This comes some six-plus decades after the University of Chicago Press published Friedrich Hayek’s 1960 book The Constitution of Liberty. (The definitive edition of the book, under the scholarly editorship of the late Ronald Hamowy and published by Routledge, came out in 2012.) In it, Hayek had much to say that is relevant today. The book’s chief aim, he wrote, is the “interweaving of the philosophy, jurisprudence, and economics of freedom.” (He used the terms “freedom” and “liberty” interchangeably; classical liberals and libertarians generally prefer “liberty.”) In 1974, he won a Nobel economics prize, and the book was one of the reasons for the award.

Hayek was a classical liberal who is often chastised as too moderate for radical libertarians and too radical for moderate classical liberals. He did not like the term “libertarian” and preferred the label “Old Whig,” which is pretty esoteric for contemporary readers.

This review will focus on the ideas in The Constitution of Liberty that seem most instructive for today’s America, in the 250th anniversary year of the Declaration of Independence. It will emphasize the classical liberal ideas that provide foundations for a free-market economy and a free society. I use “classical liberal” as encompassing moderate libertarians. Like Milton Friedman, I believe that classical liberals should reappropriate the term “liberal” tout court, and that is how I use it.

Value of Individual Liberty

Like many other classical liberals, Hayek defined individual liberty or freedom as the absence of coercion from other individuals in society. The concept is broader than just “political liberty.” “It can scarcely be contended,” he noted, “that the inhabitants of the district of Columbia, or resident aliens in the United States, or persons too young to be entitled to vote do not enjoy full personal liberty because they do not share in political liberty.” The fact that resident aliens are not as secure as they were when Hayek wrote these lines does not erase the difference between the two concepts of liberty but indicates that permanent alien residents have lost a chunk of their individual liberty, just like many citizens have. Liberty as the absence of coercion was also the original meaning of the word, as the opposite of slavery.

A useful definition of coercion is not easy to formulate. For Hayek, people are coerced when they are subject to the arbitrary will of an individual or group of individuals and are thus prevented from pursuing their own purposes, ends, or goals. “Arbitrary” in this case means that somebody else makes the decision. A free and voluntary exchange between two parties, on the contrary, is the paradigm of non-arbitrariness because both have to agree to the terms for the exchange to take place.

As we will see, this definition ties in with the rule of law, which protects individuals by allowing the government (only) to enforce non-arbitrary rules and levy taxes for that purpose. Like most classical liberals and libertarians, Hayek was not an anarchist.

Unknown Civilization in America

Hayek’s argument for free markets relies on the theory that they transmit information (he used the term “knowledge”) efficiently and do this without any central and coercive manager. “Knowledge exists only as the knowledge of individuals,” he explained. “The sum of the knowledge of all individuals exists nowhere as an integrated whole.” By using their own information for their own purposes (typically, but not necessarily, self-interested), both on the demand and supply sides of markets, individuals and private groups contribute to the formation of prices, which incorporate and transmit this information throughout the economy. Free market prices incorporate the knowledge of all market participants and, in turn, coordinate their actions. In his later three-volume work Law, Legislation, and Liberty (1973, 1976, 1979), Hayek went one step further and wrote that “the essence of freedom” is “that the several individuals act on the basis of their own knowledge and in the service of their own ends.” This is how prosperity becomes possible.

The “creative powers of a free civilization” depend on individual liberty, which allows the use of all knowledge, both explicit and tacit. There is no way a central planning bureau (or an inspired autocrat) could have access to all that knowledge, which explains why planned economies are boring if not poor. They always struggle to imitate, and catch up with, the innovations, institutions, and ways of doing things that develop in free societies. “Liberty is essential,” wrote Hayek, “in order to leave room for the unenforceable and the unpredictable; we want it because we have learned to expect from it the opportunity of realizing many of our aims.” He continued:

It is therefore no argument against individual freedom that it is frequently abused. … It is because we do not know how individuals will use their freedom that it is so important.

The Constitution of Liberty is dedicated “to the unknown civilization growing in America,” which testifies to Hayek’s (guarded) optimism for the future of American society—because it was, or could be, a free society.

Rule of Law

The rule of law and how it relates to individual liberty constitute the central part of The Constitution of Liberty. The rule of law is the classical liberal’s conception of the legal system of a free society. Laws have certain essential features. They are “long-term measures, referring to yet unknown cases and containing no references to particular persons, places or objects.” A prohibition like “Thou shalt not kill” or “Thou shalt not steal” is an example. A law also applies equally to everybody, discriminating against or in favor of no one. This principle of equality before the law is also referred to as the “generality” of law. If follows that laws apply equally to government officials and agents—except for the legitimacy of levying taxes for the purpose of enforcing true laws, which are those that meet the above criteria.

Hayek admitted that “no entirely satisfactory criterion has been found that would always tell us what kind of classification is compatible with equality before the law,” but we may say “that those inside any group singled out” by a law must “acknowledge the legitimacy of the distinction as well as those outside it.” This sort of unspoken unanimity is not easier to apply in practice than James Buchanan’s unanimous social contract. In theory, though, when we obey true laws, “we are not subject to another man’s will and are therefore free,” Hayek wrote. “It can be said that laws and not men rule.”

Hayek recognized that these necessary features of laws are not a sufficient condition for a free society. The content of laws, and not only their form, must be such that the market and the general system of voluntary cooperation “will work tolerably well.” Laws thus have a “substantial” content and not only a “formal” aspect: They must protect the equal private sphere of individuals.

A law constitutes “a limitation on the power of all governments, including the powers of the legislature”:

If a law gave the government unlimited power to act as it pleased, all its actions would be legal, but it would certainly not be under the rule of law. … The rule of law is therefore not a rule of the law, but a rule concerning what the law ought to be, a meta-legal doctrine or a political ideal.

The rule of law means that an individual and his property are not to be used as means to serve somebody else’s purposes. Laws are fundamentally different from commands, which are given by a superior to a subordinate. An arbitrary government is one that does not act in conformity with laws. A government diktat is not a law, even if issued by a democratic government. The opposition between law and arbitrary power has been a defining feature of classical liberal theories.

The main function of law is to secure individual liberty. A constitution, written or unwritten, is a law that has priority over ordinary laws but is also part of the rule of law. This conception of law must be able, in some cases, to justify civil disobedience by private individuals, although Hayek did not discuss that issue.

He insisted that the rule of law does not prevent public policies, except if they infringe on the protected sphere of individuals. In Hayek’s system, public policies don’t entail coercion if they don’t establish or protect government monopolies or try to control prices or quantities in the private economy. In more conventional terms, economic policies must support markets, not interfere in them.

The rule of law “requires independent judges who are not concerned with any temporary ends of government.” Judges must stop the government when it violates the law. The requirements of government policy cannot be an argument before a judge—a principle very different from current experience in so-called free societies. In the United States, the Department of Justice regularly defends the requirements of public policy before the courts instead of invoking the conformity with standing non-political laws. The current administration has pushed this practice aggressively.

In light of the multiple “national emergencies” that have recently been declared in America as a way to bypass the rule of law, the author of The Constitution of Liberty looks a bit cavalier when he writes:

Even the most fundamental principles of a free society, however, may have to be temporarily sacrificed when, but only when, it is a question of preserving liberty in the long run, as in the case of war…. It is necessary that such actions be confined to exceptional cases defined by rules.

Leviathan—the unbridled state—is not easy to constrain.

Rise of Law

A good way to understand the rule of law is to follow its history as summarized in The Constitution of Liberty. Its origins may go back to ancient Greece (under Pericles in the 5th century BC, not Demosthenes a century later) and the late Roman Republic. Rome’s Laws of the Twelve Tables declared that “no privileges, or statutes, shall be enacted in favour of private persons, to the injury of others contrary to the law common to all citizens.” Cicero, who influenced David Hume and many classical liberals, “became the main authority for modern liberalism.” However, the emperors reestablished the rule of men.

The 13th century Magna Carta was referred to as the Constitutio Libertatis (“Constitution of Liberty”) in Henry Bracton’s contemporaneous work on the laws and customs of England. During the 17th century, it became established that exclusive rights to produce any good was “against the common law and the liberty of the subject.” On the eve of the English Civil War, “prerogative courts” and especially the Star Chamber were abolished. The latter was, in the words of British historian F.W. Maitland, “a court of politicians enforcing a policy, not a court of judges administering the law.” Equality before the law was advancing. At the end of the 17th century, Scottish philosopher and historian Gilbert Burnet wrote, “The chief design of our whole law, and all the several rules of our constitution, is to secure and maintain our liberty.”

In a famous ruling in 1765 (Entick v. Carrington), Lord Camden wrote, “With respect to the argument of state necessity, or a distinction that has been aimed at between state offences and others, the common law does not understand that kind of reasoning, nor do our books take notice of any such distinctions.” In the same year, William Blackstone wrote in his Commentaries on the Laws of England,

In this distinct and separate existence of the judicial power in a peculiar body of men, nominated indeed, but not removable at pleasure, by the Crown consists one main preservative of the public liberty.

By the end of the 18th century, however, different ideas—including the French concept of political liberty—were already undermining this conception of law as the bulwark of individual liberty.

To America

The torch of the rule of law was relayed to America. The colonists had inherited the British tradition of classical liberalism, and they “were singularly fortunate, as perhaps no other people has been in a similar situation, in having among their leaders a number of profound students of political philosophy.” I don’t think anybody could make the same observation about today’s rulers of America.

Alexander Hamilton wrote in Federalist No. 78:

By a limited constitution, I understand one which contains certain specified exceptions to the legislative authority; such, for instance, as that it shall pass no bills of attainder, no ex post facto laws, and the like. … Limitations of this kind can be preserved in practice no other way than through the medium of the courts of justice; whose duty it must be to declare all acts contrary to the manifest tenor of the constitution void.

In the first session of the First Congress, James Madison declared that the courts would “consider themselves in a peculiar manner the guardians of those rights; they will be an impenetrable bulwark against every assumption of power in the Legislative or Executive.”

The 1780 Massachusetts Bill of Rights aimed at “a government of laws and not of men.” According to historian William Clarence Webster, all state constitutions before 1787 expressed similar ideals (suspicious of government, all even forbade standing armies in time of peace). However, Hayek observed that “these admirable principles remained largely theory and … the state legislatures soon came as near to claiming omnipotence as the British Parliament had done.”

The US Constitution, concluded Hayek, was conceived “as a protection of the people against all arbitrary action, on the part of the legislative as well as the other branches of government.” It was meant to be “a constitution of liberty.” (We can add that, alas, it was not so for the slaves.)

Decline of Law

Hayek insisted that majority rule is a method of government, not per se a way of discovering the people’s long-term opinion that (hopefully) determines the general rules limiting government. Majority voting can, over a period of time, contribute to revealing the state of opinion, but it is mainly a peaceful and less costly way of changing the ruling politicians. Liberal democracy, also known as constitutional democracy, limits the majority’s whims with the rule of law. Historically, the problem is that “democracy” took over the rule of law and became “the justification for a new arbitrary power.”

Interestingly, Hayek’s liberal democracy sometimes looks like Buchanan’s unanimous contractarianism: “To [the liberal] it is not from a mere act of will of the momentary majority,” Hayek wrote, “but from the wider agreement on common principles that a majority decision derives its authority. … And this common acceptance is the indispensable condition for a free society.”

The clash between unlimited democracy and the rule of law has produced a decline of the latter. Studying this decline in 18th century Britain and 20th century America offers a complementary way to understand what is the rule of law in classical liberalism.

Legal Positivism

The doctrine of legal positivism is the opposite of the rule of law. It claims that law is nothing other than commands that are to be obeyed. A law is simply (“positively”) what a political authority says is compulsory and has the will and power to impose. In short, the law is what the state commands.

This doctrine gripped Germany in the second half of the 19th century, spread to other Western countries, and started exerting a large influence after World War I. For the German jurist Hans Kelsen, a leading legal positivist, the impossible freedom of the individual “recedes into the background and the liberty of the social collective occupies the front of the stage,” as he wrote in the 1920s. He welcomed this “emancipation of democratism from liberalism.” He claimed that “a wrong of the state must under all circumstances be a contradiction in terms.” Hayek suggested that this approach opens new possibilities for an unlimited dictatorship, which “were already clearly seen by acute observers by the time Hitler was trying to gain power.”

The fascist and communist theories of law were an extension of legal positivism. In the 1920s, a Russian legal theorist, Aleksandr Malitzki, argued that “the fundamental principle of our legislation and our private law, which bourgeois theories will never recognize, is: Everything that is not specifically permitted is prohibited.” Another Russian legal theorist, Evgenii Pashukanis, wrote that “the subordination to a general economic plan” means “the gradual extinction of law as such.” When Pashukanis fell from favor with Stalin, he disappeared. Harvard law professor Roscoe Pound later wrote that if there had been law instead of administrative orders in the communist regime, “it might have been possible for [Pashukanis] to lose his job without losing his life.”

Legal positivism fueled the decline of law in the free world. The continental European conception of administrative powers partly shielded from judicial review was introduced in the United States even earlier than in England. The New Deal accelerated the movement. In 1937, American historian Charles McIlwain observed, “Slowly but surely we are drifting toward the totalitarian state.” In 1941, Pound lamented that public officials were allowed “to identify one side of a controversy with the public interest and so give it a greater value and ignore the others.”

In The Constitution of Liberty, Hayek did not ask why classical liberalism started to decline so rapidly. One reason may be that it is a threat to those lusting for power. Another one would be that classical liberal philosophy contradicts the tribal instincts as Hayek later emphasized in The Fatal Conceit (1988).

Conservatism, Socialism, Liberalism

Today, the welfare state has replaced traditional socialism, which originally meant the nationalization of the means of production. The main danger of the welfare state comes from its goal of redistribution and “social justice,” and the extensive regulation and subsidization required for those purposes. But, Hayek argued in the third part of The Constitution of Liberty, intentional redistribution is not the same as aiding the poor, “a minimum welfare for all,” insurance in areas where only the state can provide it, or measures to buttress the market economy (say, in education and research). He believed that the strict limits to state action entailed by the rule of law, the absence of any state monopoly (except in levying taxes to enforce general laws), and no progressive taxation would be sufficient to prevent a continuous drift to the sort of government we now have and whose power continues to grow.

Classical liberalism is different from both socialism and conservatism. The postscript of The Constitution of Liberty, titled “Why I Am Not a Conservative,” focuses on the problems of conservatism.

Hayek was speaking more of European conservatives than the American variety that was once close to classical liberalism. Like in England, American conservatives have moved toward a collectivism of the right. To add to the confusion, and especially in America, the label “liberal” has been monopolized by socialists notably since the New Deal. The real political spectrum, Hayek argued, is better represented by a triangle than a one-dimensional axis from left to right. On one corner of the triangle stand the socialists, on another the conservatives, and the classical liberals on the third corner.

He explained that he rejects conservatism for its fear of change, its distrust for “both abstract theories and general principles,” its authoritarian tendencies, often for moral or religious reasons, its obscurantism, its belief that democracy instead of unlimited government is the problem, and “its hostility to internationalism and its proneness to a strident nationalism.” Like the socialist, the conservative “does not object to coercion or arbitrary power so long as it is used for what he regards as the right purposes.”

Lessons and Hopes

Hayek brilliantly observed that the conservatives’ nationalist bias “frequently provides the bridge from conservatism to collectivism: to think in terms of ‘our’ industry or resource is only a short step away from demanding that these national assets be directed in the national interest.” He suggested, in different terms, that the main strands of socialism and conservatism share the same preference for collective and political choices over individual and private choices. That is why their economic and social policies have come to be so similar. When they appear not to be, they nonetheless share authoritarianism. For example, using the same anti-discrimination legislation, Democrats imposed “Diversity, Equity, and Inclusion” mandates on private organizations; Republicans are now using it to keep private organizations from voluntarily adopting such policies. Politicians who claim to combat leftist dirigisme with rightist dirigisme have something fundamental to learn.

As long as the state exists, Leviathan presents a permanent danger. Hayek argued for a general presumption of liberty: “The argument for liberty, in the last resort, is indeed an argument for principles and against expediency in collective action.” “In each particular instance,” he explains, “it will be possible to promise concrete and tangible advantages as the result of a curtailment of freedom, while the benefits sacrificed will in their nature always be unknown and uncertain.” The rule of law implies that whatever is not explicitly forbidden by a general rule is allowed.

British legal theorist A.V. Dicey wrote in more radical terms about the tendency to prefer the visible benefits, or promises, of government intervention: “This natural bias can be counteracted only by the existence in a given society … of a presumption or prejudice in favor of individual liberty, that is, laissez faire.” Hayek himself did not like the radical and rationalist connotations of the concept of laissez-faire; in The Constitution of Liberty, he explicitly distanced himself from it. Yet the regime he advocated with its limits on power would certainly be a great improvement on today’s situation.

In this book, Hayek occasionally slips into expressions that look strangely socialist or conservative, such as “society as a whole,” “the interest of the community,” “the public interest,” “the true interest of society,” and even the Rousseau-flavored “general interest.” What he probably and gauchely referred to is the need for the coordination of individual expectations and actions in society, which he rightly thought only a free society can achieve in a way that preserves individual liberty and promotes prosperity. He later became more conscious of the risk of defending individualist (or methodological-individualist) ideas with even mild Collectivist Speak.

One thing is as sure as anything can be: Any new power granted to a “good” politician will certainly be later used by a “bad” one. History is replete with illustrations. Hayek encapsulated this idea in a reflection that is typically liberal and close to American ideals: “The main merit of individualism which [Adam Smith] and his contemporaries advocated is that it is a system under which bad men can do least harm … which does not depend for its functioning on our finding good men for running it.”

Readings:

• Brennan, Geoffrey, and James M. Buchanan, 1985, The Reasons of Rules: Constitutional Political Economy, Cambridge University Press.
• Dicey, A.V., 1905, Lectures on the Relation Between Law and Public Opinion in England during the Nineteenth Century, Macmillan.
• Hayek, F.A., 1945, The Road to Serfdom, University of Chicago Press.
• Hayek, F.A., 1973–1979, Law, Legislation, and Liberty, University of Chicago Press.
• Hayek, F.A., 1988, The Fatal Conceit: The Errors of Socialism, University of Chicago Press.
• Lemieux, Pierre, 2018, “Against Tribal Instincts,” Regulation 41(1): 65–67.
• Lemieux, Pierre, 2021, “Where Are We on the Road to Serfdom?” Regulation 44(3): 56–59.