Tuesday, August 30, 2016

The Road to Serfdom


Serf is a medieval term which refers to a person who worked for a lord. Serfs were low status servants and held a position similar to that of a slave. The book The Road to Serfdom by F.A. Hayek was written for British citizens shortly after World War II as a warning to prevent them from becoming a socialist or communist nation.


One major issue in socialism is determining which policies to implement. Since each person is unique agreement on issues is not necessarily black and white. For example, most people may agree that the government should provide and maintain major highways, but should they be responsible for all roads? Who determines which roads are necessary? What about a road connecting two small country villages used by only a few people?

Perhaps government should assist the less fortunate such as children who are orphaned. But what about less fortunate drug abusers who self destruct and end up homeless? Some people may say yes where as other would say I'm not so sure.

Issues are not black and white, and once ruling powers begin making policy decisions, we as individuals loose the power to decide for ourselves. Therefore, an argument is made in the book that government should only implement policies for which a vast majority of the population is in agreement. Even so, each policy that is implemented leads to more potential areas for government to create policy. With more planning and policy, freedom becomes less predictable.

While living in Germany I learned of a local dance studio run by an American. Her studio was successful because she had identified a community need and her classes were well attended. Unfortunately, she was an American and not familiar enough with the rules (tax laws) where she was operating. More than once she received high tax bills (in the neighborhood of 10,000 Euros) she was not anticipating. One could argue that she should raise her prices and be more knowledgeable of her situation. Perhaps she felt that she was charging a significant price (likely compared to average American prices for similar services). After all her classes were full. Luckily, she was able to receive a donation and continue with her business.

I found this story incredibly interesting, because we also participated in dance while living in Germany, however, we attended classes within the German system. The class my daughter took cost only about 20 euros per year plus a few costume/shoe expenses which amounted to an additional 100 euros. So how could her classes be so cheap while the classes offered by the American were so expensive and her business was failing? My daughters lessons were not offered through a business. They were offered through a private club. The cost was the membership fee. It was a non-profit and the teachers were volunteers (which has its own set of issues).

So operating in the German system there was no monetary incentive for teaching dance. The teacher of the expensive lessons essentially made the same amount of money as the volunteer. Interesting? The point is that the more policy that is created, the less choice available to the citizens.

The book The Road to Serfdom explains how socialism and communism are implemented and why they gain popularity by drawing heavily on the examples of Russia and Germany. It is a college level text and not a simple book, but worth the time. After reading the Richard Maybury books and other easier books recommended in earlier posts I would recommend this book for gaining a deeper understanding of other forms of government.

1 comment:

  1. Julie, I've been enjoying reading your posts about economics, history and politics and have bought a few of the Uncle Eric books on your recommendation. They're just what I was looking for as my son had expressed an interest in learning about economics and I wanted a living book - thank you.

    I found this post especially interesting as I've just started reading 'The Year of Living Danishly', about a British couple who spend a year as ex-pats. The writer researches why Denmark consistently scores as one of the happiest countries in the world. She discovers that Denmark's economic policies allow workers to change jobs easily and their high level of taxation encourages people to work in jobs they enjoy rather than because they pay well. Food for thought.

    I've also been enjoying listening to The Great Courses - Economics by Professor Timothy Taylor which is available on Audible. It's been a great refresher for me for the economics I studied for A level at school, and has some interesting lectures on environmental issues and public goods (as referred to in this post of yours). I think my kids will find it useful too.

    Glad you're still blogging. :)

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