Planning, Market Dynamism, and the Rule of Law

This paper examines a tension in F. A. Hayek’s thought between his defense of the rule of law and his advocacy for free markets. While Hayek argues that the rule of law is valuable because it enables individuals to plan their lives, he seems unconcerned about how markets can similarly disrupt planning. The paper challenges the conventional development economics response which says that legal disruptions cause more significant economic harm than market disruptions. Instead, it argues that resolving the tension requires reconsidering Hayek’s theory of the good life. 

Rather than viewing the good life through the lens of planning, this paper embraces John Stuart Mill’s conception of the good life as the exercise of creativity. This alternative framework explains why both the rule of law and free markets are valuable, resolving the contradiction in Hayek’s thought.

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