n this book, written shortly before his death in 1992, the brilliant and influential economist F. A. Hayek argues that socialism is fundamentally inferior to capitalism. Although socialism relies on sentimental and romantic concepts like 'equality' and 'social justice' for its appeal, in reality, says Hayek, socialism is fatally flawed, and it is capitalism that has the greater potential for creating justice and prosperity. The idea that humanity in the form of a more enlightened government can shape the world according to one's will is what Hayek calls the "fatal conceit".
Hayek compares socialism, whose adherents believe that language, morals, law, and social organization were human inventions and thus can be created and improved by rational planning, to religious creationism, whose adherents believe that where there is a creation, there must have been a creator. Our institutions of property, freedom and justice are not a creation of man's reason, says Hayek, but a cultural endowment created by centuries of cultural evolution. Accumulating in those brief periods when governments were weak and could not therefore suppress innovation, cultural evolution acted as a self-organizing principle to create the modern institutions of our capitalist society. In this sense, these institutions are a sort of natural phenomenon, unplanned but perfectly adapted to human nature by cultural natural selection; their genius lies in transmuting the ordinary base desires of men and women into wealth and justice without anyone needing to understand how it happens. In contrast, centrally controlled economies stretching from modern Communist states as far back as the Roman Empire have uniformly been culturally stagnant and, despite their claims to the contrary, inherently inegalitarian and cruel.
Hayek says that the urge to remake the world in a planned, rational system is in part a reflection of contemporary rationalistic constructivism and in part a desire for absolute control over the actions of other people and the resources they create. Hayek criticizes those who inappropriately apply rationalist thought to social issues. He singles out his rival John Maynard Keynes (who is remembered today primarily for almost single-handedly inventing inflation) for particular criticism. Keynes, says Hayek, contributed greatly to the weakening of freedom.
Hayek also says that Darwin's concept of evolution was inspired by economists: Darwin was reading Adam Smith just before inventing the theory of evolution. In his belief that because science is rationalistic, people educated in science automatically believe that society can be perfected by reason (and therefore central planning, which turns them into socialists), Hayek reveals his life as a sheltered university academic. Scientists in the real world are far less likely to be socialists. As appreciation grows within the sciences for natural, self-organizing phenomena, a greater appreciation of the complexities and the value of natural phenomena that occur within human society, of which our capitalist system is a prime example, will undoubtedly emerge.
Some might argue that in rejecting rationalism, Hayek is throwing out the baby with the bathwater. How can one prove that a system of distributed information is more efficient than a centralized economy, in which all the information concerning needs and prices must flow through a single point, without using rationalistic and analytical methods? People who have committed their lives to the idea that government must impose equality of outcome on the market will need more than just compelling arguments and overwhelming evidence from their lying eyes to convince them. Such proofs are not forthcoming in this book. However, Hayek's other writings, such as his discourse on the "Intertemporal Structure of Capital", which contains a diagram that more closely resembles an engineering diagram for a suspension bridge than an economic theory, dispel any suspicion about Hayek having been a antimodern irrationalist.
Hayek's insights on the close connections between economics and biology are well illustrated in this short and accessible book. Because of the importance for modern society of Hayek's thoughts about economic policy and socialism, which despite its dismal history even today remains a temptation among world leaders, this book should be required reading for all students.