Hayek biographer Bruce Caldwell (interviewed on FutureOfCapitalism.com here) has a new paper out from the Heritage Foundation: "Ten Hayekian Insights for Trying Economic Times." Professor Caldwell has some provocative thoughts, among them: "the reason the Austrian message has been almost wholly ignored in the current debate is that it is very dour....it is simply important to recognize that the Austrian message was not popular in the 1930s, is not popular today, and will never be popular."
More: "Regulation also inserts uncertainty. As Hayek put it, 'the more the state 'plans,' the more difficult planning becomes for the individual.' There was plentiful evidence of this in the recent downturn. In the fall of 2008, each announcement by the Fed and the Department of the Treasury, while meant to reassure the markets, produced more and more panic. It also froze people into inaction....Over and over again, we encounter examples of people basing their decisions on trying to guess what the government is going to do. "
More: "another plausible scenario is that the announcements that were made in fall 2008 concerning the dire condition of the economy—announcements aimed at getting a robust stimulus program passed—in fact caused the ensuing recession to be much worse than it would have been."
There's a section at the end of the paper about public choice theory: "Firms can compete successfully in two ways: directly, by producing a better product at a lower cost than their rivals, or indirectly, by getting the government to grant them an advantage over their rivals through the granting of subsidies or the imposition of licensing restrictions, taxes, tariffs, or quotas on their competitors....We said above that the best regulator for market behavior is the carrot of profits and the stick of losses. No equivalent regulator exists when the government undertakes a project. Indeed, if a government program does not achieve its goals, the solution always seems to be: We just need to spend more money."
The whole paper is on the long side but well worth a read.