David Hume was a prominent 18th-century Scottish philosopher and economist. He played a vital role in shaping the foundations of classical liberalism and modern libertarian economics. Hume’s skepticism of central planning and government intervention laid the groundwork for the development of economic theories that emphasize the importance of free markets and individual liberty. We will explore the conceptual foundation between Hume and libertarian economics.

Hume was an empiricist, believing that knowledge came primarily from experience and observation. This approach extended to his thoughts on economics. He criticized the mercantilist policies of his time, such as protectionism and state intervention in economic affairs. Hume’s skepticism of central planning was based on several key principles:

Hume and Libertarian Economics: His Principles

1. Limited Knowledge: Hume argued that central planners could never possess enough information to efficiently allocate resources and coordinate economic activities. The sheer complexity of an economy, with countless individuals pursuing their interests and exchanging goods and services, made it impossible for a centralized authority to make optimal decisions. This insight anticipated the later work of Friedrich Hayek. Hayek expanded on this concept with the notion of the “knowledge problem” in centrally planned economies.
2. Spontaneous Order: Hume believed that social order could arise spontaneously through the interactions of individuals pursuing their self-interest, without the need for a central authority to direct them. He recognized that markets were capable of coordinating economic activities through the price mechanism, allowing for the efficient allocation of resources. This idea, later known as “spontaneous order,” became a central tenet of classical liberal and libertarian economic thought.
3. The Role of Government: Hume acknowledged the need for a government to provide certain essential services, such as defense and law enforcement. Though he was skeptical of its ability to intervene effectively in economic matters. He argued that government should play a limited role in the economy, primarily as a guarantor of individual rights and a provider of public goods. This minimalist view of government intervention laid the groundwork for the libertarian emphasis on free markets and minimal state interference.
4. The Dangers of Political Interests: Hume was also concerned about the potential for government intervention to be guided by the self-interest of politicians and bureaucrats, rather than the common good. He argued that policies often favored certain groups at the expense of others. This self-interested favoring leads to economic inefficiencies and the distortion of market processes. Public choice theory expanded upon this line of thinking by investigating the incentives and behavior of political actors.

Hume and Libertarian Economics: His Works

David Hume’s discussions on economic affairs, skepticism of central planning, and government intervention can be found mainly in his two prominent works: “A Treatise of Human Nature” (1739-1740) and “Essays, Moral, Political, and Literary” (first published in 1741-1742).

1. A Treatise of Human Nature: Although “A Treatise of Human Nature” primarily deals with philosophical issues related to human understanding, passions, and morals, it also contains some of Hume’s initial thoughts on economics. In this work, Hume presents his views on the nature of property rights, the origin of justice, and the role of government.
2. Essays, Moral, Political, and Literary: Hume’s economic ideas are more explicitly addressed in his collection of essays. Here, he discusses a variety of topics related to economics, trade, and government intervention. Some of the most relevant essays include:
   • “Of Commerce”: Hume explores the benefits of commerce and trade, while criticizing the prevailing mercantilist policies of his time. He advocates for free trade and argues that it leads to prosperity and economic growth.
   • “Of the Balance of Trade”: In this essay, Hume challenges the mercantilist belief in a favorable balance of trade, arguing that the natural workings of the market would eventually restore balance without government interference.
   • “Of Interest”: Hume examines the factors affecting interest rates and the role of money in the economy. He argues against government intervention in determining interest rates and emphasizes the importance of market forces.
   • “Of the Jealousy of Trade”: Hume criticizes the economic nationalism and protectionist policies of European nations, arguing that free trade would benefit all countries involved.

Hume’s works do not directly use the term “central planning”. However, his skepticism of government intervention and his emphasis on the self-regulating nature of markets in these essays reflect his belief in the limitations of centralized control over economic affairs.

In conclusion

David Hume’s skepticism of central planning and government intervention in economic affairs has left a lasting legacy in the field of economics. His insights on the limitations of central planning, the emergence of spontaneous order, the appropriate role of government, and the dangers of political interests have all contributed to the development of classical liberal and libertarian economic thought. As a result, Hume’s ideas continue to shape our understanding of the complex relationship between government and the economy, emphasizing the importance of free markets and individual liberty in fostering prosperity and social order.