu/dept/econ/ASSC/Papers2010-2011/O'Donnell%20-%20ASSC.pdfhttp://www2.gcc.edu/dept/econ/ASSC/Papers2010-2011/O'Donnell%20-%20ASSC.pdf


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planners #nderstood this possibility, they $o#ld still fa!e the !onstraints posed bythe kno$ledge proble, and the la!k of an spontaneo#s and systeati! !orre!tive pro!ess& Partialdisintervention, the ost typi!al and #ndane for $itnessed, ay even do ore har than theinterventionist stat#s-6#o& o long as disinterventionis is liited in its o#tlook andais to$ards spe!ifi! poli!y goals it $ill fa!e the !onstraints and fla$s des!ribed& /siilar effe!t !an be seen if disinterventionis disr#pts an artifi!ial "e6#ilibri#"

!reated by #ltiple offsetting interventions& o go ba!k to y previo#s e0aple of the #ltipleseeingly #n!oordinated interventions regarding prod#!t / and others, ass#e that arket a!torshave adapted to this interferen!e and that a soe$hat stable arket has eergedthat largely refle!ts !ons#er preferen!es& / $ell intentioned politi!al a!tor #ponseeing this sit#ation, believes that he kno$s ho$ to #ndo these past errors and thenattepts to liberali8e this arket& >et #st as 9 have arg#ed, he #st de!ide $hat, and in$hat order to best disintervene&o he goes to the p#blished register of all !odesand t#rns to the se!tion regarding this parti!#lar arket& %e is iediately!onfronted by a labyrinth of pages filled $ith !ross-referen!es to do8ens of differentr#les, reg#lations, and !o#rt de!isions interpreting those !odes in #st this onearket& 1ot only that, b#t even $ith the help of all his legislative aides none of the reali8es that they bypassedan entire se!tion of reg#lations gerane to their $ork filed #nder a different heading in another vol#e& /nd any

of the ost daaging interventions are a!t#ally not in!l#ded in either se!tion sin!e they are a!t#ally #!h ore$ide-rea!hing than the s#b-se!tioned dire!tory sho$s& Of !o#rse they still ay try their best,de!ide #pon a single !o#rse of a!tion, and reove a sle$ of distortionary ta0es&Unfort#nately for their $ell-intentioned plan, and d#e largely to their liitedkno$ledge, none of the reali8e that a n#ber of these ta0es a!t#ally held in!he!k a #!h older and overlooked s#bsidy progra even ore distortive than theta0es, and previo#sly ignored #ntil no$ d#e to its s#perfl#o#s nat#re&2ro a sit#ation$here the allo!ation of reso#r!es $as largely held in !he!k by a !ir!#lar intervention, partial disintervention has

no$ !reated a ne$ potential for isallo!ation to o!!#r&he ideal sol#tion ay have been to goeven f#rther $ith the disintervention, yet $itho#t perfe!t kno$ledge thedisinterventionists fa!e a serio#s !onstraint& Disintervention is generally #ndertakenin order to !orre!t the daage fro past interventions and regain the benefits ofthe arket pro!ess& ho#gh this essay has largely ass#ed a$ay fro analy8ing the tr#e otivations for#ndertaking the disinterventionist !o#rse of a!tion, it !an be generally inferred that the preferred ends areiproved e!onoi! gro$th, a!tivity, effi!ien!y, and in!reased prosperity& oregardless of ho$ politi!ians or the p#bli! have !oe to p#sh to$ardsdisintervention, 9 !an infer that if the !o#rse appears to fail to a!hieve these goals it$ill very likely fa!e stiff resistan!e& Ehether or not the disinterventionist eas#res in 6#estion havea!t#ally failed is alost beside the point as $ell, $hat ore or less atters ay be ho$ the effe!ts are per!eived&

in!e disintervention fa!es thefla$s 9 have entioned,along $ith the interest gro#ppress#res 9 have ostly ignored, one !o#ld reasonably s#spe!t interventionis toreeerge& '#st as the interventionist !o#rse ay breed ore interventionis #p toa t#rning point before reversing !o#rse, a siilar dynai! ay arise o#t ofdisintervention (9keda )I.& 9n this $ay, disinterventionis - espe!ially partial orpie!eeal types - !an be seen to fall 6#ite easily into the /#strian frae$ork of the

dynai!s of interventionis& his !oin!ides $ith y overall arg#ent thatdisintervention and intervention are really t$o prod#!ts of the sae ideology andindset&


6/11

*ovt $ntervention +olves

*overnment intervention in the market!lace can be effective -- lots ofrecent e)am!les.Taylor and edder ("- Professor of e!onoi!s at Central Mi!higan University&Disting#ished professor of e!onoi!s at Ohio University and ad#n!t s!holar at the/eri!an nterprise 9nstit#te ('ason and 7i!hard, "ti#l#s by pending C#ts:Lessons 2ro )J


7/11

erm +olvency thics/'emocracy

0ollaboration between the !ublic and !rivate s!heres is necessary forchecking market and government forces -- its critical to ethicaldemocratic orders.oo!man "#- Professor of Philosophy at the University of Oregon (Colin, "Moralsand Markets: Liberal Deo!ra!y hro#gh De$ey and %ayek&" he 'o#rnal ofpe!#lative Philosophy& )*)*+& Proe!t M#se&.**D7et#rning to y opening thee of the relations bet$een orals and arkets, $e !an no$ see $hy one of theost !riti!al 6#estions $e fa!e in !onteporary politi!s !on!erns ho$ $e ighttransition o#r !#rrent !apitalist pra!ti!es into ore deo!rati! fors& he pragatistresponse to this 6#estion is that deo!ra!y today re6#ires that $e look beyond thedistin!tion bet$een p#bli! and private spheres in order to grasp the f#ll range of!onte0ts in $hi!h o#r deo!rati! energies !an be p#t to #se& his shift inorientation ight enable #s to begin bringing ethi!al !oitents to bear in botharket-based ven#es and state-based ven#es in order to p#rs#e deo!rati!synergies bet$een individ#ation and asso!iation that have hitherto been fore!losed&9f this is right, then De$ey !an help #s learn $hy arket-based strategies, alongside state-basedstrategies, ay yet be!oe both profitable and ethi!al for!es for deo!ra!y&Market entities s#!h as !orporations !an, and any already do, e0pli!itly !onne!t theirself-interest to the interests of others by !on!eiving of their profits in ters ofbenefits to $ider so!ial !onstit#en!ies (organi! and fair-trade agrib#siness !orporations are #st t$ofailiar failies of e0aples.& Ehether or not s#!h arket entities $ill s#rvive and gro$ inthe long r#n depends entirely on the !ontingent efforts of those s#pporting the!orporations ethi!al val#esshareholders, dire!tors, eployees, and espe!ially !ons#ers&Unfort#nately, s#!h arket-based opport#nities for ethi!al innovation have been !onsistently ignored thro#gho#tthe history of liberal deo!rati! politi!al theory, and they are only #st no$ being taken serio#sly in !onteporaryliberal deo!rati! pra!ti!e&J /llo$ e to !on!l#de, then, by !onsidering soe of these opport#nities as theyight appear in the present oent& 7e!ent (as of the tie of ;nd Page )I+= $riting in the late onths of 5++F.t#roil in the finan!ial arkets and its s#bse6#ent o#t$ard spread to other e!onoi! se!tors offer an o!!asion for

refle!tion on these possibilities& 9 believe that s#!h philosophi!al refle!tions sho#ld take the for of a !onsidereddiagnosis of o#r !#rrent probles as preparatory for an event#al aeliorative re!onstr#!tion of o#r sit#ation& 9 !anhere only sket!h bare o#tlines of $hat s#!h a philosophi!al diagnosis and re!onstr#!tion sho#ld look like& hat isbe!a#se this sket!h is ore of an attept to e0pli!ate the #pshot of the pre!eding dis!#ssion than it is a serio#sattept at a poli!y proposal or a politi!al predi!ation& 9 do not ake predi!tions, and poli!ies re6#ire far ore $ork

than 9 here have spa!e for& 9t is #ns#rprising that re!ent arket t#roil has given rise to therene$al of fr#itless debates over the iss#e of the pros and !ons of reg#lation& hesedebates reiterate that #!h-loved great debate in the t$entieth !ent#ry bet$eenpro-planning egalitarian-leaning fig#res like @eynesor 7oosevelt and anti-planninglibertarian-leaning fig#res like %ayek or 7eagan& 3#t the 6#estions f#eling these debates are reallyred herrings& he 6#estion $e sho#ld be asking is not "$hether reg#lationH" b#t "ho$ reg#lationH" On a De$eyan

vie$ part of o#r probles !an be seen as steing fro an overplayed di!hotoybet$een p#bli! and private that has be$it!hed those on both Left and 7ight& 3y

thinking in the ters offered by this di!hotoy $e have failed to serio#sly rethink6#estions abo#t ho$ $e ight reg#late& / !lassi!al !on!eption of reg#lation th#s pro!eeds#n6#estioned& Leftists like @eynes, 'ohnson, and 7a$ls and 7ightists like %ayek, 7eagan, and 1o8i!k are all inagreeent that reg#lation is a atter of #sing the p#bli! po$er of the state to infl#en!e the private po$ers of thearket& On their vie$ p#bli! and private are opposed s#!h that reg#lation generally takes one of t$o fors& 9n onefor the state opposes arket a!tion by pres!ribing liits that p#t a !he!k on arket agents& 9n another for thestate is !o-opted by arket for!es seeking s#bsidies, bailo#ts, and other s#!h privileges& 3oth of these fors ofreg#lation are proving inade6#ate as tools for addressing the probles of the present& /nd yet fe$ politi!ians,!oentators, and theorists have anaged to think beyond these d#aliss idst the present t#roil& %en!e thes#pposedly needed reiteration of the isleading "$hether reg#lationH" 6#estion& 9f these are the only fors thatreg#lation ight take, then $e rightly o#ght to $onder $hether $e sho#ld do soething drasti! or do nothing at all&3#t are there other tools for reg#lationH On a De$eyan vie$ $e !an begin to !onsider this iportant 6#estion fro


8/11

a standpoint no longer ;nd Page )I)= beholden to the rigid separation of p#bli! and private spheres& On De$eys

vie$ $e !an affir that reg#lation is already present in both state and arket!onte0ts& On this vie$ states and arkets represent different sets of p#bli!s in $hi!ho#r lives are al$ays already being organi8ed& 9f $e $ant o#r lives to be organi8edother$ise than they are, then $e #st ore energeti!ally parti!ipate in $hateverp#bli!s are organi8ing #s& /t ties this ay take the for of playing one p#bli! off

of another (#sing states to oppose arkets or #sing arkets to dire!t states, t$ofors $e are already 6#ite failiar $ith., b#t at other ties it ight take otherfors s#!h as intervening in !ertain aspe!ts of o#r state p#bli!s and arket p#bli!sin !on!ert& he De$eyan vie$ th#s a!kno$ledges that the failiar reg#latory tools of stateliitations on arket a!tions and arket #ses of state po$ers are in soe !onte0ts6#ite #sef#l& 3#t the vie$ goes on to s#ggest that there are other !onte0ts $here $e needne$er reg#latory pra!ti!es that are not $ell fraed in ters of the separation ofp#bli! and private spheres& 9n these other !onte0ts $e ight do better to think ofboth states and arkets as p#bli! ven#es in $hi!h $e !an effe!tively deploy o#rdeo!rati! energies& 9n these other !onte0ts $e $o#ld do $ell to akesi#ltaneo#s #se of both states and arkets, both governents and !orporations&


9/11

erm +olvency +!ontaneous &rder

1ayek agrees that the !ermutation is the only way to solve -- coo!erationbetween !ublic and !rivate actors is key to the success of thes!ontaneous order.lein 2k- Professor of e!onoi!s at anta Clara University (Daniel, "Planning andthe $o Coordinations, Eith 9ll#stration in Urban ransit&" Departent ofe!onoi!s, anta Lara University& 5+++$$$-pas!&ed#*vol#e)*v)i)a)print&htl.**D

he ephasis that Mises and %ayek pla!e on lo!al kno$ledge is not erely are!ognition of the free arkets f#n!tion to distill dispersed kno$ledge into a pri!eve!tor, in a anner like the "3ig 3oard" (the 1e$ >ork to!k 0!hange.&hey also re!ogni8e theiportan!e of fle0ibility in private !ontra!t, to s!#lpt private arrangeents to fit theparti!#lars, to !ope $ith !hange, and to !oordinate $ith others& /ltho#gh %ayek!oordination is distin!t fro !helling !oordination, its pro!ess is not apart fro !helling !oordination& he pro!ess

in!l#des the pra!ti!e of vol#ntary planning, by !onsent and !ontra!t, to a!hieve !helling !oordination& %ayek()I4, J


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the state either in ters of e0pendit#re as a fi0ed share of the national $ealth, norin ters of being liited to !ertain tasks&>et, as parts 5 and J $ill highlight, %ayek !onsiders thestate to have ass#ed too any responsibilities& %e advo!ates that the state do only the rightthings, that is, to #ndertake liited a!tion to !orre!t for !ertain arket fail#res, b#tnot to engage in planning his !riti6#e of !onstr#!tivis is designed to ens#re that the state does not!ontin#e along this istaken path& >et probles still e0ist $ith this theory& 2irstly it s#pposes that the state !an be

!onstrained to only those tasks $hi!h are appropriate to it& e!ondly, and ore iportantly, it negle!ts the fa!t thatthe f#n!tions of the state are not open to the sae kind of sele!tion pro!ess $hi!h %ayek #ses to e0plain the originof so!ial instit#tions& he first proble !o#ld be responded to $ith an assertion that the theory is designed todeonstrate the prin!iples $hi!h sho#ld g#ide state a!tion, and as s#!h stands, irrespe!tive of its ability to liitstate a!tion to the prin!iples entioned& his !o#ld be a!!epted as an ade6#ate response& %o$ever at vario#spoints 5< %ayek does attept, thro#gh referen!e to prin!iples, and ore s#bstantially thro#gh the design of aodel !onstit#tion, to deonstrate ho$ the state !an be prevented fro engaging in !onstr#!tivis& Ehile val#edoes e0ist in these attepts it reains the !ase that instit#tions develop their o$n inertia $hi!h !hanges theirnat#re fro that originally intended&


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A2 redictions Fail/!istemology

$ts !ossible to make accurate !redictions about the world withoutcom!lete knowledge -- e)!ertise and reasoned arguments are sufficient

4ustification for action.Foss "5- Professor at the Copehagen 3#siness !hool (1i!olai, "he liits todesigned orders: /#thority #nder distrib#ted kno$ledge !onditions&" pringer!ien!e& 5++

aff free market k 7wj

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