The Road To Serfdom

Hayek presents four arguments in favor of central planning, shows why each has its appeal, then demonstrates how the free market solves the problem in a better way.

The first argument claims that, as industries advance, they devolve into monopolies—the sheer size of large companies drive out smaller firms—and the only way to restore competition is for the government to control these markets. Hayek admits that, in recent history, many industries had, indeed, concentrated into the hands of a few.

He then cites multiple sources, including a report from the planning-oriented 1941 American Congress, that find no evidence that size creates monopolies. Hayek points out, instead, that “aspiring monopolists regularly seek and frequently obtain the assistance of the power of the state to make their control effective” (92). He highlights the case of 19th-century Germany, where a national policy of deliberate concentration of industry led directly to the very monopolistic abuses decried by socialists.

The second argument is that economies have become so complicated that some sort of central planning is required to prevent chaos. Hayek agrees that planning is important in certain areas but that highly-complex processes, such as modern markets, simply cannot be controlled from an office.