The Fatal Conceit

Economist and political philosopher Friedrich Hayek wrote a book entitled “The Fatal Conceit: The Errors of Socialism”, which pointed out the fallacy of the socialist assumption that an economy can be centrally controlled from the top down to socially engineer a society.  This assumption is what he referred to as “The Fatal Conceit”.

This basic assumption is behind various political ideals from pure communism to the more moderate democratic socialism of the modern welfare state.  No matter how many examples history has provided that this approach simply does not work, the notion continues to thrive.  I was reminded of this when reading today’s True North Reports Daily Update.  True North investigative reporter Angela Chagnon wrote an article entitled “Ways & Means takes testimony on Blue Ribbon Tax Commission ideas”, which revealed the following:

Gary Flomenhoft of UVM advised the committee to use the tax code to control people’s behavior. His detailed proposals can be found HERE and HERE.  Touting the mantra “Tax Bads, Not Goods”, Flomenhoft believes in controlling behavior through tax policy by taxing “bad” behaviors (smoking cigarettes, consuming junk food) and lowering taxes on “good” behaviors (green energy, etc.).

“If we want more earned income, investment, production, and innovation we should tax these less,” he proposed.  “If we want less pollution, depletion, sprawl, speculation, unearned income we should tax these more.”

Flomenhoft recommended restructuring the income tax and broadening the tax base to include things like the “soda tax”. “Give people freedom of choice, but hold them accountable for their actions,” Flomenhoft said, adding that people tended to base their choices on media influence and advertising.  He suggested taxing unhealthy behavior to pay for healthcare.

Flomenhoft did not like the idea of a service tax, saying it created a “disincentive” for labor.  Instead, he recommended taxes on pollution, carbon, and imposing rent charges on the use of “common assets” like groundwater.  He also suggested adding a tax on financial transactions.

As pointed out in the article, Gary Flomenhoft is a  professor of a Public Administration class at UVM.  Anyone who thinks that the tax code should be used to control people’s behavior, rather than simply raise the revenue needed to support the legitimate functions of government, is a prime example of the kind of conceit that Hayek was talking about.  Unfortunately, he is far from alone in this view.  Using the reins of government power to control people’s behavior so as to socially engineer the public good from the top down is the essence of the Progressive worldview and is what separates that worldview from conservatism/libertarianism.