“As I [Hayek] recall Eric Hoffer once remarking: 'The hostility of the scribe towards the merchant is as old as recorded history.'

Filthy lucre, the 'rapacious' capitalist, the greedy money lender, the corrupt 'bankster', the mocked entrepreneur [surely you can get a government job?]; and myriad bumper stickers of simplistic, ignorant, vapid 'thought', populate the fervid minds of communalists, socialists, 'intellectuals' [pray you are not one], and those who don't want to work, or who feel that success and wealth is only achieved through theft, corruption and even death [doesn't Nike 'exploit' Bangladeshi workers paying them only 5x the national average ?]. Statists and those who affix bumper stickers with a slogan of emotional irrelevance cannot, due to various mental incapacities, even begin to understand the vast complexity of trade, exchange, production and eventually consumption. The great cities of Sumeria by 3200 BC were vast complexes of 100.000 citizens, enmeshed in a complicated arc of trade stretching from Jericho, across modern southern Turkey, through the Persian Gulf lands to the Indus valley. If the modern statists of day had been in charge at Ur man's development might have been permanently delayed or at least serious impaired.

In chapter 6 of his work 'The Fatal Conceit', Hayek deals with the misconceptions of 'capital', its 'ism', and the seemingly vague and mysterious creation of wealth through extended trade, and market networks, none of which can be 'centralized', 'uniformly managed'; or compassionately equal, fair and 'just'.

“But as soon as knowledge which was not 'open' or visible – was introduced as an element in competition, knowledge not possessed by other participants, and which must have seemed to many of them also to be beyond the possibility of possession, the familiarity and the sense of fairness vanished.”

The application of Smith's 'invisible hand', is in reality the allocation of resources to produce products to match existing or future demand, all of which is predicated on price points, signals and value. These facts infuriate the mandarins. How dare the little people, the grasping merchant, the benighted entrepreneur, refute state power and satisfy human needs, desires and aspirations ? Surely the central-bureaucracy can do this much better ? They know after-all what is 'good' for the little guy.

“So it was that traders were held in contempt even by Plato and Aristotle, citizens of a city which in their day owed her leading position to trade.”

'Intellectuals' including the much beloved duo of the big A and the big P, most of whom are utterly useless at doing anything but stringing words together to make meaningless metaphysical bunk [Occam's 'razor' was his attempt at cutting through all of the abstract junk which populated Christian and secular philosophy]; hate and have hated the market. To the mandarins there is no glory in production or trade. Scribes, philosophers, wise-men, or the able and strong with a sword are the real heroes of history. Intellectuals view any market [like the family] as opposition to their power, a competitor to be controlled, a nuisance to be extinguished through regulations, taxation, and the death grip of socialist 'planning', all in the name of some vapid nonsense like 'love', 'fairness', or 'equality' [as if anything in life is premised solely on love and as if in the real world, anyone or anything is equal and focused on being fair].

“Thus, when when Thomas Carlyle, who had great influence among the literati of the last century, preached that 'work alone is noble', he explicitly meant physical, even muscular, effort. To him, as to Karl Marx, labour was the source of real wealth.”

'Intellectuals' granting themselves the privileged position of 'genius' and 'omniscient sooth-sayer' have never liked the opaque messiness of a market system. Marx's 'Iron Law of Wage', in which the little man who had never worked, postulated that the only value for a product was its labour which should be the only factor in determining its price, is about as ridiculous an example of economic ignorance as one can find. Yet it was and still is, embraced by 'intellectuals' as a 'fact'. The price of a product includes not only labour costs, but capital costs, overheads, sales and marketing expenses, taxes, regulatory fees, a profit which allows the enterprise to pay back its owner of capital and invest for both current and future production, and other sundry costs associated with getting the product, or service to the market. Only a fool prices a product from one input [as much as only a fool summarizes the complexity of 'global' climate by affixing all 'change' to a trace chemical 95% emitted by the earth mother].

What determines a price in the marketplace is the 'marginal utility' or what a buyer perceives the value is for that product. Two people looking at buying the same house will calculate a different value – sometimes markedly different depending on their needs and perceptions and what they view as the real 'price' of the house's net assets [good points less its bad points].

“...only marginal utility theory brought real understanding of how demand and supply were determined, of how quantities were adapted to needs, and of how measures of scarcity resulting from mutual adjustment guided individuals.”

Anyone who has studied economics knows that market trade is driven by marginal utility. Socialists on the other hand subscribe to the 'great man' theories of economics [Keynes, Samuelson, Krugman and other socialists], in which macro-economics explains all activity. Massive 'flows' and linkages, few of which exist in reality, are given the credit for the creation of economic output. Thus, if one [meaning the state], can control these macro-flows, one can 'manage' an economy. This is of course utterly wrong, negating how markets, and wealth are created [in which wealth elevates the living standards of all, if married to several property rights, laws, cultural attributes which expect success, and ethical standards]:

“Apparently paradoxically, diversity of individual purposes leads to a greater power to satisfy needs generally than does homogeneity, unanimity and control – and, also paradoxically, this is so because diversity enables men to master and dispose of more information. Only a clear analysis of the market process can resolve these apparent paradoxes.”

Diversity not of skin colour, cult orientation or sexuality, but in skills, interests, production and intelligence, is what drives forward the market and the various complicated price points which inform a product or service and give it value. Centralized management so beloved of the elites from time immemorial leads to failure not only economically but culturally, socially and in the case of individuals, personally, by crushing invention, free-will, debate, enquiry and indeed life itself.

“The high-minded socialist slogan 'Production for use, not for Profit', which we find in one or another form from Aristotle to Bertrand Russell...betrays ignorance of how productive capacity is multiplied by different individuals obtaining access to different knowledge whose total exceeds what any single one of them could muster.”

Read's 'I Pencil' penned in 1958, and which could be updated for 'I Laptop', or 'I i-Phone', is a poignant and very real explanation of the complexity of how markets work. No one on this planet can make a pencil, a laptop, or an i-Phone by himself. But, by involving literally thousands of people, all producing something of value, a product can be imagined, designed, and built. None of these people know what their components or materials will be used for. But the fact that they are utilized to produce a product which benefits millions of consumers is testimony to the scale and intelligence of a market system. I doubt that any bureaucracy could envision, plan and make an iPhone which actually worked. But 'intellectuals' so besotted by self-importance, would either not want you to have a smart-phone, or would feel that the average human is too stupid to use one and does not need one. So it goes with the slogans of socialism. Simpleton mantras for very small minds. Socialism always fails because it ignores the very real laws of economics, free-will choice, and productive morally satisfying effort.

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Introduction

Chapter One

Chapter Two

Chapter Three

Chapter Four

Chapter Five