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F. A. Hayek, as he is known throughout the Englishspeaking world, is generally considered to be the leading twentieth-century representative of classical, nineteenthcentury liberalism and the foremost scourge of socialism. Hayek was a corecipient, with Gunnar Myrdal (1898–1987), of the Nobel Prize in Economic Science in 1974, awarded “for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena” (Nobel Foundation).
Hayek was born in Vienna on May 8, 1899, into a family of academic distinction on both parental sides. Having served in the Austrian army as an artillery officer on the Piave front during the latter stages of World War I (1914–1918), he entered the University of Vienna and earned doctorates in both law (1921) and political science (1923). In 1927 he became director of the newly established Austrian Institute for Business Cycle Research. In January 1931 Hayek delivered a series of lectures at the London School of Economics and Political Science, subsequently published as Prices and Production. As a result of these lectures, he was appointed Tooke Professor of Economic Science and Statistics in the University of London later that year. In 1950 he joined the interdisciplinary Committee on Social Thought at the University of Chicago as professor of social and moral sciences. He returned to Europe in 1962 as professor of economic policy at the University of Freiburg, Germany. In 1969 he accepted a visiting professorship at the University of Salzburg in his native Austria. Hayek died in Freiburg on March 23, 1992.
Hayek was a strong believer in the supreme power of ideas. In 1947 he convened a group of like-minded scholars dedicated to classical liberalism to a meeting in Vevey, Switzerland, and thus the Mont Pelerin Society was born. From the mid-1970s Hayek was a pivotal figure in the renaissance of Austrian economics in the United States, and his ideas have exerted increasing political influence through think tanks such as the Institute of Economic Affairs in London and the Washington-based Cato Institute.
Hayek has made lasting contributions not only to economics but also to legal philosophy, theoretical psychology, social anthropology, political philosophy, the methodology of the social sciences, and the history of ideas. The polymathic range, far from suggesting a lack of focus, is indicative of a magnificent architectonic unity to his work. Steeped in the teachings of the Austrian school of economics derived from Carl Menger (1840–1921), Friedrich von Wieser (1851–1926), and Eugen Böhm von Bawerk (1851–1914), his early work on economic theory focused on marrying monetary theory, trade-cycle theory, and the theory of capital. His policy recommendation of “waiting it out” during the years of the Great Depression brought him into immediate conflict with Keynesian notions of underinvestment and underconsumption. As Sir John Hicks (1904–1989) pointed out in a retrospective assessment, Hayek’s model of the maladjusted time structure of production triggered by low interest rates is not so much a theory of fluctuation as a theory of growth. In this sense, Hayek’s theory of overinvestment was much more applicable to the situation of the long-lasting Japanese recession of the 1980s and 1990s or to the predicament in the United States in the late 1990s when interest rates were held too low relative to higher expected returns on capital, encouraging excessive investment, reduced savings, and the biggest stock-market bubble in U.S. history. Given Hayek’s objections to the possibility of measuring the money supply and of distinguishing sharply between money and other financial assets, it is full of irony to find him frequently dubbed “the father of monetarism.”
It was also during his London years that Hayek, elaborating on an argument of his mentor, Ludwig von Mises (1881–1973), attended to the issue of rational economic calculation in planning under centralist socialism. His misgivings about the latter as a viable economic system were closely linked to his views on how knowledge is generated and disseminated in markets and paved the way for his notion of competition as a discovery procedure in a world where tastes and production techniques are frequently changing and knowledge about these matters is dispersed. Market transactions draw on the scattered—among market participants—bits of practical, local knowledge, facilitating increasingly complex layers of specialization of labor without relying on any directing agency. The role of market prices, however imperfect as signals they may be, is to enable their users to adapt to events and circumstances about whose existence they may not have any clue whatsoever. The interactions of market participants using their own specific knowledge for their own projects generate a spontaneous order. The essential point about such a regular pattern of activities is that (1) it is emphatically not the result of design, neither by a single nor by a group mind, and that (2) its complexity puts insuperable limitations on control and prediction of the overall behavior of the system. In this sense, Hayek’s view of the workings of an economy is much more akin to biology than to mechanics.
Following in the footsteps of Scottish Enlightenment philosophers such as David Hume (1711–1776), Adam Smith (1723–1790), and Adam Ferguson (1723–1816), Hayek extended the notion of a spontaneously generated order to the evolution of social institutions such as law, language, and morals. The recognition of complex orders, and the nature of rules conducive to their formation and preservation, was the central enigma fueling Hayek’s intellectual ambition. It took him almost fifty years to grasp its full significance and to put it as succinctly as possible. This was a remote, painstaking academic pursuit constituting Hayek’s legacy as a scholar. But at the same time, he was a preacher possessed by an urge to save the world from collectivism.
- Hayek, F. A. 1935. Prices and Production. 2nd ed. London: Routledge.
- Hayek, F. A. 1948. Individualism and Economic Order. Chicago: University of Chicago Press.
- Hayek, F. A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press.
- Hayek, F. A. 1992. The Collected Works of F. A. Hayek, ed. Bruce Caldwell. Chicago: University of Chicago Press.
- Hayek, F. A. 1994. Hayek on Hayek: An Autobiographical Dialogue, eds. Stephen Kresge and Leif Wenar. London: Routledge.
- Brittan, Samuel. 2005. Hayek’s Contribution. In Against the Flow: Reflections of an Individualist, 300–315. London: Atlantic.
- Caldwell, Bruce. 2004. Hayek’s Challenge: An Intellectual Biography of F. A. Hayek. Chicago: University of Chicago Press.
- Hicks, John. 1967. The Hayek Story. In Critical Essays in Monetary Theory, 203–215. Oxford: Clarendon.
- Kukathas, Chandran. 1990. Hayek and Modern Liberalism. Oxford: Clarendon Press.
- Machlup, Fritz, ed. 1976. Essays on Hayek. New York: New York University Press.
- Nobel Foundation. 1974. Press Release: Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. http://nobelprize.org/nobel_prizes/economics/laureates/1974/ press.html.
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