Labor in a Planned Economy: F. A. Hayek and John Jewkes on the Impossibility of Democratic Socialism

Milton Friedman (1962) is associated with the claim that political freedom presupposes economic freedom (cf. Lawson and Clark 2010). Friedman's famous example is that there cannot be freedom of speech where the government owns the printing presses. Less well-known is F. A. Hayek's and John Jewkes's illustrations of the same principle, both drawing from labor economics. Absent a freely operating price system, economic planning cannot function without resorting to compulsory assignment of labor. Similarly, no state may simultaneously fix “fair” wages and demand a given pattern of productive output and employment. It is impossible to both achieve income equality and accomplish an economic plan. This counters Farrant and McPhail (2009)'s claim that Hayek was incorrect in applying his thesis to the modern welfare state. Labor economics helps demonstrate why democratic socialism is impossible, in the sense that it cannot accomplish what its advocates desire