Hayek is not the only dead economist to have garnered new attention. Most of the living ones lost credibility when the Great Recession ended the much-hyped Great Moderation. And fears of another Great Depression caused a natural look to the past. When Federal Reserve Chairman Ben Bernanke zealously expanded the Fed's balance sheet, he was surely remembering Milton Friedman's indictment of the Fed's inaction in the 1930s. On the fiscal side, Keynes was also suddenly in vogue again. The stimulus package was passed with much talk of Keynesian multipliers and boosting aggregate demand.

But now that the stimulus has barely dented the unemployment rate, and with government spending and deficits soaring, it's natural to turn to Hayek. He championed four important ideas worth thinking about in these troubled times.

First, he and fellow Austrian School economists such as Ludwig Von Mises argued that the economy is more complicated than the simple Keynesian story. Boosting aggregate demand by keeping school teachers employed will do little to help the construction workers and manufacturing workers who have borne the brunt of the current downturn. If those school teachers aren't buying more houses, construction workers are still going to take a while to find work. Keynesians like to claim that even digging holes and filling them is better than doing nothing because it gets money into the economy. But the main effect can be to raise the wages of ditch-diggers with limited effects outside that sector.

Second, Hayek highlighted the Fed's role in the business cycle. Former Fed Chairman Alan Greenspan's artificially low rates of 2002-2004 played a crucial role in inflating the housing bubble and distorting other investment decisions. Current monetary policy postpones the adjustments needed to heal the housing market.

Third, as Hayek contended in "The Road to Serfdom," political freedom and economic freedom are inextricably intertwined. In a centrally planned economy, the state inevitably infringes on what we do, what we enjoy, and where we live. When the state has the final say on the economy, the political opposition needs the permission of the state to act, speak and write. Economic control becomes political control.

Even when the state tries to steer only part of the economy in the name of the "public good," the power of the state corrupts those who wield that power. Hayek pointed out that powerful bureaucracies don't attract angels—they attract people who enjoy running the lives of others. They tend to take care of their friends before taking care of others. And they find increasing that power attractive. Crony capitalism shouldn't be confused with the real thing.

The fourth timely idea of Hayek's is that order can emerge not just from the top down but from the bottom up. The American people are suffering from top-down fatigue. President Obama has expanded federal control of health care. He'd like to do the same with the energy market. Through Fannie and Freddie, the government is running the mortgage market. It now also owns shares in flagship American companies. The president flouts the rule of law by extracting promises from BP rather than letting the courts do their job. By increasing the size of government, he has left fewer resources for the rest of us to direct through our own decisions.

Hayek understood that the opposite of top-down collectivism was not selfishness and egotism. A free modern society is all about cooperation. We join with others to produce the goods and services we enjoy, all without top-down direction. The same is true in every sphere of activity that makes life meaningful—when we sing and when we dance, when we play and when we pray. Leaving us free to join with others as we see fit—in our work and in our play—is the road to true and lasting prosperity. Hayek gave us that map.

Despite the caricatures of his critics, Hayek never said that totalitarianism was the inevitable result of expanding government's role in the economy. He simply warned us of the possibility and the costs of heading in that direction. We should heed his warning. I don't know if we're on the road to serfdom, but wherever we're headed, Hayek would certainly counsel us to turn around.

Getting rid of the rotary won't eliminate the traffic problem any more than skipping dinner every night will make you skinny. You have to ask the economist's favorite question: And then what? If you skip dinner, you're probably going to end up eating more at breakfast and lunch. As for the rotary, getting rid of it encourages a lot more people to go to the Cape who didn't go before.

Yogi Berra once said of a restaurant, "Nobody goes there anymore; it's too crowded." Same with the Cape. It's the traffic that deters even more people from going there on any given Sunday. Get rid of the traffic, and more people suddenly find it attractive.

Think of my dad. He hates traffic. Growing up in Lexington, we never went to the Cape on a summer Sunday. My dad didn't want to sit in traffic getting there or coming home. We went to Revere. Piece of cake. Not as nice as the Cape. But when you considered the hassle, the ease of Revere outweighed the elegance of the Cape for my dad.

Getting rid of that rotary makes Cape Cod more attractive to my dad and thousands like him. As those folks make the trek to the suddenly more convenient Cape Cod, the roads into and out of the Cape -- and on the Cape as well -- are going to get more crowded. They have to get more crowded. Until they do, someone else will go to the Cape who previously went to Revere or Gloucester or the Jersey Shore because getting to the Cape was too inconvenient relative to its rewards.

Getting rid of the rotary can't solve the traffic problem because it doesn't change the underlying cause of the congestion: the relative scarcity of sand and surf next to magnificent dunes.

A lot of wonderful scarce things are expensive. Think box seats at Fenway on a perfect night in June, Van Gogh's paintings, or a condo overlooking Central Park.

But sitting on the beach at Cape Cod is wonderful and scarce and relatively cheap -- cheap measured by the out-of-pocket costs of a day trip. So more people want to enjoy the Cape than there is room for them on the Cape's roads and beaches. Removing a rotary makes that problem worse, not better. It removes one of the costs of enjoying those beaches. So other costs emerge in response, though no one wants it that way.

Next July or August, there will be a new bottleneck. I'm not sure where it will be, but I'm confident it will be there. The only question is how bad it will be.

It's a Catch-22. One possibility is that the new bottleneck will be just as bad as the Sagamore Rotary. In that case, the project accomplishes nothing. The second possibility is that it won't be quite as bad. But that means more people on the Cape. That's nice for the newcomers. But it also means more congestion on Route 6 when it rains and thousands of people are trying to find something to do with the kids. It means more traffic on the side streets. It means parking will be even worse in Provincetown. It means less space at the beach on a cloudless Sunday in July.

All that for the bargain price of $33 million.

I'll see you next summer. We won't be alone.

I got a little nervous when she confessed she wouldn’t be able to actually deliver the letter herself. She had a business commitment that kept her tied up the next morning. But she promised to find some other people to make the delivery. I may be naive, but I’m not a fool. That scared me. I wouldn’t be able to meet the other people who’d be helping me out. How would I know whether they were as honest as she seemed to be? Maybe I could at least talk to them on the phone?

No dice, she said, but not to worry. She’d make sure they were good people like her—people who wouldn’t open my envelope. People who wouldn’t steal my credit card numbers off the receipts. People who wouldn’t throw the package away just to avoid the hassle of delivering it. Really, it would turn out fine. Besides, she wasn’t sure in advance who would be available to help so I would just have to hope for the best.

It seemed nuts, but by now it was getting late. I had to trust her. There was no other way to get the job done. I didn’t have any other options.

I gave her some money. She didn’t object. Maybe she had done this before.

I slept like a rock that night. I’ve always thought people are basically good.

How about you? How would you have felt that night, knowing that your crucial package was in the hands of strangers, strangers you would never see and whose honesty and unreliability were unknowable?

Maybe I should have worried more. How much did I give her? A lot less than it would have cost to get the package there myself—19 bucks. That’s all she asked for. Besides, if she pulled it off and got the package to my accountant, I’d have a story I could tell for the rest of my life.

Truth is, I never gave it a second thought. I trusted that strange woman at the airport. I’d never seen her before in my life, and I’d never see her again. But I felt somehow she’d come through for me.

And she did. I called my accountant the next day, and sure enough, he had received my letter a few minutes before 10 o’clock.

A miracle? A lucky break for me? Or maybe a dangerous lesson that might cause me to rely naively on strangers in the future?

None of the above. My trust wasn’t a miracle or a lucky break. And I’m a little less naive than you might think.

That stranger I entrusted with my financial secrets was standing behind a FedEx counter wearing a FedEx uniform.

It changes everything doesn’t it? You go into a FedEx, give a stranger $19, and you can walk out without a worry in the world, knowing that your package is going to get there by 10 the next morning.

I never worried that the woman behind the counter might open the package after I left the office to see what I was sending or enjoy its contents. I didn’t worry that the man or woman who would touch the package next might open the package to see what was in it. I didn’t worry that the myriad of people who might come into contact with my package would check it out to see if there was anything in it worth stealing.

I also never worried for an instant that one of the people who would come into contact with my package might just decide it was too much trouble to deal with and throw it away.

Total strangers I would never see. What word best describes my lack of worry? Was it trust? Faith? Confidence? And what was the source of my contentment as I left my package behind?

It wasn’t trust. The chain of people who interacted with my package was long, and there was no way to interview each of them to explore if they were reliable. So how could I trust them? Never saw them. Never would. The woman behind the counter seemed like a decent enough soul. I trusted her in some sense. But it’s certainly the wrong word to describe her coworkers who brought my package safely to St. Louis. I can’t say I trusted them. I knew nothing about them.

Faith? Seems too open-ended. Faith comes from having used FedEx before and knowing that it always gets the job done. There’s a little of that. But I wasn’t even worried the first time I used FedEx.

Confidence seems like the right word. Confidence born of an understanding of how the division of labor works in a modern economy. What Hayek called the extended order of human cooperation.

You can see the miracle of the modern economy if you contrast FedEx with a different system, one where I actually find a real stranger, who seems honest, down at the gate at the airport on the way to St. Louis. Here, I say. Take this money and this package. And don’t worry if you need some help taking the package the last few miles. Take it part of the way, and give the package and some of the money to the next person on the promise that each person will keep the chain unbroken.

Who could be confident that such a gambit would succeed?

So what’s different about FedEx? On the surface, there’s no difference. I’m expecting somehow that a lot of strangers are going to come through for me and keep their promises. Yet everything is different.

When I use FedEx there are consequences of failure if the strangers let me down. There are feedback loops that reward excellence and punish dishonesty or failure. These feedback loops create accountability.

FedEx tries to hire honest, pleasant people who smile when you talk to them. They fire rude people who consistently lose packages or steal them. It honors and rewards people who do their job well. And why does FedEx try so hard? Part of the answer is reputation. But why does FedEx try so hard to keep its reputation intact? Competition is part of the answer. But there is more to it as well.

Even those feedback loops that keep the FedEx employees honest work best when people feel guilty about being thieves and slugs. Does capitalism work best when people are basically honest, or does capitalism help create the virtues that make it work well? Probably both.

The system works so well that we hardly notice it or appreciate the marvel of it. The smiling FedEx employee is always behind the desk waiting to take my package onto St. Louis. A stranger delivers my paper every morning to my driveway. I don’t even know what he or she looks like. Strangers built my car, wove my clothes, and filled the prescription for the antibiotic that cured my wife’s pneumonia this past winter. A myriad of strangers working together in some research lab in a location unknown to me discovered that antibiotic.

We think nothing of it. It has become natural to us to rely on those we do not see and cannot examine for their honesty, reliability, or excellence. Yet, most of the time, this extended order of human cooperation fulfills our expectations that the products and services we want will be waiting for us when we want them.

We understand the role of competition in sustaining this system. Having alternatives helps create accountability and raises the costs of failing to meet our expectations. But we often fail to understand or notice the resulting cooperation among strangers whose coordinated actions within and across companies serve us.

Surprisingly, relying on strangers beats relying on friends. We don’t have enough of the latter if we want to enjoy the standard of living with all of its material and nonmaterial satisfactions. Relying on friends or relying only on our family would lower our standard of living back to the level of subsistence. Self-sufficiency is the road to poverty.

Relying on strangers also frees up our friends to specialize in being friends and do what friends do best. I don’t want to buy a shoulder to cry on from the low-cost seller behind a counter. I want friends and families to give that out of love. But my friends and family have more time for comfort and delight because the extended order of human cooperation out in the marketplace means I’m not expecting them to sew my clothes or forge a car for me.

Relying on strangers creates the extraordinary web of cooperation that is the modern economy. A world where the division of labor and specialization—the fruits of trade and trust enforced by the feedback loops of price, profit, and competition—can let me send a package from Washington to St. Louis for about an hour’s worth of work for the average American worker.

What a lot of confidence can be bought for only $19. And this marvel of cooperation works even though most of us are oblivious to it and know not how it works. But appreciating the marvel may help us remember the value of the system of prices and profits that holds it together.

ARMY OF BAKERS. Such real-life experiences can mislead, though, when it comes to some financial decisions. To understand the virtues of an unmanaged indexed fund, consider the world of bagels. Did you ever stop to wonder how it is that in Washington, D.C., where I live, and in every other city of any size in America, bagel shortages never happen?

I know—you're not impressed. What's the big deal? But think of the army that has to work together to have that fresh bagel waiting for your random appearance at the local bagel shop. Who coordinates that team? Who told the farmer to grow enough wheat? Who made sure there were enough mills to grind the flour, enough trucks and truck drivers to move it around the country? Bagels have no czar. No one is managing the process. How can bagels be plentiful without someone being in charge?

When the Super Bowl rolls around each January, no one sends out a directive to the flour mill to tell them to grind extra flour for hot dog buns and sub rolls. The Super Bowl comes and goes without a shortage of hot dog buns, and still, there are plenty of bagels.

TOO MUCH KNOWLEDGE. The bagel market doesn't work perfectly. Sometimes a baker will have an oversupply of one flavor or another. Sometimes I might have to make two stops to pick up enough bagels if I decide to throw a brunch for 50 friends on the spur of the moment. Would the system work more smoothly if someone were managing it?

Strangely enough, the imperfect, unmanaged marketplace outperforms the conscious planning of experts. The Soviet Union was famous for managing its economy into failure. Go to Cuba where everything is managed, and you'll find everything but despair in short supply. The only times America has sustained shortages is when the government controls prices. In the 1970s, we had gasoline shortages with price controls and an energy czar.

Why can't a conscious planner do a better job than the unconscious marketplace? The simple answer is that planning for things of that magnitude requires too much knowledge dispersed in too many different brains spread across too much space and time.

BEST STRATEGY. Coordinating that knowledge requires more than an expert with a supercomputer because the nature of that knowledge is often intangible and can't be reduced to digital information. In the marketplace, prices encourage people to do on their own what a coordinator or planner would have to figure out and command. When demand goes up, prices rise and tell suppliers to produce more. Shortages and surpluses are self-correcting when prices are allowed to adjust freely.

Once you understand how the bagel market, while imperfect, functions smoothly without a manager, you can begin to appreciate the wisdom of buying an indexed fund. Prices, after all, capture information. The best stocks end up being more expensive than those with worse prospects. The expected return is that of the market as a whole. Bargains can't be identified in advance. Turns out the best strategy is to avoid the fees and tax consequences of managed funds and take the return of the market as a whole.

Those who are skeptical of indexed funds (and their skepticism is often self-interested) like to point out that one fund, Legg Mason Value Trust, has outperformed the S&P 500-stock index every year for the last 13 years. The indexers respond that with over 6,000 actively managed funds, surely some will outperform their benchmarks purely by chance. But because you can't know in advance which funds will be the lucky ones, you're still better off investing in indexed funds.

FOLLOWING A HUNCH. Thirteen years in a row—could it be pure luck? How can it be anything else? Right now, Amazon ( AMZN ) is Value Trust's single largest holding, almost 10%. Do you think fund manager Bill Miller knows something about Amazon that no one else knows? I doubt it. He's simply following a hunch the same way some bettors choose black in roulette or use their birth date for picking lottery numbers.

So the next time you're tempted to identify the hot manager in the hot sector, remember the humble but plentiful bagel. Rely on the wonders of the marketplace. You're likely to make more money, and you'll free the time you would spend picking the right fund for more rewarding pursuits that don't involve your wealth.