Published in 2022 as a collection component, this previously unpublished essay is dated to 1950 by its editorial note. Hayek seeks a defensible boundary between legitimate government action and intervention incompatible with a free economy. The argument moves from criticism of the rhetoric of “non-interference” to equality before the law, then tests that principle against direct economic controls and indirect incentives. Its central claim is that freedom requires government to act through general, prospective rules rather than discriminatory commands. The decisive question concerns the form of governmental power, not simply its extent.
Hayek begins by exposing a weakness in the conventional defence of economic freedom: opposition to government “interference” sounds like opposition to all governmental activity, although markets themselves depend on enforced laws.
The question is not really whether government should ever concern itself with economic matters at all, but what kind of government action is legitimate, what should be its range and how it should be limited.
Without a principled distinction, defenders of markets risk appearing to approve whatever benefits them and condemn whatever harms them. Hayek therefore separates measures objectionable in principle from measures requiring assessment on their merits. This distinction also answers the fear that acknowledging any legitimate economic role for government opens the way to unlimited intervention. A credible boundary must replace indiscriminate refusal.
That boundary is equality before the law, linked to the liberal distinction between government by law and government by men. Fixed rules announced in advance cannot guarantee wise policy, but they restrain piecemeal encroachment. Against ridicule of merely formal equality, Hayek maintains that applying the same principles despite differences in personal circumstances provides the essential barrier against arbitrary power. Equality here concerns the rules governing action, not equality of resources or outcomes.
The only meaning we can attach to privilege is exception from a general rule in view of personal circumstances.
This definition deliberately includes favourable exceptions intended to protect weakness or compensate for misfortune. Benevolent purposes do not change the discriminatory form of the measure. Hayek similarly defines arbitrariness as action unconstrained by an equally applicable general rule. His account distinguishes lawful authorization from substantive restraint: a court can determine whether an administrator exceeded delegated powers, but cannot eliminate arbitrariness within an authorized sphere of discretion. Legally conferred discretion remains discretion.
Hayek consequently proposes infringement of equality before the law as the best definition of government interference. Measures applying general rules may be useful or harmful; discrimination between persons is objectionable in principle. The argument knowingly excludes some actions with beneficial immediate effects. Its justification is that binding principles must sometimes prevent desirable acts if they are to restrain power at all.
To allow everything which seems expedient for the achievement of a desirable end is to dispense with all moral principles.
The state must therefore accept restraints comparable to those imposed on individuals. Hayek’s case is not that every prohibited intervention produces immediate harm, but that exceptions justified by attractive ends dissolve the limits needed for a free social order.
The essay next applies this distinction to economic planning. A government seeking a particular pattern of production or distribution must direct particular people, permitting some actions and forbidding or compelling others. Such decisions depend on current circumstances and tend to require executive discretion rather than fixed laws. Hayek cites the British Town and Country Planning Act of 1947 as an example of Parliament delegating even the formulation of governing principles to ministers.
Direct control however means discrimination. If the government is not allowed to discriminate, it cannot exercise direct controls.
Indirect controls differ because they alter the conditions of private choice without wholly removing that choice. Hayek regards them as generally undesirable, but less damaging to business planning. Licences, permits, allocations, and price fixing fall under his prohibition because they require officials to decide who receives what. Some quotas and subsidies could instead operate through general rules: quotas might be auctioned, or a subsidy offered to anyone producing a specified commodity. These measures cannot all be rejected by the same absolute argument, since they differ only in degree from necessary governmental activities such as taxation. Their merits require individual examination. His categorical rejection of discriminatory controls applies to a peacetime economy, with a possible exception for temporary local crises caused by natural catastrophes.
The closing movement qualifies this distinction further. Indirect controls may formally apply to everyone while becoming instruments of close direction if authorities continually adjust them to particular circumstances. A tax, tariff, or subsidy changed monthly by administrative discretion could approach the power of direct control. Generality must therefore be accompanied by temporal stability and limits on delegation. Legislative procedures offer protection partly because their cumbersome character impedes continual adjustment.
Hayek finally urges legislators to consider whether proposed norms deserve acceptance as lasting rules. He recognizes this as an ambitious aspiration and settles for a firmer barrier against discriminatory intervention. The essay’s relevance lies in this shift from the quantity of government activity to its legal structure: who decides, under what rules, with what discretion, and over what period. Its governing tension is equally clear. Formal equality supplies a categorical prohibition, yet cannot settle every question of economic policy. Hayek preserves that limitation rather than stretching “interference” into an indiscriminate objection that would weaken the argument for freedom.
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