The Freedom of the Prices: Hayek and Jewkes on Egalitarianism and Freedom of Occupation
27 Pages Posted: 19 Oct 2016
Date Written: October 13, 2016
Milton Friedman (1962) famously argued there can be no freedom of speech where the government owns the printing presses. According to Friedman, political freedom presupposes economic freedom. Less well-known are F. A. Hayek's and John Jewkes's illustrations of the same principle, both drawing from labor economics. It is impossible to maintain freedom of occupation when the price-system is abandoned, assuming productive output and employment are to be maintained. Prices do not merely create incentives, but they communicate knowledge as well. Some egalitarians recognize the need to maintain some inequality in order to furnish incentives, but they neglect the informational aspect of prices. If wage rates are manipulated, then even a socially conscientious worker will not know where his or her labor is most urgently needed. Thus, is impossible to equalize wages while maintaining individual freedom, assuming economic productivity is desired. To maintain the informational and incentivization aspects of wages, it is not enough that wages are unequal by any amount; they must be relatively unequal by the correct amount. Hayek and Jewkes suggest maintaining both knowledge and incentives together require complete freedom of prices for labor.
Keywords: Hayek; socialism; labor; prices; egalitarianism
JEL Classification: A12, B24, B25, B51, B53, D70, J00, J20, J30, J47, P10, P20, P30, P50
Suggested Citation: Suggested Citation