LAST week, the Mont Pelerin Society met in Cannes, France, to celebrate the work of its founder, Nobel Prize winning economist Friedrich Hayek.

The Mont Pelerin Society is the world's foremost group of classical liberal academic, business and governmental leaders.

Six of its 500 members, including Milton Friedman, Gary Becker and George Stigler, a Seattle native, have received Nobel Prizes in economics. This year's keynote address was given by Vaclav Klaus, Prime Minister of the Czech Republic.

The Mont Pelerin Society was formed in 1947 by people who feared that communist, fascist and socialist regimes would dominate the world.

They were prescient in anticipating the crisis of the socialist enterprise, discussed in Professor Daniel Chirot's book "The Crisis of Leninism: The Decline of the Left and the Revolutions of 1989." They sought to reassert the values of liberty, private property and toleration of people of diverse religious, ethnic and racial backgrounds.

Today's members are ahead of the curve in understanding the ethical and economic problems inherent in America's pervasive bureaucratization and regulation of private affairs. Their perspective can help us develop environmental reforms that are both sensitive and practical.

I believe that Hayek's classic 1945 article from the American Economic Review, "The Use of Knowledge in Society" is the best introduction to economics ever written.

Hayek shows us how economies are like ecosystems. They are interdependent, complex, and must constantly adjust. When we read this article, we can better understand why there are such huge conflicts between bureaucracies, which drive toward uniformity, and ecosystems, where knowledge of local circumstances is critically important.

Planning fails because the information needed to create products and coordinate human activity is widely scattered. Central planners, like everyone else, can obtain only a tiny fraction of this knowledge, and are thereby precluded from serving people's economic desires and fostering innovation.

Hayek's simple, yet tremendously powerful and far-reaching insight has grown in importance over time. Economies, like ecosystems, cannot be designed. No one can run them. Both evolve and prosper to the extent that their inhabitants remain in sync with the laws of nature.

A capitalist ecosystem is populated by organizations and industries rather than organisms and species.

Economic life evolves by technological innovation and market competition much as biological life evolves by genetic mutation and natural selection. Both involve intricate webs of innumerable participants, each pursuing his own interests, but linked into a whole greater than the sum of the parts.

Hayek's legacy is powerful because his insights are timeless; they speak to all ages and cultures. But equally important, they have been vindicated by experience. As he warned in "The Road to Serfdom," socialism has failed everywhere it was tried at the national level, creating police state nightmares from Utopian dreams and economic chaos from "rational planning."

One of socialism's many victims was environmental quality. Throughout the former U.S.S.R. the legacy of bureaucracies' single-minded focus on industrialization and production is starkly evident.

For example, at Russia's Magnitogorsk, site of the world's biggest steel complex, 90 percent of the children born in the city suffered from pollution-related illnesses. Feshbach and Friendly, authors of "Ecocide in the U.S.S.R.," state that in 1992, "there are no major industrial cities in the Soviet Union where air pollution is not shortening the life expectancy of adults and undermining the health of their children."

Aside from a few professors insulated from reality, Americans realize that communism and socialism are corrupting and economically bankrupt systems. Less clear, but just as pernicious, are the consequences of our experiments in sylvan socialism, begun with the creation of the U.S. Forest Service in 1897.

The Forest Service was the prototype for much of environmental management. Our most recent major creation, the EPA, relies on the same assumptions with tragic consequences. For example, a joint EPA-Amoco Corporation study of Amoco's Yorktown refinery found that EPA-mandated pollution controls were three times more costly than necessary. By making environmental protection more expensive, the EPA reduces the amount of protection people demand and can afford.

As we prepare to celebrate the centennial of the Forest Service, it is incumbent on us to consider the deficiencies of the socialist model. Hayek contributes to our understanding. By following his principles we can create policies that harmonize ecological and economic values.