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 Philosopher
of the Month
July
2004 - F. A. Hayek
Orlan Lee
In 1974, the Nobel Committee awarded the Prize for Economics to Gunnar Myrdal and F.A. Hayek: Not, as hitherto, for 'pure economics', but rather, 'for their penetrating analysis of the interdependence of economic, social and institutional phenomena.' For both, fitting tribute.
Friedrich August von Hayek - F.A. Hayek in his Anglo-American émigré career - was a descendent and interpreter of the 'Austrian school' of economics. Throughout most of his career he was loved and hated for only one early, popular, but polemical piece, The Road to Serfdom (1944). This essay on the dangers of economic decline and loss of social and political freedom which result from undue reliance on the doctrines of central planning, is widely regarded as one of the most influential books of the century. If read in context, it is an attack on the dictatorial systems of Soviet Russia and Nazi Germany, which both made use of social planning. J.M. Keynes, a moderate planner, agreed that such dangers existed, but argued that, in a free society, economists like Hayek and himself would be able to prevent them from making themselves felt.
Hayek had been influential in the early 1930s, but lost ground to Keynes as the latter's theory for recovery from the great depression and for paying for the second world war became dominant. The sudden widespread interest in Hayek's work is a very recent phenomenon. In the 1980s, the Reagan administration in the U.S., and the Thatcher government in Britain, openly avowed the ideals of Milton Friedman and F.A. Hayek for combating the inflationary policies of the 1970s. But, Hayek was not really 'mainstream' until still later. Only in the 1990s did one find Hayek societies spring up all around the world, even at the London School of Economics – which would have been unthinkable for most of the twentieth century - and in China, the last major society officially committed to Marxist communism.
Hayek studied in post first world war Vienna. He became the Director of the Austrian Institute for Business Cycle Research in 1927. And, he took part in the intellectual movement known as the Vienna Circle. His work on business cycles and Prices and Production caught the attention of Lionel Robbins, and, in 1931, Hayek was invited to come to L.S.E.
In London, Hayek was prominent among leading British and émigré scholars. In 1947, he organized the Mt. Pelerin conference of intellectuals concerned about ideas affecting the reconstruction of Europe. The University of Chicago was another meeting place of émigré and social and economic thinkers in those years, and, in 1951, Hayek was invited to move there.
Social thought and scientific reasoning had become the academic focus of Hayek's scholarship. Hayek stressed that the central question of economics was not allocation of resources, but how to best use knowledge of the economic process. For Hayek, the appearance of economic 'order' in society derived only from the market driven reasoning of economic man. Practical experience of many individuals with respect to opportunities perceived contributes to a 'spontaneous order', the product of individual market-based action, not the product of overall design.
The scientism of those who uncritically match the methodologies of the social sciences with those of the natural sciences has led, he contended, to unwarranted claims for certainty in the social sciences (The Counter-Revolution of Science, 1952). Like Popper, Hayek believed that if unwarranted claims for scientific validity go unchallenged, it will ultimately justify efforts at more intrusive government.
Ideally, the laws of society, like the laws of economics, should be seen only as practical, historical means of meeting social needs. In The Constitution of Liberty (1960), Hayek traced the historical emergence of the concept of political liberty - based upon limited government - in the Anglo-American tradition to which he had become a devoted adherent.
In 1962, Hayek returned to Europe to the University of Freiburg, the centre of liberal economic thought in Germany. Hayek distinguished between two theories of liberalism, the individualistic and the 'constructivist'. The one sees liberty as the result of limitations on the power of government, while the other is bent on creating new rights along with greater central power. The latter theory relies on the belief that planned social action can create what the former theory attributes only to often unconscious historical development.
Suggested Reading
Hayek, F. A. 1976 [1960]. The Constituton of Liberty. London: Routledge.
Hayek, F. A. 1980. Studies in Philosophy, Politics, and Economics. Chicago: University of Chicago Press.
Hayek, F. A. 1978, 1981. Law, Legislation, and Liberty, 3 vols. Chicago: University of Chicago Press.
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