From my well-worn copy of his The Constitution of Liberty, chapter 6:
“A society in which the position of the individuals was made to correspond to human ideas of moral merit would therefore be the exact opposite of a free society. It would be a society in which people were rewarded for duty performed instead of for success, in which every move of every individual was guided by what other people thought he ought to do, and in which the individual was thus relieved of the responsibility and the risk of decision. But if nobody’s knowledge is sufficient to guide all human action, there is also no human being who is competent to reward all efforts according to merit.
In our individual conduct we generally act on the assumption that it is the value of a person’s performance and not his merit that determines our obligation to him. Whatever may be true in more intimate relations, in the ordinary business of life we do not feel that, because a man has rendered us a service at a great sacrifice, our debt to him is determined by this, so long as we could have had the same service provided with ease by somebody else. In our dealings with other men we feel that we are doing justice if we recompense value rendered with equal value, without inquiring what it might have cost the particular individual to supply us with these services. What determines our responsibility is the advantage we derive from what others offer us, not their merit in providing it. We also expect in our dealings with others to be remunerated not according to our subjective merit but according to what our services are worth to them. Indeed, so long as we think in terms of our relations to particular people, we are generally quite aware that the mark of the free man is to be dependent for his livelihood not on other people’s views of his merit but solely on what he has to offer them. It is only when we think of our position or our income as determined by “society” as a whole that we demand reward according to merit.”
