Stop me if I'm misunderstanding the argument -- I won't have time to watch the video tonight, and have only read the quotes you excerpted -- but you seem to be posing "markets" against "universal BLoC" as mutually exclusive choices.

Your 'universal basic level of comfort' seems an awfully slippery concept to me. I imagine the average American's idea of what it is differs rather markedly from someone living in rural Africa. Both would differ from that of a medieval peasant.

That's somewhat besides the point though. The reason we can support an unprecedented human population with, on average, a level of health, comfort and material well-being that is historically high is that markets are extremely good at allocating resources efficiently and encouraging and spreading innovations. This efficiency stems in large part from the way that a market economy rewards success and not good intentions. Profits tend to flow to those who can most effectively produce goods or services valued by other market participants. Hayek's point is that this can lead to a distribution of wealth that offends many people's natural sense of justice but that attempts to enforce a more 'just' distribution tend to backfire in all kinds of ways, not least of which is through a reduction in the very efficiency we rely on to maintain our standard of living.

I am suggesting that this is a false dilemma; we have more than adequate resources to support socialism at the low end of the economic scale while allowing quite free markets at the upper end. If nobody can suffer horribly -- losing their house, their family, their ability to live adequately -- the risks of greater market freedom can be borne much more reasonably.

Part of the problem is that I believe this reflects an overly static view of the way the economy functions and neglects the effects of changes in incentives on individual behaviour and, in time, on societal norms. The idea of a 'culture of dependency' reflects these types of concern. Moral Hazard doesn't only affect too big to fail banks.

This ties in with my earlier point about defining a 'basic level of comfort'. I believe Hayek was actually supportive of some level of unemployment insurance. The tremendous inequalities between nations complicate the politics of this issue - many people in the developed world feel they are entitled to a basic level of comfort when unemployed that exceeds the level of comfort of productive workers in the developing world and this has consequences for the politics of free trade, immigration and foreign aid.

On a related note: totally unregulated markets at any level lead to dangerous accumulations of power by largely unaccountable individuals. Does Hayek (or his school of thought) have an answer for that problem?

I'm not sure exactly what Hayek's position on this issue is but the standard Austrian/libertarian view is that such problems are generally caused by government intervention and would not exist in a true free market. There's actually quite a bit of common ground between the Chomsky-esque 'left' and the libertarian/anarcho-capitalist 'right' regarding critiques of the Corporatist nature of the US and other western democracies and the special interest control of government. The diagnosis is pretty similar but the proposed solutions tend to differ.