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“”The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
Friedrich August von Hayek[note 1] (usually shortened to Friedrich von Hayek or FA Hayek, 1899—1992) was an Austrian school economist, with all of the negative connotations that such a description implies. He co-won the Nobel Prize in Economics in 1974 with Gunnar Myrdal, who was a Keynesian economist.[note 2]
Road to Serfdom
The most enduring and popular of his works today is not his strictly economic work but The Road to Serfdom,[note 3] a book explaining how "temporary" war-time measures often remain after the conclusion of the war leading to disastrous effects on economic well-being.[note 4] It shot to number one on Amazon when Glenn Beck mentioned it on his show. This ought to have set off some irony meters as Hayek penned a lengthy essay entitled "Why I Am Not a Conservative," essentially arguing that conservatism was only good so long as it was conserving classical liberalism and not just any old set of policies or values.
Hayek's work expanded on Ludwig von Mises' work on the economic calculation problem, i.e., the alleged inherent impossibility of pricing goods in a state-run economy (which itself was an expansion of Max Weber's statement of the problem). His idea of prices as information necessary to solve the calculation problem was very influential, albeit limited in reality to cases where there is no collusion, etc.
He also expanded on the Austrian Business Cycle Theory (ABCT). ABCT was rather "forward-thinking" at the time for attempting to tie the business cycle to credit expansion, although Irving Fisher, a contemporary of Hayek, came up with his debt-deflation theory which did the same during the Great Depression as well.
He debated John Maynard Keynes in a series of letters, and Hayek is generally thought to have lost the debate in that most countries left the gold standard and undertook policies of Keynesian stimulus during the Great Depression. However, the Hayek vs. Keynes debate obviously still rages on, and the basic philosophy of each is mirrored in all the liberal vs. conservative debates to this day. It has also been turned into two music videos for econ geeks to nerdgasm over.
Piero Sraffa battled Hayek's formulation of ABCT on the grounds that it relied on a "natural rate" of interest when there is no single natural rate. Hayek is generally thought to have lost that debate as well.
Differences with other Austrians
Hayek is often viewed as apart from the other Austrians for a couple of reasons. One is that, while he irrationally decried the "scientism" of mathematical econometric models popular in the field at the time, he did not fully accept the a priori praxeology of von Mises. Thus, there is sometimes a distinction made between the "Hayek tradition" and the "Mises tradition."
Second is that, like Adam Smith, Hayek is often invoked to defend absolute free market fundamentalism when he was in fact probably the most moderate of the Austrians. Let's read from The Road to Serfdom:
Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance - where, in short, we deal with genuinely insurable risks - the case for the state's helping to organize a comprehensive system of social insurance is very strong... Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken.
Although Hayek did not categorically oppose welfare measures, he would still be a right-libertarian by today's standards (though those bits about health care and anti-pollution laws didn't go down too well with the anarcho-capitalists) and is often invoked (sometimes wrongly) by libertarians.
Support for Pinochet
Hayek, demonstrating his libertarian credentials, praised the Pinochet regime in Chile. He visited multiple times and held a meeting of the Mont Pelerin Society there in the 1970s. Backing the regime as a temporary, necessary evil, he said:
Well, I would say that, as long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally I prefer a liberal dictator to democratic government lacking liberalism. My personal impression — and this is valid for South America — is that in Chile, for example, we will witness a transition from a dictatorial government to a liberal government. And during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.
Chile did, in fact, make the transition from the Pinochet regime to a liberal democracy in 1988.
Hayek, a nontheist, had this to say on religion:
...[I]f somebody really wanted religion, he had better stick to what seemed to be the 'true article,' that is, Roman Catholicism. Protestantism always appeared to me a step in the process of emancipation from a superstition -- a step which, once taken, must lead to complete unbelief."
One wonders if he is aware that Catholicism itself is a deviation from older Christianity, which is also a few steps away from other older religions.
Late in life he was associated with Stanford professor W.W. Bartley III, who was best known as a student and admirer of Karl Popper and at the time of his death was still working on editing Hayek's collected works. Hayek was also a follower of Erhard Seminars Training and author of the only authorized biography of Werner Erhard. Hayek's last published book, The Fatal Conceit (1988) was heavily edited by Bartley and there is some controversy over how much of the content is actually Hayek's writing as opposed to Bartley's.
Friedrich versus Salma
Academic research has also shown FA Hayek to be the better Hayek of the two.
- Econ Library entry
- Daniel Kuehn: Maynard & Fred & Gus & Ralph on the History of Macroeconomics, Brad DeLong
- Who's Afraid of Friedrich Hayek? The Obvious Truths and Mystical Fallacies of a Hero of the Right
- His name originally had the "von," but it was legally dropped after Austria lost the First World War.
- He was credited with a large role in the design of Sweden's welfare state. Haha.
- You can read the whole thing here, but if you don't like reading too much, there's a "cartoon version"
- It should be noted that both proponents and critics of the book often invoke a straw Hayek where any welfare programs or regulations are a slippery slope toward totalitarian government. Hayek, in fact, did not object wholesale to social safety nets and felt that laws such as environmental regulation could prove beneficial as long as they were enforced equally. (Keynes himself actually praised the book when it came out.) See Cafe Hayek's post Not the End of Hayek for one instance of this.
- The Fatal Conceit, p. 76
- Glenn Beck and Friedrich Hayek, The Economist
- Hayek, FA. "Why I Am Not a Conservative" on the Cato Institute website
- Hayek's Zombie Idea, Crooked Timber
- Beware, von Mises Institute
- Irving Fisher on Debt-Deflation and Depression, Seeking Alpha
- Some of the actual newspaper clippings
- The Tale of the Dueling Economists, New York Times
- Fear the Boom and Bust: A Hayek vs. Keynes Rap Anthem
- "Fight of the Century": Keynes vs. Hayek Rap Battle Round Two
- Hayek versus Sraffa
- FA Hayek. Scientism and the Study of Society, Economica, Vol. 9, No. 35 (Aug., 1942), pp. 267-291
- My Post on Praxeology Gets Some Attention
- Hayek, FA. The Road to Serfdom, Ch. 9
- Walter Block reviews Road to Serfdom and says he's no true capitalist.
- The Road From Serfdom by Greg Grandin (November 17, 2006) Counterpunch.
- Extracts from an Interview Friedrich von Hayek, "El Mercurio" (p. D8-D9), 12 April 1981, Santiago de Chile
- Dead nontheists
- Hayek vs. Hayek scorecard