David R. Henderson  

Applying Hayek's "Local Knowledge" Insight to Foreign Policy

The resurrection of the automa... Ayn Rand in the Happy Lab...

Now, there's nothing in Hayek's arguments to suggest that it applies only to central planning of a domestic economy. A government that wishes to intervene in another country's affairs faces the same problem, possibly even magnified by the fact that the small number of government policymakers at the center have even less information about the foreign country than they have about their own country. The problem then becomes one of knowing which countries they should intervene in and, beyond that, even if they seem to have solid grounds for intervening, how to intervene. You might think it's completely moral, and I might agree with you, to intervene in certain country's affairs but that doesn't mean you're going to do it well and that doesn't mean it's going to work.

One economist who addressed this issue briefly but insightfully is David Friedman, the son of the late Milton Friedman, and himself a well-known economist. By the way, I interviewed this economist - I have a little hobby of interviewing older economists about their lives. I interviewed this guy who had done his dissertation under Milton in the 1950s, and he told me, "I used to think Milton Friedman was the most brilliant man in the world. Then, I met David."

So David Friedman, writing in 1973, pointed out that when a government such as ours wishes to intervene, it often faces a choice between two or more illiberal dictators. Friedman gives a pithy instance. "In practice, an interventionist policy almost inevitably involves alliances with the Shah of Iran or the present government of China" - this is when he was writing in the '70s - "or Joseph Stalin or Ferdinand Marcos or, in the case of actual policy over the past 45 years, all of the above."

He also pointed out - this is more on the information problem - "In order for the policy to work, it is necessary to correctly figure out which countries are going to be your enemies and which your allies 10 years down the road. If you get it wrong, you find yourself unnecessarily blundering into other people's wars, spending your blood and treasure in their fights instead of theirs in yours. You may, to take an example not entirely at random, get into one war as a result of trying to defend China from Japan" - World War II - "spend the next 30 years trying to defend Japan and Korea and Vietnam from China, and then finally discover that the Chinese are your natural allies against the Soviet Union."

In his book Endless Enemies, former Wall Street Journal reporter, Jonathan Kwitny recounts how US government officials made major decisions about foreign policy with little knowledge of the countries for which they were making the decision, with often disastrous consequences. In discussing the Congo, for example, Kwitny tells how US government officials in 1960 failed to understand that the Congo was a few hundred mini nations whose people were trying daily to avoid starvation. Instead, those officials interpreted everything with reference to their own Cold War with the Soviet Union. This lack of local knowledge extended even to cultural differences. President Eisenhower's undersecretary of state, C. Douglas Dillon, judged the Congo's Patrice Lumumba to be, quote, "an irrational, almost psychotic personality." What was his evidence? Lumumba "would never look you in the eye." What Dillon didn't know, apparently, was that many Africans are taught that avoiding eye contact is deferential. I'll ask about that maybe a little later. Because of these officials' negative assessments of Lumumba, President Eisenhower had him murdered. Clearly, knowledge of Lumumba's true character and personality was important given the major decision riding on that misinformation.

The above 5 paragraphs are from a speech I gave at the Hoover Institution in early February. The other 3 speakers were former Chief of Naval Operations Gary Roughead, Bruce Thornton, and George Shultz. My speech is titled "An Economist's Case for a Noninterventionist Foreign Policy."

The transcript of the speech is here and the audio is here.

Comments and Sharing

COMMENTS (13 to date)
Pajser writes:

"If you get it wrong, you find yourself unnecessarily blundering into other people's wars, spending your blood and treasure in their fights instead of theirs in yours."


Greg G writes:

Well said David.

Steve Sailer writes:

Along these lines, here's an article I published in The American Conservative before the Iraq invasion arguing that the obscure but crucial phenomenon of extremely high rates cousin marriage in Iraq meant that we couldn't democratize the place:


Bostonian writes:

The Shah of Iran was much better than what followed him. If during the Cold War Communists had freely intervened while we never did, what would have been the result? Non-interventionism seems more appealing now that the Cold War has been won.

Do libertarians think the U.S should not have created NATO?

John Goodman writes:

How did the interventionists at Hoover respond to you?

Jonathan Goff writes:


The anecdote at the end about Eisenhower ordering an assassination based on incorrect information seems disturbingly just as relevant today as it was then. I wonder what fraction of "terrorists" we have killed in the GWOT are actually false positives based on faulty information. And I'm not even talking about times when we miss our intended targets--I'm talking about when we're damned sure our intended target is an evil terrorists, but it turns out we were wrong. My guess is it's a lot higher of a percentage than most militarists would like to admit.


David R. Henderson writes:

@Greg G,
Do libertarians think the U.S should not have created NATO?
I don’t know. My own view, like that of the majority of Americans at the time, I believe, is that the U.S. should not have created NATO.
@John Goodman,
How did the interventionists at Hoover respond to you?
They didn’t. George made a half-hearted attempt in his talk, but didn’t respond to any of my important arguments.

Greg Heslop writes:

I like this talk. A great deal of common sense.

Relatedly, Roger Myerson has emphasized the importance of decentralization in making democracy work, for reasons somewhat similar to the Hayekian idea of local knowledge. Basically, when political decisions are made at too central a level, those competing for national power will have less local experience and therefore be less skilled (or even more inept) at manoeuvring the idiosyncrasies of the whole country.

Just thought this information fitting in the context. There may be inherent tendencies in interventions which encourage centralism, so the planning problem doubles.

Bostonian writes:

Where is the evidence that NATO was unpopular at its inception or later? I don't know of any major party presidential candidate who campaigned on dissolving NATO.

South Korea is a prosperous country, while North Korea is a living hell. I suppose David Henderson also opposed our involvement in the Korean War, which saved South Koreans from the fate of the North Koreans.

Many posts on this blog have chastised Americans for opposing open borders and not caring enough about the welfare of foreigners. Yet the bloggers here seem indifferent to the freedoms foreigners have enjoyed in their own countries because of our alliances with them. I'd rather make other countries hospitable to their residents, when possible, than invite the whole world here. The "when possible" caveat is important. We cannot reform Afghanistan and should not try, although continuing surveillance of terrorists is necessary.

RH writes:


I think you're right in many cases. If the United States government was run by real utilitarians, they would drop a bomb on Pyongyang and free the people of that country. I don't feel the same about Syria, though, where removing the government would probably lead to even more bloodshed.

Daublin writes:

@Bostonian, it's easier to argue non-intervention if you also include World War II. Hitler was bad, but Stalin and Mao turned out to be even worse.

If we had stayed out of the whole thing, then Europe and Asia would have just pounded each other into a tired oblivion, and Russia would not have become the superpower that it did in real history. On top of that, as Bryan Caplan also points out, staying out of war would have had direct and massive benefits to our soldiers and even to our people back home.

Tracy W writes:

@Daublin: Stalin was killing millions well before WWII. And the Nazis were planning, after exterminating the Jews in their conquered territories, to starve the Slavs to death, in order to free up farming land for German farmers. The Nazis were at first greeted as liberators by people living under Stalinist rule, they managed by dint of numerous atrocities to change their minds. If they had conquered Russia then there's every reason to believe that they'd have added millions more of civilian deaths.

And Mao was fighting a guerrilla war in China with the objective of taking over the country well before America got involved. Furthermore, the Japanese were committing atrocities of their own in Manchuria, as stomach-churning as the Nazis. It's quite possible that without the US defeating the Japanese just as many people would have wound up killed by the Japanese as Mao killed.

As a Kiwi, I'm very grateful that the Americans got involved in WWII and stopped the Japanese from conquering Australia and NZ.

Tracy W writes:

David Friedman's argument doesn't strike me as a good one against intervention.

For a start, the people in charge of countries does tend to change over time. In the case of Japan, before WWII the Japanese military could control the government because constitutionally the government had to have representatives of the Army and Navy in it, so if they walked out the government fell. Consequently the civilian government couldn't do much about their military invading neighbours and committing atrocities. One of the things the Americans did was change that rule, and drastically reduce the power of the Japanese military. Which probably saved millions of lives, (to add a personal note, what would the Japanese have done in NZ?).

But, once the Japanese military control went away, and China hauled itself out of its period of civil war, which was killing many millions of innocent Chinese civilians, this did mean that China had a lot of military power in the region. And this would have been true no matter who won China's civil war.

And, of course, in all this, were millions of innocent civilians.

Objecting to intervention because it can mean shifting allies strikes me as like objecting to having kids because you find yourself switching from dealing with childcare providers to school teachers to sports coaches. Circumstances change, that's life.

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