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2
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https://purl.pt/302/1/dlib/january17/01contents.html
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en
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Lib Magazine
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D-Lib Magazine is an electronic publication with a focus on digital library research and development, including new technologies, applications, and contextual social and economic issues.
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T A B L E O F C O N T E N T S
J A N U A R Y / F E B R U A R Y 2 0 1 7
Volume 23, Number 1/2
ISSN: 1082-9873
https://doi.org/10.1045/january2017-contents
E D I T O R I A L S
Special Issue
Editorial by Laurence Lannom, Corporation for National Research Initiatives
RepScience2016
Guest Editorial by Amir Aryani, Australian National Data Service; Oscar Corcho, Departamento de Inteligencia Artificial, Universidad Politécnica de Madrid; Paolo Manghi, Istituto di Scienza e Tecnologie dell'Informazione, Consiglio Nazionale delle Ricerche; Jochen Schirrwagen, Bielefeld University Library
A R T I C L E S
From Data to Machine Readable Information Aggregated in Research Objects
Article by Markus Stocker, PANGAEA, MARUM Center for Marine Environmental Sciences, University of Bremen
Abstract: Data interpretation is an important process in scientific investigations. It results in information and gives data meaning. As a case in point, earth and environmental scientists interpret data increasingly often collected in large-scale environmental research infrastructures to gain information about the studied environment. Information is typically represented to suit human consumption in natural language text, figures and tables designed for expert processing. Building on a case study in aerosol science, we discuss how information resulting in data interpretation can be represented as machine readable information objects, here of type Interpretation. As the main contribution, we present the aggregation of interpretations in Research Objects. Together with data, metadata, workflows, software, and articles, interpretations are contextual resources of scientific investigations. The explicit aggregation of interpretations in Research Objects is arguably a further step toward a more complete representation of the context of scientific investigations.
The Scholix Framework for Interoperability in Data-Literature Information Exchange
Article by Adrian Burton and Amir Aryani, Australian National Data Service; Hylke Koers, Elsevier; Paolo Manghi and Sandro La Bruzzo, Istituto di Scienza e Tecnologie dell'Informazione, Consiglio Nazionale delle Ricerche; Markus Stocker, Michael Diepenbroek and Uwe Schindler, PANGAEA, MARUM Center for Marine Environmental Sciences, University of Bremen; Martin Fenner, DataCite
Abstract: The Scholix Framework (SCHOlarly LInk eXchange) is a high level interoperability framework for exchanging information about the links between scholarly literature and data, as well as between datasets. Over the past decade, publishers, data centers, and indexing services have agreed on and implemented numerous bilateral agreements to establish bidirectional links between research data and the scholarly literature. However, because of the considerable differences inherent to these many agreements, there is very limited interoperability between the various solutions. This situation is fueling systemic inefficiencies and limiting the value of these, separated, sets of links. Scholix, a framework proposed by the RDA/WDS Publishing Data Services working group, envisions a universal interlinking service and proposes the technical guidelines of a multi-hub interoperability framework. Hubs are natural collection and aggregation points for data-literature information from their respective communities. Relevant hubs for the communities of data centers, repositories, and journals include DataCite, OpenAIRE, and Crossref, respectively. The framework respects existing community-specific practices while enabling interoperability among the hubs through a common conceptual model, an information model and open exchange protocols. The proposed framework will make research data, and the related literature, easier to find and easier to interpret and reuse, and will provide additional incentives for researchers to share their data.
Supporting Data Reproducibility at NCI Using the Provenance Capture System
Article by Jingbo Wang, Ben Evans and Lesley Wyborn, National Computational Infrastructure, Australia; Nick Car, Geoscience Australia; Edward King, CSIRO, Australia
Abstract: Scientific research is published in journals so that the research community is able to share knowledge and results, verify hypotheses, contribute evidence-based opinions and promote discussion. However, it is hard to fully understand, let alone reproduce, the results if the complex data manipulation that was undertaken to obtain the results are not clearly explained and/or the final data used is not available. Furthermore, the scale of research data assets has now exponentially increased to the point that even when available, it can be difficult to store and use these data assets. In this paper, we describe the solution we have implemented at the National Computational Infrastructure (NCI) whereby researchers can capture workflows, using a standards-based provenance representation. This provenance information, combined with access to the original dataset and other related information systems, allow datasets to be regenerated as needed which simultaneously addresses both result reproducibility and storage issues.
Graph Connections Made By RD-Switchboard Using NCI's Metadata
Article by Jingbo Wang, Ben Evans and Lesley Wyborn, National Computational Infrastructure, Australia; Amir Aryani and Melanie Barlow, Australian National Data Service
Abstract: This paper demonstrates the connectivity graphs made by Research Data Switchboard (RD-Switchboard) using NCI's metadata database. Making research data connected, discoverable and reusable are some of the key enablers of the new data revolution in research. We show how the Research Data Switchboard identified the missing critical information in our database, and what improvements have been made by this system. The connections made by the RD-Switchboard demonstrated the various use of the datasets, and the network of researchers and cross-referenced publications.
Opening the Publication Process with Executable Research Compendia
Article by Daniel Nüst, Markus Konkol, Edzer Pebesma and Christian Kray, Institute for Geoinformatics; Marc Schutzeichel, Holger Przibytzin and Jörg Lorenz, University and State Library, Münster
Abstract: A strong movement towards openness has seized science. Open data and methods, open source software, Open Access, open reviews, and open research platforms provide the legal and technical solutions to new forms of research and publishing. However, publishing reproducible research is still not common practice. Reasons include a lack of incentives and a missing standardized infrastructure for providing research material such as data sets and source code together with a scientific paper. Therefore we first study fundamentals and existing approaches. On that basis, our key contributions are the identification of core requirements of authors, readers, publishers, curators, as well as preservationists and the subsequent description of an executable research compendium (ERC). It is the main component of a publication process providing a new way to publish and access computational research. ERCs provide a new standardisable packaging mechanism which combines data, software, text, and a user interface description. We discuss the potential of ERCs and their challenges in the context of user requirements and the established publication processes. We conclude that ERCs provide a novel potential to find, explore, reuse, and archive computer-based research.
Conquaire: Towards an Architecture Supporting Continuous Quality Control to Ensure Reproducibility of Research
Article by Vidya Ayer, Cord Wiljes, Philipp Cimiano, CITEC, Bielefeld University; Christian Pietsch, Johanna Vompras, Jochen Schirrwagen and Najko Jahn, Bielefeld University Library
Abstract: Analytical reproducibility in scientific research has become a keenly discussed topic within scientific research organizations and acknowledged as an important and fundamental goal to strive for. Recently published scientific studies have found that irreproducibility is widely prevalent within the research community, even after releasing data openly. At Bielefeld University, nine research project groups from varied disciplines have embarked on a "reproducibility" journey by collaborating on the Conquaire project as case study partners. This paper introduces the Conquaire project. In particular, we describe the goals and objectives of the project as well as the underlying system architecture which relies on a DCVS system for storing data, and on continuous integration principles to foster data quality. We describe a first prototype implementation of the system and discuss a running example which illustrates the functionality and behaviour of the system.
Towards Reproducibility of Microscopy Experiments
Article by Sheeba Samuel, Frank Taubert and Daniel Walther, Institute for Computer Science, Friedrich Schiller University Jena; Birgitta König-Ries and H. Martin Bücker, Institute for Computer Science, Friedrich Schiller University Jena, Michael Stifel Center Jena for Data-driven and Simulation Science
Abstract: The rapid evolution of various technologies in different scientific disciplines has led to the generation of large volumes of high dimensional data. Studies have shown that most of the published work is not reproducible due to the non-availability of the datasets, code, algorithm, workflow, software, and technologies used for the underlying experiments. The lack of sufficient documentation and the deficit of data sharing among particular research communities have made it extremely difficult to reproduce scientific experiments. In this article, we propose a methodology enhancing the reproducibility of scientific experiments in the domain of microscopy techniques. Though our approach addresses the specific requirements of an interdisciplinary team of scientists from experimental biology to store, manage, and reproduce the workflow of their research experiments, it can also be extended to the requirements of other scientific communities. We present a proof of concept of a central storage system that is based on OMERO (Allan et al., Nature Methods 9, 245-253, 2012). We discuss the criteria and attributes needed for reproducibility of microscopy experiments.
HyWare: a HYbrid Workflow lAnguage for Research E-infrastructures
Article by Leonardo Candela and Paolo Manghi, Istituto di Scienza e Tecnologie dell'Informazione, Consiglio Nazionale delle Ricerche; Fosca Giannotti, Valerio Grossi and Roberto Trasarti, KDD Lab, ISTI CNR, Pisa, Italy
Abstract: Research e-infrastructures are "systems of systems", patchworks of tools, services and data sources, evolving over time to address the needs of the scientific process. Accordingly, in such environments, researchers implement their scientific processes by means of workflows made of a variety of actions, including for example usage of web services, download and execution of shared software libraries or tools, or local and manual manipulation of data. Although scientists may benefit from sharing their scientific process, the heterogeneity underpinning e-infrastructures hinders their ability to represent, share and eventually reproduce such workflows. This work presents HyWare, a language for representing scientific process in highly-heterogeneous e-infrastructures in terms of so-called hybrid workflows. HyWare lays in between "business process modeling languages", which offer a formal and high-level description of a reasoning, protocol, or procedure, and "workflow execution languages", which enable the fully automated execution of a sequence of computational steps via dedicated engines.
Enabling Reproducibility for Small and Large Scale Research Data Sets
Article by Stefan Pröll, SBA Research, Austria and Andreas Rauber, Vienna University of Technology, Austria
Abstract: A large portion of scientific results is based on analysing and processing research data. In order for an eScience experiment to be reproducible, we need to able to identify precisely the data set which was used in a study. Considering evolving data sources this can be a challenge, as studies often use subsets which have been extracted from a potentially large parent data set. Exporting and storing subsets in multiple versions does not scale with large amounts of data sets. For tackling this challenge, the RDA Working Group on Data Citation has developed a framework and provides a set of recommendations, which allow identifying precise subsets of evolving data sources based on versioned data and timestamped queries. In this work, we describe how this method can be applied in small scale research data scenarios and how it can be implemented in large scale data facilities having access to sophisticated data infrastructure. We describe how the RDA approach improves the reproducibility of eScience experiments and we provide an overview of existing pilots and use cases in small and large scale settings.
N E W S & E V E N T S
In Brief: Short Items of Current Awareness
In the News: Recent Press Releases and Announcements
Clips & Pointers: Documents, Deadlines, Calls for Participation
|
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wrong_mix_range_subsidiary_00017
|
FactBench
|
2
| 54 |
https://chem.libretexts.org/Workbench/Book%253A_Information_Systems%253A_A_Manager's_Guide_to_Harnessing_Technology_(Ontario)/01%253A_Setting_the_Stage%253A_Technology_and_the_Modern_Enterprise/01.2%253A_It%25E2%2580%2599s_Your_Revolution
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en
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1.2: It’s Your Revolution
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Chemistry LibreTexts
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https://chem.libretexts.org/Workbench/Book%3A_Information_Systems%3A_A_Manager's_Guide_to_Harnessing_Technology_(Ontario)/01%3A_Setting_the_Stage%3A_Technology_and_the_Modern_Enterprise/01.2%3A_It%E2%80%99s_Your_Revolution
|
The intersection where technology and business meet is both terrifying and exhilarating. But if you’re under the age of thirty, realize that this is your space. While the fortunes of any individual or firm rise and fall over time, it’s abundantly clear that many of the world’s most successful technology firms—organizations that have had tremendous impact on consumers and businesses across industries—were created by young people. Consider just a few:
Bill Gates was an undergraduate when he left college to found Microsoft—a firm that would eventually become the world’s largest software firm and catapult Gates to the top of the Forbes list of world’s wealthiest people (enabling him to also become the most generous philanthropist of our time).
Michael Dell was just a sophomore when he began building computers in his dorm room at the University of Texas. His firm would one day claim the top spot among PC manufacturers worldwide.
Mark Zuckerberg founded Facebook as a nineteen-year-old college sophomore.
Steve Jobs was just twenty-one when he founded Apple.
Tony Hsieh proved his entrepreneurial chops when, at twenty-four, he sold LinkExchange to Microsoft for over a quarter of a billion dollars (Chafkin, 2009). He’d later serve as CEO of Zappos, eventually selling that firm to Amazon for $900 million (Lacy, 2009).
Sergey Brin and Larry Page were both twenty-something doctoral students at Stanford University when they founded Google. So were Jerry Yang and David Filo of Yahoo! All would become billionaires.
If you want to go a little older, Kevin Rose of Digg and Steve Chen and Chad Hurley of YouTube were all in their late twenties when they launched their firms. Jeff Bezos hadn’t yet reached thirty when he began working on what would eventually become Amazon.
Of course, those folks would seem downright ancient to Catherine Cook, who founded MyYearbook.com, a firm that at one point grew to become the third most popular social network in the United States. Cook started the firm when she was a sophomore—in high school.
But you don’t have to build a successful firm to have an impact as a tech revolutionary. Shawn Fanning’s Napster, widely criticized as a piracy playground, was written when he was just nineteen. Fanning’s code was the first significant salvo in the tech-fueled revolution that brought about an upending of the entire music industry. Finland’s Linus Torvals wrote the first version of the Linux operating system when he was just twenty-one. Today Linux has grown to be the most influential component of the open source arsenal, powering everything from cell phones to supercomputers.
BusinessWeek regularly runs a list of America’s Best Young Entrepreneurs—the top twenty-five aged twenty-five and under. Inc. magazine’s list of the Coolest Young Entrepreneurs is subtitled the “30 under 30” (Fenn, 2009). While not exclusively filled with the ranks of tech start-ups, both of these lists are nonetheless dominated with technology entrepreneurs. Whenever you see young people on the cover of a business magazine, it’s almost certainly because they’ve done something groundbreaking with technology. The generals and foot soldiers of the technology revolution are filled with the ranks of the young, some not even old enough to legally have a beer. For the old-timers reading this, all is not lost, but you’d best get cracking with technology, quick. Junior might be on the way to either eat your lunch or be your next boss.
|
||||||
wrong_mix_range_subsidiary_00017
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FactBench
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2
| 9 |
https://www.computerhope.com/comp/msoft.htm
|
en
|
Microsoft
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Microsoft company and contact information including phone number, address, e-mail address, and other contact and company-related information.
|
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https://www.computerhope.com/comp/msoft.htm
|
Founded on April 4, 1975, by Bill Gates and Paul Allen, Microsoft is one of the largest and most successful companies in the world. Microsoft is the developer and distributor of Microsoft Windows, Microsoft Office, DirectX, Xbox, and numerous other programs, games, and services.
Contact information
Note
If your computer (e.g., Dell or HP) came with Microsoft Windows, you'll need to contact your computer manufacturer and not Microsoft if you have questions.
Sales and support: (800) 426-9400 Main switchboard: (425) 882-8080 Xbox support: (800) 4MY-XBOX Xbox TTY: (866) 740-XBOX Fax: (425) 706-7329 Free virus and security info: (866) PC SAFETY Microsoft TDD: (800) 892-5234 MSN TDD: (425) 635-4948 Websites: Microsoft official website.
Microsoft Windows official website.
Microsoft Office 365 official website.
MSN official website.
Outlook official website.
Xbox official website. E-mail: Microsoft support. Address: Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
USA Locations: Microsoft locations around the world. Stock: MSFT
Companies selling similar products
Computer browser companies
Computer manufacturers
Computer security companies
Cloud companies
Computer game companies
Game controller companies
Computer headset companies
Keyboard companies
Mouse companies
Search engine companies
Computer software companies
Tablet companies
Related pages on Computer Hope
3D Builder
Age of Empires
APM (advanced power management)
Bus
Defrag
Dev Home
DirectX
Dr. Watson
Hotmail
Keyboard
Livedrive
Microsoft Agent
Microsoft Backup
Microsoft Close Combat
Microsoft Combat Flight Simulator
Microsoft Deadly Tides
Microsoft Excel
Microsoft Flight Simulator
Microsoft Front Page
Microsoft Fury 3
Microsoft Internet Explorer
Microsoft Office
Microsoft Outlook
Microsoft Paint
Microsoft Silverlight
Microsoft Word
Mine Sweeper
MS-DOS
MSE (Microsoft Security Essentials)
Mouse
MSN (Microsoft Network)
Office 365
Office Online
Operating System
Parallel Port
PC (personal computer)
PDA (personal digital assistant)
Plus!
Power BI
ScanDisk
Software
Solitaire
Terminal
USB (universal serial bus)
Windows 10
Windows 2000
Windows 3.x
Windows 7
Windows 8
Windows 95
Windows 98
Windows CE
Windows FTP
Windows Live
Windows Me
Windows Minesweeper
Windows NT
Windows phone
Windows Solitaire
Windows Sound Recorder
Windows Media Player
Windows Movie Maker
Windows Vista
Windows XP
VBScript
Virtual PC
Visual Basic
Microsoft company questions
What was Microsoft's first product?
Altair BASIC was Microsoft's first product. The BASIC programming language was developed by Bill Gates, Paul Allen, and Monte Davidoff for the Altair computer.
Microsoft news and history
Microsoft MS-DOS history.
Microsoft Windows history.
Friday 13, 2023 - Microsoft completed acquisition of Activision Blizzard for $68.7 billion.
February 7, 2023 - Microsoft released ChatGPT-powered Bing.
January 18, 2022 - Microsoft announced its intentions to buy Activision Blizzard for $68.7 billion.
April 12, 2021 - Microsoft announced it would be acquire Nuance in a $16 billion deal.
September 21, 2020 - Microsoft announced it acquired ZeniMax Media and its game publisher Bethesda Softworks.
October 2, 2019 - Microsoft introduced the Surface Duo.
June 4, 2018 - Microsoft announced it would acquire GitHub for $7.5 billion.
July 29, 2015 - Microsoft released Windows 10.
April 25, 2014 - The Nokia deal with Microsoft was completed making Nokia now Microsoft Mobile in a deal totaling $7.17 billion.
September 15, 2014 - Microsoft announced it purchased Mojang the makers of Minecraft for $2.5 billion.
February 4, 2014 - Satya Nadella became Microsoft CEO.
May 10, 2011 - Microsoft announced plans to acquire Skype for $8.5 billion in cash.
March 14, 2011 - Microsoft released Internet Explorer 9.
November 4, 2010 - Microsoft released the Kinect for the Xbox 360.
July 29, 2009 - Microsoft and Yahoo! reach a 10-year deal to replace the Yahoo! search with Bing.
June 16, 2009 - XPS (XML Paper Specification) was introduced by Microsoft.
June 3, 2009 - Microsoft launched the Bing search engine.
July 26, 2006 - Microsoft acquired Gteko research firm for $110 million.
July 18, 2006 - Microsoft acquired Winternals Software.
December 16, 2004 - Microsoft purchased Giant Company Software, a developer of spyware software.
July 15, 2004 - Microsoft announced it would purchase Lookout Software LLC.
June 10, 2003 - GeCAD Software announced a definite agreement with Microsoft in acquiring GeCAD's antivirus technology RAV.
February 19, 2003 - Microsoft acquired Connectix.
January 21, 2003 - Microsoft acquired PlaceWare.
October 22, 2002 - Microsoft acquired Vicinity Corporation.
September 29, 2002 - Microsoft bought British game developer Rare Ltd. for $375 million.
December 09, 2001 - Microsoft bought Navision for $1.33 billion.
December 09, 2001 - Microsoft announced Windows NT 4.0 was retiring by the end of July 2003.
December 2001 - Microsoft filed a trademark suit against Lindows.com.
October 25, 2001 - Windows XP Home and Professional editions were released.
June 5, 2001 - Microsoft ended free support for Office 97.
May 30, 2001 - Microsoft released Office XP.
May 15, 2001 - Microsoft said Hotmail users top 100 million.
May 3, 2001 - Microsoft acquired Ensemble Studios.
April 30, 2001 - Microsoft acquired NCompass Labs.
April 12, 2001 - MSN reached the 5 million user mark.
2001 - Expedia was broken off from Microsoft.
April 11, 2001 - Microsoft Office tool "Clippy" got the pink slip.
January 07, 2001 - Bill Gates unveiled the Xbox.
December 21, 2000 - Microsoft acquired Great Plains Software.
December 5, 2000 - Microsoft acquired Digital Anvil.
September 18, 2000 - Microsoft acquired Pacific Microsonics Inc
September 13, 2000 - Microsoft acquired MongoMusic.
July 12, 2000 - Microsoft acquired NetGames.
June 19, 2000 - Microsoft Corporation today announced that it had bought Bungie Software Products Corporation for undisclosed terms. This move allows Microsoft to release the highly anticipated game Halo, for its upcoming Xbox.
June 12, 2000 - Microsoft acquired Driveoff.com.
February 29, 2000 - Microsoft acquired Peach Networks.
January 13, 2000 - Bill Gates relinquished his title as CEO to Microsoft President Steve Ballmer.
November 11, 1999 - Microsoft Corp. and RadioShack announced a strategic alliance to accelerate the adoption of Web technologies and consumer connections to the Internet. Under the five-year agreement, the companies would establish a Microsoft "store within a store" in as many as 7,000 RadioShack locations across the nation. Customers can see demonstrations of and sign up for MSN dial-up or broadband Internet access.
October 29, 1999 - Microsoft acquired Entropic.
September 17, 1999 - Microsoft acquired Softway Systems.
September 15, 1999 - Microsoft acquired Visio Corp.
July 21, 1999 - Microsoft acquired STNC.
July 7, 1999 - Microsoft acquired ZOOMIT.
July 1, 1999 - Microsoft acquired Sendit.
June 15, 1999 - Microsoft acquired OmniBrowse Inc.
June 7, 1999 - Microsoft acquired ShadowFactor.
April 26, 1999 - Microsoft acquired Jump Networks.
April 19, 1999 - Microsoft acquired Access software.
March 4, 1999 - Microsoft acquired CompareNet Inc.
January 7, 1999 - Microsoft announced it would acquire FASA Interactive.
December 1998 - Microsoft announced that Hotmail hit over 30 million users.
November 6, 1998 - Microsoft acquired the advertising company LinkExchange for $265 million on November 6, 1998.
August 25, 1998 - Microsoft acquired Valence Research.
April 28, 1998 - Microsoft acquired MESA group.
April 9, 1998 - Microsoft acquired Firefly Network Inc.
February 23, 1998 - Microsoft acquired Flash Communications.
January 3, 1998 - Microsoft completed buy of Hotmail, a deal with a speculated value of up to $400 million.
December 1997 - Microsoft announced its plans to acquire Hotmail a free e-mail service in December 1997.
August 1997 - Microsoft was approved to acquire WebTV.
August 5, 1997 - Microsoft announced acquisition of VXtreme.
June 30, 1997 - Microsoft acquired LinkAge Software.
June 13, 1997 - Microsoft acquired Cooper & Peters.
May 7, 1997 - Microsoft acquired the Dimension X company.
April 6, 1997 - Microsoft acquired WebTV Networks.
March 4, 1997 - Microsoft acquired Interse.
December 10, 1996 - Microsoft acquired NetCarta.
November 20, 1996 - Microsoft acquired ResNova.
July 24, 1996 - Caldera filed a lawsuit against Microsoft for its alleged illegal activities and unfair practices with MS-DOS, Windows 95, and Windows 98, which it claims still use CP/M at their core.
June 11, 1996 - Microsoft acquired eShop Inc.
April 15, 1996 - Microsoft acquired EXOS Inc.
April 8, 1996 - Microsoft acquired aha! software.
March 12, 1996 - Microsoft announced the acquisition of Colusa Software Inc.
March 1996 - Microsoft acquired Aspect Engineering.
1996 - Microsoft VBScript was introduced.
1996 - Microsoft introduced the website Expedia.
January 16, 1996 - Microsoft purchased Vermeer Technologies Inc. for $133 million. The company was a developer of the website development tool FrontPage, which Microsoft later released as its own program.
December 12, 1995 - Microsoft acquired Bruce Artwick Organization.
November 27, 1995 - Microsoft released Internet Explorer 2.0 and officially started the browser war between Netscape.
October 16, 1995 - Microsoft acquired Blue Ribbon Soundworks.
August 1995 - Microsoft Internet Explorer 1.0 was introduced.
November 15, 1994 - Microsoft acquired One Tree Software.
June 28, 1994 - Microsoft acquired Softimage Inc., this company was later sold to Avid Technology Inc. on June 15, 1998.
June 1992 - Microsoft acquired Fox Software for $173 million.
May 2, 1991 - The domain microsoft.com came online.
June 29, 1987 - Microsoft purchased Forethought Incorporated. The company that developed the presentation software PowerPoint.
November 30, 1985 - Microsoft released the first version of Microsoft Excel on the Apple Macintosh.
March 29, 1984 - Microsoft created a new hardware and peripheral division.
July 27, 1981 - Microsoft bought the rights for QDOS from SCP (Seattle Computer Products) for $25,000.
July 14, 1978 - Microsoft released its first program, Altair BASIC. The BASIC programming language was developed by Bill Gates, Paul Allen, and Monte Davidoff for the Altair computer.
|
||||||
wrong_mix_range_subsidiary_00017
|
FactBench
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0
| 17 |
https://timelines.issarice.com/wiki/Timeline_of_Microsoft
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en
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Timeline of Microsoft
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Time period Key developments at Microsoft 1975–1985 Microsoft is founded and starts out creating its first software products, such as the MS-DOS operating system. 1985–1994 Microsoft moves to Redmond, IPOs, launches Microsoft Office and its first GUI. This would lead it to dominate much of the software market and put it in conflict with Apple Inc. Until 1995, Microsoft had failed to take advantage of the rising popularity of the Internet. 1995–2000 Microsoft releases Windows 95 and Windows 98, both which become extremely popular. It expands its presence on the Internet, and it develops an overwhelming share of the desktop operating system and Internet browser market. It also goes through an antitrust lawsuit. 2000–2006 Microsoft releases Windows ME (considered to be a botched release), which is then patched up by the popular Windows XP, which retains an overwhelming share of the OS market for a long time. Microsoft also releases the Xbox, which would eventually compete with the Playstation as one of the most popular gaming devices. 2007–2011 Microsoft releases Windows Vista (which is considered to be a botched release), and then Windows 7 to fix up the botch-up. While it still retains a significant share in the desktop operating system market, it does not anticipate the smartphone revolution. Microsoft also starts losing its share of the browser market to Firefox and Google Chrome, and MSN starts losing share of the search engine market to Google. Apple, Microsoft's old nemesis, would also introduce the iPhone, which would gradually eat into the overall Microsoft share of computing devices. Bill Gates continues to have diminishing involvement over the company. 2011–2014 The desktop operating system market is collapsing, as is the market share of Windows-based programming languages among developers.[1] Some question Microsoft's future under Steve Balmer. Windows 8 is released, but it is considered to be a botched release. 2014–present Microsoft appoints Satya Nadella as CEO, and its stock starts recovering again. Microsoft releases Windows 10, whose features help it compete with Google and Facebook to establish the strongest hold over people's digital lives.
Year Month and date Event type Details 1975 April 4 Company Bill Gates and Paul Allen founded Microsoft.[2] 1978 November 1 International The company's first international office was founded on November 1, 1978, in Japan, entitled "ASCII Microsoft" (now called "Microsoft Japan"). 1980 August Product Microsoft signs a contract with IBM to develop an operating system for IBM's first personal computer. This, in turn, was the beginning for both the Bundling of Microsoft Windows, and Wintelism, as IBM personal computers and Intel were also bundled with each other. 1981 July 27 Product Microsoft buys the rights for QDOS from Seattle Computer Products (without telling SCP that it had a lucrative contract with IBM). This would later become MS-DOS.[3] 1981 August 12 Company IBM announces the release of the IBM Personal Computer, which becomes the dominant personal computer. As DOS was the only operating system available on the PC when it was introduced in New York City, this paves way to the future domination by the MS-DOS operating system.[4][5] 1982 April International Microsoft formally launches its International Division and sets up subsidiaries in Europe and elsewhere, finding local agents to handle its business interests [5] 1983 January Products Compaq releases its first PC-compatible machine with IBM compatible clones, which hurt IBM but helped Microsoft (as it had to license DOS from Microsoft), but any application developed to run on the PC could still run on Compaq machines.[5] 1983 January 26 Competition Lotus Software releases Lotus 1-2-3, a spreadsheet program that becomes the IBM PC's first killer application, and which established the spreadsheet standard for the PC. By the late 1980s, it would eventually lose out to Microsoft Excel.[5] 1983 May 30 Products Microsoft announces Multi-Tool Word, which later becomes Microsoft Word.[5] 1984 January 24 Competition Steve Jobs introduces the original Macintosh, the first mass-market computer with a graphical user interface. Microsoft would later adopt many of its features into Windows.[6] 1985 September Products Microsoft releases Microsoft Excel, which would compete with, and later overtake, Lotus 1-2-3.[5] 1985 November 20 Products Microsoft launches the first version of its Windows operating system, Windows 1.0, which runs on top of MS-DOS and had a primitive GUI.[7][8] 1986 February Company Microsoft moves its headquarters to a suburban campus in Redmond, Washington.[7] 1986 March 13 Company Microsoft goes public with an IPO, raising $61 million at $21 a share.[7] 1987 April 2 Products Microsoft announces OS/2.[6] 1988 March Competition, Legal Apple sues Microsoft, contending that Microsoft's Windows 2.03 program violated Apple's copyrights on the Macintosh displays.[9] 1990 May 22 Products Microsoft launches Windows 3.0.[6] It gives the user virtual memory, improved graphics, and the ability to multitask. 1990 November 19 Products Microsoft releases Microsoft Office, which bundles together Microsoft Word, Microsoft Excel, and Microsoft PowerPoint for the first time.[10] 1991 September Company Microsoft creates Microsoft Research. It declares that it would support research without regard to product cycles.[11][12] 1993 March 22 Products Microsoft releases Microsoft Encarta, the first digital multimedia encyclopedia.[13] 1995 August 24 Products Microsoft releases Windows 95, which features a new interface with a novel start button.[7] Microsoft also debutted The Microsoft Network, a search engine and web portal for a wide variety of products and services.[14] 1995 December 15 Products Microsoft announces partnership with NBC to create a new 24-hour cable news television station, MSNBC.[15] 1996 October 22 Company Microsoft launches Expedia, an online travel company, as its first Internet property.[16] 1996 May Products Microsoft launches the Internet Gaming Zone, which would later become the MSN Gaming Zone.[17] 1997 August 6 Competition, Partnerships Apple Inc announces that it will enter in a partnership with Microsoft. Microsoft releases Microsoft Office for Macintosh, ships Internet Explorer as the default browser for the Macintosh, and invests $150 million in Apple.[18] 1998 June 25 Products Microsoft releases Windows 98.[13] It includes support for USB devices, back and forward navigation buttons, the address bar in Windows Explorer, and the Windows Driver Model. 1998 International Microsoft launches its Indian headquarters, which becomes its second-largest after its US headquarters.[19] 1998 May 18 Legal United States v. Microsoft Corp., an Antitrust trial, begins against Microsoft, with the US Department of Justice suing Microsoft for illegally thwarting competition in order to protect and extend its software (for reasons including bundling Internet Explorer with Microsoft Windows and requiring personal computer manufacturers to agree to adopt a uniform "boot-up" or "first screen" sequence specified by Microsoft).[20] 1999 July 22 Products Microsoft releases MSN Messenger, an IM client.[21] 2000 January 13 Team Bill Gates hands over his CEO position to Steve Ballmer.[22] 2000 September 14 Product Microsoft releases Windows ME.[13] It has improved support for digital media. 2001 May Acquisitions Microsoft acquires Ensemble Studios.[23] 2001 October 25 Products Microsoft releases Windows XP.[13] 2001 November 15 Products Microsoft launches the first Xbox.[13] 2002 February 13 Products Microsoft launches the .NET initiative, which creates an entirely new API for Windows programming, and includes a new programming language C#.[13] 2002 November 1 Legal The Department of Justice reaches an agreement with Microsoft to settle the United States v. Microsoft Corp. case. The proposed settlement required Microsoft to share its application programming interfaces with third-party companies and appoint a panel of three people who will have full access to Microsoft's systems, records, and source code for five years in order to ensure compliance. [24] 2003 June 23 Products Microsoft announces Windows Mobile.[13] 2006 May 14 Company Microsoft launches adCenter, an online advertising service that provides pay per click advertising. Until then, all the ads displayed on the MSN search engine were supplied by Overture (and later Yahoo!).[25] 2007 January 30 Product Microsoft releases Windows Vista to the general public.[26] and was made available for purchase and download from Microsoft's website.[27] 2008 June Team Bill Gates retires as chief software architect and devotes more of his time to philanthropy.[7] 2008 September 2 Competition Google launches Google Chrome, a browser that would cut into the web browser operating share of Internet Explorer.[28] 2009 October 22 Products Microsoft launches Windows 7 to the general public.[29] 2009 May 28 Products Microsoft unveils Microsoft Bing, a search engine to replace MSN.[30] 2010 February Products Microsoft launches Microsoft Azure, its foray into cloud computing.[31] 2010 March Competition Google lifts censorship on issues sensitive to the Chinese government, and is blocked by China, allowing the way for domination by alternative search engines, including Baidu.[32] 2010 November Products Microsoft announces Windows Phone, a family of mobile operating systems as the replacement successor to Windows Mobile.[33] 2011 May 10 Acquisitions Microsoft acquires Skype for $8.5 billion.[34] 2012 October 26 Products Microsoft launches Microsoft Surface, a series of Windows-based personal computing devices designed and manufactured by Microsoft under its hardware division.[35] 2013 September Acquisitions Microsoft acquires Nokia in an attempt to expand its presence in mobile.[36] 2013 December 13 Competition Valve Corporation announces SteamOS, an operating system to compete with Windows.[37] 2014 February 4 Team Satya Nadella succeeded Steve Ballmer as CEO of Microsoft.[38] 2014 April Products Microsoft announces Cortana (software), an intelligent personal assistant.[39] 2014 September Company Microsoft reassigns half of its staff in Microsoft Research to a new group called MSR NeXT, to focus on products with greater impact to the company rather than pure research.[40] 2014 September Products The Windows Insider program is announced, which allows users to test Windows 10 and provide feedback to Microsoft developers.[41] As of 2015, the program had over 7 million users.[42] 2015 January 21 Products HoloLens, the world's first holographic headset is announced and Microsoft announces that Windows 10 will be a free upgrade for customers with Windows 7, Windows 8.1 or Windows Phone 8.1 (excluding enterprise).[43][44] 2015 October 26 Retail The first flagship Microsoft Store opens in New York City[47] 2015 November 19 Company Microsoft, alongside ARM Holdings, Dell, Intel, Cisco Systems, and Princeton University, founded the OpenFog Consortium, to promote interests and development in fog computing.[48] 2016 February 24 Acquisitions Microsoft announces that it is buying Xamarin, a company that allows developers to build fully native apps across several platforms from a single shared code base.[50] 2016 June 13 Acquisitions Microsoft announces the acquisition of LinkedIn at $26.2 billion ($60 per user).[51][52][53] 2016 October 26 Products The Surface Studio and Surface Dial are announced[54] 2016 November 2 Products Microsoft Teams, a cloud-based team collaboration tool, is launched as part of Office 365[55]
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https://contemporarythinkers.org/friedrich-hayek/biography/
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Friedrich Hayek
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Friedrich Augustus von Hayek (May 8, 1899–March 23, 1992) was one of the 20th century’s most important social thinkers. He has written seminal works in economics, political philosophy, ethics, legal theory, and even psychology that continue to inform the academic conversation within the fields to this day.[Read More]
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Friedrich Hayek
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https://contemporarythinkers.org/friedrich-hayek/biography/
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Friedrich Augustus von Hayek (May 8, 1899–March 23, 1992) was one of the twentieth century’s most important social thinkers. He wrote seminal works in economics, political philosophy, ethics, legal theory, and even psychology that continue to inform the academic conversation within the fields to this day. He is primarily remembered for his works of economic theory, for which he won the 1974 Nobel Prize, and as one of the great advocates for classical liberalism.
Hayek was born in Vienna into an aristocratic family. In 1919, however, titles of nobility were abolished in Austria, and Hayek’s legal name changed from “Friedrich von Hayek” to “Friedrich Hayek.” He served in the Austro-Hungarian army during the First World War, during which he was wounded and decorated for bravery. After the war, Hayek decided to pursue an academic career, driven to explore the ways societies could avoid such destructive conflicts in the future.
He earned doctorates in law and political science from the University of Vienna in 1921 and 1923, and he also studied economics, philosophy, and psychology. It was at the University of Vienna that he first encountered the works of Carl Menger, the founder of the Austrian school of economics. Initially sympathetic to social democracy, Hayek’s political-economic outlook shifted toward classical liberalism after reading Ludwig von Mises’s treatise, Socialism, which detailed the reasons why private property in the means of production was a necessary condition for economic efficiency. Although Hayek was never formally his student, Mises became one of the greatest influences in Hayek’s ongoing research program in technical economics.
In 1931, Hayek joined the faculty of the London School of Economics. It was during this time he became recognized as one of the world’s foremost economic theorists. His work on the market process, coordination, and the informational role of prices greatly influenced the development of microeconomics and is still the locus of lively scholarly debate. During this time, Hayek studied with and influenced a number of economists who themselves would go onto illustrious careers, such as Arthur Lewis, Ronald Coase, Abba Lerner, and Oskar Lange. He remained in Britain after becoming a British subject in 1938, refusing to return to Austria after the Anschluss.
Between 1940 and 1943, Hayek wrote what was perhaps his most well-known work, The Road to Serfdom, where he argued that political freedom and economic control (socialism) were incompatible. The book was immensely popular in Great Britain. When published in the United States by the University of Chicago Press in 1945, it achieved even greater popularity. Reader’s Digest published an abridged version in April 1945, allowing Hayek’s argument to reach a wider audience and propelling him to international fame. However, the book displeased many of his colleagues in the academy, who saw the work as an apology for an outdated and unjust political-economic system.
Beginning in the 1930s, Hayek became engaged in a debate with his friend and intellectual rival, John Maynard Keynes, that would shape the future of macroeconomics. In response to the Great Depression, Keynes advocated for government stimulus programs to fight unemployment and falling income. Hayek instead recommended restraint, although he was not an advocate of “do-nothing liquidationism,” for which he is often incorrectly criticized. Nevertheless, the economic theory behind Hayek’s recommendations lost to Keynes’s aggregative approach to dealing with the economy “as a whole.” By the mid-1940s, despite pushback from the previous generation of economists in high positions at prominent universities, the Keynesian Revolution had changed the way economics was practiced from then on.
Hayek left the London School of Economics and Great Britain for the University of Chicago in 1950. While there, he was a professor on the university’s Committee on Social Thought. By this time, Hayek had moved away from economic theory toward political philosophy, undoubtedly due in part to his publicly perceived defeat at the hands of the new Keynesian macroeconomics. In 1960, he published The Constitution of Liberty, perhaps his most well-known and well-received work on political philosophy in academic circles.
Hayek spent 1962 to 1968 at the University of Freiburg, where he began work on his next work on political philosophy and legal theory, Law, Legislation, and Liberty. After his retirement, he spent a year as a visiting professor at the University of California, Los Angeles, where he continued working on Law, Legislation, and Liberty. From here, Hayek moved to the University of Salzburg in 1969, staying until 1977, although Hayek was unhappy with his time there.
In 1974, an event propelled Hayek back to the attention of academic economists: He was awarded (along with Swedish economist Gunnar Myrdal) the Nobel Prize in Economics “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.” Hayek and Myrdal, it should be noted, by no means worked together. They were economists of vastly differing viewpoints. Hayek’s award directly contributed to the “Austrian revival,” a restoration of Austrian economics as an ongoing research program in academic economics.
Hayek passed away in Freiburg, Germany, in 1992, and is buried in Vienna. Modern work on information economics, business cycle theory, political philosophy, and legal theory continues to be influenced by his writings. His ideas in their own right and their implications are the source of several living research projects in the social sciences, and his arguments in favor of a free society with a robust market economy are an essential feature of the classical liberal canon.
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https://www.palgrave.com/gp/blogs/business-economics-finance-management/exploring-economic-history/the-london-school-of-economics-legacy-to-the-discipline
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The London School of Economics’ Legacy to the Discipline
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https://resource-cms.springernature.com/springer-cms/rest/v1/content/16537354/data/v3
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The London School of Economics has been and continues to be one of the foremost global centres for researching and teaching of economics. Founded in 1895, the School was for the two decades of its existence overshadowed, at least when it came to the discipline of economics, by Cambridge University. However, spurred on by the work and activities of some of its early professors, notably Edwin Cannan, the LSE soon found itself at the forefront of the various economics debates which raged in the 1920s and 1930s. Leading the charge for the School was the formidable figure of Lionel, later Lord, Robbins, who was prepared to go up against the equally dominant John Maynard Keynes (who was also to become a peer) at Cambridge. However, Robbins was not on his own. He recruited a host of other economists, many of whom would go on to become important in their own right, to help him strengthen the economics offering coming out of LSE, most notable amongst them being Friedrich von Hayek and John Hicks.
As well as Robbins and his acolytes, LSE was producing other economists who would go on to achieve worldwide notoriety. For example, Ronald Coase came through the ranks at the School, first as a student in the 1930s and then, after a short interval, securing an appointment on the staff before leaving for the USA in the early 1950s. It was whilst he was at LSE that Coase’s highly influential 1937 article, The Nature of the Firm, appeared, it being one of the reasons why Coase was later to receive the Nobel Prize in Economics. In the 1950s, the School was also home to Bill Phillips of Phillips Curve fame.
In more recent decades, at least two key areas of contributions to economics can be identified. First, LSE was home to a number of eminent econometricians, spearheaded by James Durbin, who specialised in the analysis of economic time series and serial correlation, and Denis Sargan, whose expertise was also in time series. Second has been the important work of the School’s labour economists, led by Richard (Lord) Layard, with a particular focus on unemployment and matching theory, the latter resulting in a Nobel Prize for LSE economist Chris Pissarides in 2010. In the last few years, Layard has also become a leading figure in the research of the economics of happiness.
These currents of thought and more are brought together in the recently published volume entitled The Palgrave Companion to LSE Economics, edited by Robert Cord. With six chapters on themes in LSE economics and 29 chapters on the lives and work of LSE economists, The Palgrave Companion to LSE Economics shows how economics became established at the School, how it produced some of the world’s best-known economists, and how it remains a global force in economics. With original contributions from a stellar cast, The Palgrave Companion to LSE Economics provides economists – especially those interested in macroeconomics and the history of economic thought – with the first in-depth analysis of LSE economics.
The Palgrave Companion to LSE Economics follows the publication of The Palgrave Companion to Cambridge Economics (2017, and will be followed itself by The Palgrave Companion to Oxford Companion (due 2020). We then cross the pond to examine the influence of American universities, including MIT, Chicago and Harvard.
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https://www.linkedin.com/posts/michael-cox-0099a66_friedrich-a-von-hayek-18991992-at-lse-activity-7213135208521285632-DZUt
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Michael Cox on LinkedIn: Friedrich A von Hayek (1899–1992) at LSE
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2024-06-30T11:04:07.257000+00:00
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Hayek’s appointment in 1931 was without doubt an important moment in the history of the LSE which as the economist John Hicks has observed, provided a…
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https://static.licdn.com/aero-v1/sc/h/al2o9zrvru7aqj8e1x2rzsrca
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https://www.linkedin.com/posts/michael-cox-0099a66_friedrich-a-von-hayek-18991992-at-lse-activity-7213135208521285632-DZUt
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Hayek’s appointment in 1931 was without doubt an important moment in the history of the LSE which as the economist John Hicks has observed, provided a theoretical boost to a major debate then underway about the nature of economics and economic policy in an era of depression between Hayek and his close colleague at the School Lionel Robbins, and Keynes and his various followers up In Cambridge. But whether, as claimed by Lachezar Grudev in his excellent blog on Hayek, the young Austrian became ‘the leading figure’ at an institution established by Fabians ( and with which Sidney and Beatrice Webb remained closely associated) is not so obvious. There were after all several other intellectual heavy-weights at the LSE at the time, from Harold Laski in the Government Department, Malinowski in Anthropology, Tawney in Economic History, not to mention its 4th Director William Beveridge. There is little doubt however that Hayek’s 1944 ‘Road to Serfdom’ was, as suggested, ‘one of the most influential books written in the twentieth century’. But it’s also worth recalling what Keynes (who had got to know Hayek in Cambridge during the war years) actually said about Hayek’s defence of ‘individualism’ against what he saw as the ‘totalitarian’ threat posed by ‘collectivism’ in its various guises. And interestingly, far from disagreeing with the book’s main thesis that central planning posed a threat to individual liberty, fulsomely praised Hayek’s slim, controversial, and then unfashionable volume, arguing that Hayek had written ‘a grand book’ with which he found himself ‘morally and philosophically in agreement’. Indeed, he was not only in ‘agreement with it, but in deeply moved agreement’. Hayek may not have thought much of Keynes as an economist; and Keynes ( or at least some of his more youthful supporters) often said some pretty scathing things about Hayek’s economics. But both in the end were sceptical liberals who admired Edmund Burke, thought socialism ‘unachievable’ (Hayek), Marx’s Das Kapital ‘dreary’ and ‘out of date’ ( Keynes) and ‘Red Russia’ as Keynes called it in the 1920s, as holding ‘too much which is detestable’ to make him change his mind about the ‘bourgeois’ and ‘intelligentsia’ who in his view carried ‘the seeds of all human advancement’. As was observed many years ago by Tim Worstall ( then a Fellow at the Adam Smith Institute in London) there may have been a ‘gap’ between the two, but there was much less of a ‘philosophic canyon’ than the many devotees of both men later liked to claim.
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https://muse.jhu.edu/article/42770/summary
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Friedrich Hayek: A Biography (review)
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In lieu of an abstract, here is a brief excerpt of the content:
History of Political Economy 35.2 (2003) 346-348
[Access article in PDF]
Friedrich Hayek: A Biography. By Alan Ebenstein. New York: Palgrave, 2001. xiii; 403 pp. $29.95.
“The purpose of this work is to trace the intellectual life of Friedrich Hayek. Hayek was the greatest philosopher of liberty during the twentieth century” (xi).
This book has its virtues, not the least of which is its readability. But it is not a book for economists, nor for those who the author persists in calling “economic historians,” that is, historians of economics. From our point of view Hayek is not well served by his disciples who neglect his contributions to economics in favor of his later writings in social philosophy.
Friedrich August von Hayek was born in Vienna on 8 May 1899. He served with the field artillery of the Austro-Hungarian army on the Italian front before studying law and economics at the University of Vienna (1918–21). After completing his doctoral dissertation while working for a government agency set up to deal with the financial clauses of the peace treaty, he spent just over a year in the United States in 1923–24. With an introduction from Ludwig von Mises to Professor Jeremiah W. Jenks he worked as Jenks's research assistant for six months and registered as a doctoral student at New York University, also attending lectures at Columbia, especially those of Wesley Mitchell. On his return from America Hayek became an active participant in Mises's famous seminar; when Mises set up the Austrian Institute for Business Cycle Research in 1927 he appointed Hayek as its first director. By 1929 Hayek had obtained his Privatdozentur and began lecturing at the University of Vienna. Ebenstein tries, with some success, to evoke the atmosphere of Vienna and its famous university, and he provides many details of Hayek's childhood and early adult life, taken from unpublished autobiographical notes and those published in Hayek on Hayek (1994) as well as the interviews Hayek gave to members of the Oral History Program at UCLA.
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Friedrich Hayek: The ideas and influence of the libertarian economist (Harriman Economics Essentials): Amazon.co.uk: Butler, Eamonn: 9780857191755: Books
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Buy Friedrich Hayek: The ideas and influence of the libertarian economist (Harriman Economics Essentials) First Edition by Butler, Eamonn (ISBN: 9780857191755) from Amazon's Book Store. Everyday low prices and free delivery on eligible orders.
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en
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https://www.amazon.co.uk/Friedrich-Hayek-influence-libertarian-Essentials/dp/0857191756
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0
| 79 |
https://www.hetwebsite.net/het/schools/lse.htm
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en
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HET: London School of Economics (LSE)
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The London School of Economics
[Note: Part of the HET Website. This site is not related to or endorsed by the London School of Economics or any other organization. See the official L.S.E. website]
The London School of Economics and Political Science (known everywhere by its "L.S.E." acronym) was set up as in 1895 by Sidney J. Webb and Beatrice Potter Webb. In 1900, it became one of the colleges of the University of London system. The quixotic philosopher Bertrand Russell gave his considerable inheritance to help fund the L.S.E.
Despite being founded by Fabian socialists, its early appointments were more conservative: W.A.S. Hewins (later a Tory MP) was its first director, the outspoken and staunchly Neoclassical economist, Edwin Cannan, was to head the economics department, the technocratic Arthur L. Bowley headed statistics and liberal theorists L.T. Hobhouse headed sociology. However, the Fabian roots of the school were well-represented in the appointments of more radical scholars such as Graham Wallas, R.H. Tawney, Lord Beveridge, Harold Laski and Hugh Dalton.
The L.S.E. from the very beginning aimed at being an academic teaching-and-research powerhouse. It was one of the group of "new universities" founded at the turn of century which eschewed the Oxbridge-Ivy League "gentlemanly education" approach in favor of a more serious academic and technical approach, akin to the Central European model. Like other "new universities", the L.S.E. was keen on raising its profile via academic research. They shocked the old Oxbridge system by creating departments that were hitherto unheard of, like anthropology (under Malinowski) and sociology (under Hobhouse), and by splitting economics into separate "pure economics" and "economic history" components. In arriviste fashion, the L.S.E encouraged the formation of professional associations and journals -- in economics alone, the L.S.E. brought forth Economica in 1921 the Economic History Review in 1927 and the Review of Economic Studies in 1933.
Edwin Cannan served from 1895 to 1926, after which Allyn A.Young took over. Young, however, died rather suddenly in 1929 and was succeeded by the thirty-year old Lionel Robbins, a young economist much influenced by the work of Philip H.Wicksteed and the Austrian School of economics. The remarkable Robbins saw the L.S.E. as an instrument by which to break the orthodox Marshallian hold over English economics. Under Robbins, continental economic theory (Walrasian, Austrian and Swedish) began to finally infiltrate the Anglo-Saxon world. Robbins himself announced the arrival of this "new" economics in his famous Essay on the Nature and Significance of Economic Science (1932) expounding the methodology of radical Neoclassical theory.
The Robbins years were glory years for the L.S.E. It produced a remarkable group of economists, notably John Hicks, Paul Sweezy, Roy G.D. Allen, Abba Lerner, Nicholas Kaldor, George Shackle, Ursula (Webb) Hicks and Tibor Scitovsky in the 1930s, all of whom went on to stretch and change economic theory in a significant manner. One of their notable efforts was the resurrection of Paretian general equilibrium theory and the forging of the "New Welfare Economics" in this period. Much of this new activity was channeled into the Review of Economic Studies, a publication founded and run by L.S.E. graduate students.
One of Robbins' more daring moves was to bring the Austrian economist Friedrich A. Hayek to the L.S.E. in 1932 as the L.S.E's answer to Cambridge's young star, John Maynard Keynes. Hayek and Keynes locked horns over the theory of macrofluctuations in the early 1930s, and their rivalry placed the L.S.E. clearly on the map. However, the Keynesian Revolution did much to entice many of the younger members of L.S.E. away from the Robbins-Hayek sphere of influence. The fault for this "disloyalty" lay in good part with the intransigence of their elders: the deserting students, notably Kaldor, Lerner and Shackle, had made numerous attempts to forge the L.S.E. approach with the Keynesian, but Robbins and Hayek refused to entertain such a merger. Be that as it may, the L.S.E. heritage of these younger economists remained quite visible, even in their subsequent "Keynesian" work.
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https://www.latimes.com/archives/la-xpm-1992-03-24-mn-4357-story.html
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en
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Friedrich August von Hayek; Economist Influenced Reagan Policy
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[
"L.A. Times Archives"
] |
1992-03-24T00:00:00
|
Friedrich August von Hayek, 92, the Nobel Prize-winning economist described as the intellectual guru of President Ronald Reagan's free-market policy-makers.
|
en
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/apple-touch-icon.png
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Los Angeles Times
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https://www.latimes.com/archives/la-xpm-1992-03-24-mn-4357-story.html
|
Friedrich August von Hayek, 92, the Nobel Prize-winning economist described as the intellectual guru of President Ronald Reagan’s free-market policy-makers. Hayek was a British citizen of Austrian birth. His 1944 book, “The Road to Serfdom,” stated that socialist economics would fail and warned that Western Europe and the United States were on a dangerous road toward excessive government involvement. In November, 1991, President Bush awarded Hayek the Medal of Freedom. Hayek’s son, Laurence, received the award for his ailing father. Hayek was considered the intellectual spirit behind such hard-core free-market types in the Reagan Administration as Martin Anderson, Reagan’s first chief domestic policy adviser, and Paul Craig Roberts, who was assistant secretary of the treasury for economic policy. Hayek’s works also influenced Milton Friedman, the University of Chicago economist who gained prominence in the United States in the 1960s. Hayek shared the 1974 Nobel Prize in economics with Gunnar Myrdal of Sweden for pioneering the analysis of interdependence of economic, social and institutional phenomena. In Freiburg, Germany, on Monday.
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https://oll.libertyfund.org/pages/friedrich-hayek-birthday-biography-may-1899
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en
|
Friedrich August von Hayek (May 8, 1899)
|
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https://oll.libertyfund.org/pages/friedrich-hayek-birthday-biography-may-1899
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by Peter Mentzel
This month’s featured birthday anniversary is the Austrian economist and political philosopher Friedrich Hayek, often abbreviated as F.A.Hayek, one of the chief architects of what is called the Austrian School Economics, and one of the preeminent economists of the twentieth century.
Hayek was born in Vienna to August von Hayek and Felicitas von Juraschek. He was the eldest of three brothers. His father was a medical doctor and a well-known amateur botanist, and his mother came from a family of wealthy land-owners. His grandfathers on both sides of his family were noted scholars in the life-sciences. His family’s circumstances were very comfortable, owing largely to his mother’s wealth. Young Friedrich was a precocious child who learned to read at an early age and exhibited a lively curiosity. Bored at school, however, he was a poor student and often scored at the bottom of his class. As a teenager he volunteered for service in the Austro-Hungarian army in 1917 and saw action on the Italian Front, an experience that permanently damaged his hearing, leading to deafness in his left ear (he often jokingly noted that Karl Marx was deaf in his right ear). Though he had initially planned to study biology, in later years, Hayek said that his experience in the war motivated him to study economics in the hope of finding the path to a more prosperous and peaceful world. After the war he returned to Vienna and entered the University of Vienna, studying law and economics with the goal of going into the diplomatic service. He never lost his interest in biology and the environment, however, and in later years offered to lend his name in support of the efforts of organizations such as the World Wildlife Fund and the National Audubon Society.
While he was initially attracted to socialism, Hayek soon became disillusioned with socialist theory, a development hastened and deepened by his reading of Ludwig von Mises’ Socialism(published in 1922). Sometime soon after that he joined Mises’ seminar at the University of Vienna along with such future luminaries as Fritz Machlup and Alfred Schutz. Upon his graduation with degrees in Law and Politics, Mises helped Hayek set up the Austrian Institute for Business Cycle Research. In 1929 he was appointed lecturer in economics at the University of Vienna, a post he held until 1931. In the meantime, in 1926, he married Helen Berta Maria von Fritsch (1901-1960), who was a secretary in Mises’ office. Together they had two children: Laurence, who became a well-known botanist, and Christine, an entomologist with the British Museum of Natural History.
During the 1920s and 1930s, building on the economic insights of Carl Menger, Mises, and others, he gained an international reputation, helped by the publication in 1929 of his Monetary Theory and the Trade Cycle. The previous year, he had met and befriended John Maynard Keynes, with whom he would have a long-standing debate about money and monetary theory. In 1931, the British economist Lionel Robbins invited Hayek to give a series of lectures at the London School of Economics, which made such an impression that he was offered the position of Professor of Economic Science that same year. In 1938 he became a British subject. During these years, besides his on-going debates with Keynes, Hayek further developed the ideas that became known as the Austrian Business Cycle Theory, as well as work (begun by Mises) on what is called the “Calculation Debate.”
During World War II (much of which he spent in Cambridge with Keynes), Hayek became increasingly interested in social and political questions, and began work on a series of essays that were eventually published (in 1952) as The Counter-Revolution of Science. He also wrote what is probably his most famous book, The Road to Serfdom (1944). With the war drawing to a close, he feared that the victory over National Socialism would be a pyrrhic one if the Western Allies persisted in their growing penchant for economic planning. He argued that efforts by governments to meddle in the workings of the free market economy would eventually end in “serfdom,” a centrally planned, tyrannical political and economic system. These same concerns were the impetus behind the organization, in 1947, of the Mont Pelerin Society, of which he became the first president. Hayek and the original 39 members founded the Society to foster and strengthen the ideas of a free society that they believed had been largely forgotten during the traumatic years of the war. In 1954, Hayek published Capitalism and the Historians, based on some of the first academic papers presented at the Society’s meetings.
In 1950 he left Great Britain for the USA to take a position at the University of Chicago. That same year he divorced his wife and married his cousin, Helene Bitterlich (1900-1996), with whom he had long been close. In 1962, after three decades of work in Great Britain and the United States, Hayek accepted an invitation to come to the University of Freiburg, where he was Professor of Economic Policy until his retirement in 1967. He received numerous awards and honorary doctorates from universities all over the world, and in 1971 the University of Vienna, his alma mater, made him an honorary senator. Shortly thereafter, in 1974, he was awarded (with Gunnar Myrdal) the Nobel Prize in Economics. Hayek was the first free market economist to win the Prize.
During this same time, despite his deteriorating health, Hayek was writing his magisterial three volume study Law, Legislation and Liberty, the first volume of which he published the same year he won the Nobel Prize. He eventually completed the third volume in 1979, whereupon he embarked on another project, The Fatal Conceit (published in 1988).
His health by this time was very poor and the last years of his life were spent at his home in Freiburg, where he was cared for by his daughter Helene. He died on March 23, 1992.
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https://ecotalker.wordpress.com/2014/09/13/sir-john-hicks/
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SIR JOHN HICKS
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Born: 8 April 1904 Died: 20 May 1989 Nationality: British Field: Economist Early life and Education: Hicks was born in 1904 at Warwick, England. His father was a journalist at a local newspaper. He was educated at Clifton College (1917–22) and at Balliol College, Oxford (1922–26), financed by mathematical scholarships. During his school days, and…
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Arthashastra
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https://ecotalker.wordpress.com/2014/09/13/sir-john-hicks/
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Born: 8 April 1904
Died: 20 May 1989
Nationality: British
Field: Economist
Early life and Education:
Hicks was born in 1904 at Warwick, England. His father was a journalist at a local newspaper.
He was educated at Clifton College (1917–22) and at Balliol College, Oxford (1922–26), financed by mathematical scholarships.
During his school days, and in his first year at Oxford, he specialised in mathematics but also had interests in literature and history. In 1923, he moved to Philosophy, Politics and Economics, the “new school” just being started at Oxford, graduating with second-class honors and, so he states, “no adequate qualification in any of the subjects” that he had studied.
Career, Influences and Honours:
From 1926 to 1935 Hicks lectured at the London School of Economics and Political Science. He started as a labour economist and did descriptive work on industrial relations but gradually he moved over to the analytical side, where his mathematics background returned to the fore.
Hick’s influences included Lionel Robbins and such associates as Friedrich von Hayek, R.G.D. Allen, Nicholas Kaldor, and Abba Lerner – and Ursula Webb, who, in 1935, became his wife.
From 1935 to 1938, he lectured at Cambridge where he was also a fellow of Gonville and Caius College. He was mainly occupied in writing Value and Capital, which was based on the work he had done in London.
From 1938 to 1946, he was Professor at the University of Manchester. It was there that he did his main work on welfare economics, with its application to social accounting.
In 1946 he returned to Oxford, first as a research fellow of Nuffield College (1946–52), then as Drummond Professor of Political Economy (1952–65), and finally as a research fellow of All Souls College (1965–71) where he continued writing after retirement. He was also an honorary fellow of Linacre College. He died in 1989.
Hicks was knighted in 1964 and was co-recipient of the Nobel Prize in Economic Sciences (with Kenneth J. Arrow) in 1972. He donated the Nobel Prize to the London School of Economics and Political Science’s Library Appeal in 1973.
Contributions:
Hicks’s early work as a labour economist culminated in The Theory of Wages (1932, 2nd ed. 1963), still considered standard in the field. He collaborated with R.G.D. Allen in two seminal papers on value theory published in 1934.
It introduced general equilibrium theory to an English-speaking audience, refined the theory for dynamic analysis, and for the first time attempted a rigorous statement of stability conditions for general equilibrium.
Hicks formalized comparative statistics.
In the same year, he also developed the famous “compensation” criterion called Kaldor-Hicks efficiency for welfare comparisons of alternative public policies or economic states.
Hicks’s most familiar contribution in macroeconomics was the Hicks-Hansen IS-LM Model, which formalised an interpretation of the theory of John Maynard Keynes.The model describes the economy as a balance between three commodities: money, consumption and investment. Hicks himself did not embrace the theory as he interpreted it; and, in a paper published in 1980, Hicks asserted that it had omitted some crucial components of Keynes’s arguments, especially those related to uncertainty.
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https://www.newworldencyclopedia.org/entry/John_Richard_Hicks
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John Richard Hicks
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https://www.newworldencyclopedia.org/entry/John_Richard_Hicks
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Sir John Richard Hicks (April 8, 1904 – May 20, 1989) was a British economist, one of the most influential economists of the twentieth century. He contributed to the field of economics with his IS/LM model, which summarized the Keynesian view of macroeconomics in graphical form. He also introduced the idea of elasticity of substitution, which showed that labor-saving technical progress does not reduce labor's share of income. In his book, Value and Capital, one of the first works on general equilibrium theory, Hicks showed that value could be understood without having to quantify utility. He also contributed to welfare economics, developing a way to compare the impact of different policies, regarding the one that produced sufficient gain to compensate for any losses and still provide benefit to be worthy of implementation.
Hicks was not a follower of a particular school of economics, but rather took an eclectic approach, reviving and further developing the best of each school. Thus, his work was an attempt to better understand all types of economic forces and to be better able to establish an economically stable human society, benefiting all people. In 1972, Hicks was awarded the Nobel Prize in Economics, together with Kenneth J. Arrow, for his contributions to general economic equilibrium theory and welfare theory.
Life
John Richard Hicks was born in Leamington Spa, Warwickshire, England, the son of a journalist. He was educated at Clifton College (1917-1922) and later received a mathematical scholarship to study at Balliol College, at the University of Oxford, where he enrolled in 1923.
Although initially specializing in mathematics, Hicks was not content and had a strong interest in literature and history. He transferred in 1923 to the newly opened School of Philosophy, Politics and Economics. However, he did not have adequate qualification in any of the subjects that he studied, and graduated with a second-class degree.
In the 1920s, economists were very scarce and so Hicks picked up a temporary lectureship at the London School of Economics, which was then continued. He started as a labor economist, doing descriptive work on industrial relations, but gradually moved over to the analytical side. He discovered that his knowledge of mathematics, by that time almost forgotten, could be revived, and was sufficient to cope with what anyone used in economics.
In 1935, Hicks married fellow economist, Ursula Webb. At that time he transferred to Cambridge University where he became a lecturer in economics. During his three years in Cambridge, Hicks completed his significant book, Value and Capital, which was based on the work he had done in London. He was also a fellow of Gonville and Caius College, at Cambridge, from 1935 to 1938.
In 1938, Hicks became professor at the University of Manchester. It was there that he started to focus mainly on welfare economics, and its application to social accounting. In 1946, he returned to Oxford, first as a research fellow of Nuffield College (1946-1952), then as Drummond Professor of Political Economy (1952-1965), and finally as a research fellow of All Souls College (1965-1971).
Hicks became a fellow of the British Academy in 1942; a foreign member of the Royal Swedish Academy in 1948, of the Accademia dei Lincei, Italy, in 1952, and of the American Academy in 1958. He was knighted in 1964. He received honorary doctor degrees from several British Universities—Glasgow, Manchester, Leicester, East Anglia, and Warwick—as well as of the Technical University of Lisbon, Portugal.
In 1972, Hicks received the Nobel Prize in Economics, together with Kenneth J. Arrow, for his work on general economic equilibrium theory and welfare theory.
John Hicks died on May 20, 1989 in Blockley, Gloucestershire, Great Britain.
Work
Microeconomics
Hicks' early work was as a labor economist culminated in The Theory of Wages (1932), still considered a standard in the field. In that book he gave his own interpretation of marginal productivity theory, attempting to reinvoke interest in it. In the book he also introduced his famous "elasticity of substitution" which is defined as “the elasticity of the ratio of two inputs to a production (or utility) function with respect to the ratio of their marginal products (or utilities).” Using this, Hicks was able to show that, contrary to Karl Marx's analysis, labor-saving technical progress does not necessarily reduce labor's share of national income.
In the mid-1930s, Hicks worked on a way to unite various theories of imperfect competition, introducing the concept of "conjectural variations." He also attempted to resurrect the Lausanne School of economics developed by Léon Walras and Vilfredo Pareto. The central feature of the Lausanne School was its development of general equilibrium theory, and he attempted to introduce this to the English-speaking world. In 1934, he tried to do the same with his review of Gunnar Myrdal's work, which drew attention to the Stockholm School of economics.
His magnum opus was Value and Capital, published in 1939. This book built upon ordinal utility and mainstreamed the now-standard distinction in demand theory between the substitution effect and the income effect for an individual for the case of two consumer goods. It generalized analysis to the case of one consumer good and a composite good, that is, all other goods. It also aggregated individuals and businesses through demand and supply across the economy, anticipating the aggregation problem most acutely for the stock of capital goods.
Hicks' book introduced general equilibrium theory to an English-speaking audience, refined the theory for dynamic analysis, and for the first time attempted a rigorous statement of stability conditions for general equilibrium. In the course of analysis Hicks formalized comparative statics. In the same year, he also developed the famous "compensation" criteria, called the Kaldor-Hicks efficiency, for welfare comparisons of alternative public policies or economic states. In essence, Hicks suggested the criterion that would judge an outcome to be preferable if those who gain by the measure would still gain if they had to compensate those who would lose. Based on this compensation criterion, policies could be compared and the one leading to the greatest net benefit would be implemented.
Under Pareto efficiency (developed by Vilfredo Pareto), an outcome is more efficient if at least one person is made better off and nobody is made worse off. This seems a reasonable way to determine whether an outcome is efficient or not. However, some believe that in practice it is almost impossible to make any large change such as an economic policy change without making at least one person worse off. Under ideal conditions, exchanges are Pareto efficient since individuals would not voluntarily entered into them unless they were mutually beneficial. Using Kaldor-Hicks efficiency, an outcome is more efficient if those that are made better off could "in theory" compensate those that are made worse off and lead to a Pareto optimal outcome. Thus, a more efficient outcome can in fact leave some people worse off. The criterion is used because it is argued that it is justifiable for society as a whole to be better off, even though it involves making some worse off if this means a greater gain for others.
Macroeconomics
Hicks' most familiar contribution to macroeconomics was the Hicks-Hansen IS-LM model, which formalized the theory of John Maynard Keynes. The model describes the economy as a balance between three commodities: money, consumption, and investment. It can be presented as a graph of two intersecting lines in the first quadrant.
The horizontal axis represents national income or real gross domestic product and is labelled Y. The vertical axis represents the real interest rate, i.
The IS schedule is drawn as a downward-sloping curve. The initials IS stand for "Investment/Saving equilibrium," but since 1937 they have been used to represent the locus of all equilibria where total spending (Consumer spending + planned private Investment + Government purchases + net exports) equals an economy's total output (equivalent to income, Y, or GDP). The level of real GDP (Y) is determined along this line for each interest rate.
The LM schedule is an upward-sloping curve representing the role of finance and money. The initials LM stand for "Liquidity preference/Money supply equilibrium" but is easier to understand as the equilibrium of the demand to hold money as an asset and the supply of money by banks and the central bank. The interest rate is determined along this line for each level of real GDP.
The Hicks-Hansen model illustrates graphically Keynes' conclusion that an economy can be in equilibrium with less than 100 percent employment. This model eventually became the starting point of the Neo-Keynesian synthesis in economic systems which dominated in the mid-twentieth century. It later came under criticism in the early 1970s, when high inflation and growing unemployment seemed to be incompatible with the predictions of the system. In one of his later works, published in 1980, Hicks criticized his own model, asserting it had omitted some crucial components of Keynes' arguments, especially those related to uncertainty.
Among his other contributions to macroeconomics is the concept of "liquidity trap"—which happens in a stagnant economy, when the nominal interest rate is close or equal to zero, and when people start to keep their savings only in short-term bank accounts, expecting a recession. He also developed the concept of "temporary equilibrium," enlarged the "Linear Theory" and elaborated on the von Neumann turnpike.
In the 1970s, Hicks worked to resurrect the Austrian school of economics, attempting to formalize the Austrian theory of capital which included both fixed and circulating capital.
Legacy
John Richard Hicks was one of the most important and influential economists of the twentieth century. He broke with Marshallian tradition that dominated the English-speaking world in the 1930s, in what is commonly known as “Paretian revival,” and reintroduced the theories of Leon Walras, the Austrian school, and the Swedish school based on the work of Gunnar Myrdal and Bertil Ohlin. His work, together with other great economic thinkers such as Paul Samuelson, Oskar Lange, Abba Lerner, Maurice Allais, and Harold Hotellin, helped consolidate the Marginalist revolution, which started some 50 years before.
In many ways, Hicks' work is the standard of how economics should be done: without partisanship for favored theories but learning from all, constantly searching for new ideas and staying attached to none, and his own most severe critic.
Although his work was deep enough, and his influence strong enough to form a school of thought, Hicks never gathered any great number of followers. The reason for this is probably that his approach was critical and eclectic, building upon every school that had something to offer. He did, however, inspire generations of thinkers, especially in the neo-Walrasian tradition, including Michio Morishima, Frank H. Hahn, and Takashi Negishi.
Publications
Hicks, John R. 1932. The Theory of Wages. London: Macmillan.
Hicks, John R. 1939. "The Foundations of Welfare Economics." Economic Journal, 69, 696-712.
Hicks, John R. [1939] 2001. Value and Capital. Oxford University Press. ISBN 0198282699
Hicks, John R. 1940. "The Valuation of Social Income." Economica, 7, 105-24.
Hicks, John R. 1941. "The Rehabilitation of Consumers' Surplus." Review of Economic Studies, 8, 108-16.
Hicks, John R. [1942] 1971. The Social Framework: An Introduction to Economics. Oxford University Press. ISBN 0198281730
Hicks, John R. [1950] 1979. A Contribution to the Theory of the Trade Cycle. Oxford University Press. ISBN 0198284160
Hicks, John R. [1956] 1986. A Revision of Demand Theory. Oxford University Press. ISBN 0198285507
Hicks, John R. 1959. Essays in World Economics. Oxford: Clarendon.
Hicks, John R. 1965. Capital and Growth. Oxford: Clarendon.
Hicks, John R. [1969] 2001. A Theory of Economic History. Oxford University Press. ISBN 0198811632
Hicks, John R. 1975. "The Scope and Status of Welfare Economics." Oxford Economics Papers, Vol. 27, No. 3, 307-26.
Hicks, John R. 1977. Economic Perspectives. Oxford University Press. ISBN 0198284071
Hicks, John R. 1980. "IS-LM: An Explanation." Journal of Post Keynesian Economics, Vol. 3, No. 2, 139-54
Hicks, John R. 1981. Wealth and Welfare: Vol I. of Collected Essays in Economic Theory. Harvard University Press. ISBN 0674137418
Hicks, John R. 1982. Money, Interest and Wages: Vol. II of Collected Essays in Economic Theory. Harvard University Press. ISBN 0674584252
Hicks, John R. 1983. Classics and Moderns: Vol. III of Collected Essays in Economic Theory. Harvard University Press. ISBN 0674137434.
References
ISBN links support NWE through referral fees
Bliss, Christopher. 1987. "Hicks, John Richard." in The New Palgrave: A Dictionary of Economics. edited by Milgate, Murray, and Peter Newman John Eatwell. Vol. 2. 641-46. Macmillan.
Autobiography of John Richard Hicks. NobelPrize.org. Retrieved on June 16, 2007.
Wood, John. Sir John Hicks: Critical Assessments (Second Series). Routledge. ISBN 0415367077
All links retrieved August 3, 2022.
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The London School of Economics’ Legacy to the Discipline
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https://resource-cms.springernature.com/springer-cms/rest/v1/content/16537354/data/v3
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The London School of Economics has been and continues to be one of the foremost global centres for researching and teaching of economics. Founded in 1895, the School was for the two decades of its existence overshadowed, at least when it came to the discipline of economics, by Cambridge University. However, spurred on by the work and activities of some of its early professors, notably Edwin Cannan, the LSE soon found itself at the forefront of the various economics debates which raged in the 1920s and 1930s. Leading the charge for the School was the formidable figure of Lionel, later Lord, Robbins, who was prepared to go up against the equally dominant John Maynard Keynes (who was also to become a peer) at Cambridge. However, Robbins was not on his own. He recruited a host of other economists, many of whom would go on to become important in their own right, to help him strengthen the economics offering coming out of LSE, most notable amongst them being Friedrich von Hayek and John Hicks.
As well as Robbins and his acolytes, LSE was producing other economists who would go on to achieve worldwide notoriety. For example, Ronald Coase came through the ranks at the School, first as a student in the 1930s and then, after a short interval, securing an appointment on the staff before leaving for the USA in the early 1950s. It was whilst he was at LSE that Coase’s highly influential 1937 article, The Nature of the Firm, appeared, it being one of the reasons why Coase was later to receive the Nobel Prize in Economics. In the 1950s, the School was also home to Bill Phillips of Phillips Curve fame.
In more recent decades, at least two key areas of contributions to economics can be identified. First, LSE was home to a number of eminent econometricians, spearheaded by James Durbin, who specialised in the analysis of economic time series and serial correlation, and Denis Sargan, whose expertise was also in time series. Second has been the important work of the School’s labour economists, led by Richard (Lord) Layard, with a particular focus on unemployment and matching theory, the latter resulting in a Nobel Prize for LSE economist Chris Pissarides in 2010. In the last few years, Layard has also become a leading figure in the research of the economics of happiness.
These currents of thought and more are brought together in the recently published volume entitled The Palgrave Companion to LSE Economics, edited by Robert Cord. With six chapters on themes in LSE economics and 29 chapters on the lives and work of LSE economists, The Palgrave Companion to LSE Economics shows how economics became established at the School, how it produced some of the world’s best-known economists, and how it remains a global force in economics. With original contributions from a stellar cast, The Palgrave Companion to LSE Economics provides economists – especially those interested in macroeconomics and the history of economic thought – with the first in-depth analysis of LSE economics.
The Palgrave Companion to LSE Economics follows the publication of The Palgrave Companion to Cambridge Economics (2017, and will be followed itself by The Palgrave Companion to Oxford Companion (due 2020). We then cross the pond to examine the influence of American universities, including MIT, Chicago and Harvard.
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Friedrich A. Hayek: A Centenary Appreciation
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In 1967, English economist Sir John Hicks published an essay titled “The Hayek Story” in which he said that:
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In 1967, English economist Sir John Hicks published an essay titled “The Hayek Story” in which he said that:
When the definitive history of economic analysis during the nineteen thirties comes to be written, a leading character in the drama (it was quite a drama) will be Professor Hayek. . . . Hayek’s economic writings . . . are almost unknown to the modern student; it is hardly remembered that there was a time when the new theories of Hayek were the principal rival of the new theories of Keynes. Which was right, Keynes or Hayek?[1]
In February 1931, Friedrich August von Hayek had arrived in England from Vienna, Austria, to deliver a series of lectures at the London School of Economics. The lectures created such excitement and sensation that he was invited to permanently join the faculty of the LSE.[2] In the early fall of 1931 these lectures appeared in book form under the title Prices and Production and began the “drama” to which John Hicks referred. Indeed, in the years between 1931 and 1935, Hayek was the third-most frequently cited economist in the English-language economics journals. (John Maynard Keynes and his Cambridge University colleague Dennis Robertson came in first and second.)[3]
But by the 1960s, when Hicks wrote the passage quoted, the general opinion among economists and policy-makers would have been almost unanimous. The “New Economics” of Keynes dominated the economics profession and was the guiding star for macroeconomic policy. Hayek was only known to those who took an interest in the economic ideas of the earlier decades of the twentieth century. Thirty years later, however, it is Keynesian economics that is now merely a passing episode in the history of economic ideas. And it is Hayek’s ideas in economics, political philosophy, social theory, and the methodology of the human sciences that have gained increasing attention and relevancy as the twentieth century draws to a close.
One War, Two Doctorates
On May 8, 1899, F.A. Hayek was born in Vienna. The occasion of his centenary serves as an appropriate opportunity to appreciate the man and his contributions to the cause of liberty and the free-market economy. Hayek had briefly served in the Austrian Army on the Italian front during World War I. Shortly after returning from the battlefield in 1918 he entered the University of Vienna and earned two doctorates, one in jurisprudence in 1921 and the other in political science in 1923. While at the university, he studied with one of the founders of the Austrian school of economics, Friedrich von Wieser.
But perhaps the most important intellectual influence on his life began in 1921, when he met Ludwig von Mises while working for the Austrian Reparations Commission. It is not meant to detract from Hayek’s own contributions to suggest that many areas in which he later made his profoundly important mark were initially stimulated by the writings of Mises. This is most certainly true of Hayek’s work in monetary and business-cycle theory, his criticisms of socialism and the interventionist state, and in some of his writings on the methodology of the social sciences.
In 1923 and 1924, Hayek visited New York to learn about the state of economics in the United States. After he returned to Austria, Mises helped arrange the founding of the Austrian Institute for Business Cycle Research, with Hayek as the first director. Though Hayek initially operated the institute with almost no staff and only a modest budget primarily funded by the Rockefeller Foundation, it was soon recognized as a leading center for the study of economic trends and forecasting in central Europe. Hayek and the institute were frequently asked to prepare studies on economic conditions in Austria and central Europe for the League of Nations. When Hayek moved to London in September 1931, Oskar Morgenstern became the institute’s director until the Nazi annexation of Austria in March 1938, when it ceased to operate as an independent organization. Beginning in 1929, Hayek was also a Privatdozent (an unsalaried professor) at the University of Vienna.
Hayek and the Great Depression
Hayek remained at the London School of Economics until 1949. During that time he published a large body of work that established his international stature as one of the leading economists of his time. It was during this period that he became the greatest challenger to the emerging New Economics of Keynes. In Prices and Production; Monetary Theory and the Trade Cycle (1933); a series of articles reprinted in 1939 under the title Profits, Interest and Investment; and The Pure Theory of Capital (1941), Hayek argued that business cycles had their origin in the mismanagement of the monetary system. Also, in 1931–1932, Hayek wrote a lengthy two-part review of Keynes’s Treatise on Money for the journal Economica. It was considered a definitive critique of Keynes’s work.[4] The Great Depression served as the backdrop against which Hayek explained his own theory and criticized Keynes.
Hayek argued that in the 1920s, the American Federal Reserve System had followed a monetary policy geared toward stabilizing the general price level. But that decade had been one of major technological innovations and increases in productivity. If the Federal Reserve had not increased the money supply, the prices for goods and services would have gently fallen to reflect the increased ability of the American economy to produce greater quantities of output at lower costs of production.
Instead, the Federal Reserve increased the money supply just sufficiently to prevent prices from falling and to create the illusion of economic stability under an apparently stable price level. But the only way the Fed could succeed in this task was to increase reserves to the banking system, which then served as additional funds lent primarily for investment purposes to the business community. To attract borrowers to take these funds off the market, interest rates had to be lowered. Beneath the calm surface of a stable price level, interest rates had been artificially pushed below real market-clearing levels. That generated a misdirection of labor and investment resources into long-term capital projects that eventually would be revealed as unsustainable because there was no savings available to complete and maintain them.
The break finally came in 1928 and 1929, when the Fed became concerned that prices in general were finally beginning to rise. The Fed stopped increasing the money supply, investment profitability became uncertain, and the stock market crashed in October 1929. Hayek argued that the economic downturn that then began was the inevitable consequence of the investment distortions caused by the earlier monetary inflation. A return to economic balance required a writing down of unprofitable capital investments, a downward adjustment of wages and prices, and a reallocation of labor and other resources to uses reflecting actual supply and demand in the market.
But the political and ideological climate of the 1930s was one increasingly dominated by collectivist and interventionist ideas. Governments in Europe as well as the United States did everything in their power to resist these required market adjustments. Business interests as well as trade unions called for protection from foreign competition and government support of various types to keep prices and wages at their artificial inflationary levels. International trade collapsed, industrial output fell dramatically, and unemployment increased and became permanent for many of those now out of work.
Throughout the 1930s Keynes presented arguments to justify activist monetary and fiscal policies to try to overcome the imbalances the earlier monetary manipulation and interventions had created. This culminated in his 1936 book, The General Theory of Employment, Interest and Money, which soon became the bible of a new macroeconomics that claimed that capitalism was inherently unstable and could only be saved through government “aggregate demand management.” Hayek and other critics of Keynesian economics were rapidly swept away in the euphoric belief that government had the ability to demand-manage a return to full employment.
But while seemingly “defeated” in the area of macroeconomics, Hayek realized that what was at stake was the wider question of whether in fact government had the wisdom and ability to successfully plan an economy. This also led him to ask profoundly important questions about how markets successfully function and what institutions are essential for economic coordination to be possible in a complex system of division of labor.
Debunking Central Planning
In 1935, Hayek edited a collection of essays titled Collectivist Economic Planning, which included a translation of Mises’s famous 1920 article, “Economic Calculation in the Socialist Commonwealth.” For the volume, Hayek wrote an introduction summarizing the history of the question of whether socialist central planning could work and a concluding chapter on “the present state of the debate” in which he challenged many of the newer arguments in support of planning. This was followed by a series of articles over the next several years on the same theme: “Economics and Knowledge” (1937), “Socialist Calculation: The Competitive ‘Solution’” (1940), “The Use of Knowledge in Society” (1945), and “The Meaning of Competition” (1946). Along with other writings, they were published in a volume with the title Individualism and Economic Order (1948).[5]
In this work Hayek emphasized that the division of labor has a counterpart: the division of knowledge. Each individual comes to possess specialized and local knowledge in his corner of the division of labor that he alone may fully understand and appreciate how to use. Yet if all of these bits of specialized knowledge are to serve everyone in society, some method must exist to coordinate the activities of all these interdependent participants in the market. The market’s solution to this problem, Hayek argued, was the competitive price system. Prices not only served as an incentive to stimulate work and effort, they also informed individuals about opportunities worth pursuing. Hayek clearly and concisely explained this in “The Use of Knowledge in Society”:
We must look at the price system as such a mechanism for communicating information if we want to understand its real function. . . . The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action.[6]
In elaborating his point, Hayek wrote that “The marvel is that in a case like that of a scarcity of one raw material, without an order being issued, without more than perhaps a handful of people knowing the cause, tens of thousands of people whose identity could not be ascertained by months of investigation, are made to use the material or its products more sparingly.”[7]
Hayek added: “I am convinced that if it [the price system] were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind.”[8]
It was in this period that Hayek applied his thinking about central planning to current politics. In 1944 he published what became his most famous book, The Road to Serfdom, in which he warned of the danger of tyranny that inevitably results from government control of economic decision-making through central planning. His message was clear: Nazism and fascism were not the only threats to liberty. The little book was condensed in Reader’s Digest and read by millions.
In 1949 Hayek moved to the United States and took a position at the University of Chicago in 1950 as professor of social and moral science. He remained there until 1962, when he returned to Europe, where he held positions at various times at the University of Freiburg in West Germany and the University of Salzburg in Austria.
Undesigned Order
The realization that something so significant—the price system—was undesigned and not intended to serve the purpose it serves so well became the centerpiece of Hayek’s writings for the rest of his life. He developed the idea in several directions in another series of works, including, The Counter-Revolution of Science (1952); The Constitution of Liberty (1960); Law, Legislation and Liberty in three volumes (1973–1979); in various essays collected in Studies in Philosophy, Politics and Economics (1967) and New Studies in Philosophy, Politics, Economics and the History of Ideas (1978); and in his final work, The Fatal Conceit: The Errors of Socialism (1988).
His underlying theme was that most institutions in society and the rules of interpersonal conduct are, as the eighteenth-century Scottish philosopher Adam Ferguson expressed it, “the result of human action, but not the execution of any human design.”[9] In developing this idea, Hayek consciously took up the task of extending and improving the notion of the “invisible hand” as first formulated by Adam Smith in The Wealth of Nations and refined in the nineteenth century by Carl Menger, the founder of the Austrian school of economics.[10]
Hayek argued that many forms of social interaction are coordinated through institutions that at one level are unplanned and are part of a wider “spontaneous order.” Language, customs, traditions, rules of conduct, and exchange relationships have all to a large extent evolved and developed without any conscious design guiding them. Yet without such unplanned rules and institutions, society would have found it impossible to progress beyond a rather primitive level.
Another way of expressing this is that in Hayek’s view, the unique characteristic of an advanced civilization is that no one mind (or group of minds) controls or directs it. In a small tribal society all members often share basically one scale of values and preferences; the chief or leader can know the potentialities of each member and can assign roles and duties so that the tribe’s physical and mental means can be applied more or less successfully to the common hierarchy of ends.
However, once the group passes beyond a simple level of development, any further social progress will require radical revision of the social rules and order: the complexity of social and economic activity will make it impossible for any individual to master the information necessary to coordinating the members of the group. Nor will the members continue to agree on preferences and values; their actions and interests will become more diverse.
An advanced society, therefore, must always be a “planless” society, that is, a society in which no one overall “plan” is superimposed over the actions and plans of the individuals making up the society. Instead, civilization is by necessity a “spontaneous order,” in which the participants use their own special knowledge and pursue their own individually chosen plans without a higher will or mind guiding them.
“Social Justice”
The very complexity that makes it impossible to know all the information required to guide society, Hayek reasoned, makes it equally impossible to judge the “justice” or “worthiness” of an individual’s total actions. As a result, the popular call for “social,” or “distributive,” justice is inapplicable in a free society. Social justice requires not merely that individuals receive what is rightly theirs in general terms, but that individuals and groups also receive some stipulated distributional share of the society’s total output or wealth. However, Hayek showed that in the market economy, distributions of income are not based on some standard of “deservedness,” but rather on the degree to which the individual has directly or indirectly satisfied consumer demand within the general rules of individual rights and property.
To attempt to distribute income shares by “deservedness” would require the government to establish some overarching standard for disbursing “social justice,” and would necessitate an economic system in which that government had the authority and the power to investigate, measure, and judge each person’s “right” to a share of the society’s wealth. Hayek suggested that such a system would involve a return to the mentality and the rules of a tribal society: government would reimpose a single hierarchy of ends and would decide what each member should have and what should be expected from him in return. It would mean the end of the free and open society.
In October 1974, Hayek won the Nobel Prize in economics (along with Swedish welfare-state economist Gunnar Myrdal). In explaining its reasons for choosing Hayek for this highest of awards, the Nobel Committee drew especial attention to his contributions to monetary and business-cycle theory and to his work on alternative economic systems.
By the time Hayek died on March 23, 1992, at the age of 91, an answer could finally and clearly be given to Sir John Hicks’s question: “Who was right, Hayek or Keynes?” Hayek was right, regarding both Keynesianism and socialism.
And thanks to his ideas, the 21st century may very well be a freer and more prosperous place to live.
Notes
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Friedrich Hayek: The Ideas and Influence of the Libertarian Economist – EH.net
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Published by EH.Net (April 2013)
Eamonn Butler, Friedrich Hayek: The Ideas and Influence of the Libertarian Economist. London: Harriman House and Institute of Economic Affairs, 2012. vii + 151 pp. ?15 (paperback), ISBN: 978-0-857191755.
Reviewed for EH.Net by Steven Horwitz, Department of Economics, St. Lawrence University.
This short book by Eamonn Butler, Director of the Adam Smith Institute in London, is a very accessible and largely well-written ?once over lightly? introduction to the work of F.A. Hayek, and not just his economics.? Though a Ph.D. in philosophy, Butler has written other books on Milton Friedman, Adam Smith, and Ludwig von Mises, and those books demonstrated a solid knowledge of all of their works, and others in the classical liberal tradition.? This book is also the work of someone very familiar with Hayek?s ideas and with a talent for translating complicated contributions in economics, political theory, psychology, and philosophy into language that the non-specialist can access. As Butler says early on, the book is written for those ?who want to learn more about the case for individual freedom and free-market capitalism ? and the deeply insightful case for liberalism put forward by one of its greatest exponents? (p. 2).
With that his purpose, Butler is very successful.? The book is covers a remarkable amount of ground in a rather brief 151 pages.? Chapters average fifteen or so pages and cover topics such as ?Freedom and the Law,? ?The Market Process,? ?Money, Inflation, Booms, and Busts,? ?Psychology, Science, and Society,? and ?Why Socialism Was a Mistake.?? Each chapter provides a fairly thorough overview of Hayek?s thinking on each topic and does a nice job in connecting to ideas developed in prior chapters.? Butler ends up offering a fairly integrated and coherent view of Hayek?s social thought, building from his fundamental premises about liberalism through his economics, both micro and macro, and then on to his broader social theory.? This book would work very well for an undergraduate seminar on Hayek?s thought or one on the history of classical liberalism in the twentieth century.
However, the book is not a work in the history of economic thought.? There is some very brief biographical material on Hayek in the first chapter and some discussion of his influence on twentieth-century economic thought, but very little, if any, discussion of either those who influenced Hayek or the larger historical context out of which he developed his ideas.? There are a few mentions of Mises, but there is no index entry for Carl Menger and only two brief mentions of Bohm-Bawerk in the business cycle theory chapter.? For the reader looking to learn more about those influences and the context of Hayek?s ideas, Bruce Caldwell?s Hayek?s Challenge is the work to consult, as Butler himself notes.? Having not set himself the goal of writing for the scholarly audience in economics, Butler should not be held too responsible for not writing a book that achieves that goal.? However, historians of economic thought should be aware that the book is not intended for them.
In some ways it is unfortunate that Butler did not at least inject a little bit more historical context in places as it would have helped provide some clarity.? For example, in the chapter on booms and busts, Butler does mention the earlier work of Mises in first developing the barebones Austrian business cycle theory and he notes the importance of Bohm-Bawerk?s capital theory.? He does not, however, note that Mises?s work built on the earlier contributions of Knut Wicksell.? The Austrian theory would not be possible without Wicksell?s natural and market rates of interest concept and a brief discussion of that influence would have enriched the discussion in that chapter.?
The business cycle chapter also contains a brief comparison of the Austrian theory to Keynesian and Monetarist theories.? Given the brevity of the discussion, a lack of nuance is not surprising.? Butler?s treatment of both Keynesianism and Friedman is far from what historians of economic thought would provide, so any classroom use of this book for discussing the history of macroeconomics should probably be supplemented by other texts.? Butler does rightly note one key difference between the Monetarist and Austrian approaches that is always worth emphasizing: although both theories focus on the money supply, Monetarism saw the problem with excess money creation as movements in the price level, while Austrians were concerned with relative prices, regardless of the average level of prices as a whole.?
One other point in the history of economic thought that Butler does not handle well is the relationship between Mises and Hayek.? Toward the end, he asserts a contrast between the two, with Mises thinking ?economic truth can be deduced from the very nature of human action? and Hayek preferring trial and error.? Butler argues that this leads to Hayek?s emphasis on markets as processes.? His portrayal of Mises is something of a caricature, but the more important issue is that the idea of the market as an economic process is very clearly in Mises?s work and was part of Mises?s influence on Hayek.? The attempt to draw these sorts of lines between the two thinkers ignores substantial historical evidence of their influence on each other as well as their common ancestry in Menger.? A good book on the Mises-Hayek relationship that made substantive use of archival sources would be most welcome.
Eamonn Butler?s book on Hayek would be a very good addition to an undergraduate course on Hayek, Austrian Economics, or twentieth-century classical liberal thought.? It would also make helpful background reading for someone teaching Hayek for the first time. It is not a contribution to the history of economic thought, but it is nonetheless a very good, and very accessible, introduction to the breadth of Hayek?s thought.?
Steven Horwitz is Charles A. Dana Professor of Economics at St. Lawrence University in Canton, NY and is the author of Microfoundations and Macroeconomics: An Austrian Perspective, released in paperback in 2009.?
Copyright (c) 2013 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ([email protected]). Published by EH.Net (April 2013). All EH.Net reviews are archived at https://eh.net/BookReview
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Introduction: the road to serfdom & after
MT's first encounter with Hayek came when he published The Road to Serfdom in 1944. She read it as an undergraduate at Oxford, where it became part of her enduring outlook. In fact one can argue that few books influenced her more deeply at any point in her life. Partly, perhaps, that is the luck of timing: it was published when she was 18, so that at a formative period she found herself exposed to one of the most effective and courageous political works ever written, a head-on assault against socialism, the fashionable cause of the day, an armed doctrine at the height of its power. This was the time when Stalin, grotesquely, was known as "Uncle Joe", Soviet heroism against the Nazis a thing of legend and the case for 'planning' and government action of all kinds unanswerable, or at least unanswered. Such a state of affairs naturally left Conservatives demoralised and defensive, deeply in need of powerful intellectual support and all the more delighted to find it.
While The Road to Serfdom was very much the product of evil times, it achieved lasting appeal. Many Conservatives from later generations had a similar reaction to the book as MT, even those who read it when they were much older, and the times more peaceful - such as Norman Tebbit, who first came across The Road to Serfdom in 1970. For Tebbit, as for MT, reading it felt like a kind of intellectual homecoming. This was part of the genius of the book: it carried many readers to a position of complete identification with its complex argument by skilfully fostering a sense that they were discovering the roots of their own convictions, stated with a force they could not match. In that sense, among others, it bears comparison with Burke's Reflections on the Revolution in France.
Two related elements of the book's argument held a powerful place in MT's long-term thinking. She absorbed deeply Hayek's idea that you cannot compromise with socialism, even in mild social democratic forms, because by degrees socialism tends always to totalitarian outcomes, regardless of the intentions, professed or real, of its proponents. And she saw that her own party had done just that, putting her deeply at odds with its collective leadership. She took to heart the book's ironic dedication, pictured on this page.
There is an obvious complication or contradiction here. It was really not possible in any practical sense to be a Hayekian in British politics during the first decades of the postwar period. A rising hope of her party, MT had a career to make. She gave few public signs of being at odds with the fundamentals of the party's direction and made some compromises with socialism herself, notably as Education Secretary 1970-74, when she loyally served a Prime Minister whose whole way of thinking was antithetical to Hayek. Heath, as it turned out, was the last of succession of Conservative leaders back to Baldwin, who had worked to accommodate Labour and the trade unions within the British parliamentary system, recognising the electoral appeal of socialism and aiming to undercut it by compromise, an approach sometimes hard to distinguish from outright agreement. In the postwar period this strategy became known as the politics of consensus.
Hayek's influence on her in those years was under the surface, and well down. Of course her steady and profound rejection of socialism as a doctrine was clear enough. Signs of unease on her part at the whole tendency of Conservative policy in that respect were rarer and only ever privately expressed, but they did exist - for example, her distance from 'Butskellism' in the early 1950s and her discomfort during the last years of Heath. And consensus itself was always a concept that disturbed her and attracted her criticism. But by Hayekian standards she did not stand out: very probably if she had, she would never have become leader of the Conservative Party. And Hayek himself largely fell out of discussion in Britain, remembered for The Road to Serfdom but little more, greatly to his distress. Like many others who had been influenced by the earlier book, it is very doubtful MT read his great work, The Constitution of Liberty, when it appeared in 1960. Indeed even Keith Joseph, a hard-reading fellow of All Souls, passed it over.
1974-79: Hayek's return
For Hayek the period between The Constitution of Liberty and the award of the Nobel Prize was a dark age, professionally and personally. The award transformed his political standing and morale. In British terms the timing was particularly apt because 1974 saw the beginning of the break-up of consensus politics and unprecedented fluidity in thinking among the political elite. It was the year post-war inflation peaked at 25 per cent and the Conservatives found themselves expelled from office after mishandling a confrontation with the miners. The formation of 'Thatcherism' began.
Keith Joseph kicked off that process by establishing a new think tank, naming it with impeccable blandness, "the Centre for Policy Studies". Originally it was to be called "the Erhard Foundation", the ostensible purpose of the organisation being to study the evidently superior West German economic model, but the "Hayek Foundation" featured on his long list of possible names. And it was precisely at this moment that Joseph put right his long omission to tackle The Constitution of Liberty, lugging it north to Fife as holiday reading in the recess, midway in his great sequence of speeches from Upmister to Preston. "I am steeping myself in Hayek", he wrote to Ralph Harris of the Institute of Economic Affairs (IEA), the very day he spoke at Leith (8 Aug 1974) explaining and defending the role of profit. The final and most important speech in the sequence, at Preston on 5 September 1974 was titled "Inflation is Caused by Governments" and earned him a letter of praise from Hayek in Salzburg, a devoted reader of The Times , which published the speech word for word. Joseph replied warmly, thanking him "for your blessing on what I said at Preston", a little as if the pope had moved to Austria.
In The Constitution of Liberty Hayek had added a famous appendix explaining "why I am not a conservative". His objection was that "by its very nature it cannot offer an alternative to the direction in which we are moving". Joseph shocked and angered many by developing the insight in 1975, suggesting that the problem was that Conservatives hadn't been conservative: "it was only in April 1974 that I was converted to Conservatism. (I had thought that I was a Conservative but I now see that I was not really one at all.)" One might easily see this as the moment the Thatcherites caught up with Hayek and began consciously to offer a new kind of Conservatism, redefining the party creed as radical in purpose. There is a story to similar effect, beloved of biographers and documentary makers and perhaps a little too perfect to be actually true, that as Leader of the Opposition MT once cut short a presentation by a leftish member of the Conservative Research Department by fetching out a copy of The Constitution of Liberty from her bag and slamming it down on the table, declaring "this is what we believe".
There are indeed echoes of The Constitution of Liberty in MT's thinking. The book gave centrality to the rule of law, the exclusion of the arbitrary and the personal in favour of the open and equal application of rules. But Hayek had no copyright over that idea. The Oxford jurist A.V. Dicey gave the concept currency in Britain generations before - and MT knew her Dicey far better than her Hayek. Whether she ever really slammed his book on the table, MT was not in plain fact a Hayekian, and certainly never a slavish follower of any thinker.
How then does one assess his role? While there is no reason to doubt Hayek's emblematic significance to the Thatcherites in their search for new roots, it was as a political and economic philosopher that he mattered, not as an economist. And The Road to Serfdom counted for more than The Constitution of Liberty, the critique of socialism more than the vision of a pared-down liberal state. A sobering indication of this can be found in an early prospectus for the CPS circulated by Keith Joseph to possible donors in June 1975. Reassuring them that the "purpose of the Centre will be practicable [sic]", it went on: "There will be no attempt to propose policies such as denationalisation that are not politically feasible". Only when Ralph Harris protested at the "blinkered vision" of the passage was this colossal hostage to fortune dropped.
The private files bring out the nature of Hayek's influence and its limitations very well. The IEA had been for many years Hayek's chief support in the UK, patient advocates and allies of the man and the economic liberal cause. We publish here a selection from its correspondence with Joseph and Hayek, tracing particularly its role in the formation of the CPS as well as bringing Hayek into contact with Conservative leaders. Documents from Hayek's own papers complement the series.
The files show Hayek in one vital respect at odds with the new Conservatism: he was not a monetarist in the manner, say, of Milton Friedman. Indeed Hayek's distance from Friedman and from modern economics as a whole is one of the most striking features of the correspondence, set out for example in a letter he wrote to Arthur Seldon in May 1985:
I do indeed regard the abandonment of the whole macroeconomics nonsense as very important, but it is for me a very delicate matter and I have for some time avoided stating my views too bluntly and would not have time to state them adequately. The source of the difficulty is the constant danger that the Mont Pelerin society might split into a Friedmanite and a Hayekian wing. [The Mont Pelerin Society was an association of classical liberal scholars of great distinction, formed by Hayek in 1947] I have long regretted my failure to take time to criticise Friedman's Positive Economics almost as much as my failure to return to the critique of Keynes General Theory after I had dealt with his Treatiese. [sic] It still seems to me paradoxical that Keynes, who was rather contemptuous of econometrics, should have become the main source of the revival of macroeconomics - which incidentally was also the reason why Milton was for a time a Keynesian.
Sometimes described as a kind of godfather to the new monetary policy, in fact Hayek's contribution to contemporary economic thinking was slight. His response to this experience of marginalisation is fascinating. While not exactly seeking to hide the plain fact of the thing, he consciously underplayed it and even provided public support for key features of the new economic policy despite his fundamental scepticism. When Nigel Lawson first put forward the notion of an MTFS in September 1978 he received a letter of congratulation from Hayek, who endorsed the notion that policy should be based on rules rather than discretion, a position MT herself never wholeheartedly occupied. Hayek also focussed on areas where there was common ground, particularly trade union reform. For example he strongly backed and perhaps originated the idea floated by MT in a tv interview of September 1977 that if the unions resisted reform a future Conservative Government should call a referendum on the topic. Letters to The Times played a large part in his modus operandi, partly through frustrated affection for the paper in the age of print union hegemony - his letters of complaint to the subscription department are heartrending - but also because he sought to influence debate as a private citizen, modestly writing from home, rather than as a supposed economic adviser with privileged knowledge whose words would be taken as evidence of Conservative intentions. Such circumspection and good manners only increased the high regard in which he was held by MT, who quickly and comfortably fell into the habit of meeting him one-to-one, trusting to his discretion.
1979-81: Early years in office & the role of friedman
After the 1979 general election the figure of Milton Friedman bulks larger in the story, as monetarism came to define the political battleground and its professional advocates and opponents argued the toss in terms largely impenetrable to the public.
If by this stage Hayek was the benign philosopher king, Friedman was the frenetic man of business, jetting from lecture theatre to presidential suite, all but omnipresent on the op-ed pages and the tv screen. His ten part television series making the case for capitalism, Free To Choose, was broadcast in Britain in early 1980 and the government approached his arrival pre-screening almost as a state visit. Where MT met Hayek one-to-one for quiet chats, a deputation of ministers was arranged for Friedman and his wife Rose, among them Ian Gilmour whose disbelief in all Friedman stood for was absolute but who could hardly complain that he had not been offered the chance to make his case.
Someone in Whitehall decided that Friedman's visit was a party matter, so the official machine stood aloof and Nigel Lawson was deputed to write MT's briefing rather than a private secretary. The occasion had its complications. Friedman was a critic of the monetary regime the new government had established, publicly questioned the choice of £M3 as target and had attacked its raising of VAT to finance income tax cuts in the June 1979 budget (urging deeper spending cuts instead). The argument over £M3 was particularly difficult, going to the core of the government's policy. Friedman's critical approach to MT's policy was not lost on Republicans close to Reagan, who did their best to distance him from MT as soon as he was elected in November 1980. Indeed, divisions between British and US economic policy remained throughout his presidency, MT proving far more averse to government deficits than her ally and friend for whom the reduction of taxes took priority. Only when the fruits of Thatcherite economic policy began to show in economic recovery did people like Don Regan acknowledge MT as an economic ally.
Private documents reinforce the sense that Friedman had his doubts about MT. Meeting her for the first time in 1978 over dinner at the Ralph Harris's, he wrote afterwards to his host describing her as "a very attractive and interesting lady", before going on: "Whether she really has the capacities that Britain so badly needs at this time, I must confess, seems to me still a very open question but we shall I hope have some proof of that in the not too distant future". Keith Joseph inspired doubts too following a meeting in San Francisco in 1981. Admitting that he was "finding what happens in Britain very hard to interpret", Friedman admitted to Ralph Harris ("for your eyes only") that he had been "rendered somewhat uneasy by his [KJ's] attitudes as well. He recognized of course the inconsistency between the policies that the Industry Ministry had been following and Mrs Thatcher's professed philosophy, but he seemed to treat it as somewhat of a joke rather than as a matter for very deep and serious concern". Hayek privately echoed some of this concern, writing to MT in April 1980 decrying the government's policy of 'gradualism' in checking inflation, as he saw it.
Such things were not said in public, of course. Hayek and Friedman alike fastened instead on the undoubted fact that the Thatcherites faced internal resistance to their programme and argued that the slowness of reform was owing to that. Appearing on BBC TV's Panorama the night before the 1981 budget, both men heaped blame on the wets, Hayek fastening on Prior for blocking faster movement on union law, Friedman attacking their resistance to spending cuts. And the year 1981 saw large steps in the right direction from their perspective. Although the tax increases of the 1981 budget were not to his taste, Friedman approved the dethroning of £M3 which the budget inaugurated. Economic recovery established itself in the first quarter of the year and the wets were purged in the September reshuffle, clearing the way for a faster pace on union reform when Norman Tebbit replaced Prior as Employment Secretary. The rest is merely history.
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Who Was Hayek? – Law & Liberty
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2023-10-02T10:00:00+00:00
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G. Patrick Lynch writes about his conversation with Bruce Caldwell about Friedrich Hayek, one of the most important economist.
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en
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Law & Liberty
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https://lawliberty.org/features/who-was-hayek/
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There is a famous internet comparison of the world’s two most famous Hayek’s—Salma and Friedrich. Obviously, Salma is more well-known, but Friedrich may be gaining on her. He has appeared in numerous books and scholarly articles recently, but there is little agreement about who he was. Some portray him as an evil villain who has subjected the world to the horrors of “neoliberalism,” and its disruptive social effects. Others have argued that he is much closer to Rawls and Keynes and would have supported a generous welfare state to ameliorate the social problems his preferred policies generated. Still others view him as a heroic defender of libertarian views about the need to limit state intervention in society, and particularly in markets. Salma must be increasingly jealous, but probably confused about who exactly this nominal competitor was.
So who was Hayek? To answer that question I spoke with Bruce Caldwell, the editor of the Collected Works of FA Hayek for the University of Chicago Press and also the co-author with Hansjoerg Klausinger of the first volume of a new two-volume biography entitled Hayek: A Life, 1899-1950. We obviously addressed some material in the biography, but we also discussed who Hayek the person was to provide a better picture of the individual, the context he lived in, and what animated him intellectually. The picture that emerges is much more complex than either his supporters or critics fully realize.
A Liberal Boy from Vienna
Caldwell told me that the perspective taken in the biography was to “try to see the world the way Hayek saw it.” Hayek was raised in early-twentieth-century Vienna. He fought in the First World War, and lived through the Second World War in England during part of the Blitz. He observed the rise of fascism and the height of popularity for socialism and Soviet communism. He held academic positions in several countries and traveled the world. He also was surrounded by and interacted with what Caldwell calls “a wonderful cast of people.”
“Fritz” as they referred to him while he was young, was born into a lower ennobled family that was intellectual, took education seriously, and frequently pursued scientific interests outdoors. His father was a doctor, but his passion was botany. He was a sort of “plant geographer” and took the family on hikes collecting samples. Friedrich’s father read to him about exploring the North and South Poles, the advent of flight, and other new scientific discoveries. Hayek was raised in a world constrained by class and extended family. His tastes derived from “German-oriented culture” as Caldwell called it, particularly literary and theatrical material. Like his father, Fritz collected programs from plays and other performances he attended beginning at age 11.
His family and friends recognized he was very bright and intellectually advanced for his age, but Fritz chafed at the limits of the oppressive and formal Austrian education system. Hayek’s approach to education was to “drink things in, formulate them, intersperse them with his own ideas, and then come up with a particular view,” but he never took his formal education that seriously and was actually held back one year. What seem to be contradictions in the later Hayek may have originated in this very independent mind even at a young age. Hayek called himself a puzzler, as compared to someone who is a master of material, and as a student he approached learning similarly.
Hayek was athletic, excelling at tennis, rock climbing, and skiing. His upbringing and love of the outdoors extended into his adult life as he regularly vacationed in the Austrian Alps during the summers. Caldwell noted that those trips were “an essential part of his life” where “his batteries got charged, he planned the year ahead” outlining the intellectual projects he planned to pursue. While some came to fruition and others didn’t, he had a rhythm to his professional and personal life that revolved around being outdoors.
Hayek served in World War I on the Italian front, returning home unscathed despite several near-lethal incidents in observation balloons and airplanes. He then attended the University of Vienna. After three years of “classes” which were largely optional to attend, students took oral exams. Hayek, however, did things his own way. He was part of a small group (Caldwell estimates there were perhaps 30 members) of fellow students who actually did attend lectures and consulted with each other about which ones were interesting and worth attending, no matter the subject. For example, he sat in the lectures of the famed legal positivist Hans Kelsen, who was one of the authors of the Austrian Constitution, but also attended lectures in psychology, art history, economics, and other fields.
Political matters were very prominent in the aftermath of World War I. A new Austrian national political landscape emerged, in which all the major parties were either socialist, Marxist, or pan-German. Hayek rejected all of them because he was very much a defender of tolerance and discourse.
The large Austrian parties were “pretty awful in the views they embraced”—specifically anti-Semitism. For example the Pan German parties advocated Anschluss with Germany and “were emphasizing German culture. Hayek was fine with emphasizing German culture but many of these political parties had ‘Aryan Paragraphs’ which said if you’re Jewish you can’t be a member of it, and that was not something that he would have any part of.” The socialist party, influenced by Austro-Marxism, had no appeal for Hayek. Instead, he and one of his closest friends, Herbert Fürth, worked with a tiny party that was liberal, pro-democracy (including female suffrage), culturally tolerant, and secular. It performed so poorly it faded from history.
According to Caldwell the student population in Vienna at the time was “rife” with anti-Semitism, but this was common “in Anglo-Saxon areas as well. You go to Harvard, you go to Yale, you’re Jewish, it doesn’t work out so well for you.” Yet Hayek rejected this widely held prejudice out of hand.
Particularly important for the development of this progressive sensibility was an intellectual group founded by Hayek and Fürth, who was of Jewish descent.
Caldwell explains:
Fürth was really the person who was responsible for identifying people to join this group, and many of them were of Jewish descent or practicing Judaism, and it was through interacting with this group that Hayek came to realize that there was this whole additional culture, intellectual culture in Vienna that he had not experienced through his rather insular upbringing in the Hayek family. And he embraced it—he thought great! And wondered whether he had Jewish blood because he said “these are my people! They’re really smart; they know about literatures that I didn’t know.”
Through this group, Hayek was introduced to Italian, French, and other intellectual traditions outside of the largely Germanic views he’d previously learned.
During the next period of his life, Hayek interacted with many Jewish scholars, including Ludwig von Mises, Ludwig Lachmann, Fritz Machlup, and Karl Popper. As Caldwell put it, Hayek was “interested in ideas and he [was] a liberal. You’re going to judge people according to whether they’re good people…not according to things like race or whether they are Jewish.”
Mises and Starting a Career
Mises had an enormous impact on Hayek. The celebrated economist welcomed him into his seminar in Vienna, got him a job with an inflation-protected salary in the postwar era of hyperinflation, and helped set up his first trip to America. Mises had also written two books on the exact two topics—monetary policy and socialism—that would define Hayek’s early research.
Mises eventually tapped Hayek for a position at the Austrian business cycle institute he had founded. Caldwell describes this as an awkward fit for Hayek. While it served as the springboard for his professional career, he was deeply skeptical about the ability of economists to predict business cycles, which was very much in vogue among the American institutionalists, such as Wesley Clair Mitchell whose seminar Hayek attended at Columbia during his trip to America. Mitchell and others believed theory was derived from data, and this approach reminded Hayek and Mises of the German Historical School, the first nemesis of the Austrian economists. And the forecasting that the institute was required to do was another thing Hayek did not feel particularly comfortable doing as an Austrian. This, Caldwell says, was a difficult “needle to thread” for Hayek.
Eventually, Hayek landed at the London School of Economics, which was fortuitous because of the quality of his colleagues and his growing enthusiasm for British liberalism. Support for economic planning and socialism were common in the 1930s, even in Britain. “The world is really starting to fall apart between the Great Depression and the rise of these various fascisms and totalitarian systems,” Caldwell observed. “This is a fraught time that’s going to get worse and worse.” Remembering that context is important for understanding Hayek.
At the LSE, he bonded with fellow liberal economist Lionel Robbins, but Hayek maintained his civil and discursive approach toward all of his ideologically diverse colleagues and students. Those descriptions of Hayek are very consistent: “He’s very understated; he’s interested in pursuing the truth, and he does so dispassionately. He’s not someone who gets excited,” particularly when contrasted with the more exuberant and flamboyant Robbins. In video interviews, Hayek was always trying to explain his opinions, not “trying to ram them down your throat.” Of course, Caldwell reminded me that as someone with a German accent in England at that time, perhaps not being too assertive was the best way to go!
Along with Arnold Plant and Robbins, Hayek ran what was known as the “Grand Seminar” in which some of the foundational work in modern economic theory was being formulated. Among the students who attended it were Ronald Coase (The Coase Theorem), Nicholas Kaldor and John Hicks (Kaldor-Hicks efficiency), Aaron Director, John Kenneth Galbraith, Ludwig Lachmann, Tibor Scitovsky, and many others. Visitors attending the seminar included Frank Knight, Jacob Viner, Wilhelm Röpke, and Joseph Schumpeter.
Hayek the Scholar
One of Hayek’s first major research projects at the LSE was The Pure Theory of Capital, which received a chilly reception from the economics community. The second was a serious work extending the Austrian critique of socialism. During the war, he wrote his most famous economics article—“The Use of Knowledge in Society.” As Caldwell explains, that paper addresses “how a well-functioning market system is a mechanism for coordinating human action in a world of dispersed and subjectively held knowledge—where people have different bits of knowledge.” This raises serious questions about the possibility of effective central planning. To cite Bastiat, “Paris gets fed” because markets can process the decentralized and specialized knowledge of the real world better than central planners can. “The Use of Knowledge” is still widely cited in economics today.
Hayek’s work in this highly productive period wasn’t tethered merely to economics. His Abuse of Reason project began as an intellectual history of how what Hayek called “scientism,” the misuse of quasi-scientific principles in studying human institutions, spread from thinkers such as Saint-Simon and Comte through other channels and ultimately informed approaches to what in the twentieth century would become the social sciences. This project was never completed, but the discussion of the French period which became The Counter-Revolution of Science is widely cited and influential. Another piece from this period entitled Scientism and the Study of Society addresses other methodological issues.
As it became clearer that the Allies were going to win WWII, Hayek plainly saw the enthusiasm for economic and social planning by experts. Many popular pieces were being written by “men of science” (natural scientists who were public intellectuals) and others, such as Hayek’s LSE colleague Harold Laski, about the need for planning the economy, social order, and scientific research. While the war effort bolstered support for the need for planning it was clear that the Soviet Union was the model these men of science admired.
These individuals, Caldwell explains, believed they were “fighting for a new Jerusalem….fighting for a new world after World War II is over, and that world should be a socialist world.”
These ideas were effectively promoted to a mass audience. So Hayek began a popular project of his own. Pivoting from a more intellectual response (the second volume of the Abuse of Reason), Hayek turned instead to the more accessible and persuasive The Road to Serfdom. It was a major international success. Interestingly, Caldwell points out that the book is strangely silent on the dangers of Soviet communism, but since the Soviets were then our allies, Hayek had to remove a lot of material in the text bashing the USSR. Still the message of the book is clear: the risks of government power and planning, no matter the type of regime, are great.
Caldwell believes that The Road to Serfdom “gives Hayek his 15 minutes of fame, [and] that becomes quite important in terms of his ability to create the Mont Pèlerin Society.”
The Big Tent
Aside from his numerous intellectual contributions to economics, politics, and law, the Mont Pèlerin Society has proven to be one of Hayek’s most lasting achievements. Caldwell describes Hayek as “a very skilled institution creator,” using the recognition he attained from The Road to Serfdom (driven in part by a Reader’s Digest abridgment) to launch the MPS. He traveled internationally, giving talks and meeting like-minded individuals, including Harold Luhnow. Luhnow was president of Volker Fund, an early supporter of Hayek’s work and other pro-liberty/free market initiatives throughout academia. These trips helped Hayek identify many of the attendees of the first meeting, and Volker helped pay travel expenses.
“Between 1944 and 1946 he met people, often just a couple in each country, who shared his views that liberalism for the 20th century needed to be further developed, was certainly under attack, and maybe they could all get together to discuss its prospects.” But Hayek included a wide range of individuals at the first meeting. “There were vast differences of opinion among the various people who were there,” but this reflects how little intellectual support there was for liberalism in the late 1940s. For example, despite Hayek’s public debate with Keynes, Hayek always viewed Keynes as a liberal.
That first meeting has drawn a lot of attention from scholars opposed to “neoliberalism” today. As Caldwell said plainly, “This initial meeting of the Mont Pèlerin Society is taken by critics of neoliberalism in particular as the catalyst event in bringing together this cabal of corporate apologists and apologists for the plutocracy.” For a cabal, they certainly didn’t agree on much as can be seen in the transcripts of the meeting which Caldwell himself published in a separate book Mont Pèlerin 1947.
Hayek was trying to forge a network of sympathizers, but Caldwell believes Hayek the puzzler had another project at that first MPS meeting—to “figure out what the fundamental ideas of liberalism in the twentieth century might look like.” He “really wanted to avoid an organization that would be taking specific policy stances or putting out think tank papers.” Instead, he envisioned “a discussion group of like-minded people to try to iron out what our differences are and what the similarities are.” Caldwell believes that Hayek himself was defending this exact position—“it’s the ideas stupid”—in his 1949 article “The Intellectuals and Socialism.”
And this project can be seen from the opening session of the first MPS meeting. The topic was “Free Enterprise or the Competitive Order?” He’s drawing a contrast immediately between laissez faire and a more classical liberal order with constraints: hardly the raging neoliberal his opponents wish to paint him as today. Even more interestingly, the first three speakers were himself, Aaron Director from the University of Chicago, and Walter Eucken, an ordoliberal. All three are competitive order advocates, not defenders of laissez faire such as Mises and Henry Hazlitt, who were also at the first meeting. Hayek stacked the deck against laissez faire. “What is this liberal order if it’s not just laissez faire?” Caldwell asked me. In many ways this explains why Hayek occupies a unique position among defenders of liberty. He maintained close relationships with “liberals” and advocates for a very limited government.
Now Caldwell admits that “by the 1970s he’s (Hayek) really much closer to Mises, but in trying to construct this conversation among all these various people at this point he does have this broader view but he wants to figure out exactly what that broader view means.” Interestingly one of the first seminars Hayek ran at Chicago was titled “Liberalism from Locke to Mises” so his definition of the term was broad indeed.
Caldwell pointed to a very interesting difference between the Hayek of the first MPS and the Hayek of The Constitution of Liberty, which includes a chapter on the danger of unions, but nothing on the dangers of private sector or enterprise monopolies. In the 1940s, most economists assumed that markets could lead to monopoly. But by the 60s, that view had faded and Hayek’s writing reflected the change. This change alienated some of his older liberal allies. Walter Lippmann upon receiving his copy of The Constitution of Liberty sent a reply complaining about Hayek’s failure to deal with the monopoly question. It demonstrates once again the needle Hayek is trying to thread. “Among libertarians, the Constitution of Liberty might be viewed as allowing for too much intervention by the government.” Yet the liberal Lippmann was also uncomfortable with the work. “So it is this ongoing conversation he is engaged in and enjoys engaging in.”
While Hayek’s search for the meaning of liberalism certainly evolved, so did society’s re-embrace of socialism, and Caldwell sees this as an immense frustration for Hayek:
You think of the changes that are taking place in societies in the 60’s and the 70s, and he’s saying ‘You know we fought these battles about socialism back in the 30s and laid out some really good arguments and here people are bringing back this stuff? And ignoring any of the problems associated with it?’ So I think he became kind of fed up with the vacuity of the arguments of opponents.”
Hayek believed people were falling prey to “scientism”—and failing to look at the arguments or weigh the real-world evidence.
Caldwell shares a letter from a former student who characterized Hayek as someone who reached his conclusions about socialism logically:
he was someone who looked like he got the opinions that he held through a process of thinking it through, the dispassionate scholar, these are just the facts of the matter. This is a system that has really deep flaws. And you can put it into effect but it’s going to cause massive suffering.
Despite this frustration with the continuing popularity of socialism and his increasing doubts about the efficacy of government Hayek never was impressed with or supported anarcho-capitalism. Caldwell is still working on a second volume, which deals with the 60s and 70s but he called Hayek “unimpressed” with Rothbard. However, he acknowledges that the question of how much or how little government intervention Hayek would have allowed in his liberal order is tough to nail down.
A Failure to Communicate
I ended my discussion with Caldwell by reviewing Hayek’s relationship with his two families—his mother and siblings he had in Austria, and his wife and two children in England. Once the Anschluss occurred, Hayek, along with his wife and children, became a naturalized British citizen. The correspondence that survives between his family members who lived under the Nazi regime shows Hayek’s firm opposition to the Nazis and, regrettably, their initial support for the regime.
The situation with his wife and children is much more complicated and shows us that Hayek was less dispassionate in his personal life. Caldwell says as a father and husband Hayek was “the worst communicator, and all of the problems that arise from his family arise from this absence of communication.” Hayek had a long-standing affection for a cousin who had married someone else while Hayek was visiting America for the first time. Hayek then married his wife, Hella and had two children.
At some point in the 1930s, he and his cousin discussed divorcing their spouses and marrying one another, but the war intervened. After the war, Hayek was unable to split amicably with his wife, and a very ugly divorce drama unfolded. His friendship with Lionel Robbins, who took Hella’s side, was a casualty of the whole affair. In the end, Hayek’s move to the University of Chicago ended both the marriage and (at least for a while) the relationship with Robbins.
Who Was Hayek?
Too often, those who wish to paint him as a Machiavellian monster or a bleeding-heart quasi-socialist ignore the world Hayek lived in and the experiences that shaped him. When Hayek was presented with either fascism or communism, he chose neither. When the mainstream social norms were anti-Semitism, nationalism, and little flexibility in personal relationships, he pursued more liberal ends.
Not all of Hayek’s choices were defensible, which makes him human. But it’s easy to forget that he wasn’t reacting to a “socialism” like that of the Nordic countries, although I doubt he would have been a huge fan of the Norwegian model of society. He was a self-proclaimed liberal in speech, markets, and personal lives in the era of Hitler and Stalin. He was an avowed multiculturalist for his time and, as some of his fans on the left remind us, he was not opposed to some form of a welfare state. He was hardly a full-throated supporter of laissez faire, although he moved in that direction as his life went on.
He was less imperfect than many other twentieth-century intellectuals. There is something in Hayek for everyone and quite a bit to think about. He was quite possibly the most important economic liberal in the world in the later part of the twentieth century. He may never reach the heights of Salma, but there is much to admire in this unique individual who through puzzling, drinking it all in, building an independent life from an insular background, networking, living by principle and good fortune, went on to help shape the materially richer and freer world we currently live in.
Editor’s note: Corrections have been made to this essay related to certain biographical details.
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2023-10-02T10:00:00+00:00
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G. Patrick Lynch writes about his conversation with Bruce Caldwell about Friedrich Hayek, one of the most important economist.
|
en
|
Law & Liberty
|
https://lawliberty.org/features/who-was-hayek/
|
There is a famous internet comparison of the world’s two most famous Hayek’s—Salma and Friedrich. Obviously, Salma is more well-known, but Friedrich may be gaining on her. He has appeared in numerous books and scholarly articles recently, but there is little agreement about who he was. Some portray him as an evil villain who has subjected the world to the horrors of “neoliberalism,” and its disruptive social effects. Others have argued that he is much closer to Rawls and Keynes and would have supported a generous welfare state to ameliorate the social problems his preferred policies generated. Still others view him as a heroic defender of libertarian views about the need to limit state intervention in society, and particularly in markets. Salma must be increasingly jealous, but probably confused about who exactly this nominal competitor was.
So who was Hayek? To answer that question I spoke with Bruce Caldwell, the editor of the Collected Works of FA Hayek for the University of Chicago Press and also the co-author with Hansjoerg Klausinger of the first volume of a new two-volume biography entitled Hayek: A Life, 1899-1950. We obviously addressed some material in the biography, but we also discussed who Hayek the person was to provide a better picture of the individual, the context he lived in, and what animated him intellectually. The picture that emerges is much more complex than either his supporters or critics fully realize.
A Liberal Boy from Vienna
Caldwell told me that the perspective taken in the biography was to “try to see the world the way Hayek saw it.” Hayek was raised in early-twentieth-century Vienna. He fought in the First World War, and lived through the Second World War in England during part of the Blitz. He observed the rise of fascism and the height of popularity for socialism and Soviet communism. He held academic positions in several countries and traveled the world. He also was surrounded by and interacted with what Caldwell calls “a wonderful cast of people.”
“Fritz” as they referred to him while he was young, was born into a lower ennobled family that was intellectual, took education seriously, and frequently pursued scientific interests outdoors. His father was a doctor, but his passion was botany. He was a sort of “plant geographer” and took the family on hikes collecting samples. Friedrich’s father read to him about exploring the North and South Poles, the advent of flight, and other new scientific discoveries. Hayek was raised in a world constrained by class and extended family. His tastes derived from “German-oriented culture” as Caldwell called it, particularly literary and theatrical material. Like his father, Fritz collected programs from plays and other performances he attended beginning at age 11.
His family and friends recognized he was very bright and intellectually advanced for his age, but Fritz chafed at the limits of the oppressive and formal Austrian education system. Hayek’s approach to education was to “drink things in, formulate them, intersperse them with his own ideas, and then come up with a particular view,” but he never took his formal education that seriously and was actually held back one year. What seem to be contradictions in the later Hayek may have originated in this very independent mind even at a young age. Hayek called himself a puzzler, as compared to someone who is a master of material, and as a student he approached learning similarly.
Hayek was athletic, excelling at tennis, rock climbing, and skiing. His upbringing and love of the outdoors extended into his adult life as he regularly vacationed in the Austrian Alps during the summers. Caldwell noted that those trips were “an essential part of his life” where “his batteries got charged, he planned the year ahead” outlining the intellectual projects he planned to pursue. While some came to fruition and others didn’t, he had a rhythm to his professional and personal life that revolved around being outdoors.
Hayek served in World War I on the Italian front, returning home unscathed despite several near-lethal incidents in observation balloons and airplanes. He then attended the University of Vienna. After three years of “classes” which were largely optional to attend, students took oral exams. Hayek, however, did things his own way. He was part of a small group (Caldwell estimates there were perhaps 30 members) of fellow students who actually did attend lectures and consulted with each other about which ones were interesting and worth attending, no matter the subject. For example, he sat in the lectures of the famed legal positivist Hans Kelsen, who was one of the authors of the Austrian Constitution, but also attended lectures in psychology, art history, economics, and other fields.
Political matters were very prominent in the aftermath of World War I. A new Austrian national political landscape emerged, in which all the major parties were either socialist, Marxist, or pan-German. Hayek rejected all of them because he was very much a defender of tolerance and discourse.
The large Austrian parties were “pretty awful in the views they embraced”—specifically anti-Semitism. For example the Pan German parties advocated Anschluss with Germany and “were emphasizing German culture. Hayek was fine with emphasizing German culture but many of these political parties had ‘Aryan Paragraphs’ which said if you’re Jewish you can’t be a member of it, and that was not something that he would have any part of.” The socialist party, influenced by Austro-Marxism, had no appeal for Hayek. Instead, he and one of his closest friends, Herbert Fürth, worked with a tiny party that was liberal, pro-democracy (including female suffrage), culturally tolerant, and secular. It performed so poorly it faded from history.
According to Caldwell the student population in Vienna at the time was “rife” with anti-Semitism, but this was common “in Anglo-Saxon areas as well. You go to Harvard, you go to Yale, you’re Jewish, it doesn’t work out so well for you.” Yet Hayek rejected this widely held prejudice out of hand.
Particularly important for the development of this progressive sensibility was an intellectual group founded by Hayek and Fürth, who was of Jewish descent.
Caldwell explains:
Fürth was really the person who was responsible for identifying people to join this group, and many of them were of Jewish descent or practicing Judaism, and it was through interacting with this group that Hayek came to realize that there was this whole additional culture, intellectual culture in Vienna that he had not experienced through his rather insular upbringing in the Hayek family. And he embraced it—he thought great! And wondered whether he had Jewish blood because he said “these are my people! They’re really smart; they know about literatures that I didn’t know.”
Through this group, Hayek was introduced to Italian, French, and other intellectual traditions outside of the largely Germanic views he’d previously learned.
During the next period of his life, Hayek interacted with many Jewish scholars, including Ludwig von Mises, Ludwig Lachmann, Fritz Machlup, and Karl Popper. As Caldwell put it, Hayek was “interested in ideas and he [was] a liberal. You’re going to judge people according to whether they’re good people…not according to things like race or whether they are Jewish.”
Mises and Starting a Career
Mises had an enormous impact on Hayek. The celebrated economist welcomed him into his seminar in Vienna, got him a job with an inflation-protected salary in the postwar era of hyperinflation, and helped set up his first trip to America. Mises had also written two books on the exact two topics—monetary policy and socialism—that would define Hayek’s early research.
Mises eventually tapped Hayek for a position at the Austrian business cycle institute he had founded. Caldwell describes this as an awkward fit for Hayek. While it served as the springboard for his professional career, he was deeply skeptical about the ability of economists to predict business cycles, which was very much in vogue among the American institutionalists, such as Wesley Clair Mitchell whose seminar Hayek attended at Columbia during his trip to America. Mitchell and others believed theory was derived from data, and this approach reminded Hayek and Mises of the German Historical School, the first nemesis of the Austrian economists. And the forecasting that the institute was required to do was another thing Hayek did not feel particularly comfortable doing as an Austrian. This, Caldwell says, was a difficult “needle to thread” for Hayek.
Eventually, Hayek landed at the London School of Economics, which was fortuitous because of the quality of his colleagues and his growing enthusiasm for British liberalism. Support for economic planning and socialism were common in the 1930s, even in Britain. “The world is really starting to fall apart between the Great Depression and the rise of these various fascisms and totalitarian systems,” Caldwell observed. “This is a fraught time that’s going to get worse and worse.” Remembering that context is important for understanding Hayek.
At the LSE, he bonded with fellow liberal economist Lionel Robbins, but Hayek maintained his civil and discursive approach toward all of his ideologically diverse colleagues and students. Those descriptions of Hayek are very consistent: “He’s very understated; he’s interested in pursuing the truth, and he does so dispassionately. He’s not someone who gets excited,” particularly when contrasted with the more exuberant and flamboyant Robbins. In video interviews, Hayek was always trying to explain his opinions, not “trying to ram them down your throat.” Of course, Caldwell reminded me that as someone with a German accent in England at that time, perhaps not being too assertive was the best way to go!
Along with Arnold Plant and Robbins, Hayek ran what was known as the “Grand Seminar” in which some of the foundational work in modern economic theory was being formulated. Among the students who attended it were Ronald Coase (The Coase Theorem), Nicholas Kaldor and John Hicks (Kaldor-Hicks efficiency), Aaron Director, John Kenneth Galbraith, Ludwig Lachmann, Tibor Scitovsky, and many others. Visitors attending the seminar included Frank Knight, Jacob Viner, Wilhelm Röpke, and Joseph Schumpeter.
Hayek the Scholar
One of Hayek’s first major research projects at the LSE was The Pure Theory of Capital, which received a chilly reception from the economics community. The second was a serious work extending the Austrian critique of socialism. During the war, he wrote his most famous economics article—“The Use of Knowledge in Society.” As Caldwell explains, that paper addresses “how a well-functioning market system is a mechanism for coordinating human action in a world of dispersed and subjectively held knowledge—where people have different bits of knowledge.” This raises serious questions about the possibility of effective central planning. To cite Bastiat, “Paris gets fed” because markets can process the decentralized and specialized knowledge of the real world better than central planners can. “The Use of Knowledge” is still widely cited in economics today.
Hayek’s work in this highly productive period wasn’t tethered merely to economics. His Abuse of Reason project began as an intellectual history of how what Hayek called “scientism,” the misuse of quasi-scientific principles in studying human institutions, spread from thinkers such as Saint-Simon and Comte through other channels and ultimately informed approaches to what in the twentieth century would become the social sciences. This project was never completed, but the discussion of the French period which became The Counter-Revolution of Science is widely cited and influential. Another piece from this period entitled Scientism and the Study of Society addresses other methodological issues.
As it became clearer that the Allies were going to win WWII, Hayek plainly saw the enthusiasm for economic and social planning by experts. Many popular pieces were being written by “men of science” (natural scientists who were public intellectuals) and others, such as Hayek’s LSE colleague Harold Laski, about the need for planning the economy, social order, and scientific research. While the war effort bolstered support for the need for planning it was clear that the Soviet Union was the model these men of science admired.
These individuals, Caldwell explains, believed they were “fighting for a new Jerusalem….fighting for a new world after World War II is over, and that world should be a socialist world.”
These ideas were effectively promoted to a mass audience. So Hayek began a popular project of his own. Pivoting from a more intellectual response (the second volume of the Abuse of Reason), Hayek turned instead to the more accessible and persuasive The Road to Serfdom. It was a major international success. Interestingly, Caldwell points out that the book is strangely silent on the dangers of Soviet communism, but since the Soviets were then our allies, Hayek had to remove a lot of material in the text bashing the USSR. Still the message of the book is clear: the risks of government power and planning, no matter the type of regime, are great.
Caldwell believes that The Road to Serfdom “gives Hayek his 15 minutes of fame, [and] that becomes quite important in terms of his ability to create the Mont Pèlerin Society.”
The Big Tent
Aside from his numerous intellectual contributions to economics, politics, and law, the Mont Pèlerin Society has proven to be one of Hayek’s most lasting achievements. Caldwell describes Hayek as “a very skilled institution creator,” using the recognition he attained from The Road to Serfdom (driven in part by a Reader’s Digest abridgment) to launch the MPS. He traveled internationally, giving talks and meeting like-minded individuals, including Harold Luhnow. Luhnow was president of Volker Fund, an early supporter of Hayek’s work and other pro-liberty/free market initiatives throughout academia. These trips helped Hayek identify many of the attendees of the first meeting, and Volker helped pay travel expenses.
“Between 1944 and 1946 he met people, often just a couple in each country, who shared his views that liberalism for the 20th century needed to be further developed, was certainly under attack, and maybe they could all get together to discuss its prospects.” But Hayek included a wide range of individuals at the first meeting. “There were vast differences of opinion among the various people who were there,” but this reflects how little intellectual support there was for liberalism in the late 1940s. For example, despite Hayek’s public debate with Keynes, Hayek always viewed Keynes as a liberal.
That first meeting has drawn a lot of attention from scholars opposed to “neoliberalism” today. As Caldwell said plainly, “This initial meeting of the Mont Pèlerin Society is taken by critics of neoliberalism in particular as the catalyst event in bringing together this cabal of corporate apologists and apologists for the plutocracy.” For a cabal, they certainly didn’t agree on much as can be seen in the transcripts of the meeting which Caldwell himself published in a separate book Mont Pèlerin 1947.
Hayek was trying to forge a network of sympathizers, but Caldwell believes Hayek the puzzler had another project at that first MPS meeting—to “figure out what the fundamental ideas of liberalism in the twentieth century might look like.” He “really wanted to avoid an organization that would be taking specific policy stances or putting out think tank papers.” Instead, he envisioned “a discussion group of like-minded people to try to iron out what our differences are and what the similarities are.” Caldwell believes that Hayek himself was defending this exact position—“it’s the ideas stupid”—in his 1949 article “The Intellectuals and Socialism.”
And this project can be seen from the opening session of the first MPS meeting. The topic was “Free Enterprise or the Competitive Order?” He’s drawing a contrast immediately between laissez faire and a more classical liberal order with constraints: hardly the raging neoliberal his opponents wish to paint him as today. Even more interestingly, the first three speakers were himself, Aaron Director from the University of Chicago, and Walter Eucken, an ordoliberal. All three are competitive order advocates, not defenders of laissez faire such as Mises and Henry Hazlitt, who were also at the first meeting. Hayek stacked the deck against laissez faire. “What is this liberal order if it’s not just laissez faire?” Caldwell asked me. In many ways this explains why Hayek occupies a unique position among defenders of liberty. He maintained close relationships with “liberals” and advocates for a very limited government.
Now Caldwell admits that “by the 1970s he’s (Hayek) really much closer to Mises, but in trying to construct this conversation among all these various people at this point he does have this broader view but he wants to figure out exactly what that broader view means.” Interestingly one of the first seminars Hayek ran at Chicago was titled “Liberalism from Locke to Mises” so his definition of the term was broad indeed.
Caldwell pointed to a very interesting difference between the Hayek of the first MPS and the Hayek of The Constitution of Liberty, which includes a chapter on the danger of unions, but nothing on the dangers of private sector or enterprise monopolies. In the 1940s, most economists assumed that markets could lead to monopoly. But by the 60s, that view had faded and Hayek’s writing reflected the change. This change alienated some of his older liberal allies. Walter Lippmann upon receiving his copy of The Constitution of Liberty sent a reply complaining about Hayek’s failure to deal with the monopoly question. It demonstrates once again the needle Hayek is trying to thread. “Among libertarians, the Constitution of Liberty might be viewed as allowing for too much intervention by the government.” Yet the liberal Lippmann was also uncomfortable with the work. “So it is this ongoing conversation he is engaged in and enjoys engaging in.”
While Hayek’s search for the meaning of liberalism certainly evolved, so did society’s re-embrace of socialism, and Caldwell sees this as an immense frustration for Hayek:
You think of the changes that are taking place in societies in the 60’s and the 70s, and he’s saying ‘You know we fought these battles about socialism back in the 30s and laid out some really good arguments and here people are bringing back this stuff? And ignoring any of the problems associated with it?’ So I think he became kind of fed up with the vacuity of the arguments of opponents.”
Hayek believed people were falling prey to “scientism”—and failing to look at the arguments or weigh the real-world evidence.
Caldwell shares a letter from a former student who characterized Hayek as someone who reached his conclusions about socialism logically:
he was someone who looked like he got the opinions that he held through a process of thinking it through, the dispassionate scholar, these are just the facts of the matter. This is a system that has really deep flaws. And you can put it into effect but it’s going to cause massive suffering.
Despite this frustration with the continuing popularity of socialism and his increasing doubts about the efficacy of government Hayek never was impressed with or supported anarcho-capitalism. Caldwell is still working on a second volume, which deals with the 60s and 70s but he called Hayek “unimpressed” with Rothbard. However, he acknowledges that the question of how much or how little government intervention Hayek would have allowed in his liberal order is tough to nail down.
A Failure to Communicate
I ended my discussion with Caldwell by reviewing Hayek’s relationship with his two families—his mother and siblings he had in Austria, and his wife and two children in England. Once the Anschluss occurred, Hayek, along with his wife and children, became a naturalized British citizen. The correspondence that survives between his family members who lived under the Nazi regime shows Hayek’s firm opposition to the Nazis and, regrettably, their initial support for the regime.
The situation with his wife and children is much more complicated and shows us that Hayek was less dispassionate in his personal life. Caldwell says as a father and husband Hayek was “the worst communicator, and all of the problems that arise from his family arise from this absence of communication.” Hayek had a long-standing affection for a cousin who had married someone else while Hayek was visiting America for the first time. Hayek then married his wife, Hella and had two children.
At some point in the 1930s, he and his cousin discussed divorcing their spouses and marrying one another, but the war intervened. After the war, Hayek was unable to split amicably with his wife, and a very ugly divorce drama unfolded. His friendship with Lionel Robbins, who took Hella’s side, was a casualty of the whole affair. In the end, Hayek’s move to the University of Chicago ended both the marriage and (at least for a while) the relationship with Robbins.
Who Was Hayek?
Too often, those who wish to paint him as a Machiavellian monster or a bleeding-heart quasi-socialist ignore the world Hayek lived in and the experiences that shaped him. When Hayek was presented with either fascism or communism, he chose neither. When the mainstream social norms were anti-Semitism, nationalism, and little flexibility in personal relationships, he pursued more liberal ends.
Not all of Hayek’s choices were defensible, which makes him human. But it’s easy to forget that he wasn’t reacting to a “socialism” like that of the Nordic countries, although I doubt he would have been a huge fan of the Norwegian model of society. He was a self-proclaimed liberal in speech, markets, and personal lives in the era of Hitler and Stalin. He was an avowed multiculturalist for his time and, as some of his fans on the left remind us, he was not opposed to some form of a welfare state. He was hardly a full-throated supporter of laissez faire, although he moved in that direction as his life went on.
He was less imperfect than many other twentieth-century intellectuals. There is something in Hayek for everyone and quite a bit to think about. He was quite possibly the most important economic liberal in the world in the later part of the twentieth century. He may never reach the heights of Salma, but there is much to admire in this unique individual who through puzzling, drinking it all in, building an independent life from an insular background, networking, living by principle and good fortune, went on to help shape the materially richer and freer world we currently live in.
Editor’s note: Corrections have been made to this essay related to certain biographical details.
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What Hayek Got Wrong About Keynes
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Was Keynes, as Hayek maintained, a "brilliant scholar"?
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Mises Institute
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https://mises.org/mises-wire/what-hayek-got-wrong-about-keynes
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Was Keynes, as Hayek maintained, a “brilliant scholar”? “Scholar” hardly, since Keynes was abysmally read in the economics literature: he was more of a buccaneer, taking a little bit of knowledge and using it to inflict his personality and fallacious ideas upon the world, with a drive continually fueled by an arrogance bordering on egomania. But Keynes had the good fortune to be born within the British elite, to be educated within the top economics circles (Eton/Cambridge/Apostles), and to be specially chosen by the powerful Alfred Marshall.
“Brilliant” is scarcely an apt word either. Clearly, Keynes was bright enough, but his most significant qualities were his arrogance, his unlimited self-confidence, and his avid will to power, to domination, to cutting a great swath through the arts, the social sciences, and the world of politics.
Furthermore, Keynes was scarcely a “revolutionary” in any real sense. He possessed the tactical wit to dress up ancient statist and inflationist fallacies with modern, pseudoscientific jargon, making them appear to be the latest findings of economic science. Keynes was thereby able to ride the tidal wave of statism and socialism, of managed and planning economies. Keynes eliminated economic theory’s ancient role as spoilsport for inflationist and statist schemes, leading a new generation of economists on to academic power and to political pelf and privilege.
A more fitting term for Keynes would be “charismatic”—not in the sense of commanding the allegiance of millions but in being able to con and seduce important people—from patrons to politicians to students and even to opposing economists. A man who thought and acted in terms of power and brutal domination, who reviled the concept of moral principle, who was an eternal and sworn enemy of the bourgeoisie, of creditors, and of the thrifty middle class, who was a systematic liar, twisting truth to fit his own plan, who was a Fascist and an anti-Semite, Keynes was nevertheless able to cajole opponents and competitors.
Even as he cunningly turned his students against his colleagues, he was still able to cozen those same colleagues into intellectual surrender. Harassing and hammering away unfairly at Pigou, Keynes was yet able, at last and from beyond the grave, to wring an abject recantation from his old colleague. Similarly, he inspired his old foe Lionel Robbins to muse absurdly in his diary about the golden halo around Keynes’s “godlike” head. He was able to convert to Keynesianism several Hayekians and Misesians who should have known—and undoubtedly did know—better: in addition to Abba Lerner, John Hicks, Kenneth Boulding, Nicholas Kaldor, and G.L.S. Shackle in England, there were also Fritz Machlup and Gottfried Haberler from Vienna, who landed at Johns Hopkins and Harvard, respectively.
Of all the Misesians of the early 1930s, the only economist completely uninfected by the Keynesian doctrine and personality was Mises himself. And Mises, in Geneva and then for years in New York without a teaching position, was removed from the influential academic scene. Even though Hayek remained anti-Keynesian, he too was touched by the Keynesian charisma. Despite everything, Hayek was proud to call Keynes a friend and indeed promoted the legend that Keynes, at the end of his life, was about to convert from his own Keynesianism.
Hayek’s evidence for Keynes’s alleged last-minute conversion is remarkably slight—based on two events in the final years of Keynes’s life. First, in June 1944, upon reading The Road to Serfdom, Keynes, now at the pinnacle of his career as a wartime government planner, wrote a note to Hayek, calling it “a great book…morally and philosophically I find myself in agreement with virtually the whole of it.” But why should this be interpreted as anything more than a polite note to a casual friend on the occasion of his first popular book?
Moreover, Keynes made it clear that, despite his amiable words, he never accepted the essential “slippery slope” thesis of Hayek, namely, that statism and central planning lead straight to totalitarianism. On the contrary, Keynes wrote that “moderate planning will be safe if those carrying it out are rightly oriented in their minds and hearts to the moral issue.” This sentence, of course, rings true, for Keynes always believed that the installation of good men, namely, himself and the technicians and statesmen of his social class, was the only safeguard needed to check the powers of the rulers (Wilson 1982, pp. 64ff.).
Hayek proffers one other bit of flimsy evidence for Keynes’s alleged recantation, which occurred during his final meeting with Keynes in 1946, the last year of Keynes’s life. Hayek reports,
A turn in the conversation made me ask him whether or not he was concerned about what some of his disciples were making of his theories. After a not very complimentary remark about the persons concerned he proceeded to reassure me: those ideas had been badly needed at the time he had launched them. But I need not be alarmed: if they should ever become dangerous I could rely upon him that he would again quickly swing round public opinion—indicating by a quick movement of his hand how rapidly that would be done. But three months later he was dead. (Hayek 1967, p. 348)
Yet this was hardly a Keynes on the verge of recantation. Rather, this was vintage Keynes, a man who always held his sovereign ego higher than any principles, higher than any mere ideas, a man who relished the power he held. He could and would turn the world, set it right with a snap of his fingers, as he presumed to have done in the past.
Moreover, this statement was also vintage Keynes in terms of his long-held view of how to act properly when in or out of power. In the 1930s, prominent but out of power, he could speak and act “a little wild”; but now that he enjoyed the high seat of power, it was time to tone down the “poetic license.” Joan Robinson and the other Marxo-Keynesians were making the mistake, from Keynes’s point of view, of not subordinating their cherished ideas to the requirements of his prodigious position of power.
And so Hayek too, while never succumbing to Keynes’s ideas, did fall under his charismatic spell. In addition to creating the legend of Keynes’s change of heart, why did Hayek not demolish The General Theory as he had Keynes’s Treatise on Money? Hayek admitted to a strategic error, that he had not bothered to do so because Keynes was notorious for changing his mind, so Hayek did not think then that The General Theory would last. Moreover, as Mark Skousen has noted , Hayek apparently pulled his punches in the 1940s in order to avoid interfering with Britain’s Keynesian financing of the war effort—certainly an unfortunate example of truth suffering at the hands of presumed political expediency.
Later economists continued to hew a revisionist line, maintaining absurdly that Keynes was merely a benign pioneer of uncertainty theory (Shackle and Lachmann), or that he was a prophet of the idea that search costs were highly important in the labor market (Clower and Leijonhufvud). None of this is true. That Keynes was a Keynesian—of that much derided Keynesian system provided by Hicks, Hansen, Samuelson, and Modigliani —is the only explanation that makes any sense of Keynesian economics. Yet Keynes was much more than a Keynesian. Above all, he was the extraordinarily pernicious and malignant figure that we have examined in this chapter: a charming but power-driven statist Machiavelli, who embodied some of the most malevolent trends and institutions of the 20th century.
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Hayek in the 1930s
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2013-08-10T20:31:49+00:00
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Paul Krugman on Hayek’s influence in the 1930s: …back in the 30s nobody except Hayek would have considered his views a serious rival to those of Keynes… Alvin Hansen reviewing Hayek’s Prices and Production in 1933 in the American Economic Review. The present volume is, it seems to me, the only book of recent years […]
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Marginal REVOLUTION
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https://marginalrevolution.com/marginalrevolution/2013/08/hayek-in-the-1930s.html
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Paul Krugman on Hayek’s influence in the 1930s:
…back in the 30s nobody except Hayek would have considered his views a serious rival to those of Keynes…
Alvin Hansen reviewing Hayek’s Prices and Production in 1933 in the American Economic Review.
The present volume is, it seems to me, the only book of recent years which at all approaches Keynes’s A Treatise on Money in the impetus it has given to renewed interest and discussion of business-cycle theory.
This in itself is high praise. Altogether aside from the soundness of its
conclusions, the value of the book and its important place in the recent
literature of cycle theory is unquestioned.
The Nobel Prize committee:
von Hayek’s contributions in the field of economic theory are both profound and original. His scientific books and articles in the twenties and thirties aroused widespread and lively debate. Particularly, his theory of business cycles and his conception of the effects of monetary and credit policies attracted attention and evoked animated discussion. He tried to penetrate more deeply into the business cycle mechanism than was usual at that time. Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929.
To be clear, it is true that Keynes’s General Theory eclipsed Hayek but to say that Hayek was not a serious rival to Keynes in the 1930s is a Whiggish misreading of the history of economic thought.
Addendum: Don Boudreaux also comments noting that Hicks specifically referred to the great Hayek-Keynes rivalry of the 1930s. See also Greg Ransom’s citations from Hicks and Coase in the comments.
Do note that reading Hayek out of the debate diminishes Hayek but perhaps even more it diminishes Keynes who clearly won over the profession.
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https://www.degruyter.com/document/doi/10.18574/nyu/9781479833818.003.0005/html
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PREFACE
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https://www.degruyter.com/document/cover/isbn/9781479833818/product
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https://www.degruyter.com/document/cover/isbn/9781479833818/product
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2015-09-25T00:00:00
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PREFACE was published in The Structure of Production on page liii.
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/assets/images/ec7d7606b4e2f3f921b5e1700948efb6-favicon.ico
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De Gruyter
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https://www.degruyter.com/document/doi/10.18574/nyu/9781479833818.003.0005/html
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Skousen, Mark. "PREFACE". The Structure of Production: New Revised Edition, New York, USA: New York University Press, 2015, pp. liii-lviii. https://doi.org/10.18574/nyu/9781479833818.003.0005
Skousen, M. (2015). PREFACE. In The Structure of Production: New Revised Edition (pp. liii-lviii). New York, USA: New York University Press. https://doi.org/10.18574/nyu/9781479833818.003.0005
Skousen, M. 2015. PREFACE. The Structure of Production: New Revised Edition. New York, USA: New York University Press, pp. liii-lviii. https://doi.org/10.18574/nyu/9781479833818.003.0005
Skousen, Mark. "PREFACE" In The Structure of Production: New Revised Edition, liii-lviii. New York, USA: New York University Press, 2015. https://doi.org/10.18574/nyu/9781479833818.003.0005
Skousen M. PREFACE. In: The Structure of Production: New Revised Edition. New York, USA: New York University Press; 2015. p.liii-lviii. https://doi.org/10.18574/nyu/9781479833818.003.0005
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https://www.palgrave.com/gp/blogs/business-economics-finance-management/exploring-economic-history/lse-and-the-history-of-economic-thought
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en
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LSE and the History of Economic Thought
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https://resource-cms.springernature.com/springer-cms/rest/v1/content/16537354/data/v3
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https://resource-cms.springernature.com/springer-cms/rest/v1/content/16537354/data/v3
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with Palgrave Macmillan
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Robert Cord discusses the role played by the LSE in the history of economic thought.
The London School of Economics has been and continues to be one of the foremost global centres for researching and teaching of economics. Founded in 1895, the School was for the two decades of its existence overshadowed, at least when it came to the discipline of economics, by Cambridge University. However, spurred on by the work and activities of some of its early professors, notably Edwin Cannan, the LSE soon found itself at the forefront of the various economics debates which raged in the 1920s and 1930s. Leading the charge for the School was the formidable figure of Lionel, later Lord, Robbins, who was prepared to go up against the equally dominant John Maynard Keynes (who was also to become a peer) at Cambridge. However, Robbins was not on his own. He recruited a host of other economists, many of whom would go on to become important in their own right, to help him strengthen the economics offering coming out of LSE, most notable amongst them being Friedrich von Hayek and John Hicks.
As well as Robbins and his acolytes, LSE was producing other economists who would go on to achieve worldwide notoriety. For example, Ronald Coase came through the ranks at the School, first as a student in the 1930s and then, after a short interval, securing an appointment on the staff before leaving for the USA in the early 1950s. It was whilst he was at LSE that Coase’s highly influential 1937 article, The Nature of the Firm, appeared, it being one of the reasons why Coase was later to receive the Nobel Prize in Economics. In the 1950s, the School was also home to Bill Phillips of Phillips Curve fame.
In more recent decades, at least two key areas of contributions to economics can be identified. First, LSE was home to a number of eminent econometricians, spearheaded by James Durbin, who specialised in the analysis of economic time series and serial correlation, and Denis Sargan, whose expertise was also in time series. Second has been the important work of the School’s labour economists, led by Richard (Lord) Layard, with a particular focus on unemployment and matching theory, the latter resulting in a Nobel Prize for LSE economist Chris Pissarides in 2010. In the last few years, Layard has also become a leading figure in the research of the economics of happiness.
These currents of thought and more are brought together in the forthcoming volume entitled The Palgrave Companion to LSE Economics, edited by Robert Cord. With six chapters on themes in LSE economics and 29 chapters on the lives and work of LSE economists, The Palgrave Companion to LSE Economics shows how economics became established at the School, how it produced some of the world’s best-known economists, and how it remains a global force in economics. With original contributions from a stellar cast, The Palgrave Companion to LSE Economics provides economists – especially those interested in macroeconomics and the history of economic thought – with the first in-depth analysis of LSE economics.
The next volume in the series will be The Palgrave Companion to Oxford Economics, to appear in 2020. We then cross the pond to examine the influence of American universities, notably MIT, Chicago, and Harvard.
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https://ipa.org.au/ipa-review-articles/a-life-lived-for-liberty
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A Life Lived For Liberty
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2024-01-15T20:54:37+00:00
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A new biography of F A Hayek provides inspiration for the ongoing fight against socialism
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en
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IPA - The Voice For Freedom
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https://ipa.org.au/ipa-review-articles/a-life-lived-for-liberty
|
A new biography of F A Hayek provides inspiration for the ongoing fight against socialism, writes IPA Executive Director Scott Hargreaves.
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
– Friedrich Hayek
I originally sat down to read this biography out of a sense of obligation to the free-market tradition that has influenced the IPA and me personally so much. I had it on pre-order for when it was published in late 2022. But I found myself completely drawn in by the character of this very interesting and occasionally brilliant man, and by the sense that the problems he was grappling with feel very much like those of the present day. It pushed aside other books and was read within a few weeks.
Friedrich von Hayek was a relatively normal young man of the Viennese lower middle class who did his duty in the (Great) war on the Italian front. After, through his studies at the University of Vienna, he became enamoured of a very British classical liberalism, with his technical economics building on the local Austrian ‘school’. But then his lot was to see his own country become less-and-less liberal, his cosmopolitan outlook challenged by the rise of Aryanism and anti-Semitism, and the free market approach to creating prosperity shunted aside by the central planning and Big State ambitions of left and right.
For most of Hayek’s adult life his battle was to earn his academic stripes and develop his theories of economics, while also making an impact in the world. Perhaps the apogee of his early career was the famous battle with Keynes in London in 1931, over the nature of the business cycle and limits that should be set for government intervention—but that was also the nadir as whatever the intellectual points he scored, the societies and governments of the UK and the USA were set to embrace a bastardised form of Keynesian economics as the basis for central planning, socialism, and the growth of the State. Everything Hayek had rejected.
Meanwhile, he was continually under pressure from the less worldly and more doctrinaire economists of the Austrian school—notably Ludwig von Mises. Unlike Mises, Hayek explicitly rejected laissez-faire as the rallying cry for defenders of freedom as it limited the ability to deal with certain practical problems of economics, and was more-or-less unsaleable as an alternative to socialism and central planning.
The socialist calculation debate and the knowledge problem remain (for me) his enduring and unassailable contribution to epistemology, the science of what we know. In the 1930s, as now, it was thought the growth of computing (or AI) would lead to a world in which technocrats could just ‘pull the levers’ to smooth out economic shocks, while maintaining full employment and steady growth. But, as paraphrased by the economist and (here) biographer of Hayek, Bruce Caldwell:
The dispersion of knowledge is not some temporary condition that gets eliminated by a movement to equilibrium. It is a permanent condition. If everyone always has privileged access to different bits of information, in a world of constantly changing data, the question becomes: how can the fragments of knowledge that exist in different minds ever get coordinated?
That is a critique not just of socialism and the conceits of central planners, it is also a rejection of the then dominant conceptions of mainstream economics which idealised ‘perfect competition’ and the state of equilibrium. Even before the arrival of Keynesianism, Hayek saw the slippery slope of ‘assume an equilibrium state’ and what became known as ‘comparative statics’.
This is an official biography and Caldwell, Director of the Center for the History of Political Economy at Duke University in North Carolina, does a masterful job anchoring his narrative in the contemporary documentary sources, ably assisted by the economist Hansjoerg Klausinger who also undertook the translation duties for the benefit of Caldwell and the reader. We live through Hayek’s struggles in the years to 1950, without the foreshadowing of any ‘triumphs’ of the eventual Nobel Prize. As an intellectual biography, the closest we get to the omnipotent biographer is identifying the moment of key insight—and the initial fragments of thought, sometimes published—that may not have been fully developed or ready to share with the world until many years later. London was a small place and at the London School of Economics (LSE)—where he took refuge as first the one-party regime of the fascist-inspired Fatherland Front and later the actual Nazis took over Austria—he worked, taught, and debated cheek by jowl with the apostles of Big Government. When the LSE was evacuated to Cambridge during the War (the London offices being commandeered for War work), the lifestyle was better but the pressures intensified.
It was absolutely fascinating and very relevant to the foundation of the Institute of Public Affairs to read of the role played in Hayek’s life, and wider intellectual milieu, by William Beveridge, LSE Director from 1919 until 1937. After that he took up the role of Master of University College, Oxford, and was commissioned by the wartime coalition government to produce what became the ‘Beveridge Report’ of 1942, the blueprint for the post-War welfare state, Social Insurance and Allied Services. As Caldwell notes, this catapulted this otherwise obscure academic figure to public standing and acclaim that Hayek himself was not to match until the publication of The Road to Serfdom in 1944.
Hayek understood the need for liberals to put forward a positive program.
This thunderbolt of the Beveridge Report would also have struck Earth in Australia, then under an ALP Government also looking ahead to the ‘peace dividend’. I have no doubt it would have been this, allied to the vision of Soviet-style central planning proselytised by yet another high-profile LSE figure, Harold Laski, that would have (rightly) so alarmed the businessmen who later came together to form the Institute of Public Affairs. Seen in that light, the visit to the IPA by Hayek in 1976 could be seen to close the loop on that history, while writing the first page in what became a repeat of the struggle to combat central planning of markets, in the 1980s and 1990s. The IPA Review reported:
Although 77 years of age, Professor Hayek willingly undertook a programme of engagements in his month in Australia which would have taxed the resources of a man in the prime of life. The IPA was privileged to participate in the sponsorship of his visit and in the arrangements for the Victorian end of his programme.
It went on, presciently, to outline the battle for freedom—or, at very least, the battle to allow the private sphere room to operate—that was to be waged over the following two decades:
Hayek’s eminence as an economist undoubtedly derives, in part, from the exceptional range and depth of his intellectual interests. As he has said himself, “An economist who is only an economist is not a good economist”. Professor Hayek came to Australia at a peculiarly appropriate time. It is clear that this country has reached a grand climacteric, a fateful parting of the ways so far as its political and economic future is concerned. The momentous question is whether, in the years ahead, libertarian values are to prevail, enterprise, both corporate and individual, is to be properly rewarded, and the market is to be allowed to perform its traditional function of allocating the resources of the community in the most effective manner in the interests of all; or whether Government as such is to assume an ever larger role in the distribution of resources and income, in the provision of so-called Welfare and in the general direction of the lives of the people. In short, what is ultimately at stake is the survival of individual freedom.
A remarkable essay from 1945, Individualism: True and False, reveals both Hayek’s British sensibilities and keen understanding of the main current of Western philosophy:
The true individualism which I shall try to defend began its modern development with John Locke, and particularly with Bernard Mandeville and David Hume, and achieved full stature for the first time in the work of Josiah Tucker, Adam Ferguson, and Adam Smith and in that of their great contemporary, Edmund Burke—the man whom Smith described as the only person he ever knew who thought on economic subjects exactly as he did without any previous communication having passed between them. In the 19th century I find it represented most perfectly in the work of two of its greatest historians and political philosophers: Alexis de Tocqueville and Lord Acton.
The contrast was with Descartes and those influenced by the French rationalist tradition, including the physiocrats who in turn influenced Bentham and the Mills (James and his son, John Stuart).
Intervention is a ‘slippery slope’.
For me this distinction is absolutely critical. It informs the structure of the work I commissioned from IPA Adjunct Fellow Dr Brad Bowden, in The Enlightenment and the Advance of Liberty (1689–1815). Many of the criticisms based on the ills ascribed by socialist and social conservatives alike to ‘unbridled individualism’ are justified only insofar as they reflect the influence of the ‘individualism false’. As Caldwell describes, this essay was meant to be part of an even larger ‘Abuse of Reason’ project which would further “justify such distinctions, showing how one tradition led to liberal democracy, the other towards scientism, planning, and ultimately totalitarianism”. That reference to totalitarianism takes us to the development of The Road to Serfdom, the work conceived by Hayek precisely to reach a wider audience and combat socialism, central planning, totalitarianism, and—along the way—the purist versions of laissez-faire. Hayek understood the need for liberals to put forward a positive program, and not simply critique socialism. He succeeded in part with The Road to Serfdom, but the title itself helped ensure it is remembered mainly for the idea that interventionist measures are a ‘slippery slope’; that every error introduced by government action and interference with market exchange simply leads to great clamour for ever-greater controls. This, moreover, required a profoundly anti-democratic view of the role of government, as by definition it ignores the preferences of the individuals who otherwise may have expressed those preferences by their free choice. This, in extremis, leads to totalitarianism.
Even at the time this was seen as a little extreme. Hayek himself was willing to modify the inevitability of that turn. But his point was made, and it is valid. Ironically, it was thought to have been negated by the turn back towards markets in the 1980s, as the political system appeared to have an inbuilt ‘pendulum’. But now, as the progressives, socialists, and technocrats have found the long march through the non-government institutions of society a conducive way to achieve the same ends, it will be some time before we know whether Hayek was right the first time. This is a biography of the man as well as his intellectual development, and so it covers his sometimes excruciating private life. He missed the moment to propose to the love of his life in Vienna, but then maintained a special relationship with her even after both married other people. The efforts to (eventually) divorce his first wife and make the move to the US (necessary in part so he could afford to maintain two families) take up the latter part of the book, and are anything other than a joy to read. He also had to deal with the problems of the family left behind in Austria, including a brother who became a Nazi (how active, how committed, was the million-dollar question, at least for Hayek and the post-War authorities). That said, he was in company a more relaxed, almost clubbable version of the English gentleman he so valued. He valued good friends and seemed to have quite a few of them.
Relevantly, Caldwell describes Hayek’s desperate efforts over many years to maintain intellectual and social links—and friendship—across Europe in the pre-War years and even during the War. He had refused to repudiate his Jewish friends even as Austria was Aryanising, and his vision of the Western intellectual milieu was undiminished despite what the Nazis and Soviets were attempting. It is important Caldwell lays this out so well, as it informs that later chapter on the formation of the Mont Pelerin Society (MPS) in 1947.
Hayek was instrumental in rounding up the remainders of European liberal political, philosophical and economic thought, and the American money that enabled gathering for a conference at the Mont Pelerin Hotel on the shores of Lake Geneva. MPS, which has boasted luminaries such as Hayek, Friedman, and Mises, continues to operate as a source of intellectual strength for intellectuals, think tankers, and academics who then take its galvanising ideas into the world.
This book is the proverbial damned fat square, running to 730 pages of text. Those looking to be inspired in the struggle against socialism should read The Road to Serfdom. To cast aside the detritus of wasted years at university read The Use of Knowledge in Society. But if you are struggling to see the path forward for liberalism, and fearful for the survival of individualism and the market order in the 21st century, then you might take up this book to see how one man—brilliant, but of flesh and blood—battled through very similar challenges quite a few generations ago. And perhaps hope also for the moment in the sun that the resurgent ideas of freedom achieved a bit later, which will be the subject of Caldwell and Klausinger’s second volume.
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https://samplecontents.library.ph/wikipedia/wp/j/John_Maynard_Keynes.htm
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John Maynard Keynes
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Find out about John Maynard Keynes on the Wikipedia for Schools from SOS Children
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http://schools-wikipedia.org/wp/j/John_Maynard_Keynes.htm
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John Maynard Keynes, 1st Baron Keynes, CB, FBA (pron.: / ˈ k eɪ n z / KAYNZ; 5 June 1883 – 21 April 1946) was a British economist whose ideas have affected the theory and practice of modern macroeconomics, and informed the economic policies of governments. He built on and greatly refined earlier work on the causes of business cycles, and is widely considered to be one of the founders of modern macroeconomics and the most influential economist of the 20th century. His ideas are the basis for the school of thought known as Keynesian economics, as well as its various offshoots.
In the 1930s, Keynes spearheaded a revolution in economic thinking, overturning the older ideas of neoclassical economics that held that free markets would, in the short to medium term, automatically provide full employment, as long as workers were flexible in their wage demands. Keynes instead argued that aggregate demand determined the overall level of economic activity, and that inadequate aggregate demand could lead to prolonged periods of high unemployment. He advocated the use of fiscal and monetary measures to mitigate the adverse effects of economic recessions and depressions. Following the outbreak of the Second World War, Keynes's ideas concerning economic policy were adopted by leading Western economies. In 1942, Keynes was awarded a hereditary peerage as Baron Keynes of Tilton in the County of Sussex. During the 1950s and 1960s, the success of Keynesian economics resulted in almost all capitalist governments adopting its policy recommendations.
Keynes's influence waned in the 1970s, partly as a result of problems that began to afflict the Anglo-American economies from the start of the decade, and partly because of critiques from Milton Friedman and other economists who were pessimistic about the ability of governments to regulate the business cycle with fiscal policy. However, the advent of the global financial crisis in 2007 caused a resurgence in Keynesian thought. Keynesian economics provided the theoretical underpinning for economic policies undertaken in response to the crisis by Presidents George W. Bush and Barack Obama of the United States, Prime Minister Gordon Brown of the United Kingdom, and other heads of governments.
In 1999, Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century, commenting that: "His radical idea that governments should spend money they don't have may have saved capitalism." In addition to being an economist, Keynes was also a civil servant, a director of the British Eugenics Society, a director of the Bank of England, a patron of the arts and an art collector, a part of the Bloomsbury Group of intellectuals, an advisor to several charitable trusts, a writer, a philosopher, a private investor, and a farmer.
Early life and education
John Maynard Keynes was born in Cambridge, Cambridgeshire, England, to an upper-middle-class family. His father John Neville Keynes was an economist and a lecturer in moral sciences at the University of Cambridge and his mother Florence Ada Keynes a local social reformer. Keynes was the first born, and was followed by two more children – Margaret Neville Keynes in 1885 and Geoffrey Keynes in 1887.
According to the economist and biographer Robert Skidelsky, Keynes's parents were loving and attentive. They remained in the same house throughout their lives, where the children were always welcome to return. Keynes would receive considerable support from his father, including expert coaching to help him pass his scholarship exams and financial help both as a young man and when his assets were nearly wiped out at the onset of Great Depression in 1929. Keynes's mother made her children's interests her own, and according to Skidelsky, "because she could grow up with her children, they never outgrew home".
Keynes had his early education at home and at nursery. He attended The Perse School nursery in 1890 before becoming a day pupil at St Faith's preparatory school in 1892. Teachers described Keynes as brilliant, but on occasion, careless and lacking in determination. His health was often poor during this period, leading to several long absences.
Keynes won a scholarship to Eton College in 1897, where he displayed talent in a wide range of subjects, particularly mathematics, classics and history. At Eton, Keynes experienced the first "love of his life" in Dan Macmillan, older brother of the future Prime Minister Harold Macmillan. Despite his middle-class background, Keynes mixed easily with upper-class pupils. In 1902 Keynes left Eton for King's College, Cambridge after receiving a scholarship for this also to study mathematics. Alfred Marshall begged Keynes to become an economist, although Keynes's own inclinations drew him towards philosophy – especially the ethical system of G. E. Moore. Keynes was an active member of the semi-secretive Cambridge Apostles society, a debating club largely reserved for the brightest students. Like many members, Keynes retained a bond to the club after graduating and continued to attend occasional meetings throughout his life. Before leaving Cambridge, Keynes became the President of the Cambridge Union Society and Cambridge University Liberal Club. In May 1904 he received a first class B.A. in mathematics. Aside from a few months spent on holidays with family and friends, Keynes continued to involve himself with the university over the next two years. He took part in debates, further studied philosophy and attended economics lectures informally as a graduate student. He also studied for his 1905 Tripos and 1906 civil service exams.
The economist Harry Johnson wrote that the optimism imparted by Keynes's early life is key to understanding his later thinking. Keynes was always confident he could find a solution to whatever problem he turned his attention to, and retained a lasting faith in the ability of government officials to do good. Keynes's optimism was also cultural, in two senses – he was of the last generation raised by an empire still at the height of its power, in its own eyes and by much of the world (at least outwardly) seen as preeminent in both power and benevolence. Keynes was also of the last generation who felt entitled to govern by culture, rather than by expertise. According to Skidelsky, the sense of cultural unity current in Britain from the 19th century to the end of World War I provided a framework with which the well-educated could set various spheres of knowledge in relation to each other and to life, enabling them to confidently draw from different fields when addressing practical problems.
Career
Keynes's Civil Service career began in October 1906, as a clerk in the India Office. He enjoyed his work at first, but by 1908 had become bored and resigned his position to return to Cambridge and work on probability theory, at first privately funded only by two dons at the university – his father and the economist Arthur Pigou. In 1909 Keynes published his first professional economics article in the Economics Journal, about the effect of a recent global economic downturn on India. Also in 1909, Keynes accepted a lectureship in economics funded personally by Alfred Marshall. Keynes's earnings rose further as he began to take on pupils for private tuition, and on being elected a fellow. In 1911 Keynes was made editor of The Economic Journal. By 1913 he had published his first book, Indian Currency and Finance. He was then appointed to the Royal Commission on Indian Currency and Finance – the same topic as his book – where Keynes showed considerable talent at applying economic theory to practical problems.
World War I
The British Government called on Keynes's expertise during the First World War. While he did not formally re-join the civil service in 1914, Keynes travelled to London at the government's request a few days before hostilities started. Bankers had been pushing for the suspension of specie payments – the convertibility of banknotes into gold – but with Keynes's help the Chancellor of the Exchequer (then Lloyd George) was persuaded that this would be a bad idea, as it would hurt the future reputation of the city if payments were suspended before absolutely necessary.
In January 1915 Keynes took up an official government position at the Treasury. Among his responsibilities were the design of terms of credit between Britain and its continental allies during the war, and the acquisition of scarce currencies. According to economist Robert Lekachman, Keynes's "nerve and mastery became legendary" because of his performance of these duties, as in the case where he managed to assemble – with difficulty – a small supply of Spanish pesetas. The secretary of the Treasury was delighted to hear Keynes had amassed enough to provide a temporary solution for the British Government. But Keynes did not hand the pesetas over, choosing instead to sell them all to break the market: his boldness paid off, as pesetas then became much less scarce and expensive. In the 1917 King's Birthday Honours, Keynes was appointed Companion of the Order of the Bath for his wartime work, and his success led to the appointment that would have a huge effect on Keynes's life and career; Keynes was appointed financial representative for the Treasury to the 1919 Versailles peace conference. He was also appointed Officer of the Belgian Order of Leopold.
Versailles peace conference
Keynes's experience at Versailles was influential in shaping his future outlook, yet it was not a successful one for him. Keynes's main interest had been in trying to prevent Germany's compensation payments being set so high it would traumatise innocent German people, damage the nation's ability to pay and sharply limit her ability to buy exports from other countries – thus hurting not just Germany's own economy but that of the wider world. Unfortunately for Keynes, conservative powers in the coalition that emerged from the 1918 coupon election were able to ensure that both Keynes himself and the Treasury were largely excluded from formal high-level talks concerning reparations. Their place was taken by the Heavenly Twins – the judge Lord Sumner and the banker Lord Cunliffe whose nickname derived from the "astronomically" high war compensation they wanted to demand from Germany. Keynes was forced to try to exert influence mostly from behind the scenes.
The three principal players at Versailles were Britain's Lloyd George, France's Clemenceau and America's President Wilson. It was only Lloyd George to whom Keynes had much direct access; until the 1918 election he had some sympathy with Keynes's view but while campaigning had found his speeches were only well received by the public if he promised to harshly punish Germany, and had therefore committed to extracting high payments. Lloyd George did however win some loyalty from Keynes with his actions at the Paris conference by intervening against the French to ensure the dispatch of much-needed food supplies to German civilians. Clemenceau also pushed for high reparations; generally France argued for an even more severe settlement than Britain. Wilson initially favoured relatively lenient treatment of Germany – he feared too harsh conditions could foment the rise of extremism, and wanted Germany to be left sufficient capital to pay for imports. To Keynes's dismay, Lloyd George and Clemenceau were able to pressure Wilson to agree to very high repayments being imposed. Towards the end of the conference, Keynes came up with a plan that he argued would not only help Germany and other impoverished central European powers but also be good for the world economy as a whole. It involved the writing down of war debts which would have the effect of increasing international trade all round. Lloyd George agreed it might be acceptable to the British electorate. However, America was against it; the US was then the largest creditor and by this time Wilson had started to believe in the merits of a harsh peace as a warning to future aggressors. Hence despite his best efforts, the end result of the conference was a treaty which disgusted Keynes both on moral and economic grounds, and led to his resignation from the Treasury.
In June 1919 he turned down an offer to become chairman of the British Bank of Northern Commerce, a job that promised a salary of £2000 in return for a morning per week of work.
Keynes's analysis on the predicted damaging effects of the treaty appeared in the highly influential book, The Economic Consequences of the Peace, published in 1919. This work has been described as Keynes's best book, where he was able to bring all his gifts to bear – his passion as well as his skill as an economist. In addition to economic analysis, the book contained pleas to the reader's sense of compassion:
I cannot leave this subject as though its just treatment wholly depended either on our own pledges or on economic facts. The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable, –abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilised life of Europe.
Also present was striking imagery such as "...that year by year Germany must be kept impoverished and her children starved and crippled..." along with bold predictions which were later justified by events:
If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for very long that final war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing.
Keynes's predictions of disaster were borne out when the German economy suffered the hyperinflation of 1923, and again by the collapse of the Weimar Republic and the outbreak of World War II. Only a fraction of reparations were ever paid. The Economic Consequences of the Peace gained Keynes international fame, but also caused him to be regarded as anti-establishment – it was not until after the outbreak of World War II that Keynes was offered a directorship of a major British Bank, or an acceptable offer to return to government with a formal job. However, Keynes was still able to influence government policy making through his network of contacts, his published works and by serving on government committees; this included attending high-level policy meetings as a consultant.
In the 1920s
Keynes had completed his A Treatise on Probability before the war, but published it in 1921. The work was a notable contribution to the philosophical and mathematical underpinnings of probability theory, championing the important view that probabilities were no more or less than truth values intermediate between simple truth and falsity. Keynes developed the first upper-lower probabilistic interval approach to probability in chapters 15 and 17 of this book, as well as having developed the first decision weight approach with his conventional coefficient of risk and weight, c, in chapter 26. In addition to his academic work, the 1920s saw Keynes active as a journalist selling his work internationally and working in London as a financial consultant. In 1924 Keynes wrote an obituary for his former tutor Alfred Marshall which Schumpeter called "the most brilliant life of a man of science I have ever read." Marshall's widow was "entranced" by the memorial, while Lytton Strachey rated it as one of Keynes's "best works".
In 1922 Keynes continued to advocate reduction of German reparations with A Revision of the Treaty. He attacked the post World War I deflation policies with A Tract on Monetary Reform in 1923 – a trenchant argument that countries should target stability of domestic prices, avoiding deflation even at the cost of allowing their currency to depreciate. Britain suffered from high unemployment through most of the 1920s, leading Keynes to recommend the depreciation of sterling to boost jobs by making British exports more affordable. From 1924 he was also advocating a fiscal response, where the government could create jobs by spending on public works. During the 1920s Keynes's pro stimulus views had only limited effect on policy makers and mainstream academic opinion – according to Hyman Minsky one reason was that at this time his theoretical justification was "muddled" . The Tract had also called for an end to the gold standard. Keynes advised it was no longer a net benefit for countries such as Britain to participate in the gold standard, as it ran counter to the need for domestic policy autonomy. It could force countries to pursue deflationary policies at exactly the time when expansionary measures were called for to address rising unemployment. The Treasury and Bank of England were still in favour of the gold standard and in 1925 they were able to convince the then Chancellor Winston Churchill to re-establish it, which had a depressing effect on British industry. Keynes responded by writing The Economic Consequences of Mr. Churchill and continued to argue against the gold standard until Britain finally abandoned it in 1931.
During the Great Depression
Keynes had begun a theoretical work to examine the relationship between unemployment, money and prices back in the 1920s. The work, Treatise on Money, was published in 1930 in two volumes. A central idea of the work was that if the amount of money being saved exceeds the amount being invested – which can happen if interest rates are too high – then unemployment will rise. This is in part a result of people not wanting to spend too high a proportion of what employers pay out, making it difficult, in aggregate, for employers to make a profit.
Keynes was deeply critical of the British government's austerity measures during the Great Depression. He believed that budget deficits were a good thing, a product of recessions. He wrote, "For Government borrowing of one kind or another is nature's remedy, so to speak, for preventing business losses from being, in so severe a slump as to present one, so great as to bring production altogether to a standstill."
At the height of the Great Depression, in 1933, Keynes published The Means to Prosperity, which contained specific policy recommendations for tackling unemployment in a global recession, chiefly counter cyclical public spending. The Means to Prosperity contains one of the first mentions of the multiplier effect. While it was addressed chiefly to the British Government, it also contained advice for other nations affected by the global recession. A copy was sent to the newly elected President Roosevelt and other world leaders. The work was taken seriously by both the American and British governments, and according to Skidelsky, helped pave the way for the later acceptance of Keynesian ideas, though it had little immediate practical influence. In the 1933 London Economic Conference opinions remained too diverse for a unified course of action to be agreed upon.
Keynesian-like policies were adopted by Sweden and Germany, but Sweden was seen as too small to command much attention, and Keynes was deliberately silent about the successful efforts of Germany as he was dismayed by their imperialist ambitions and their treatment of Jews. Apart from Great Britain, Keynes's attention was primarily focused on the United States. In 1931, he received considerable support for his views on counter-cyclical public spending in Chicago, then America's foremost centre for economic views alternative to the mainstream. However, orthodox economic opinion remained generally hostile regarding fiscal intervention to mitigate the depression, until just before the outbreak of war. In late 1933 Keynes was persuaded by Felix Frankfurter to address President Roosevelt directly, which he did by letters and face to face in 1934, after which the two men spoke highly of each other. However according to Skidelsky, the consensus is that Keynes's efforts only began to have a more than marginal influence on US economic policy after 1939.
Keynes's magnum opus, The General Theory of Employment, Interest and Money was published in 1936. It was researched and indexed by one of Keynes's favourite students, later the economist David Bensusan-Butt. The work served as a theoretical justification for the interventionist policies Keynes favoured for tackling a recession. The General Theory challenged the earlier neo-classical economic paradigm, which had held that provided it was unfettered by government interference, the market would naturally establish full employment equilibrium. In doing so Keynes was partly setting himself against his former teachers Marshall and Pigou. Keynes believed the classical theory was a "special case" that applied only to the particular conditions present in the 19th century, his own theory being the general one. Classical economists had believed in Say's law, which, simply put, states that " supply creates its own demand", and that in a free market workers would always be willing to lower their wages to a level where employers could profitably offer them jobs. An innovation from Keynes was the concept of price stickiness – the recognition that in reality workers often refuse to lower their wage demands even in cases where a classical economist might argue it is rational for them to do so. Due in part to price stickiness, it was established that the interaction of "aggregate demand" and "aggregate supply" may lead to stable unemployment equilibria – and in those cases, it is the state, and not the market, that economies must depend on for their salvation.
The General Theory argues that demand, not supply, is the key variable governing the overall level of economic activity. Aggregate demand, which equals total un-hoarded income in a society, is defined by the sum of consumption and investment. In a state of unemployment and unused production capacity, one can only enhance employment and total income by first increasing expenditures for either consumption or investment. Without government intervention to increase expenditure, an economy can remain trapped in a low employment equilibrium – the demonstration of this possibility has been described as the revolutionary formal achievement of the work. The book advocated activist economic policy by government to stimulate demand in times of high unemployment, for example by spending on public works. "Let us be up and doing, using our idle resources to increase our wealth," he wrote in 1928. "With men and plants unemployed, it is ridiculous to say that we cannot afford these new developments. It is precisely with these plants and these men that we shall afford them."
The General Theory is often viewed as the foundation of modern macroeconomics. Few senior American economists agreed with Keynes through most of the 1930s. Yet his ideas were soon to achieve widespread acceptance, with eminent American professors such as Alvin Hansen agreeing with the General Theory before the outbreak of World War II.
Keynes himself had only limited participation in the theoretical debates that followed the publication of the General Theory as he suffered a heart attack in 1937, requiring him to take long periods of rest. Hyman Minsky and other post-Keynesian economists have argued that as result of this, Keynes's ideas were diluted by those keen to compromise with classical economists or to render his concepts with mathematical models like the IS/LM model (which, they argue, distort Keynes's ideas). Keynes began to recover in 1939, but for the rest of his life his professional energies were largely directed towards the practical side of economics – the problems of ensuring optimum allocation of resources for the War efforts, post-War negotiations with America, and the new international financial order that was presented at Bretton Woods, New Hampshire.
World War II
During World War II, Keynes argued in How to Pay for the War, published in 1940, that the war effort should be largely financed by higher taxation and especially by compulsory saving (essentially workers lending money to the government), rather than deficit spending, in order to avoid inflation. Compulsory saving would act to dampen domestic demand, assist in channelling additional output towards the war efforts, would be fairer than punitive taxation and would have the advantage of helping to avoid a post war slump by boosting demand once workers were allowed to withdraw their savings. In September 1941 he was proposed to fill a vacancy in the Court of Directors of the Bank of England, and subsequently carried out a full term from the following April. In June 1942, Keynes was rewarded for his service with a hereditary peerage in the King's Birthday Honours. On 7 July his title was gazetted as "BARON KEYNES, of Tilton, in the County of Sussex" and he took his seat in the House of Lords on the Liberal Party benches.
As the Allied victory began to look certain, Keynes was heavily involved, as leader of the British delegation and chairman of the World Bank commission, in the mid-1944 negotiations that established the Bretton Woods system. The Keynes-plan, concerning an international clearing-union argued for a radical system for the management of currencies. He proposed the creation of a common world unit of currency, the bancor, and new global institutions – a world central bank and the International Clearing Union. Keynes envisaged these institutions managing an international trade and payments system with strong incentives for countries to avoid substantial trade deficits or surpluses. The USA's greater negotiating strength, however, meant that the final outcomes accorded more closely to the more conservative plans of Harry Dexter White. According to US economist Brad Delong, on almost every point where he was overruled by the Americans, Keynes was later proved correct by events.
The two new institutions, later known as the World Bank and International Monetary Fund (IMF), were founded as a compromise that primarily reflected the American vision. There would be no incentives for states to avoid a large trade surplus; instead, the burden for correcting a trade imbalance would continue to fall only on the deficit countries, which Keynes had argued were least able to address the problem without inflicting economic hardship on their populations. Yet, Keynes was still pleased when accepting the final agreement, saying that if the institutions stayed true to their founding principles, "the brotherhood of man will have become more than a phrase."
Postwar
After the war, Keynes continued to represent the United Kingdom in international negotiations despite his deteriorating health. He succeeded in obtaining preferential terms from the United States for new and outstanding debts to facilitate the rebuilding of the British economy.
Just before his death in 1946, Keynes told Henry Clay, a professor of Social Economics and Advisor to the Bank of England of his hopes that Adam Smith's ' invisible hand' can help Britain out of the economic hole it is in: "I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago."
Legacy
The Keynesian ascendancy 1939–1979
From the end of the Great Depression to the mid-1970s, Keynes provided the main inspiration for economic policy makers in Europe, America and much of the rest of the world. While economists and policy makers had become increasingly won over to Keynes's way of thinking in the mid and late 1930s, it was only after the outbreak of World War II that governments started to borrow money for spending on a scale sufficient to eliminate unemployment. According to economist John Kenneth Galbraith (then a US government official charged with controlling inflation), in the rebound of the economy from wartime spending, "one could not have had a better demonstration of the Keynesian ideas."
The Keynesian Revolution was associated with the rise of modern liberalism in the West during the post-war period. Keynesian ideas became so popular that some scholars point to Keynes as representing the ideals of modern liberalism, as Adam Smith represented the ideals of classical liberalism. After the war Winston Churchill attempted to check the rise of Keynesian policy-making in the United Kingdom, and used rhetoric critical of the mixed economy in his 1945 election campaign. Despite his popularity as a war hero Churchill suffered a landslide defeat to Clement Attlee whose government's economic policy continued to be influenced by Keynes's ideas.
Neo-Keynesian economics
In the late 1930s and 1940s, economists (notably John Hicks, Franco Modigliani, and Paul Samuelson) attempted to interpret and formalise Keynes's writings in terms of formal mathematical models. In a process termed "the neoclassical synthesis", they combined Keynesian analysis with neo-classical economics to produce Neo-Keynesian economics, which came to dominate mainstream macroeconomic thought for the next 40 years.
By the 1950s, Keynesian policies were adopted by almost the entire developed world and similar measures for a mixed economy were used by many developing nations. By then, Keynes's views on the economy had become mainstream in the world's universities. Throughout the 1950s and 1960s, the developed and emerging free capitalist economies enjoyed exceptionally high growth and low unemployment. Professor Gordon Fletcher has written that the 1950s and 1960s, when Keynes's influence was at its peak, appear in retrospect as a Golden Age of Capitalism.
In late 1965 Time magazine ran a cover article with the title inspired by a possibly tongue-in-cheek comment from Milton Friedman, a comment later echoed by U.S. President Richard Nixon, that " We are all Keynesians now". The article described the exceptionally favourable economic conditions then prevailing, and reported that "Washington's economic managers scaled these heights by their adherence to Keynes's central theme: the modern capitalist economy does not automatically work at top efficiency, but can be raised to that level by the intervention and influence of the government." The article also states that Keynes was one of the three most important economists who ever lived, and that his General Theory was more influential than the magna opera of other famous economists, like Smith's The Wealth of Nations.
Economics: out of favour 1979–2007
Keynesian economics were officially discarded by the British Government in 1979, but forces had begun to gather against Keynes's ideas over 30 years earlier. Friedrich Hayek had formed the Mont Pelerin Society in 1947, with the explicit intention of nurturing intellectual currents to one day displace Keynesianism and other similar influences. Its members included Austrian School economist Ludwig von Mises along with the then young Milton Friedman. Initially the society had little impact on the wider world – Hayek was to say it was as if Keynes had been raised to sainthood after his death and that people refused to allow his work to be questioned. Friedman however began to emerge as a formidable critic of Keynesian economics from the mid-1950s, and especially after his 1963 publication of A Monetary History of the United States.
On the practical side of economic life, big government had appeared to be firmly entrenched in the 1950s but the balance began to shift towards private power in the 1960s. Keynes had written against the folly of allowing "decadent and selfish" speculators and financiers the kind of influence they had enjoyed after World War I. For two decades after World War II public opinion was strongly against private speculators, the disparaging label Gnomes of Zürich being typical of how they were described during this period. International speculation was severely restricted by the capital controls in place after Bretton Woods. Journalists Larry Elliott and Dan Atkinson say 1968 was a pivotal year when power shifted in the favour of private agents such as currency speculators. They pick out a key 1968 event as being when America suspended the conversion of the dollar into gold except on request of foreign governments, which they identify as when the Bretton Woods system first began to break down.
Criticisms of Keynes's ideas had begun to gain significant acceptance by the early 1970s as they were able to make a credible case that Keynesian models no longer reflected economic reality. Keynes himself had included few formulas and no explicit mathematical models in his General Theory. For commentators such as economist Hyman Minsky, Keynes's limited use of mathematics was partly the result of his scepticism about whether phenomena as inherently uncertain as economic activity could ever be adequately captured by mathematical models. Nevertheless, many models were developed by Keynesian economists, with a famous example being the Phillips curve which predicted an inverse relationship between unemployment and inflation. It implied that unemployment could be reduced by government stimulus with a calculable cost to inflation. In 1968 Milton Friedman published a paper arguing that the fixed relationship implied by the Philips curve did not exist. Friedman suggested that sustained Keynesian policies could lead to both unemployment and inflation rising at once – a phenomenon that soon became known as stagflation. In the early 1970s stagflation appeared in both the US and Britain just as Friedman had predicted, with economic conditions deteriorating further after the 1973 oil crisis. Aided by the prestige gained from his successful forecast, Friedman led increasingly successful criticisms against the Keynesian consensus, convincing not only academics and politicians but also much of the general public with his radio and television broadcasts. The academic credibility of Keynesian economics was further undermined by additional criticism from other Monetarists trained in the Chicago school of economics, by the Lucas Critique and by criticisms from Hayek's Austrian School. So successful were these criticisms that by 1980 Robert Lucas was saying economists would often take offence if described as Keynesians. Keynesian principles fared increasingly poorly on the practical side of economics – by 1979 they had been displaced by Monetarism as the primary influence on Anglo-American economic policy. However many officials on both sides of the Atlantic retained a preference for Keynes, and in 1984 the Federal Reserve officially discarded monetarism, after which Keynesian principles made a partial comeback as an influence on policy making. Not all academics accepted the criticism against Keynes – Minsky has argued that Keynesian economics had been debased by excessive mixing with neo-classical ideas from the 1950s, and that it was unfortunate the branch of economics had even continued to be called "Keynesian". Writing in The American Prospect Robert Kuttner argued it was not so much excessive Keynesian activism that caused the economic problems of the 1970s but the breakdown of the Bretton Woods system of capital controls, which allowed capital flight from regulated economies into unregulated economies in a fashion similar to Gresham's Law (where weak currencies undermine strong currencies). Historian Peter Pugh has stated a key cause of the economic problems afflicting America in the 1970s was the refusal to raise taxes to finance the Vietnam War, which was against Keynesian advice.
A more typical response was to accept some elements of the criticisms while refining Keynesian economic theories to defend them against arguments that would invalidate the whole Keynesian framework – the resulting body of work largely composing New Keynesian economics. In 1992 Alan Blinder was writing about a "Keynesian Restoration" as work based on Keynes's ideas had to some extent become fashionable once again in academia, though in the mainstream it was highly synthesised with Monetarism and other neo-classical thinking. In the world of policy making, free-market influences broadly sympathetic to Monetarism remained very strong at government level – in powerful normative institutions like the World Bank, IMF and US Treasury, and in prominent opinion-forming media such as the Financial Times and The Economist.
Economics: the Keynesian resurgence of 2008–2009
The 2007–2012 global financial crisis led to public skepticism about the free market consensus even from some on the economic right. In March 2008, Martin Wolf, chief economics commentator at the Financial Times, announced the death of the dream of global free-market capitalism. In the same month macroeconomist James K. Galbraith used the 25th Annual Milton Friedman Distinguished Lecture to launch a sweeping attack against the consensus for monetarist economics and argued that Keynesian economics were far more relevant for tackling the emerging crises. Economist Robert Shiller had begun advocating robust government intervention to tackle the financial crises, specifically citing Keynes. Nobel laureate Paul Krugman also actively argued the case for vigorous Keynesian intervention in the economy in his columns for the New York Times. Other prominent economic commentators arguing for Keynesian government intervention to mitigate the financial crisis include George Akerlof, Brad Delong, Robert Reich, and Joseph Stiglitz. Newspapers and other media have also cited work relating to Keynes by Hyman Minsky, Robert Skidelsky, Donald Markwell and Axel Leijonhufvud.
A series of major bail-outs were pursued during the financial crisis, starting on 7 September with the announcement that the U.S. government was to nationalise the two government-sponsored enterprises which oversaw most of the U.S. subprime mortgage market – Fannie Mae and Freddie Mac. In October, the British Chancellor of the Exchequer referred to Keynes as he announced plans for substantial fiscal stimulus to head off the worst effects of recession, in accordance with Keynesian economic thought. Similar policies have been adopted by other governments worldwide. This is in stark contrast to the action permitted to Indonesia during its financial crisis of 1997, when it was forced by the IMF to close 16 banks at the same time, prompting a bank run. Much of the recent discussion reflected Keynes's advocacy of international coordination of fiscal or monetary stimulus, and of international economic institutions such as the IMF and the World Bank, which many had argued should be reformed at a "new Bretton Woods" even before the crises broke out. IMF and United Nations economists advocated a coordinated international approach to fiscal stimulus. Donald Markwel argued that in the absence of such an international approach, there would be a risk of worsening international relations and possibly even world war arising from similar economic factors to those present during the depression of the 1930s.
By the end of December 2008, the Financial Times reported that "the sudden resurgence of Keynesian policy is a stunning reversal of the orthodoxy of the past several decades." In December 2008, Paul Krugman released his book, The Return of Depression Economics and the Crisis of 2008, arguing that economic conditions similar to what existed during the earlier part of the 20th century had returned, making Keynesian policy prescriptions more relevant than ever. In February 2009 Shiller and George Akerlof published Animal Spirits, a book where they argue the current US stimulus package is too small as it does not take into account Keynes's insight on the importance of confidence and expectations in determining the future behaviour of businessmen and other economic agents.
In a March 2009 speech entitled Reform the International Monetary System, Zhou Xiaochuan, the governor of the People's Bank of China came out in favour of Keynes's idea of a centrally managed global reserve currency. Zhou argued that it was unfortunate that part of the reason for the Bretton Woods system breaking down was the failure to adopt Keynes's bancor. Zhou proposed a gradual move towards increased use of IMF special drawing rights (SDRs). Although Zhou's ideas have not yet been broadly accepted, leaders meeting in April at the 2009 G-20 London summit agreed to allow $250 billion of special drawing rights to be created by the IMF, to be distributed globally. Stimulus plans have been credited for contributing to a better than expected economic outlook by both the OECD and the IMF, in reports published in June and July 2009. Both organisations warned global leaders that recovery is likely to be slow, so counter recessionary measures ought not be rolled back too early.
While the need for stimulus measures has been broadly accepted among policy makers, there has been much debate over how to fund the spending. Some leaders and institutions such as Angela Merkel and the European Central Bank have expressed concern over the potential impact on inflation, national debt and the risk that a too large stimulus will create an unsustainable recovery.
Among professional economists the revival of Keynesian economics has been even more divisive. Although many economists, such as George Akerlof, Paul Krugman, Robert Shiller, and Joseph Stiglitz, support Keynesian stimulus, over 300 economists signed a petition stating that they do not believe higher government spending will help the United States economy recover from the Great Recession. Some economists, such as Robert Lucas, questioned the theoretical basis for stimulus packages. Others, like Robert Barro and Gary Becker, say that the empirical evidence for beneficial effects from Keynesian stimulus does not exist. However, there is a growing academic literature that shows that fiscal expansion helps an economy grow in the near term, and that certain types of fiscal stimulus are particularly effective.
Reception
Praise
Keynes's economic thinking only began to achieve close to universal acceptance in the last few years of his life. On a personal level, Keynes's charm was such that he was generally well received wherever he went – even those who found themselves on the wrong side of his occasionally sharp tongue rarely bore a grudge. Keynes's speech at the closing of the Bretton Woods negotiations was received with a lasting standing ovation, rare in international relations, as delegates acknowledged the scale of his achievements made despite poor health.
Hayek
Austrian School economist Friedrich Hayek was Keynes's most prominent contemporary critic, with sharply opposing views on the economy. Yet after Keynes's death he wrote:
He was the one really great man I ever knew, and for whom I had unbounded admiration. The world will be a very much poorer place without him.
For his part, Keynes praised Hayek's book The Road to Serfdom, writing to the Austrian economist that, "Morally and philosophically I find myself in agreement with virtually the whole of it."
Lionel Robbins
Lionel Robbins, former head of the economics department at the London School of Economics, who had many heated debates with Keynes in the 1930s, had this to say after observing Keynes in early negotiations with the Americans while drawing up plans for Bretton Woods:
This went very well indeed. Keynes was in his most lucid and persuasive mood: and the effect was irresistible. At such moments, I often find myself thinking that Keynes must be one of the most remarkable men that have ever lived – the quick logic, the birdlike swoop of intuition, the vivid fancy, the wide vision, above all the incomparable sense of the fitness of words, all combine to make something several degrees beyond the limit of ordinary human achievement.
LePan
Douglas LePan, an official from the Canadian High Commission, wrote:
I am spellbound. This is the most beautiful creature I have ever listened to. Does he belong to our species? Or is he from some other order? There is something mythic and fabulous about him. I sense in him something massive and sphinx like, and yet also a hint of wings.
Russell
Bertrand Russell named Keynes one of the most intelligent people he had ever known, commenting:
Every time I argued with Keynes, I felt that I took my life in my hands and I seldom emerged without feeling something of a fool.
The Times
Keynes's obituary in The Times included the comment:
There is the man himself – radiant, brilliant, effervescent, gay, full of impish jokes ... He was a humane man genuinely devoted to the cause of the common good.
Critiques
As a man of the centre described as undoubtedly having the greatest impact of any 20th-century economist, Keynes attracted considerable criticism from both sides of the political spectrum. In the 1920s, Keynes was seen as anti-establishment and was mainly attacked from the right. In the "red 1930s", many young economists favoured Marxist views, even in Cambridge, and while Keynes was engaging principally with the right to try to persuade them of the merits of more progressive policy, the most vociferous criticism against him came from the left, who saw him as a supporter of capitalism. From the 1950s and onwards, most of the attacks against Keynes have again been from the right.
Hayek
In 1931 Friedrich Hayek extensively critiqued Keynes's 1930 Treatise on Money. After reading Hayek's The Road to Serfdom, Keynes wrote to Hayek saying: "Morally and philosophically I find myself in agreement with virtually the whole of it" but concluded the same letter with the recommendation:
What we need therefore, in my opinion, is not a change in our economic programmes, which would only lead in practice to disillusion with the results of your philosophy; but perhaps even the contrary, namely, an enlargement of them. Your greatest danger is the probable practical failure of the application of your philosophy in the United States.
On the pressing issue of the time, whether deficit spending could lift a country from depression, Keynes replied to Hayek's criticism in the following way:
I should... conclude rather differently. I should say that what we want is not no planning, or even less planning, indeed I should say we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers wholly share your own moral position. Moderate planning will be safe enough if those carrying it out are rightly oriented in their own minds and hearts to the moral issue.
Hayek explained the letter by saying:
Because Keynes believed that he was fundamentally still a classical English liberal and wasn't quite aware of how far he had moved away from it. His basic ideas were still those of individual freedom. He did not think systematically enough to see the conflicts.
Hayek felt that application of Keynes's policies would give too much power to the state and would lead to socialism.
Friedman
While Milton Friedman described The General Theory as "a great book", he argues that its implicit separation of nominal from real magnitudes is neither possible nor desirable. Macroeconomic policy, Friedman argues, can reliably influence only the nominal. He and other monetarists have consequently argued that Keynesian economics can result in stagflation, the combination of low growth and high inflation that developed economies suffered in the early 1970s. More to Friedman's taste was the Tract on Monetary Reform (1923), which he regarded as Keynes's best work because of its focus on maintaining domestic price stability.
Schumpeter
Joseph Schumpeter was an economist of the same age as Keynes and one of his main rivals. He was among the first reviewers to argue that Keynes's General Theory was not a general theory, but was in fact a special case. He said the work expressed "the attitude of a decaying civilisation". After Keynes's death Schumpeter wrote a brief biographical piece called Keynes the Economist – on a personal level he was very positive about Keynes as a man ; praising his pleasant nature, courtesy and kindness. He assessed some of Keynes biographical and editorial work as among the best he'd ever seen. Yet Schumpeter remained critical about Keynes's economics, linking Keynes's childlessness to what Schumpeter saw as an essentially short term view. He considered Keynes to have a kind of unconscious patriotism that caused him to fail to understand the problems of other nations. For Schumpeter "Practical Keynesianism is a seedling which cannot be transplanted into foreign soil: it dies there and becomes poisonous as it dies."
Hazlitt
Austrian School economic commentator and journalist Henry Hazlitt's The Failure of the New Economics is a paragraph-by-paragraph refutation of The General Theory. In 1960 he published the book The Critics of Keynesian Economics where he gathered together the major criticisms of Keynes made up to that year.
Harry Truman
President Harry Truman was skeptical of Keynesian theorizing. "Nobody can ever convince me that Government can spend a dollar that it's not got," he told Leon Keyserling, a Keynesian economist who chaired Truman's Council of Economic Advisers.
Allegations of racism
Keynes was on occasion heard making statements which could be perceived as racist: for example, he would use the word "niggers" to refer to black people in casual conversations. This term was often used neutrally in British circles at that time, and was not necessarily an expression of negative feelings, as when, for example, he wrote to Duncan Grant that “the only really sympathetic and original thing in America are the niggers, who are charming”. Nonetheless fellow British observers recount being shocked by some statements he made, such as the following, apropos the Washington summer: "It's far too hot. Much too hot for white men. All right for niggers." He also wrote that there was "beastliness in the Russian nature” as well as "cruelty and stupidity”, and other comments which may be construed as anti-Russian. Some critics, such as Rothbard, have sought to infer that Keynes had sympathy with Nazism, and a number of writers have described him as anti-Semitic. Keynes's private letters express portraits and descriptions some of which can be characterised as anti-Semitic, others as pro-Semitic. Scholars have suggested that these reflect clichés current at the time that he accepted uncritically, rather than any racism. Keynes had many Jewish friends, including Isaiah Berlin and Piero Sraffa. Keynes several times used his influence to help his Jewish friends, most notably when he successfully lobbied for Ludwig Wittgenstein to be allowed residency in the United Kingdom explicitly in order to rescue him from being deported to Nazi-occupied Austria. Keynes was, furthermore, a supporter of Zionism, serving on committees supporting the cause.
Allegations that he was racist or had totalitarian beliefs have been rejected by biographers such as Robert Skidelsky. Professor Gordon Fletcher writes that "the suggestion of a link between Keynes and any support of totalitarianism cannot be sustained". Once the aggressive tendencies of the Nazis towards Jews and other minorities became apparent, Keynes made clear his loathing of Nazism. As a lifelong pacifist he had initially favoured peaceful containment, yet he began to advocate a forceful resolution while many conservatives were still arguing for appeasement. After the war started he roundly criticised the Left for losing their nerve to confront Hitler.
The intelligentsia of the Left were the loudest in demanding that the Nazi aggression should be resisted at all costs. When it comes to a showdown, scarce four weeks have passed before they remember that they are pacifists and write defeatist letters to your columns, leaving the defence of freedom and civilisation to Colonel Blimp and the Old School Tie, for whom Three Cheers.
Allegations of pro-inflationary views
Keynes has been characterised as being indifferent or even positive about inflation. Keynes had indeed expressed a preference for inflation over deflation, saying that if one has to choose between the two evils it is "better to disappoint the rentier" than to inflict pain on working-class families. However, Keynes was consistently adamant about the need to avoid inflation where possible.
In The Economic Consequences of the Peace, Keynes had written:
Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
Keynes remained convinced of the dangers of inflation to the end of his life; during World War II he argued strongly for policies that would minimise post-war inflation.
Personal life
Keynes's early romantic and sexual relationships were almost exclusively with men. At Eton and at Cambridge, Keynes had been prolific in his homosexual activity; significant among these early partners were Dilly Knox and Daniel Macmillan. Keynes was open about his homosexual affairs, and between 1901 to 1915, kept separate diaries in which he tabulated his many sexual encounters. Keynes's relationship and later close friendship with Macmillan was to be fortuitous; through Dan, Macmillan & Co first published his Economic Consequences of the Peace. Attitudes in the Bloomsbury Group, in which Keynes was avidly involved, were relaxed about homosexuality. Keynes, together with writer Lytton Strachey, had reshaped the Victorian attitudes of the influential Cambridge Apostles; "since [their] time, homosexual relations among the members were for a time common", wrote Bertrand Russell. One of Keynes's greatest loves was the artist Duncan Grant, whom he met in 1908. Like Grant, Keynes was also involved with Lytton Strachey, though they were for the most part love rivals, and not lovers. Keynes had won the affections of Arthur Hobhouse, as well as Grant, both times falling out with a jealous Strachey for it. Strachey had previously found himself put off by Keynes, not least because of his manner of "treat[ing] his love affairs statistically".
Ray Costelloe (who would later marry Oliver Strachey) was an early heterosexual interest of Keynes. Of this infatuation, Keynes had written "I seem to have fallen in love with Ray a little bit, but as she isn't male I haven't [been] able to think of any suitable steps to take."
Marriage
In 1921, Keynes fell "very much in love" with Lydia Lopokova, a well-known Russian ballerina, and one of the stars of Sergei Diaghilev's Ballets Russes. For the first years of the courtship, Keynes maintained an affair with a younger man, Sebastian Sprott, in tandem with Lopokova, but eventually chose Lopokova exclusively, on marrying her. They married in 1925. The union was happy, with biographer Peter Clarke writing that the marriage gave Keynes "a new focus, a new emotional stability and a sheer delight of which he never wearied". Lydia became pregnant in 1927 but miscarried. Among Keynes's Bloomsbury friends, Lopokova was, at least initially, subjected to criticism for her manners, mode of conversation and supposedly humble social origins – the latter of the ostensible causes being particularly noted in the letters of Vanessa and Clive Bell, and Virginia Woolf. In her novel Mrs Dalloway (1925), Woolf bases the character of Rezia Warren Smith on Lopokova. E. M. Forster would later write in contrition: "How we all used to underestimate her".
Support for the arts
Keynes was interested in literature in general and drama in particular and supported the Cambridge Arts Theatre financially, which allowed the institution, at least for a while, to become a major British stage outside of London.
Keynes's personal interest in classical opera and dance led him to support the Royal Opera House at Covent Garden and the Ballet Company at Sadler's Wells. During the War as a member of CEMA (Council for the Encouragement of Music and the Arts) Keynes helped secure government funds to maintain both companies while their venues were shut. Following the War Keynes was instrumental in establishing the Arts Council of Great Britain and was the founding Chairman in 1946. Unsurprisingly from the start the two organisations that received the largest grant from the new body were the Royal Opera House and Sadler's Wells.
Like several other notable British authors of his time, Keynes was a member of the Bloomsbury Group. Virginia Woolf's biographer tells an anecdote on how Virginia Woolf, Keynes and T. S. Eliot would discuss religion at a dinner party, in the context of their struggle against Victorian era morality. Keynes had attended church up to his teens, but by university he had become agnostic, which he remained until his death.
Investments
Keynes was ultimately a successful investor, building up a private fortune. His assets were nearly wiped out following the Wall Street Crash of 1929, which he did not foresee, but he soon recouped. At Keynes's death, in 1946, his worth stood just short of £500,000 – equivalent to about £11 million ($16.5 million) in 2009. The sum had been amassed despite lavish support for various causes and his personal ethic which made him reluctant to sell on a falling market when if too many did it could deepen a slump.
Keynes built up a substantial collection of fine art, including works, not all of them minor, by Paul Cézanne, Edgar Degas, Amedeo Modigliani, Georges Braque, Pablo Picasso, and Georges Seurat (some of which can now be seen at the Fitzwilliam Museum). He enjoyed collecting books: for example, he collected and protected many of Isaac Newton's papers. It is in part on the basis of these papers that Keynes wrote of Newton as "the last of the magicians."
Political causes
Keynes was a lifelong member of the Liberal party, which until the 1920s had been one of the two main political parties in the United Kingdom, and as late as 1916 had often been the dominant power in government. Keynes had helped campaign for the Liberals at elections from as early as 1906, yet he always refused to run for office himself, despite being asked to do so on three separate occasions in 1920. From 1926 when Lloyd George became leader of the Liberals, Keynes took a major role in defining the party's economics policy, but by then the Liberals had been displaced into third party status by the Labour party.
In 1939 Keynes had the option to enter Parliament as an independent MP with the University of Cambridge seat. A by-election for the seat was to be held due to the illness of an elderly Tory, and the master of Magdalene College had obtained agreement that none of the major parties would field a candidate if Keynes chose to stand. Keynes declined the invitation as he felt he would wield greater influence on events if he remained a free agent.
Keynes was a proponent of eugenics. He served as Director of the British Eugenics Society from 1937 to 1944. As late as 1946, shortly before his death, Keynes declared eugenics to be "the most important, significant and, I would add, genuine branch of sociology which exists."
Keynes once remarked that "the youth had no religion save Communism and this was worse than nothing." Marxism "was founded upon nothing better than a misunderstanding of Ricardo", and, given time, he, Keynes, "would deal thoroughly with the Marxists" and other economists to solve the economic problems their theories "threaten[ed] to cause".
In 1931 Keynes went on to write the following on Marxism:
How can I accept the Communist doctrine, which sets up as its bible, above and beyond criticism, an obsolete textbook which I know not only to be scientifically erroneous but without interest or application to the modern world? How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeoisie and the intelligentsia, who with all their faults, are the quality of life and surely carry the seeds of all human achievement? Even if we need a religion, how can we find it in the turbid rubbish of the red bookshop? It is hard for an educated, decent, intelligent son of Western Europe to find his ideals here, unless he has first suffered some strange and horrid process of conversion which has changed all his values.
Death
Throughout his life Keynes worked energetically for the benefit both of the public and his friends – even when his health was poor he laboured to sort out the finances of his old college, and at Bretton Woods, he worked to institute an international monetary system that would be beneficial for the world economy. Keynes suffered a series of heart attacks, which ultimately proved fatal, beginning during negotiations for an Anglo-American loan in Savannah, Georgia, where he was trying to secure favourable terms for the United Kingdom from the United States, a process he described as "absolute hell." A few weeks after returning from the United States, Keynes died of a heart attack at Tilton, his farmhouse home near Firle, East Sussex, England, on 21 April 1946 at the age of 62. A member of a very long-lived family (his parents, two grandparents and his brother all lived into their nineties), he died surprisingly young, apparently the result of overwork and childhood illness. Both of Keynes's parents outlived him: father John Neville Keynes (1852–1949) by three years, and mother Florence Ada Keynes (1861–1958) by twelve. Keynes's brother Sir Geoffrey Keynes (1887–1982) was a distinguished surgeon, scholar and bibliophile. His nephews include Richard Keynes (1919–2010) a physiologist; and Quentin Keynes (1921–2003), an adventurer and bibliophile. His widow, Lydia Lopokova, died in 1981.
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Friedrich Hayek
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Books
Monetary Theory and the Trade Cycle
– Geldtheorie und Konjunkturtheorie. (Beitrage zur Konjunkturforschung, heraus-gegeben vom Österreichisches Institut für Konjunkturforschung, No. 1). Vienna and Leipzig: Hölder-Pichler-Tempsky, 1929/2, xii, 147 pp. (England 1933, Japan 1935, Spain 1936.) Translated into English by Lionel Robbins as Monetary Theory and the Trade Cycle. London: Jonathan Cape, 1933, 244 pp. American edition, New York: Harcourt Brace & Co., 1933. Reprinted New York: Augustus M. Kelley, 1966.
The German essay, of which the following is a translation, represents an expanded version of a paper prepared for the meeting of the Verein für Sozialpolitik, held in Zurich in September… More
Prices and Production
– Studies in Economics and Political Science, edited by the director of the London School of Economics and Political Sciences. No. 107 in the series of Monographs by writers connected with the London School of Economics and Political Science.) London: Routledge & Sons, 1931/2, xv, 112 pp. 2nd revised and enlarged edition, London: Routledge & Kegan Paul, 1935/9, also 1967 edition, xiv, 162 pp. American edition, New York: Macmillan, 1932.
These seven works taken together represent the first integration and systematic elaboration of the Austrian theories of money, capital, business cycles, and comparative monetary… More
Monetary Nationalism and International Stability
– Geneva, 1937; London: Longmans, Green (The Graduate Institute of International Studies, Geneva, Publication Number 18), 1937, xiv, 94 pp. Reprinted New York: Augustus M. Kelley, 1964, 1971, 1974.
From Preface: “The five lectures which are here reproduced are necessarily confined to certain aspects of the wide subject indicated by the title. They are printed essentially as they… More
Profits, Investment, and Other Essays
– London: Routledge & Kegan Paul, 1939/3, viii, 266 pp., also 1969 edition. Reprinted New York: Augustus M. Kelley, 1969, 1970; Clifton, New Jersey: Augustus M. Kelley, 1975.
From Preface: “The essays collected in this volume are a selection from the various attempts made in the course of the past ten years to improve and develop the outline of a theory of… More
The Pure Theory of Capital
– London: Routledge & Kegan Paul, 1941/2 (also 1950 edition); Chicago: University of Chicago Press, 1941 (also 1950, 1952 and 1975 editions); xxxi, 454 pp. (Spain 1946, Japan 1951 and 1952).
The Pure Theory of Capital, F. A. Hayek’s long-overlooked, little-understood volume, was his most detailed work in economic theory. Originally published in 1941 when fashionable economic… More
The Road to Serfdom
– London: George Routledge & Sons, 1944/1945/20 (also 1969 edition); Chicago: University of Chicago Press, 1944/1945/20 (also 1969 edition), 250 pp.
An unimpeachable classic work in political philosophy, intellectual and cultural history, and economics, The Road to Serfdom has inspired and infuriated politicians, scholars, and general… More
Individualism and Economic Order
– London: George Routledge & Sons, 1948/5, also 1960, 1976; Chicago: University of Chicago Press, 1948/5, also 1969, 1976, vii, 272 pp.
Excerpt: “Although the essays collected in this volume may at first appear to be concerned with a great variety of topics, I hope that the reader will soon discover that most of them… More
John Stuart Mill and Harriet Taylor: Their Friendship and Subsequent Marriage
– London: Routledge & Kegan Paul, 1951/1969; Chicago: University of Chicago Press, 1951/1969, 320 pp.
Excerpt: “The literary portrait which in the Autobiography John Stuart Mill has drawn for us of the woman who ultimately became his wife creates a strong wish to know more about her.… More
The Counter-Revolution of Science: Studies on the Abuse of Reason
– Glencoe, Illinois: The Free Press, 1952, 255 pp; new edition New York, 1964; 2nd edition with 1959 Preface to German edition, Indianapolis, Indiana: Liberty Press, 1979, also available in Liberty Press paperback.
Early in the last century the successes of science led a group of French thinkers to apply the principles of science to the study of society. These thinkers purported to have discovered the… More
The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology
– London: Routledge & Kegan Paul, 1952; Chicago: University of Chicago Press, 1952, xxii, 209 pp; new edition 1963/1976. Reprinted Chicago: University of Chicago Press, Phonenix Book paperback, 1963 (out of print). University of Chicago Press has reissued the paperback in a Midway Reprint, 1976, with the Heinrich Klüver Introduction.
A great deal of explanation would be necessary were I to justify why an economist ventures to rush in where psychologists fear to tread. But this excursion into psychology has little… More
The Political Ideal of the Rule of Law
– Cairo: National Bank of Egypt, Fiftieth Anniversary Commemorative Lectures, 1955, 76 pp. Publication of four lectures Hayek delivered at the invitation of the National Bank of Egypt.
The Constitution of Liberty
– London: Routledge and Kegan Paul, 1960; Chicago: University of Chicago Press, 1960/1963/5 (also 1969 edition); Toronto: The University of Toronto Press, 1960, x, 570 pp. Also available in paperback: Chicago: Henry Regnery Co. Gateway Edition, 1972.
From Introduction: “If old truths are to retain their hold on men’s minds, they must be restated in the language and concepts of successive generations. What at one time are… More
Studies in Philosophy, Politics, and Economics
– London: Routledge & Kegan Paul, 1967/1969; Chicago: University of Chicago Press, 1967/1969; Toronto: University of Toronto Press, 1967/1969; x, 356 pp. Reprinted in paperback New York: Simon and Schuster Clarion Book, 1969.
The reason for the collection of essays presented here by Hayek is succinctly presented in the author’s preface: “This volume contains a selection from the work of the last… More
Freiburg Studies: Collected Essays
– Tübingen: Walter Eucken Institut (Wirtschaftswissenschaftliche und wirtschaftsrechliche Untersuchungen 5) J.C.B. Mohr/P. Siebeck, 1969, 284 pp.
Law, Legislation, and Liberty
– (3 volumes) London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1973, xi, 184 pp. A trilogy published in the following sequence:
Vol. I, Rules and Order, 1973
Vol. II, The Mirage of Social Justice, 1976
Vol. III, The Political Order of a Free People, 1979
Law, Legislation and Liberty is the 1973 magnum opus in three volumes by Nobel laureate economist and political philosopher Friedrich Hayek. In it, Hayek further develops the philosophical… More
New Studies in Philosophy, Politics, Economics and the History of Ideas
– London: Routledge & Kegan Paul, 1978; Chicago: University of Chicago Press, 1978.
Excerpt: “On the whole the present volume deals again equally with problems of philosophy, politics and economics, though it proved to be a little more difficult to decide to which… More
The Fatal Conceit: The Errors of Socialism
– William Warren Bartley, ed. The University of Chicago Press. 1991.
Editorial Foreword Preface Introduction: Was Socialism a Mistake? 1. Between Instinct and Reason 2. The Origins of Liberty, Property and Justice 3. The Evolution of the Market: Trade and… More
Essays
The Stabilization Problem for Countries on the Gold Standard
– “Das Stabilisierungsproblem in Goldwährungsländern.” Zeitschrift für Volkswirtschaft und Sozialpolitik, N.S. 4 (1924).
Discount Policy and Commodity Prices
– “Diskontopolitik und Warenpreise.” Der Österreichische Volkswirt 17 (1,2), (Vienna 1924).
The American Banking System since the Reform of 1914
– “Das amerikanische Bankwesen seit der Reform von 1914.” Der Österreichische Volkswirt 17 (29–33), (Vienna 1925).
The Monetary Policy in the United States Since Overcoming the Crisis of 1920
– “Die Währungspolitik der Vereinigten Staaten seit der Überwindung der Krise von 1920.” Zeitschrift für Volkswirtschaft und Sozialpolitik. N.S. 5 (1925).
Comments on the Problem of Imputation
– “Bemerkungen zum Zurechnungsproblem.” Jahrbücher für Nationalökonomie und Statistik 124 (1926): 1–18.
The Meaning of Business Cycle Research for Economic Life
– “Die Bedeutung der Konjunkturforschung für das Wirtschaftsleben.” Der Österreichische Volkswirt 19 (2), (Vienna 1926).
Business Cycle Research in Austria
– “Konjunkturforschung in Osterreich.” Die Industrie 32 (30), (Vienna 1927).
On the Setting of the Problem of Rent Theory
– "Zur Problemstellung der Zinstheorie." Archiv für Sozialwissenschaften und Sozialpolitik 58 (1927): 517-532.
The Laws of Human Relationships and of the Rules to be Derived Therefrom for Human Action
– Hermann Heinrich Gossen. Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln. Introduced by Friedrich A. Hayek. 3rd edition. Berlin: Prager, 1927, xxiii, 278 pp.
“The Laws of Human Relationships and of the Rules to be Derived Therefrom for Human Action.” Cf.: A-15. Gossen’s (1810–1858) fame rests on this one book, first published in… More
The Intertemporal Equilibrium System of Prices and the Movements of the ‘Value of Money.’
– “Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des ‘Geldwertes.’” Weltwirtschaftliches Archiv 28 (1928): 33–76.
Some Remarks on the Relationship between Monetary Theory and Business Cycle Theory
– “Einige Bemerkungen über das Verhältnis der Geldtheorie zur Konjunkturtheorie.” Schriften des Vereins für Sozialpolitik 173/2 (1928): 247–295.
Discussion Comments on ‘Credit and Business Cycle’
– “Diskussionsbemerkungen über ‘Kredit und Konjunktur.’” Shriften des Vereins für Sozialpolitik 175, Verhandlungen 1928, (1928).
Theorie der Preistaxen
– “Theorie der Preistaxen.” Közgazdasági Enciklopédia, Budapest, 1929.
The Rent Control Problem, Political Economic Considerations
– Das Mieterschutzproblem, Nationalökonomische Betrachtungen. Vienna: Steyrermühl-Verlag, Bibliothek für Volkswirtschaft und Politik, No. 2, 1929.
The Repercussions of Rent Restrictions
– “Wirkungen der Mietzinbeschränkungen.” Munich: Schriften des Vereins für Sozialpolitik 182 (1930)
Comments on the Preceding Reply of Prof. Emil Lederer
– “Bemerkungen zur vorstehenden Erwiderung Prof. Emil Lederers.” Zeitschrift für Nationalökonomie 1 (5), (1930).
The Pure Theory of Money: A Rejoinder to Mr. Keynes
– “The Pure Theory of Money: A Rejoinder to Mr. Keynes.” Economica 11, no. 34 (November 1931): 398–403.
Money and Capital: A Reply to Mr. Sraffa
– "Money and Capital: A Reply to Mr. Sraffa.” Economic Journal 42 (June 1932): 237–249
Excerpt: “With an article devoted to a critical discussion of my Prices and Production, Mr. Sraffa has recently entered the arena of monetary controversy. There is no denying the fact… More
A Note on the Development of the Doctrine of ‘Forced Saving’
– “A Note on the Development of the Doctrine of ‘Forced Saving’.” Quarterly Journal of Economics 47 (November 1932): 123–133.
Excerpt: “The enhanced interest in the problem of “forced saving,” due to recent developments in the theory of industrial fluctuations, has led to the discovery of so many more or… More
Reflections on the Pure Theory of Money of Mr. J. M. Keynes
– “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 12 (February 1932 - Part II): 22–44.
The Fate of the Gold Standard
– “Das Schicksal der Goldwährung.” Der Deutsche Volkswirt 6 (20), (1932).
Foreign Exchange Restrictions
– “Foreign Exchange Restrictions.” The Economist 6 (1932).
Capital Consumption
– “Kapitalaufzehrung.” Weltwirtschaftliches Archiv 36 (July 1932/II): 86–108.
Gossen, Hermann Heinrich
– “Gossen, Hermann Heinrich.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1932. Vol. 7, p. 3.
Macleod, Henry D.
– “Macleod, Henry D.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2, p. 30.
Norman, George W.
– “Norman, George W.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2.
Concerning Neutral Money
– “Über Neutrales Geld.” Zeitschrift für Nationalökonomie 4 (October 1933).
The Present State and Immediate Prospects of the Study of Industrial Fluctuations
– Contribution to Gustav Clausing, ed. Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff. Munich: Duncker & Humblot, 1933.
Contributions on Monetary Theory
– Beiträge zur Geldtheorie. Edited and prefaced by Friedrich A. Hayek. Contributions by Marco Fanno, Marius W. Holtrop, Johan G. Koopmans, Gunnar Myrdal, Knut Wicksell. Vienna, 1933.
Capital and Industrial Fluctuations
– “Capital and Industrial Fluctuations.” Econometrica 2 (April 1934): 152–167.
Excerpt: A sympathetic criticism of the kind to which the views of the present author have been subjected by Messrs Hansen and Tout in a recent issue of ECONOMETRICA, offers a welcome… More
On the Relationship between Investment and Output
– “On the Relationship between Investment and Output.” Economic Journal 44 (1934): 207–231.
Carl Menger
– “Carl Menger.” Economica N.S. 1 (November 1934): 393–420.
Excerpt: “The history of economics is full of tales of forgotten forerunners, men whose work had no effect and was only rediscovered after their main ideas had been made popular by… More
Philippovich, Eugen von
– “Philippovich, Eugen von.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 12, p. 116.
Saving
– “Saving.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 13, pp. 548–552.
The Outlook for Interest Rates
– “The Outlook for Interest Rates.” The Economist 7 (1934).
Stable Prices or Neutral Money
– “Stable Prices or Neutral Money.” The Economist 7 (1934).
A Regulated Gold Standard
– “A Regulated Gold Standard.” The Economist (May 11, 1935).
Excerpt: “It is still impossible to predict when conditions will make a solution of international currency problems appear practicable. This does not mean that it is too early to ask… More
Spor miedzy szkola ‘Currency’ i szkola ‘Banking’
– “Spor miedzy szkola ‘Currency’ i szkola ‘Banking’.” Ekonomista 55 (Warsaw, 1935).
Edwin Cannan
– “Edwin Cannan” (Obituary). Zeitschrift für Nationalökonomie 6 (1935): 246–250.
Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism
– Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism. Edited with an Introduction and a Concluding Essay by F. A. Hayek. Contributions by N. G. Pierson, Ludwig von Mises, Georg Halm, and Enrico Barone. London: George Routledge & Sons, 1935.
Excerpt: “There is reason to believe that we are at last entering an era of reasoned discussion of what has long uncritically been assumed to be a reconstruction of society on… More
Economic Planning in Soviet Russia
– Boris Brutzkus. Economic Planning in Soviet Russia. Edited and prefaced by Friedrich A. Hayek. London: George Routledge & Sons, 1935; xvii, 234 pp.
From a review: These two volumes, together with a translation (yet to appear) of Mises’ Die Gemeinwirtschaft, constitute a formidable counterattack by laissez-faire on all forms of… More
The Mythology of Capital
– “The Mythology of Capital.” Quarterly Journal of Economics 50 (1936): 199–228.
Excerpt: “Professor Knight’s crusade against the concept of the period of investment revives a controversy which attracted much attention thirty and forty years ago but was not… More
Technical Progress and Overcapacity
– “Technischer Fortschritt und Überkapazität.” Österreichische Zeitschrift für Bankwesen 1 (1936).
Utility Analysis and Interest
– “Utility Analysis and Interest.” Economic Journal 46 (1936): 44–60.
The International Monetary Situation
– “La situation monétaire internationale.” Bulletin Périodique de la Societé Belge d'Études et d'Expansion (Brussels), No. 103. (1936).
Economics and Knowledge
– “Economics and Knowledge.” Economica N.S. 4 (February 1937): 33–54.
Excerpt: “The ambiguity of the title of this paper is not accidental. Its main subject is of course the role which assumptions and propositions about the knowledge possessed by the… More
Investment that Raises the Demand for Capital
– “Investment that Raises the Demand for Capital.” Review of Economic Statistics 19 (November 1937).
Excerpt: “The purpose of this article is to state a proposition which underlies the modern “monetary over-investment theories” of the trade cycle in a form in which, as… More
Introduction to a Theory of Capital
– “Einleitung zu einer Kapitaltheorie.” Zeitschrift für Nationalökonomie 8 (1937): 1–9.
The Gold Problem
– “Das Goldproblem.” Österreichische Zeitschrift für Bankwesen 2 (1937).
Freedom and the Economic System
– “Freedom and the Economic System.” Contemporary Review (April 1938).
Excerpt: The link between classical liberalism and present-day Socialism — often still misnamed liberalism — is undoubtedly the belief that the consummation of individual freedom… More
The Paradox of Saving
– "The Paradox of Saving," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The assertion that saving renders the purchasing power of the consumer insufficient to take up the volume of current production, although made more often by members of the… More
Price Expectations, Monetary Disturbances and Malinvestments
– “Price Expectations, Monetary Disturbances and Malinvestments," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The most characteristic feature of the work of our generation of economists is probably the general endeavor to apply the methods and results of the pure theory of… More
The Maintenance of Capital
– “The Maintenance of Capital,” Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The significance of the problem. It is not likely that in the whole field of economics there are many more concepts which are at the same time so generally used and so… More
Economic Conditions of Inter-State Federation
– “Economic Conditions of Inter-State Federation.” New Commonwealth Quarterly 5 (London, 1939).
Excerpt: “It is rightly regarded as one of the great advantages of inter-state federation that it would do away with the impediments as to the movement of men, goods, and capital… More
Pricing versus Rationing
– “Pricing versus Rationing.” The Banker 51 (London, September 1939).
An Enquiry into the Nature and Effects of the Paper Credit of Great Britain
– Henry Thornton. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). Edited and introduced by Friedrich A. Hayek. London: Allen and Unwin, 1939.
Excerpt: “To most of the contemporaries of Henry Thornton his authorship of the book which is now reprinted after one hundred and thirty-six years would by no means have been regarded… More
Socialist Calculation: The Competitive ‘Solution’
– “Socialist Calculation: The Competitive ‘Solution’.” Economica N.S. 7 (May 1940): 125–149.
Excerpt: “Two chapters in the discussion of the economics of socialism may now be regarded as closed. The first deals with the belief that socialism will dispense entirely with… More
The Counter-Revolution of Science
– “The Counter-Revolution of Science.” Parts I-III. Economica N.S. 8 (February - August 1941): 281–320.
Excerpt: “In the course of its slow development in the eighteenth and early nineteenth centuries the study of economic and social phenomena was guided in the choice of its methods in… More
Maintaining Capital Intact: A Reply to Professor Pigou
– “Maintaining Capital Intact: A Reply [to Professor Pigou.]” Economica N.S. 8 (1941): 276–280.
Excerpt: “Professor Pigou’s defense of the conception of “maintaining capital intact” consists essentially of two parts. The first is a restatement of his own attempt to… More
Planning, Science and Freedom
– “Planning, Science and Freedom.” Nature 148 (November 15, 1941).
Excerpt: “The last ten years have witnessed in Great Britain a strong revival of a movement that for at least three generations has been a decisive force in the formation of opinion… More
The Ricardo Effect
– “The Ricardo Effect.” Economica N.S. 9 (1942).
Excerpt: “When in a recent essay on industrial fluctuations the author introduced “the familiar Ricardian proposition that a rise in wages will encourage capitalists to substitute… More
Scientism and the Study of Society
– “Scientism and the Study of Society.” Part I: Economica N.S. 9 (1942). Part II: Economica 10 (1943). Part III: Economica 11 (1944).
Excerpt: “In the course of its slow development in the 18th and early 19th centuries the study of economic and social phenomena was guided in the choice of its methods in the main by… More
A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’
– “A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’.” Economica N.S. 9 (November 1942): 383–385.
John Stuart Mill, The Spirit of the Age
– John Stuart Mill, The Spirit of the Age. Introduced by F.A. Hayek. Chicago: University of Chicago Press, 1942.
Hayek’s Introduction is entitled, “John Stuart Mill at the Age of Twenty-Four,” and surveys Mill’s intellectual development at the time of Mill’s famous essay, “The… More
A Commodity Reserve Currency
– “A Commodity Reserve Currency.” Economic Journal 53 (1943).
Excerpt: “The gold standard as we knew it undoubtedly have some grave defects. But there is some danger that the sweeping condemnation of it which is now the fashion may have secure… More
The Facts of the Social Sciences
– “The Facts of the Social Sciences.” Ethics 54 (October 1943).
Excerpt: “There there exists today no commonly accepted term to describe the group of disciplines with which we shall be concerned in this paper. The term “moral sciences,” in the… More
The Geometrical Representation of Complementarity
– “The Geometrical Representation of Complementarity.” Review of Economic Studies 10 (1942–1943): 122–125.
Excerpt: “Geometrical representation of complementarity encounters difficulties because complementarity involves a relationship between the three commodities and three-dimensional… More
Planning and the Rule of Law
– “Gospodarka planowa a idea planowania prawa.” Economista Polski (London, 1943).
John Rae and John Stuart Mill: A Correspondence
– “John Rae and John Stuart Mill: A Correspondence.” Economica N.S. 10 (1943): 253–255.
The Case of the Tyrol
– The Case of the Tyrol. London: Committee on Justice for the South Tyrol, 1944.
Richard von Strigl
– “Richard von Strigl” (Obituary). Economic Journal 54 (1944): 284–286.
Strigl, who died in 1944, was a “Neo-Austrian” involved in developing the theory of saving and investment and analyzing monopolistic competition theory.
Report on the Changes in the Cost of Living in Gibraltar 1939–1944 and on Wages and Salaries
– Report on the Changes in the Cost of Living in Gibraltar 1939–1944 and on Wages and Salaries. Gibraltar, no date (1945).
The Use of Knowledge in Society
– “The Use of Knowledge in Society.” American Economic Review 35 (September 1945): 519–530.
Excerpt: “What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough if we possess all the… More
Time-Preference and Productivity: A Reconsideration
– “Time-Preference and Productivity: A Reconsideration.” Economica, N.S. no. 4, 12 (February 1945): 22–25.
Excerpt: “The question I wish here to reconsider is in the 1st instance the purely theoretical one of the relative importance, in determining the marginal productivity of investment,… More
Nationalities and States in Central Europe
– “Nationalities and States in Central Europe.” Central European Trade Review 3 (London, 1945): 134–139.
Notes on N.W. Senior’s Political Economy’ by John Stuart Mill
– Edited: “‘Notes on N.W. Senior's Political Economy’ by John Stuart Mill.” Economica N.S. 12 (1945): 134–139.
Excerpt: “The following notes are reproduced from an interleaved copy of the first (quarto) edition of N.W. Senior’s Outline of the Science of Political Economy.”
Individualism: True and False
– Individualism: True and False. (The Twelfth Finlay Lecture, delivered at University College, Dublin, on December 17, 1945.) Dublin: Hodges, Figgis & Co. Ltd. 1946; and Oxford: B. H. Blackwell Ltd. 1946, 38 pp.
Excerpt: “To advocate any clear-cut principles of social order today is an almost certain way to incur the stigma of being an unpractical doctrinaire. It has come to be regarded as… More
Fuld Beskaeftigelse
– “Fuld Beskaeftigelse.” Nationalökonomisk Tidsskrift 84 (1946): 1–31.
The London School of Economics 1895–1945
– “The London School of Economics 1895–1945.” Economica N.S. 13 (February 1946): 1–31.
Excerpt: “In October, 1945, the London School of Economics and Political Science completed its 50th year. It had been hoped that this event would be marked by the publication of a… More
Problems and Difficulties of the English Economy
– “Probleme und Schwierigkeiten der englischen Wirtschaft.” Schweizer Monatshefte 27 (1947).
Full Employment
– “Le plein emploi.” Economie Appliquée 1, no. 2–3, (Paris, 1948): 197–210.
Man in the Planned Economy
– “Der Mensch in der Planwirtschaft.” In Simon Moser (ed.) Weltbild und Menschenbild. Innsbruck and Vienna: 1948.
The Political Effects of the Planned Economy
– “Die politischen Folgen der Planwirtschaft.” Die Industrie. Zeitschrift der Vereinigung Österreichischer Industrieller. No. 3 (Vienna, January 1948).
Wesley Clair Mitchell 1874–1948
– “Wesley Clair Mitchell 1874–1948” (Obituary). Journal of the Royal Statistical Society 111 (1948).
The Intellectuals and Socialism
– “The Intellectuals and Socialism.” The University of Chicago Law Review 16, no. 3 (Spring 1949): 417–433.
Excerpt: “In all democratic countries, in the United States even more than elsewhere, a strong belief prevails that the influence of the intellectuals on politics is negligible. This… More
A Levy on Increasing Efficiency: The Economics of Development Charges
– “A Levy on Increasing Efficiency. The Economics of Development Charges.” The Financial Times (April 26–28, 1949).
Economics
– “Economics.” Chambers’ Encyclopaedia 4 (Oxford 1950).
Ricardo, David
– “Ricardo, David.” Chambers’ Encyclopaedia 11 (Oxford 1950).
Full Employment, Planning and Inflation
– “Full Employment, Planning and Inflation.” Institute of Public Affairs Review 4 (6) (Melbourne, Australia 1950).
Excerpt: “In the five years that have elapsed since the war, central planning, “full employment,” and inflationary pressure have been the three features which have dominated… More
Capitalism and the Proletariat
– “Capitalism and the Proletariat.” Farmand 7, no. 56 (Oslo: February 17, 1951).
Comte and Hegel
– “Comte and Hegel.” Measure 2 (Chicago, July 1951).
Excerpt: “The discussions of every age are filled with the issues on which its leading schools of thought differ. But the general intellectual atmosphere of the time is always… More
Comments on ‘The Economics and Politics of the Modern Corporation’
– “Comments on ‘The Economics and Politics of the Modern Corporation’.” The University of Chicago Law School, Conference Series no. 8, (December 7, 1951).
The Ideals of Economic Freedom: A Liberal Inheritance
– “The Ideals of Economic Freedom: A Liberal Inheritance,” in The Owl (London 1951), pp. 7–12.
Excerpt: “At the end of the First World War the spiritual tradition of liberalism was all but dead. True, it was still uppermost in the thoughts of many a leading figure of public and… More
Equality and Justice
– “Gleichheit und Gerechtigkeit.” Jahresbericht der Züricher Volkswirt-schaftlichen Gesellschaft (1951).
Friedrich Freiherr von Wieser
– “Friedrich Freiherr von Wieser” The Development of Economic Thought: Great Economists in Perspective. Edited by Henry William Spiegel. New York & London: John Wiley & Sons, Inc. 1952, 1961, pp. 554–567.]
Commemorative article on the occasion of the death of Hayek’s Austrian School of economics mentor, von Wieser (1851–1926).
The Injustice of the Progressive Income Tax
– “Die Ungerechtigkeit der Steuerprogression.” Schweizer Monatshefte 32 (November 1952).
The Case Against Progressive Income Taxes
– “The Case Against Progressive Income Taxes.” The Freeman 4 (December 28, 1953): 229–232.
Leftist Foreign Correspondent
– “Leftist Foreign Correspondent.” The Freeman 3 (January 12, 1953): 275.
Excerpt: “The editorial comments of The Freeman on the apparent professional bias of foreign correspondents tempt me to set down on paper some observations which have long puzzled me.… More
The Actonian Revival
– “The Actonian Revival.” Review of Lord Acton by Gertrude Himmelfarb and Acton's Political Philosophy by G. E. Fasnacht. The Freeman3 (March 23, 1953): 461–462.
Decline of the Rule of Law. Part I
– “Decline of the Rule of Law. Part I.” The Freeman 3 (April 20, 1953): 518–520; Part II The Freeman 3 (May 4, 1953): 561–563.
Substitute for Foreign Aid
– “Substitute for Foreign Aid.” The Freeman 3 (April 6, 1953): 482–484.
Excerpt: “For the time being financing for rearmament has in a large measure taken the place of other forms of capital movements to Europe. But this provides only a partial and… More
The Rise and Fall of the Ideal of the Constitutional State
– “Entstehung und Verfall des Rechtsstaatsideales.” In: Albert Hunold (ed.) Wirtschaft ohne Wunder. Volkswirtschaftliche Studien für das Schweizerische Institut für Auslandsforschung. Zurich, 1953.
Market Economy and The Economic Policy
– “Marktwirtschaft und Wirtschaftspolitik.” Ordo 6 (February 1954): 3–18.
Capitalism and the Historians
– Capitalism and the Historians. Edited and introduced by F. A. Hayek. London: Routledge & Kegan Paul, and Chicago: University of Chicago Press, 1954.
Excerpt: “The influence which the writers of history thus exercise on public opinion is probably more immediate and extensive than that of the political theorists who launch new… More
Economic History and Politics
– “Wirtschaftsgeschichte und Politik.” Ordo 7 (March 1955).
Degrees of Explanation
– “Degrees of Explanation.” The British Journal for the Philosophy of Science 6, no. 23 (1955): 209–225.
Excerpt: “The discussion of scientific method has been guided almost entirely by the example of classical physics. The reason for this is mainly that certain features of the… More
Towards a Theory of Economic Growth, Discussion of Simon Kuznets’ Paper
– “Towards a Theory of Economic Growth, Discussion of Simon Kuznets’ Paper.” In: National Policy for Economic Welfare at Home and Abroad. New York: Columbia University Bicentennial Conference, 1955.
Comments
– “Comments.” In: Congress for Cultural Freedom (ed.) Science and Freedom. London: (Proceedings of the Hamburg Conference of the Congress for Cultural Freedom) 1955.
Progressive Taxation Reconsidered
– “Progressive Taxation Reconsidered.” In: Mary Sennholz (ed.) On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises. Princeton: D. von Nostrand Co., 1956
Excerpt: “Among the measures of economic policy which are gradually transforming our society and producing far-reaching results which few people yet clearly grasp, few are as firmly… More
The Dilemma of Specialization
– “The Dilemma of Specialization.” In Leonard D. White (ed.) The State of the Social Sciences. Chicago: University of Chicago Press, 1956.
Excerpt: “We have been commemorating the foundation of a research centre within our University, and our thoughts have inevitably often touched upon the problem of the relation between… More
On the ‘Meaning’ of Social Institutions
– “Uber den ‘Sinn’ sozialer Institutionen.” Schweizer Monatshefte 36 (October 1956).
Review of Mill and His Early Critics
– Review of Mill and His Early Critics by J.C. Rees. Leicester: University College of Leicester, 1956. In Journal of Modern History (June 1957): 54.
The Fundamental Facts of Progress
– “Grundtatsachen des Fortschritts.” Ordo 9 (1957): 19–42.
Inflation Resulting from the Downward Inflexibility of Wages
– “Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147–152.
Excerpt: “Contrary to what is widely believed, the crucial results of the “Keynesian revolution” is the general acceptance of a factual assumption and, what is more, of an… More
Liberty, the Planned Economy, and the Law
– “La Libertad, La Economia Planificada y el Derecho.” Temas Contemporaneos (Buenos Aires) 3 (1958).
The Individual and Change of Economic System
– “Das Individuum im Wandel der Wirtschaftsordnung.” Der Volkswirt No. 51–52 (Frankfurt am Main 1958).
The Creative Powers of a Free Civilization
– “The Creative Powers of a Free Civilization.” In: Felix Morley (ed.) Essays in Individuality. Philadelphia: University of Pennsylvania Press, 1958.
Excerpt: “The socratic maxim that the recognition of our ignorance is the beginning of wisdom has a profound application to social life. If we are to comprehend how society works we… More
Freedom, Reason, and Tradition
– “Freedom, Reason, and Tradition.” Ethics 68 (1958).
Excerpt: “Though freedom is not a state of nature but an artifact of civilization, it did not arise as a result of design. The institutions of freedom, like all that freedom has… More
Equality, Value, and Profit
– “Gleichheit, Wert und Verdienst.” Ordo 10 (1958): 5–29.
The Reality of a Teaching
– “Attualitá di un insegnamento,” In: Angelo Dalle Molle, ed. Il Maestro dell’ Economia di Domani (Festschrift for Luigi Einaudi on his 85th Birthday). Verona, 1958, pp. 20–24.
Liberalism
– “Liberalismus (1) Politischer Liberalismus.” Handwörterbuch der Sozialwissenschaften 6 (Stuttgart-Tübingen-Göttingen, 1959).
Excerpt: The term is now used with a variety of meanings which have little in common beyond describing an openness to new ideas, including some which are directly opposed to those which are… More
Unions, Inflation and Profits
– “Unions, Inflation and Profits.” In: Philip D. Bradley (ed.) The Public Stake in Union Power. Charlottesville, University of Virginia Press: 1959.
Excerpt: “Tendencies are observable in the field of labor economics which most seriously threaten our future prosperity. The developments which are bringing this about are not of… More
Freedom and Independence
– “Freiheit und Unabhängigkeit.” Schweizer Monatshefte 39 (1959).
Responsibility and Freedom
– “Verantwortlichkeit und Freiheit.” In: Albert Hunold (ed.) Erziehung zur Freiheit. Erlenbach-Zürich: E. Rentsch, 1959: 147–170.
Market Economy and Structural Policy
– “Marktwirtschaft und Strukturpolitik.” Die Aussprache 9 (1959).
On Röpke
– “An Röpke.” In Wilhelm Röpke, Gegen die Brandung. Zürich: E. Rentsch, 1959.
The Free Market Economy: The Most Efficient Way of Solving Economic Problems
– “The Free Market Economy: The Most Efficient Way of Solving Economic Problems.” Human Events 16, no. 50 (Dec. 16, 1959).
The Economics of Abundance
– “The Economics of Abundance,” in Henry Hazlitt, ed. The Critics of Keynesian Economics. Princeton and London: Van Nostrand Co., 1960, pp. 126–130.
Excerpt: “Now in such a situation, in which abundant unused reserves of all kinds of resources, including all intermediate products, exist, may occasionally prevail in the depths of… More
The Social Environment
– “The Social Environment.” In B. H. Bagdikian (ed.) Man's Contracting World in an Expanding Universe Providence, R.I.: 1960.
Freedom, Reason and Tradition
– “Freedom, Reason and Tradition.” Proceedings of the 16th Annual Meeting: The Western Conference of Prepaid Medical Service Plans, (Winnipeg 1960).
Progenitor of Scientism
– “Progenitor of Scientism.” National Review (1960).
Democratic Government and Economic Activity
– “Gobierno Democratico y Actividad Economica.” Espejo 1 (Mexico City 1960).
The Corporation in a Democratic Society: In Whose Interest Ought It and Will It Be Run?
– “The Corporation in a Democratic Society: In Whose Interest Ought It and Will It Be Run?” In: M. Anshen and G. L. Bach (eds.)Management and Corporations 1985. New York: McGraw-Hill, 1960.
Excerpt: “My thesis will be that if we want effectively to limit the powers of corporations to where they are beneficial, we shall have to confine them much more than we have yet done… More
Why I Am Not a Conservative
– In The Constitution of Liberty (Chicago: The University of Chicago Press, 1960)
Excerpt: At a time when most movements that are thought to be progressive advocate further encroachments on individual liberty, those who cherish freedom are likely to expend their… More
The Case for Freedom
– "The Case for Freedom." The Freeman (October 1960). Reprinted from The Constitution of Liberty (London: Routledge and Kegan Paul, 1960).
Excerpt: “What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the… More
What is ‘Social’—What Does It Mean?
– “What is ‘Social’—What Does It Mean?” Translated in an unauthorized English translation in Freedom and Serfdom (ed. A. Hunold), Dordrecht, 1961.
Excerpt: “Except in the fields of philology and logic, there are probably few cases in which one would be justified in devoting a whole article to the meaning of a single word.… More
The ‘Non Sequitur’ of the ‘Dependence Effect’
– “The ‘Non Sequitur’ of the ‘Dependence Effect’.” The Southern Economic Journal 27 (April 1961).
Excerpt: “For well over a hundred years the critics of the free enterprise system have resorted to the argument that if production were only organized rationally, there would be no… More
Freedom and Coercion: Some Comments and Mr. Hamowy’s Criticism
– “Freedom and Coercion: Some Comments and Mr. Hamowy's Criticism.” New Individualist Review 1, no. 2 (Summer 1961): 28–32.
The Origins of the Constant Danger to Freedom
– “Die Ursachen der ständigen Gefährdung der Freiheit.” Ordo 12 (1961): 103–112.
How Much Education at Public Expense?
– “How Much Education at Public Expense?” Context 1 (Chicago 1961).
Two Essays on Free Enterprise
– Two Essays on Free Enterprise. Bombay: Forum of Free Enterprise, 1962.
The Moral Element in Free Enterprise
– “The Moral Element in Free Enterprise.” In: National Association of Manufacturers (eds.) The Spiritual and Moral Significance of Free Enterprise. New York: 1962.
Excerpt: “Economic activity provides the material means for all our ends. At the same time, most of our individual efforts are directed to providing means for the ends of others in… More
The Vienna School
– “Wiener Schule.” Handwörterbuch der Sozialwissenschaften 12 (Stuttgart-Tübingen-Göttingen, 1962).
The Uses of ‘Gresham’s Law’ as an Illustration of ‘Historical Theory’
– “The Uses of ‘Gresham's Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).
Excerpt: “Mr. A. L. Burns’ use of Gresham’s Law as an illustration provides a good example for showing how useful it would be for the historian if he examined what… More
Rules, Perception and Intelligibility
– “Rules, Perception and Intelligibility.” Proceedings of the British Academy 48 (1962), London, 1963, pp. 321–344.
Excerpt: “The most striking instance of the phenomenon from which we shall start is the ability of small children to use language in accordance with the rules of grammar and idiom of… More
Old Truths and New Errors
– “Alte Wahrheiten und neue Irrtümer.” In: Internationales Institut der Sparkassen, ed. Das Sparwesen der Welt, Proceedings of the 7th International Conference of Savings Banks. Amsterdam: 1963.
Kinds of Order in Society
– “Arten der Ordnung.” Ordo 14 (1963).
Excerpt: “We call a multitude of men a society when their activities are mutually adjusted to one another. Men in society can successfully pursue their ends because they know what to… More
Right, Law, and Economic Freedom
– “Recht, Gesetz und Wirtschaftsfreiheit.” In: Hundert Jahre Industrie und Handelskammer zu Dortmund 1863–1963. Dortmund, 1963.
Introduction to “The Earlier Letters of John Stuart Mill.”
– Introduction to “The Earlier Letters of John Stuart Mill.” In F.E. Mineka, ed. John Stuart Mill, Vol. XII. Toronto: Toronto University Press and London: Routledge & Kegan Paul, 1963.
Excerpt: “John Stuart Mill has not been altogether fortunate in the manner in which his memory was served by those most concerned and best authorized to honour it. It is true that… More
The Legal and Political Philosophy of David Hume
– “The Legal and Political Philosophy of David Hume.” Il Politico 28, no. 4 (December 1963): 691–704.
Excerpt: “It is always misleading to label an age by a name which suggests that it was ruled by a common set of ideas. It particularly falsifies the picture if we do this for a period… More
The Theory of Complex Phenomena
– “The Theory of Complex Phenomena.” In Mario A. Bunge (ed.) The Critical Approach to Science and Philosophy: Essays in Honor of Karl R. Popper. New York: The Free Press of Glencoe, Inc., 1964.
Excerpt: “Man has been impelled to scientific inquiry by wonder and by need. Of these wonder has been in comparably more fertile. There are good reasons for this. Where we wonder we… More
Commerce, History of
– Parts of “Commerce, History of.” Encyclopaedia Britannica, vol. VI. Chicago: 1964.
What Has Happened to the Gold Standard. A Report Beginning with the Year 1932 with Two Supplements
– Was der Goldwährung geschehen ist. Ein Bericht aus dem Jahre 1932 mit zwei Ergänzungen. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze, 12), 1965, 36 pp. (France 1966): Révue d'Economie Politique 76 (1966), for French version. [“What Has Happened to the Gold Standard. A Report Beginning with the Year 1932 with Two Supplements.”]
The Perception of the Majority and Contemporary Democracy
– “Die Anschauungen der Mehrheit und die zeitgenössische Demokratie.” Ordo 15/16 (1965): 19–41.
Kinds of Rationalism
– “Kinds of Rationalism.” The Economic Studies Quarterly 15, no. 3 (Tokyo, 1965).
Excerpt: “In the course of my critical examination of certain dominance beliefs of our time I have sometimes had to make a difficult choice. It often happens that quite specific… More
Personal Recollections of Keynes and the ‘Keynesian Revolution’
– “Personal Recollections of Keynes and the ‘Keynesian Revolution’.” The Oriental Economist 34 (Tokyo, January 1966).
Excerpt: “Even to those who knew Keynes but could never bring themselves to accept his monetary theories, and at times thought his pronouncements somewhat irresponsible, the personal… More
The Misconception of Human Rights as Positive Claims
– “The Misconception of Human Rights as Positive Claims.” Farmand Anniversary Issue II/12 (Oslo, 1966): 32–35.
The Principles of a Liberal Social Order
– “The Principles of a Liberal Social Order.” Il Politico 31, no. 4 (December 1966): 601–618.
Excerpt: “It should be specially emphasized that the two political philosophies which both describe themselves as “liberalism” and lead in a few respects to similar conclusions,… More
The Gold Standard—Its Evolution
– “L'Etalon d'Or — Son Evolution.” Revue d'Economie Politique 76 (1966).
The Economy, Science and Politics
– "The Economy, Science and Politics,” Studies in Philosophy, Politics and Economics. London: Routledge & Kegan Paul, 1967/1969, pp.251-269.
Excerpt: “In spite of the fact that at least the first half of my career as an economist has been fully devoted to pure theory, and because I have since devoted much time to subjects… More
Dr. Bernard Mandeville
– “Dr. Bernard Mandeville.” Proceedings of the British Academy 52 (1966), London 1967.
Excerpt: “It is to be feared that not only would most of Bernard Mandeville’s contemporaries turn in their graves if they could know that he is today presented as a mastermind… More
The Results of Human Action but not of Human Design
– Résultats de l'action des hommes mais non de leurs desseins.” In: Les Fondements Philosophiques des Systèmes Economiques. Textes de Jacques Rueff et essais rédiges en son honneur. (Paris 1967).
Excerpt: “The belief in the superiority of deliberate design and planning over the spontaneous forces of society enters European thought explicitly only through the rationalist… More
Remarks on “Ernst Mach und das sozialwissenschaftliche Denken in Wien”
– Remarks on “Ernst Mach und das sozialwissenschaftliche Denken in Wien.” In Ernst Mach Institut (ed.), Symposium aus Anlass des 50. Todestages von Ernst Mach. (Freiburg i. B., 1967.)
Legal Order and Commercial Order
– “Rechtsordnung und Handelnsordnung.” In Eric Streissler (ed.), Zur Einheit der Rechts-und Staatswissenschaften, Vol. 27. Karlsruhe, 1967.
The Constitution of A Liberal State
– “The Constitution of A Liberal State.” Il Politico 32, no. 1 (Sept. 1967): 455–461.
The Confusion of Language in Political Thought, With Some Suggestions for Remedying It
– The Confusion of Language in Political Thought, With Some Suggestions for Remedying It. London: Institute of Economic Affairs (Occasional Paper 20), 1968/1976, 36 pp.
Excerpt: “Modern civilization has given man undreamt powers largely because, without understanding it, he has developed methods of utilizing more knowledge and resources than any one… More
Bruno Leoni, the Scholar
– “Bruno Leoni, the Scholar.” Il Politico 33, no. 1 (March 1968): 21–25
Juridical Regulation and Social Order
– “Ordinamento giuridico e ordine sociale.” Il Politico 33, no. 4 (December 1968): 693–724.
A Self-Generating Order for Society
– “A Self-Generating Order for Society.” In John Nef (ed.), Towards World Community. The Hague, 1968.
Excerpt: “It is very difficult to know where to begin when one would wish to comment on almost every preceding speaker. I am particularly tempted to make some remarks on the problem… More
Speech on the 70th Birthday of Leonard Reed
– Speech on the 70th Birthday of Leonard Reed. In: What's Past is Prologue. New York: Foundation for Economic Education, 1968.
Wieser, Friedrich von
– “Wieser, Friedrich von.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & The Free Press, 1968, 1972; Volumes 15, 16, 17, pp. 549–550.
The Trend of Economic Thinking
– “The Trend of Economic Thinking,” Studies in Philosophy, Politics and Economics. London: Routledge & Kegan Paul, 1967/1969;
Excerpt: “The position of the economists in the intellectual life of our time is unlike that of practitioners of any other branch of knowledge. Questions for whose solution his… More
Scientism
– “Szientismus.” In W. Bernsdorf (ed.), Wörterbuch der Soziologie, Edited by W. Bernsdorf. 2nd ed. (Stuttgart, 1969).
Three Elucidations of the ‘Ricardo Effect’
– “Three Elucidations of the ‘Ricardo Effect’.” Journal of Political Economy 77 (March-April 1969): 274–285.
Excerpt: “The immediate aim of this paper is to clear up a point on which Sir John Hicks in his recent review of my earlier discussions of the relation between the demand for consumer… More
The Primacy of the Abstract
– “The Primacy of the Abstract.” In Arthur Koestler and J. R. Smythies (eds.), Beyond Reductionism—The Alpbach Symposium. London, 1969.
Excerpt: “What I shall try to explain under this paradoxical heading seems to me in some ways merely a final step in a long development, which would probably have been explicitly… More
Market Economy or Syndicalism?
– “Marktwirtschaft oder Syndikalismus?” In: Protokoll des Wirtschaftstages der CDU/DSU (Bonn 1969).
The Competitive System as a Tool of Knowledge
– “Il sistema concorrenziale come strumento di conoscenza.” L'industria 1 (Turin, January-March 1970): 34–50.
Principles or Expediency?
– “Principles or Expediency?” In Toward Liberty: Essays in Honor of Ludwig von Mises on the Occasion of his 90th Birthday, September 29, 1971. Sponsoring Committee F. A. von Hayek et.al; F. A. Harper, Secretary. Menlo Park, California: Institute for Humane Studies, 1971, vol I, pp. 29–45.
Excerpt: “A condition of liberty in which all are allowed to use their own knowledge for their own purposes, restrained only by rules of just conduct of universal application, is… More
Nature vs. Nurture Once Again
– “Nature vs. Nurture Once Again.” A comment on C. D. Darlington, The Evolution of Man and Society, London, 1962 in Encounter (February 1971).
Excerpt: “After his authoritative Genetics and Man, Dr. C.D. Darlington has now given us a magnificent account of The Evolution of Man and Society. This monumental work is bound to… More
The Genius Of the West
– Louis Rougier. The Genius of the West. Introduction by F.A. v. Hayek. Los Angeles: Nash Publishing (published for the Principles of Freedom Committee), 1971.
To quote the book jacket: “Western Civilization is the result of a mentality which responds to the challenge of existence with intellectual force & courage. This mentality… More
A Tiger by the Tail: The Keynesian Legacy of Inflation
– A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40 Years’ Running Commentary on Keynesianism by F. A. Hayek. Compiled and introduced by Sudha R. Shenoy. London: Institute of Economic Affairs (Hobart Paperback #4), 1972
Excerpt from Introduction: “The small book you are holding in your hands is unique. It is perhaps the finest introduction to the thought of a major thinker ever published in the… More
Economic Thought VI: The Austrian School
– “Economic Thought VI: The Austrian School.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & Free Press, 1968, 1972; Volume 4, pp. 458–462.
The Outlook for the 1970’s: Open or Repressed Inflation
– “The Outlook for the 1970's: Open or Repressed Inflation.” In Sudha R. Shenoy (ed.) A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40-Years’ Running Commentary on Keynesianism. London: Institute of Economic Affairs (Hobart Paperback 4), 1972.
Excerpt: “In the last 40 years monetary policy has increasingly committed us to a development which has recurrently made necessary further measures that weakened the functioning of… More
The Place of Menger’s Grundsätze in the History of Economic Thought
– “The Place of Menger's Grundsätze in the History of Economic Thought.” In J. R. Hicks and W. Weber (eds.), Carl Menger and the Austrian School of Economics. Oxford, 1973, pp. 1–14
Excerpt: “When the Grundsatze appeared in 1871, it was only 95 years since the Wealth of Nations, only 54 since Ricardo’s Principles, and a mere 23 it since the great… More
In Memoriam Ludwig von Mises 1881–1973
– “In Memoriam Ludwig von Mises 1881–1973.” Zeitschrift für Nationalökonomie 33 (Vienna 1973).
Tribute to von Mises, Vienna Years
– “Tribute to von Mises, Vienna Years.” National Review (Autumn 1973).
Talk at the Mont Pélèrin
– “Talk at the Mont Pélèrin.” Newsletter of the Mont Pélèrin Society 3 (Luxembourg 1973).
Inflation: The Path to Unemployment
– “Inflation: The Path to Unemployment.” Addendum 2 to Lord Robbins et. al. Inflation: Causes, Consequences, Cures: Discourses on the Debate between the Monetary and the Trade Union Interpretations. London: The Institute for Economic Affairs (IEA Readings, No. 14), 1974, pp. 115–120.
Inflation and Unemployment
– “Inflation and Unemployment.” New York Times (Nov. 15, 1974).
Banquet Speech
– Speech at the Nobel Banquet, December 10, 1974.
Excerpt: Now that the Nobel Memorial Prize for economic science has been created, one can only be profoundly grateful for having been selected as one of its joint recipients, and the… More
The Repercussions of Rent Restrictions
– "The Repercussions of Rent Restrictions,” in F. A. Hayek, Milton Friedman, et al. Rent Control: A Popular Paradox. Evidence on The Effects of Rent Control. Vancouver: The Fraser Institute, 1975, pp. 67–83.
Excerpt: “A unique feature of price control in housing compared with that in other goods and services is that wartime housing regulations have been retained and enforced ever since.… More
Full Employment at Any Price?
– Full Employment at Any Price? London: Institute of Economic Affairs (Occasional Paper 45), 1975/1978, (Italy 1975), 52 pp.
The Pretense of Knowledge
– “The Pretence of Knowledge.” An Alfred Nobel Memorial Lecture, delivered December 11, 1974 at the Stockholm School of Economics. In Les Prix Nobel en 1974. Stockholm: Nobel Foundation, 1975.
Excerpt: “The particular occasion of this lecture, combined with the chief practical problem which economists have to face today, have made the choice of its topic almost inevitable.… More
Freedom and Equality in Contemporary Society
– “Freedom and Equality in Contemporary Society.” PHP 4 (The PHP Institute, Tokyo), (Tokyo 1975).
Economics, Politics and Freedom: An Interview with F. A. Hayek
– “Economics, Politics & Freedom: An Interview with F. A. Hayek.” Interview conducted by Tibor Machan in Salzburg, Austria. Reason 6 (February 1975): 4–12.
Excerpt: “REASON is proud to present the highlights of this conversation, to give our readers a better appreciation of one of the intellectual giants of our time. REASON: Dr. Hayek,… More
The Preservation of the Liberal Ideal of Thought
– “Die Erhaltung des liberalen Gedankengutes.” In Friedrich A. Lutz (ed.) Der Streit um die Gesellschaftsordnung (Zurich 1975).
The Courage of His Convictions
– "The Courage of His Convictions.” In Tribute to Mises 1881–1973. The Session of the Mont Pélèrin Society at Brussels 1974 devoted to the Memory of Ludwig von Mises. Chislehurst, 1975.
The Formation of the Open Society
– “The Formation of the Open Society.” Address given by Professor Friedrich A. von Hayek at the University of Dallas Commencement Exercises, May 18, 1975. [Unpublished typescript, available at the Institute for Humane Studies.]
Two Types of Mind
– “Types of Mind.” Encounter 45 (September 1975).
Excerpt: “Accident has drawn my attention to the contrast between two types of scientific thinking which I have since again and again been watching with growing fascination. I have… More
Politicians Can’t Be Trusted with Money
– “Politicians Can't Be Trusted with Money.” [(Newspaper editor's title. Paper delivered in September at the Gold and Monetary Conference in Lausanne, Switzerland.) The Daily Telegraph of London, Part I (September 30, 1975).
World Inflationary Recession
– “World Inflationary Recession.” Paper presented to the International Conference on World Economic Stabilization, April 17–18, 1975, co-sponsored by the First National Bank of Chicago and the University of Chicago. First Chicago Report 5/1975.
Choice in Currency: A Way to Stop Inflation
– Choice in Currency. A Way to Stop Inflation. London: Institute of Economic Affairs (Occasional Paper 48), February 1976/1977, 46 pp.
Excerpt: The chief root of our present monetary troubles is, of course, the sanction of scientific authority which Lord Keynes and his disciples have given to the age-old superstition that… More
Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies
– Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: The Institute of Economic Affairs (Hobart Paper Special 70), October 1976, 107 pp.
Excerpt: “In my despair about the hopelessness of finding a politically feasible solution to what is technically the simplest possible problem, namely to stop inflation, I threw out… More
Socialism and Science
– "Socialism and Science," A Lecture delivered to The Economic Society of Australia and New Zealand on October 19, 1976.
Excerpt: “Socialism is related to Science in various ways. Probably the least interesting relation today is that from which Marxism lays claim to the name of “scientific… More
The New Confusion about Planning
– “The New Confusion about Planning.” The Morgan Guaranty Survey (January 1976): 4–13.
Institutions May Fail, but Democracy Survives
– “Institutions May Fail, but Democracy Survives.” U.S. News and World Report (March 8, 1976.)
Adam Smith’s Message in Today’s Language
– “Adam Smith's Message in Today's Language.” Daily Telegraph, London (March 9, 1976.)
Excerpt: “During the 40-odd years over which I have been lecturing on the history of economics, I have always found the lectures on Adam Smith particularly difficult to give. By the… More
The Problem of Money Today
– “Il Problema della Moneta Oggi.” Academia Nationale dei Lincei. Atti de Convegni Rome (1976).
Remembering My Cousin Ludwig Wittgenstein
– “Remembering My Cousin Ludwig Wittgenstein.” Encounter (August 1977).
Excerpt: “Between the rails and the building of the railway station of Bad Ischl there used to be ample space where, sixty years ago, in the season, a regular promenade used to… More
Toward Free Market Money
– “Toward Free Market Money.” Wall Street Journal (August 19, 1977).
Economics as a Coordination Problem
– Foreword by F. A. Hayek. In Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, ed. by Gerald P. O'Driscoll, Jr. Kansas City: Sheed Andrews and McMeel, Inc., 1977.
Foreword by Hayek: “To give a coherent account of the whole of the theoretical work of an economist who has not attempted to do so himself is sometimes a useful task. But the proof of… More
Competition as a Discovery Procedure
– “Competition as a Discovery Procedure.” New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul, 1978.
Excerpt: “It is difficult to defend economists against the charge that for some 40 to 50 years they have been discussing competition on assumptions that, if they were true in the real… More
The Errors of Constructivism
– "The Errors of Constructivism," New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul, 1978.
Excerpt: “It seemed to me necessary to introduce the term ‘constructivism’ as a specific name for a manner of thinking that in the past has often, but misleadingly, been… More
Economic Freedom and Representative Government
– "Economic Freedom and Representative Government," New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul, 1978.
Excerpt: “Thirty years ago I wrote a book which, in a manner which many regarded as unduly alarmist, described the danger that the then visible collectivist tendencies created for… More
The Reactionary Character of the Socialist Conception
– The Reactionary Character of the Socialist Conception, Remarks by F. A. Hayek. Hoover Institution, Stanford University, 1978.
Economic Progress in an Open Society
– Economic Progress in an Open Society. Seoul, Korea: Korea International Economic Institute (Seminar Series No. 16), 1978.
Liberalism
– "Liberalism," New Studies in Philosophy, Politics, Economics and the History of Ideas, Routledge & Keagan Paul, London and Henley, 1982 [1978], pp. 119-151.
Excerpt: “The term is now used with a variety of meanings which have little in common beyond describing an openness to new ideas, including some which are directly opposed to those… More
The Reactionary Character of the Socialist Conception, Remarks by F. A. Hayek
– The Reactionary Character of the Socialist Conception, Remarks by F. A. Hayek. Hoover Institution, Stanford University, 1978.
The Mirage of Social Justice
– Law, Legislation and Liberty, Volume 2: The Mirage of Social Justice, University of Chicago Press, 1978
Coping with Ignorance
– “Coping with Ignorance.” Ludwig von Mises Memorial Lecture. Imprimis (Hillsdale College) 7 (July 1978) 6 pp.
Excerpt: “It is to me not only a great honor but also the discharge of an intellectual duty and a real pleasure to be allowed to deliver a Ludwig von Mises memorial lecture. There is… More
The Miscarriage of the Democratic Ideal
– “The Miscarriage of the Democratic Ideal.” Encounter (March 1978).
Excerpt: “It is no longer possible to ignore that more and more thoughtful and well-meaning people are slowly losing their faith in what was to them once the inspiring ideal of… More
Will the Democratic Ideal Prevail
– “Will the Democratic Ideal Prevail?” In Arthur Seldon, ed. The Coming Confrontation: Will the Open Society Survive to 1989? London: The Institute for Economic Affairs (Hobart Paperback No. 12), 1978, pp. 61–73.
The Dethronement of Politics
– “Die Entthronung der Politik.” In Uberforderte Demokratie? hrsg. von D. Frei, Sozialwissenschaftliche Studien de schweizerischen Instituts für Auslandsforschung, N.F. 7, Zurich 1978.
Can we still avoid inflation?
– “Can we still avoid inflation?” In Richard M. Ebeling (ed.) The Austrian Theory of the Trade Cycle and Other Essays. New York: Center for Libertarian Studies (Occasional Paper Series 8) 1978.
Excerpt: “In one sense the question asked in the title of this lecture is purely rhetorical. I hope none of you has suspected me of doubting even for a moment that technically there… More
Exploitation of Workers by Workers
– “Exploitation of Workers by Workers.” The last of three talks given by Professor F. A. Hayek under the title, “The Market Economy” (Radio 3, BBC). The Listener (August 17, 1978): 202–203.
Three Lectures on Democracy, Justice, and Socialism
– "Three Lectures on Democracy, Justice, and Socialism," CIS Occasional Papers, 1979.
The Three Sources of Human Values
– “The Three Sources of Human Values.” The Hobhouse Lecture given at the London School of Economics, May 17, 1978. Published in the Epilogue to Law, Legislation and Liberty, Vol. III. London: Routledge & Kegan Paul, 1979
Social Injustice, Socialism and Democracy
– Social Injustice, Socialism and Democracy. Sidney, Australia, 1979.
Towards a Free Market Monetary System
– “Towards a Free Market Monetary System.” The Journal of Libertarian Studies 3, no. 1 (1979): 1–8.
When a little over two years ago, at the second Lausanne Conference of this group, I threw out, almost as a sort of bitter joke, that there was no hope of ever again having decent money,… More
Notes on the Evolution of Systems of Rules of Conduct
– “Notas sobre la Evolución de Sistemas de Reglas de Conducta.” Teorema 9, no. 1 (1979): 57–77.
Free Choice of Currency Standards
– “Freie Wahl de Währungen.” In Geldpolitik, ed. by J. Badura and O. Issing. Stuttgart and New York, 1980, pp. 136–146.
An Interview with F. A. Hayek
– “An Interview with F. A. Hayek.” Conducted by Richard E. Johns. The American Economic Council Report (May 1980.)
The Muddle of the Middle
– “Midju—Modid.” Frelsid (Journal of the Freedom Association of Iceland) 1 (1980): 6–15.
Dankadresse
– “Dankadresse.” In Erich Hoppmann, ed. Friedrich A. von Hayek. Baden—Baden: Nomos Verlagsgesellschaft, 1980. pp. 37–42.
Review of Thomas Sowell’s Knowledge and Decisions
– Review of Thomas Sowell's Knowledge and Decisions. (New York: Basic Books, 1980). In Reason 13 (December 1981): 47–49.
Socialism: An Economic and Sociological Analysis
– Ludwig von Mises. Socialism: An Economic and Sociological Analysis. Translated by Jacques Kahane. 1981 Introduction by F.A. Hayek. Indianapolis: LibertyClassics, 1981
Hayek’s Foreward pays tribute to Mises for the anti-socialist impact that Mises’ Die Gemeinwirtschaft: Untersuchungen über den Sozialismus (Jena: Gustav Fischer, 1922) created on… More
Gesammelte Aufsätze
– Ewald Schams. Gesammelte Aufsätze. Prefaced by F.A. Hayek. Ready in Spring 1983. Munich: Philosophia Verlag.
Richard Cantillon
– "Richard Cantillon." Journal of Libertarian Studies, VII, no. 2 (Fall 1985), 217–247.
Excerpt: In economics, just as in other sciences, it is by no means an exceptional occurrence to find that, no sooner has a “new” doctrine made its mark, than earlier,… More
Introduction: Selected Essays on Political Economy
– Introduction by F. A. Hayek. In Selected Essays on Political Economy, trans. by Seymour Caln. Irvington-on-Hudson, NY: The Foundation for Economic Education, Inc., 1995.
Excerpt: Even those who may question the eminence of Frédéric Bastiat as an economic theorist will grant that he was a publicist of genius. Joseph Schumpeter calls him “the most… More
The Defense of Our Civilization Against Intellectual Error
– "The Defense of Our Civilization Against Intellectual Error." The Freeman (March 2004). Reprinted from What’s Past Is Prologue, a collection of tributes published in honor of FEE founder Leonard E. Read’s 70th birthday, September 26, 1968.
Excerpt: I believe that what the Foundation for Economic Education, with Leonard Read at its head, and all his co-fighters and friends are committed to is nothing more nor less than the… More
The Common Sense of Progress
– "The Common Sense of Progress." The Freeman (November 1960). Reprinted from The Constitution of Liberty (London: Routledge and Kegan Paul, 1960).
Excerpt: If today in the United States or western Europe the relatively poor can have a car or a refrigerator, an airplane trip or a radio, at the cost of a reasonable part of their income,… More
Commentary
A Reply to Dr. Hayek
– Keynes, J.M. “A Reply to Dr. Hayek.” Economica 12 (November 1931): 387–397.
Excerpt: “In an article recently published, Dr. Hayek has invited me to clear up some ambiguities of terminology which he finds in my Treatise of Money, and also other matters. As he… More
Dr. Hayek on Money and Capital
– Sraffa, Piero. “Dr. Hayek on Money and Capital [on F.A. von Hayek's Prices and Production] London 1931.” The Economic Journal 42 (1932): 42–53, 249–251.
Excerpt: “To deal with the theory of money, from its doctrinal history down to the inevitable practical proposals, touching upon some of the most perplexing parts of the subject, and… More
Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion
– Marget, Arthur W. “Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion.” Journal of Political Economy 40 (April 1932): 261–266.
Theories of the Trade Cycle
– Macfie, A.L. Theories of the Trade Cycle. London: Macmillan, 1934.
Professor Hayek and the Theory of Investment
– Knight, F.H. “Professor Hayek and the Theory of Investment.” The Economic Journal 45 (1935): 77–94.
Excerpt: “In the remarks which follow, I am not concerned with the technical problems of the ‘structure of investment’ actually discussed in Prof. Hayek’s recent… More
Hayek och ‘Ricardo-effekten’
– Welinder, C. “Hayek och ‘Ricardo-effekten’” In Ekonomisk Tidsskrift (Uppsala och Stockholm) 42 (1940): 33–39.
Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital
– Pigou, A.C. “Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital.” Economica 8 (1941): 271–275.
Professor Hayek’s Theory of Interest
– Lutz, Friedrich A. “Professor Hayek's Theory of Interest.” Economica 10 (1943): 302–310
Excerpt: “In the following discussion attention will be concentrated on that parts of Prof. Hayek’s Pure Theory of Capital which contains his theory of interest in “real”… More
Keynes vs. Hayek on a Commodity Reserve Currency
– Graham, F.D. “Keynes vs. Hayek on a Commodity Reserve Currency.” The Economic Journal 54 (1944): 422–429.
Excerpt: “The issues raised in Lord Keynes’ reply to Prof. Hayek’s article on a commodity reserve currency, in a recent issue of this journal, seem worthy of more extended… More
Professor Hayek on German Socialism
– Heimann, E. “Professor Hayek on German Socialism.” The American Economic Review. 35 (1945): 935–937.
Excerpt: Mr. Hoselitz’s criticism of Hayek’s chapter XII—or rather of his pages 168 and 169—is right as far as it goes. Bebel’s utterance was ironical; why else… More
Professor Hayek on German Socialism
– Hoselitz, B.F. “Professor Hayek on German Socialism.” The American Economic Review 35 (1945): 926–934.
Excerpt: “In chapter XI of his recent book, the Road to Serfdom, Prof. Hayek undertakes to show that the philosophy of German national socialism as it has its roots in the teachings… More
Professor Hayek’s Philosophy
– Murray, A.H. “Professor Hayek's Philosophy.” Economica 12 (August 1945): 149–162.
Excerpt: “In a series of articles the importance of which cannot be overestimated for the theory of method of economics, entitled Scientism and the Study of Society, Prof. Hayek… More
Professor Hayek on Economic Planning and Political Liberty
– Durbin, E.F.M. The Economic Journal. Vol. 55, No. 220 (December, 1945), 357-370.
Review of Hayek’s Capitalism and the Historians
– Eastman, Max. Review of Hayek's Capitalism and the Historians. The Freeman 4 (February 22, 1954): 385–387.
The Rate of Interest in the Trade Cycle Theories of Prof. Hayek
– Palmer, G.G.D. “The Rate of Interest in the Trade Cycle Theories of Prof. Hayek.” The South African Journal of Economics 23 (1955): 1–18.
Excerpt: “For many years the trade cycle theories of Prof. Hayek have been the centre of interest and controversy. His approach stands in contrast on the one hand to that of the… More
Professor Hayek’s Contribution to Trade Cycle Theory
– Gilbert, J.C. “Professor Hayek's Contribution to Trade Cycle Theory.” Economic Essays in Commemoration of the Dundee School of Economics, 1931–1955. pp. 51–62
An Unrepentant Old Whig
– Davenport, John. “An Unrepentant Old Whig.” Fortune (March 1960): 134–135, 192, 194, 197–198
Prof. Hayek and the Concertina Effect
– Kaldor, N. “Prof. Hayek and the Concertina Effect.” In Economica N.S. 9 (1942): 148–176; reprinted in: Kaldor, Essays on Economic Stability and Growth. London: Duckworth, 1960
Excerpt: “It was more than ten years ago that Prof. Hayek first fascinated the academic world of economists by a new theory of industrial fluctuations which in theoretical conception,… More
Hayek’s Conception of Freedom: A Critique
– Hamowy, Ronald. “Hayek's Conception of Freedom: A Critique.” New Individualist Review 1, no. 1 (April 1961): 28–31.
Excerpt: F. A. HAYEK, in his latest book, The Constitution of Liberty (University of Chicago Press, Chicago, 1960), attempts a thorough exposition of the theoretical and historical… More
Hayek on Liberty
– Rees, J.C. “Hayek on Liberty.” Philosophy (1961).
Professor Hayek’s book is a massive contribution to the persistent question of the limits of state action. It runs counter to prevailing notions about the role of government in… More
Hayek on Liberty
– Robbins, Lionel. “Hayek on Liberty.” Economica (February 1961): 66–81.
Excerpt: “This is a very ambitious book. “It has been a long time,” says the author, “since that ideal of freedom which inspired modern Western civilization and whose partial… More
Hayek on Liberty and Liberalism
– Seldon, Arthur. “Hayek on Liberty and Liberalism.” Contemporary Review 200 (1961): 399–406.
Philosophy
– Seldon, Arthur, ed. “Philosophy” Agenda for a Free Society: Essays on Hayek's The Constitution of Liberty. London: Published for the Institute of Economic Affairs by Hutchinson, 1961.
Hayek on Freedom and Coercion
– Viner, Jacob. “Hayek on Freedom and Coercion.” Southern Economic Journal 27 (January 1961): 230–236.
Excerpt: “This important and challenging book presents a learned and powerfully argued brief on behalf of the propositions, that, in general, maximum possible amounts of “liberty”… More
Theories and Thoughts of Prof. Hayek
– Keizai, S. “Theories and Thoughts of Prof. Hayek.” The World Economy. Tokyo, 1964.
Hayek’s Theory of Sensory Order and the Methodology of the Social Sciences
– Murray, A.H. “Hayek's Theory of Sensory Order and the Methodology of the Social Sciences.” The Journal of Applied Sociology 7 (Tokyo 1964).
Revival of the Philosophy of Economics: A Critique of Hayek’s System of Liberty
– Murray, A.H. “Revival of the Philosophy of Economics: A Critique of Hayek's System of Liberty.” The Economics Studies Quarterly 15, no. 2. (Tokyo 1965).
The Hayek Story
– Heimann, E. “The Hayek Story.” In Critical Essays in Monetary Theory. Oxford University Press: 1967.
Roads to Freedom: Essays in Honour of Friedrich A. von Hayek
– Roads to Freedom: Essays in Honour of Friedrich A. von Hayek. Edited by Erich Streissler et.al. London: Routledge and Kegan Paul, 1969.
The Determinants of Social Action
– Polanyi, Michael. “The Determinants of Social Action.” In Roads to Freedom: Essays in Honour of Friedrich A. von Hayek. Edited by Erich Streissleret.al. London: Routledge & Kegan Paul, 1969, pp. 145–179.
Laudatio: Un Message pour le siècle
– Rueff, Jacques. “Laudatio: Un Message pour le siècle.” In Erich Streissler et al., eds. Roads to Freedom: Essays in Honour of Friedrich A. von Hayek. London: Routledge & Kegan Paul, 1969, pp. 1–3.
Roads to Freedom: Essays in Honour of Friedrich A. von Hayek.
– Streissler, Erich et al. eds. Roads to Freedom: Essays in Honour of Friedrich A. von Hayek. London: Routledge & Kegan Paul, 1969.
The articles in this volume were written in honour of F. A. Hayek and cover the whole scope of his thought. Many of the essays take as a starting point Hayek’s own writings. The list… More
Bibliography of the Writings of Friedrich A. von Hayek
– Streissler, Erich, “Bibliography of the Writings of Friedrich A. von Hayek.” Roads to Freedom: Essays in Honour of Friedrich A. von Hayek. London: Routledge & Kegan Paul, 1969, pp. 309–315.
On Hayek
– Harris, R. “On Hayek.” Swinton Journal (1970)
Note on Professor Hayek’s ‘True Theory of Unemployment’
– Johr, W.A. “Note on Professor Hayek's ‘True Theory of Unemployment.’” Kyklos 30, no. 4 (1970): 713–723
Excerpt: “Prof. Hayek is an economist whose prestige, acquired by his writings on problems of economics and social philosophy, stands high. Consequently, every work he publishes… More
A Tribute to Hayek—The Rational Persuader
– Plant, Sir Arnold. “A Tribute to Hayek—The Rational Persuader.” Economic Age 2, no. 2 (Jan.-Feb. 1970): 4–8.
Hayek’s Liberalism: The Constitution of Perpetual Privilege
– Bay, Christian. “Hayek's Liberalism: The Constitution of Perpetual Privilege.” Political Science Review 1 (Fall 1971): 93–124
Excerpt: “Already the heading may strike admirers of this work as slanted and unfair, demonstrating this reviewer’s prejudice against Hayek’s Old Whig Liberalism. And I… More
Capital Intensity and the Real Wage: A Critical Evaluation of Hayek’s Ricardo Effect
– Falconer, Robert T. “Capital Intensity and the Real Wage: A Critical Evaluation of Hayek's Ricardo Effect.” Texas A & M Ph.D. Dissertation. College Station, Texas, 1971.
Friedrich Hayek: An Appreciation
– Glasner, David. “Friedrich Hayek: An Appreciation.” Intercollegiate Review 7 (Summer 1971): 251–255.
Excerpt: “One of the most eminent scholars of our time, Prof. Hayek has collected in this volume a selection of the work which he has been engaged in during the years since 1944. As… More
Freedom and The Rule of Law in F.A. Hayek
– Hamowy, Ronald. “Freedom and The Rule of Law in F.A. Hayek.” Il Politico 36, no. 2 (June 1971): 349–377.
Professor Hayek on Individualism
– Harris, R. “Professor Hayek on Individualism.” In R. Harrod, ed. Economic Essays, 2nd edition. London and New York: 1972. pp. 293–301.
The Political Thought of F.A. Hayek
– Morris, M.W. “The Political Thought of F.A. Hayek.” Political Studies 2 (1972): 169–184.
Methodological Individualism: A Commentary on F.A. von Hayek
– Stewart, William P. “Methodological Individualism: A Commentary on F.A. von Hayek.” Unpublished paper presented at the First Libertarian Scholars Conference. New York, September 23–24, 1972.
The Political Philosophy of Friedrich A. Hayek
– Wilhelm, Morris M. “The Political Philosophy of Friedrich A. Hayek.” Columbia University Ph.D. Dissertation in Political Science, New York, 1969. An article based on this, in condensed form, appears as “The Political Thought of Friedrich A. Hayek,” in Political Studies 20, no. 2 (June 1972): 169–184.
Liberalismus zwischen Spontaneitat und Gestaltung. Zu v. Hayek’s gesammelten Aufsatzen
– Willgerodt, H. “Liberalismus zwischen Spontaneitat und Gestaltung. Zu v. Hayek's gesammelten Aufsatzen.” In Zeitschrift für Wirtschafts-und Sozialwissenschaften. Berlin 92, no. 4, (1972): 461–465.
Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation
– Grinder, Walter E. Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation. In Libertarian Review (November 1974): 4–5
Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften
– Leube, Kurt R. “Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften.” (University of Salzburg Research Papers, 1974).
Friedrich von Hayek’s Contribution to Economics
– Machlup, Fritz. “Friedrich von Hayek's Contribution to Economics.” The Swedish Journal of Economics 76 (December 1974): 498–531.
Excerpt: “Some of Hayek’s 15 books appeared also in foreign translations. There are altogether 20 foreign language editions (in 11 different languages), so that the combined… More
Friedrich von Hayek on Scientific and Scientistic Attitudes
– Machlup, Fritz. “Friedrich von Hayek on Scientific and Scientistic Attitudes.” The Swedish Journal of Economics 76 (1974).
Conservatives Gratified by Nobel Prize to Von Hayek
– Roche III, George C. “Conservatives Gratified by Nobel Prize to Von Hayek.” Human Events (November 16, 1974).
Freedom, Planning, and Totalitarianism: The Reception of F. A. Hayek’s Road to Serfdom
– Rosenof, Theodore. Canadian Review of American Studies. Volume 5, No. 2 (1974).
Abstract: One of the classic issues of politics has been that of the relationship of the state to the economy. A long tradition in the western world has held that the relationship should be… More
Hayek Revisited: Mind as a Process of Classification
– Agonito, Rosemary. “Hayek Revisited: Mind as a Process of Classification.” In: Behaviorism: A Forum for Critical Discussions 3, no. 2 (Spring 1975): 162–171.
Excerpt: “During the fifties an extremely perceptive work in theoretical psychology appeared in this country which provided an account of mind defined as the process of… More
Reflections on John Hick’s ‘The Hayek Story’
– Ebeling, Richard. “Reflections on John Hick's ‘The Hayek Story.’” Unpublished manuscript, no date; 23 pp.: Available from the Institute for Humane Studies, Menlo Park, California 94025.
Hayek: The Road to Stockholm
– “Hayek: The Road to Stockholm.” The Alternative: An American Spectator 8, no. 8 (May 1975): 10–12
Review of 4 books: F.A. Hayek’s The Counter-Revolution of Science; Individualism and Economic Order; Studies in Philosophy, Politics and Economics; and Ludwig M. Lachmann’s The Legacy of Max Weber.
– Grinder, Walter E. Review of 4 books: F.A. Hayek's The Counter-Revolution of Science; Individualism and Economic Order; Studies in Philosophy, Politics and Economics; and Ludwig M. Lachmann's The Legacy of Max Weber. In Libertarian Review 4, no. 4 (April 1975): 4–5.
The Facts of Hayek
– Johnson, Frank. “The Facts of Hayek.” Sunday Telegraph Magazine, September 26, 1975, pp. 30–34.
F.A. von Hayek. Zu sienem 75. Geburtstag
– Leube, Kurt R. “F.A. von Hayek. Zu sienem 75. Geburtstag.” Salzburger Nachrichten 1975
Ausgewählte Bibliographie zur Wiederauflage
– Leube, Kurt R. “Ausgewählte Bibliographie zur Wiederauflage F.A. Hayek: Preise und Produktion.” Vienna, 1975.
Hayek and Keynes: A Retrospective Assessment
– O'Driscoll, Jr. Gerald P. “Hayek and Keynes: A Retrospective Assessment.” Iowa State University Department of Economics Staff Paper No. 20. Ames, Iowa: Xerox 1975. [Paper prepared for the Symposium on Austrian Economics, University of Hartford, June 22–28, 1975.]
Friedrich August von Hayek o el intento de romper con la neoclassica
– Sacristan, A. “Friedrich August von Hayek o el intento de romper con la neoclassica.” In Comercio Esterior 25 (1975), pp. 193–195.
Inflation, Unemployment and Hayek
– Spencer, Roger W. “Inflation, Unemployment and Hayek.” Review (Federal Reserve Bank of St. Louis.) 57 (1975): 6–10.
Excerpt: “In these times of high unemployment and rising price levels, one looks to the leaders of the economics profession for analysis and solutions. One possible candidate, who has… More
F. A. Hayek: Next Construction for the Giant
– Worsthorne, Peregrine. “F. A. Hayek: Next Construction for the Giant.” In: Prophets of Freedom and Enterprise. Edited by Michael Ivens. London: Kogan Page, Ltd., for Aims of Industry, 1975. pp. 70–80.
The Political Philosophy of F. A. von Hayek
– Baumgarth, William P. “The Political Philosophy of F. A. von Hayek.” Harvard University Ph.D. Dissertation in Government, Cambridge, Mass., 1976
F.A. Hayek, Freedom for Progress
– Crespigny, Anthony de. “F.A. Hayek, Freedom for Progress.” in Anthony de Crespigny and Kenneth Minogue (eds.) Contemporary Political Philosophers. New York: Dodd, Mead and Co., 1975; London: Methuen, 1976, pp. 49–66
Hayek on The Rule of Law
– Dietze, Gottfried. “Hayek on The Rule of Law.” In Fritz Machlup, ed. Essays on Hayek. New York: New York University Press, 1976, pp. 107–146
Capitalism and the Historians
– Hartwell, Ronald Max. “Capitalism and the Historians.” In Fritz Machlup, ed. Essays on Hayek. New York: New York University Press, 1976, pp. 73–94.
Rereading von Hayek
– Leduc, G. “En rélisant von Hayek.” Revue d'Economie Politique 86 (1976): 491–494.
The Achievements of Friedrich A. Hayek
– Letwin, Shirley Robin. “The Achievements of Friedrich A. Hayek.” In Fritz Machlup, ed. Essays on Hayek. New York: New York University Press, 1976, pp. 147–162.
Inflationstheorie bei Hayek und Keynes
– Leube, Kurt R. “Inflationstheorie bei Hayek und Keynes.” (Paper prepared for a Seminar at the University of Salzburg, 1975).
Hayek’s Perception of the ‘Rule of Law’
– Leube, Kurt R. “Hayek's Perception of the ‘Rule of Law’.” The Intercollegiate Review (Winter 1976/1977).
Excerpt: “Of society’s many organizations, the biggest one called Government, has the double task of enforcing the general rules of society and providing those services to the… More
Hayek’s Critique of Reason
– Miller, Eugene F. “Hayek's Critique of Reason.” Modern Age 20, no. 4 (Fall 1976): 383–394.
Excerpt: “My essay will examine what I take to be the foundation of Hayek’s thoughts, namely, the accounts he gives of human knowledge. There is ample evidence that his work in… More
The Relevance of Friedrich A. Hayek
– Roche III, George C. “The Relevance of Friedrich A. Hayek.” In Fritz Machlup, ed., Essays on Hayek. New York: New York University Press, 1976, 1–12.
Libertarianism and Conservatism in the Work of F.A. von Hayek
– Shearmur, Jeremy. “Libertarianism and Conservatism in the Work of F.A. von Hayek.” Unpublished manuscript; lecture originally presented to the Carl Menger Society in London, 1976.
Friedrich A. Hayek: Nobel Prizewinner
– Shearmur, Jeremy. “Friedrich A. Hayek: Nobel Prizewinner.” In Fritz Machlup, ed., Essays on Hayek. New York: New York University Press, 1976, pp. 171–176.
The New Thought of F.A. Hayek
– Shearmur, Jeremy. “The New Thought of F.A. Hayek.” Modern Age 20 (Winter 1976): 54–61.
The ‘Great Society’ and the ‘Open Society’: Liberalism in Hayek and Popper
– Vernon, R. “The ‘Great Society’ and the ‘Open Society’: Liberalism in Hayek and Popper.” Canadian Journal of Political Science 9 (June 1976).
An Interview with Friedrich Hayek
– Ebeling, Richard. “An Interview with Friedrich Hayek.” Libertarian Review (September 1977): 10–16.
Böhm-Bawerk, Wieser und Hayek
– Leube, Kurt R. “Böhm-Bawerk, Wieser und Hayek.” (Unpublished paper presented in Bonn, 1977.)
Review of Law, Legislation and Liberty, Vol. II: The Mirage of Social Justice
– Miller, David. “Review of Law, Legislation and Liberty, Vol. II: The Mirage of Social Justice.” British Journal of Law and Society 4 (Summer 1977): 142–145
Economics as a Coordination Problem by Gerald O’Driscoll Jr.
– O'Driscoll, Jr. Gerald P. Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, with a foreword by F.A. Hayek. Kansas City: Sheed Andrews & McMeel, 1977.
Hayek and Political Order: The Rule of Law
– Baumgarth, William P. “Hayek and Political Order: The Rule of Law.” The Journal of Libertarian Studies 2, no. 1 (Winter 1978): 11–28
Excerpt: “We might assume from the title of Hayek’s earliest comprehensive treatment of the subject that the “rule of law” would appear as the summation of his… More
Time in Economics vs. Economics in Time. The ‘Hayek Problem
– Boland, L.A. “Time in Economics vs. Economics in Time. The ‘Hayek Problem.’” In The Canadian Journal of Economics (Canadian Economic Association) Toronto, 2, no. 2 (1978): 240–262.
Excerpt: “Several notable writers have recently charged that neoclassical economics is ‘timeless.’ But strictly speaking neoclassical economics is not timeless. Indeed,… More
Law and the Liberal Society: F.A. Hayek’s Constitution of Liberty
– Hamowy, Ronald. “Law and the Liberal Society: F.A. Hayek's Constitution of Liberty.” Journal of Libertarian Studies 2, no. 4 (1978): 287–297.
Excerpt: “This paper will focus on the work of Hayek, the leading modern exponent of the liberal conception of freedom and the rule of law. I intended my analysis to lay bare the… More
Hayek, the Inter-War Years and the Gold Standard
– Miller, Robert. “Hayek, the Inter-War Years and the Gold Standard.” Unpublished paper presented to The Carl Menger Society, June 10, 1978.
Hayek, Smith (and Hume)
– Shearmur, Jeremy. “Hayek, Smith (and Hume).” Unpublished manuscript of paper presented at one-day Conference on Hayek at University College, London, October 28, 1978, and sponsored by The Carl Menger Society.
Menger, Hayek and Methodological Individualism
– Shearmur, Jeremy. “Menger, Hayek & Methodological Individualism.” Unpublished paper presented to The Carl Menger Society, February 11, 1978.
Hayek and Liberty
– Steiner, Hillel. “Hayek and Liberty.” Unpublished paper presented to The Carl Menger Society Conference on Hayek, Oct. 28, 1978.
Hayek’s Critique of Social Injustice
– Torrence, Thomas. “Hayek's Critique of Social Injustice.” Unpublished paper presented to The Carl Menger Society Conference on Hayek, October 28, 1978.
The Efficiency Properties of Institutional Evolution: With Particular Reference to the Social—Philosophical Works of F. A. Hayek
– Arnold, Roger A. “The Efficiency Properties of Institutional Evolution: With Particular Reference to the Social—Philosophical Works of F. A. Hayek.” Virginia Polytechnic Institute and State University Ph.D. Dissertation, 1979.
Hayek’s Social and Economic Philosophy
– Barry, Norman P. Hayek's Social and Economic Philosophy. London: Macmillan, 1979.
Liberty and the Rule of Law
– Cunningham, Robert L. (ed.) Liberty and the Rule of Law. College Station, Texas: Texas A & M University Press, 1979.
This collection of essays originated in a conference held in 1976 at the University of San Francisco to discuss Hayek’s defense of liberal constitutionalism and in particular his… More
From the Constitution of Liberty to its Deconstruction by Liberalist Dissipation, Disintegration, Disassociation, Disorder
– Dietze, Gottfried. "From the Constitution of Liberty to its Deconstruction by Liberalist Dissipation, Disintegration, Disassociation, Disorder.” In Fritz Meyer, ed., Zur Verfassung der Freiheit. Festgabe für Friedrich von Hayek. Stuttgart, New York: Gustav Fischer Verlag (Ordo, vol. 30), 1979, pp. 177–197.
American Conservatism and F.A. Hayek
– Dyer, P.W. and Hickman, R.H. “American Conservatism and F.A. Hayek.” Modern Age 23, no. 4 (Fall 1979).
Excerpt: “It has been asserted often that the political ideas of F.A. Hayek are consistent with those of American conservatism. This opinion has come from sources as diverse as the… More
Ökonom und Philosoph: Zum 80. Geburtstag des grossen Österreichers Friedrich A. von Hayek
– Leube, Kurt R. “Ökonom und Philosoph: Zum 80. Geburtstag des grossen Österreichers Friedrich A. von Hayek.” Die Industrie 19 (1979).
F.A. Hayek—Zum 80. Geburtstag
– Leube, Kurt R. “F.A. Hayek—Zum 80. Geburtstag.” Zeitschrift für das gesamte Kreditwesen. Frankfurt/M. 1979.
Hayek und die österr. Schule der Nationalökonomie
– Leube, Kurt R. “Hayek und die österr. Schule der Nationalökonomie.” Bayern Kurier, Munich 1979.
Zur Verfassung der Freiheit: Festgabe für Friedrich A. von Hayek zur Vollendung seines achtzigsten Lebensjahres
– Meyer, Fritz W. et. al, eds. Zur Verfassung der Freiheit: Festgabe für Friedrich A. von Hayek zur Vollendung seines achtzigsten Lebensjahres. Stuttgart, New York: Gustav Fischer Verlag. (Ordo: Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, vol. 30), 1979
The Cognitive Basis of Hayek’s Political Thought
– Miller, Eugene F. “The Cognitive Basis of Hayek's Political Thought.” In Robert L. Cunningham Liberty and the Rule of Law. College Station and London: Texas A & M University Press, 1979. pp. 242–267.
Wave of the Past? Or Wave of the Future
– Minard, Lawrence. “Wave of the Past? Or Wave of the Future?” Forbes (October 1, 1979): 45–50, 52
Zweikammersystem und Bundesverfassungsgericht. Bermerkungen zu einem verfassungspolitischen Reformvorschlag F.A. von Hayeks
– Rupp, Hanns Heinrich. “Zweikammersystem und Bundesverfassungsgericht. Bermerkungen zu einem verfassungspolitischen Reformvorschlag F.A. von Hayeks.” In Zur Verfassung der Freiheit: Festgabe für Friedrich A. von Hayek zur Vollendung seines achtzigsten Libensjahres. Stuttgart, New York: Gustav Fischer Verlag, 1979, pp. 95–104.
Introduction: The Debate, 1931–71
– Shenoy, Sudha R. “Introduction: The Debate, 1931–71.” in F.A. Hayek, A Tiger by the Tail: The Keynesian Legacy of Inflation, Cato 1979.
Excerpt: “The roots of current economic ideas and of those guiding the wages policy lie in the 1930s, in discussion inspired by the publication of the General Theory. Though… More
Zu F.A. Hayeks verfassungsrechtlichen Ideen
– Simson, W. von “Zu F.A. Hayeks verfassungsrechtlichen Ideen.” Der Staat, Zeitschrift für Staatslehre, Offentliches Recht un Verfassungeschichte. Berlin 18, no. 3, (1979): 403–421.
Friedrich August von Hayek—Zum Achtzigsten Geburtstag des grossen Nationalökonomen, Stadts- und Rechtsphilosophen
– Winterberger, G. “Friedrich August von Hayek—Zum Achtzigsten Geburtstag des grossen Nationalökonomen, Stadts- und Rechtsphilosophen.”Schweizer Monatshefte 5 (1979): 359–363.
Handeln in Ungewissheit. F.A. v. Hayek’s Grundlegung einer freiheitlichen Sozialphilosphie
– Zöller, Michael. “Handeln in Ungewissheit. F.A. v. Hayek's Grundlegung einer freiheitlichen Sozialphilosphie.” [“Acting under Uncertainty. F.A. von Hayek's Foundation of a Liberal Social Philosophy.”] In Zur Verfassung der Freiheit: Festgabe für Friedrich A. von Hayek zur Vollendung seines achtzigsten Lebensjahres. Stuttgart, New York: Gustav Fischer Verlag (Ordo 30), 1979, pp. 117–129
Hayek and Institutional Evolution
– Arnold, Roger A. “Hayek and Institutional Evolution.” The Journal of Libertarian Studies 4, no. 4 (Fall 1980): 341–352.
Excerpt: “Casual observation of the last thirty years or so indicates that the role government plays in the lives of individuals has been increasing. Within the internal structure of… More
Hayek and the New Right
– Brittan, Samuel. “Hayek and the New Right.” Encounter 54 (January 1980): 30–46.
Excerpt: “Since the publication of his Road to Serfdom in 1944, Hayek has been cursed by sneerers, who dismiss everything he has to say without giving it a hearing, and even more by… More
F.A. Hayek on Constructivism and Ethics
– Diamond, Arthur M. “F.A. Hayek on Constructivism and Ethics.” The Journal of Libertarian Studies 4, no. 4 (Fall 1980): 353–366.
Excerpt: “Long before receiving his Nobel Prize, Hayek was well respected in the academic community. Keynes had glowing praise for Hayek’s The Road to Serfdom. Milton Friedman… More
Law and Liberty: A Comparison of Hayek and Bastiat
– Dorn, J.A. “Law and Liberty: A Comparison of Hayek and Bastiat.” Unpublished paper (October 1980), 50 pp.
Hayek on Inflation
– Ebeling, Richard. “Hayek on Inflation.” Unpublished Paper presented to The Carl Menger Society Conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980
F.A. Hayek on Liberty and Tradition
– Gray, John N. “F.A. Hayek on Liberty and Tradition.” The Journal of Libertarian Studies 4 (Spring 1980): 119–137.
Excerpt: “One of the most salutary results of the recent revival of scholarly interest in the intellectual traditions of classical liberalism is that Hayek’s social and… More
Hayek or the Political Economy of Liberty
– Lepage, Henri. “Hayek ou l’économie politique de la liberté.” [“Hayek or the Political Economy of Liberty”]. Part 6 of Demain le libéralism [“Tomorrow Liberalism”]. Paris: Le Livre de Poche (8358L), Collection Pluriel, 1980, pp. 409–453.
Hayek—An Overview
– Liggio, Leonard P. “Hayek—An Overview.” Unpublished paper presented to The Carl Menger Society Conference entitled “Hayek—An Introductory Course,” London, December 6, 1980.
F.A. Hayek and the Concept of Coercion
– Roche III, George C. “F.A. Hayek and the Concept of Coercion.” Ordo 31 (Stuttgart, New York: Gustav Fischer Verlag, 1980), pp. 43–50.
Hayek and the Invisible Hand
– Shearmur, Jeremy. “Hayek and the Invisible Hand.” Unpublished paper presented to the Seminar for Austro-German Philosophy at Carl Menger joint conference on Austrian Philosophy & Austrian Politics, London, April 26, 1980.
Hayek on Politics
– Shearmur, Jeremy. “Hayek on Politics.” Unpublished paper presented to The Carl Menger Society conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980
Hayek on Law
– Smith, Graham. “Hayek on Law.” Unpublished paper presented to The Carl Menger Society conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980.
Spontaneous Order and Traditionalism in Hayek
– Steele, David Ramsey. “Spontaneous Order and Traditionalism in Hayek.” Expanded version of a paper delivered to The Colloquium on Austrian Philosophy and Austrian Politics, organized jointly by The Seminar for Austro-German Philosophy & The Carl Menger Society, at The Institute of Contemporary Arts, London, April 26–27, 1980, 75 pp. (Available at the Institute for Humane Studies.)
Hayek on Socialism
– Steele, David Ramsey. “Hayek on Socialism.” Unpublished paper presented to The Carl Menger Society Conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980.
Bibliographie der wissenschaftlichen Veröffenlichungen von Friedrich von Hayek
– Wilde, Olga. “Bibliographie der wissenschaftlichen Veröffenlichungen von Friedrich von Hayek.” In Friedrich A. von Hayek, edited by Erich Hoppmann. Baden—Baden: Nomos Verlagsgesellschaft, 1980, pp. 55–56.
The Political Economy of F.A. Hayek
– Gordon, Scott. “The Political Economy of F.A. Hayek.” Canadian Journal of Economics 14 (1981): 470–487.
Excerpt: “Why should a book on political philosophy be reviewed in an economics journal? If one reads the “Note to contributors” published regularly on the back cover of this… More
Hayek, the Answer Man
– “Hayek, the Answer Man.” The Washington Post (December 2, 1982), pp. C1, C17.
He is everything you want an 83-year-old Viennese conservative economist to be. Tall and rumpled. A pearl stickpin in his tie. A watch chain across his vest, even though he wears a digital… More
Constitution or Competition? Alternative Views on Monetary Reform
– Brown, Pamela. “Constitution or Competition? Alternative Views on Monetary Reform.” Literature of Liberty 5 (Autumn 1982): 7–52
Excerpt: Money, for practically as long as it has existed, has been employed to realize two fundamentally different sorts of goals: production or plunder. In a market economy, private… More
Hayek on Spontaneous Order
– Gray, John N. “Hayek on Spontaneous Order.” Unpublished paper presented to The Carl Menger Society Conference on Hayek, London, Oct. 30, 1982.
Hayek’s Philosophy of Liberty
– Hoy, Calvin M. “Hayek's Philosophy of Liberty.” Columbia University Ph.D. Dissertation. New York, 1982.
Hayek on Law
– Shearmur, Jeremy. “Hayek on Law.” Unpublished paper presented to The Carl Menger Society Conference on Hayek, London, October 30, 1982.
Mises, Hayek, Hahn and The Market Process: Comment on Littlechild
– White, Lawrence H. “Mises, Hayek, Hahn and The Market Process: Comment on Littlechild.” In Method, Process, and Austrian Economics: Essays in Honor of Ludwig von Mises. Edited by Israel M. Kirzner. Lexington, Mass. & Toronto: Lexington-Books, D.C. Heath and Company, 1982, pp. 103–110.
Excerpt: Littlechild correctly emphasizes Mises’s recognition that the conditions necessary for general equilibrium cannot be met in the real world. It is not so much that the future… More
F. A. Hayek and the Rebirth of Classical Liberalism by John Gray
– Gray, John. “F.A. Hayek and the Rebirth of Classical Liberalism.” In Literature of Liberty, Winter 1982, vol. 5, No. 4 (1982).
Excerpt: In the recent revival of public and scholarly interest in the values of limited government and the market order, no one has been more centrally significant than Friedrich A. Hayek.… More
Interview with F.A. Hayek
– Policy Report. February 1983.
Excerpt: In December the Cato Institute launched its Distinguished Lecturer Series with an address by F. A. Hayek, 1974 Nobel laureate in economics and author of numerous books,… More
The Austrian Connection: F.A. Hayek and the Thought of Carl Menger
– Shearmur, Jeremy. “The Austrian Connection: F.A. Hayek and the Thought of Carl Menger.” In B. Smith and W. Grassl, eds. Austrian Philosophy and Austrian Politics. Munich: Philosophia Verlag, forthcoming (1982–1983).
Hayek, Justice and the Market
– Cragg, A. W. Canadian Journal of Philosophy. Vol. 13, No. 4 (December 1983), pp. 563-567.
Justice and the Market
– MacLeod, A. M. Canadian Journal of Philosophy. Vol. 13, No. 4 (December, 1983), pp. 551-561.
Hayek on Justice and the Market: A Reply to MacLeod
– Mack, Eric. Canadian Journal of Philosophy. Vol. 13, No. 4 (December 1983), pp. 569-574.
Hayek on Justice and the Market: A Rejoinder to Cragg and Mack
– Macleod, A. M. Canadian Journal of Philosophy. Vol. 13, No. 4 (December 1983), pp. 575-584.
Exclusive Interview with F.A. Hayek
– Blanchard, James U. Policy Report. May-June 1984.
Excerpt: F.A. Hayek is one of the world’s leading free-market economists and social philosophers. Besides the important 1944 bestseller, The Road to Serfdom, he has written books on… More
Spontaneous Market Order and Social Rules: A Critical Examination of F.A. Hayek’s Theory of Cultural Evolution
– Vanberg, Viktor. Economics and Philosophy. Volume 2, Issue 1 (April 1986), pp 75-100.
Individualism, Social Rules, Tradition: The Case of Friedrich A. Hayek
– Galeotti, Anna Elisabetta. Political Theory. Vol. 15, No. 2 (May, 1987), pp. 163-181.
Hayek’s Transformation
– Caldwell, Bruce. History of Political Economy. Vol. 20, no. 4 (Winter 1988): pp. 513-541.
Hayek’s Bizarre Liberalism: A Critique
– Forsythe, Murray. Political Studies. Volume 36, Issue 2, pages 235–250, (June 1988).
Abstract: This paper questions the conventional view of F. A. Hayek as a reviver of ‘classical liberalism’. It argues that the foundation of Hayek’s doctrine is a naturalist or… More
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Friedrich August von Hayek CH FBA ( HY-ək, German: [ˈfʁiːdʁɪç ˈʔaʊɡʊst fɔn ˈhaɪɛk]; 8 May 1899 – 23 March 1992), often referred to by his initials F. A. Hayek, was an Austrian-British intellectual who made contributions to economics, political science, psychology, intellectual history, philosophy and other fields. Hayek shared the 1974 Nobel Memorial Prize in Economic Sciences with Gunnar Myrdal for work on money and economic fluctuations, and the interdependence of economic, social and institutional phenomena. His account of how prices communicate information is widely regarded as an important contribution to economics that led to him receiving the prize.
During his teenage years, Hayek fought in World War I. He later said this experience, coupled with his desire to help avoid the mistakes that led to the war, drew him into economics. He earned doctoral degrees in law in 1921 and political science in 1923 from the University of Vienna. He subsequently lived and worked in Austria, Great Britain, the United States, and Germany. He became a British citizen in 1938. His academic life was mostly spent at the London School of Economics, later at the University of Chicago, and the University of Freiburg. He is widely considered a major contributor to the Austrian School of Economics.
Hayek had considerable influence on a variety of political movements of the 20th century, and his ideas continue to influence thinkers from a variety of political backgrounds today. Although sometimes described as a conservative, Hayek himself was uncomfortable with this label and preferred to be thought of as a classical liberal. As the co-founder of the Mont Pelerin Society he contributed to the revival of classical liberalism in the post-war era. His most popular work, The Road to Serfdom, has sold over 2.25 million copies and been republished many times over the eight decades since its original publication.
Hayek was appointed a Companion of Honour in 1984 for his academic contributions to economics. He was the first recipient of the Hanns Martin Schleyer Prize in 1984. He also received the Presidential Medal of Freedom in 1991 from President George H. W. Bush. In 2011, his article "The Use of Knowledge in Society" was selected as one of the top 20 articles published in the American Economic Review during its first 100 years.
Life
Early life
Friedrich August von Hayek was born in Vienna to August von Hayek and Felicitas Hayek (née von Juraschek). His father, born in 1871 also in Vienna, was a medical doctor employed by the municipal ministry of health. August was a part-time botany lecturer at the University of Vienna. Friedrich was the oldest of three brothers, Heinrich (1900–1969) and Erich (1904–1986), who were one-and-a-half and five years younger than he was.
His father's career as a university professor influenced Hayek's goals later in life. Both of his grandfathers, who lived long enough for Hayek to know them, were scholars. Franz von Juraschek was a leading economist in Austria-Hungary and a close friend of Eugen von Böhm-Bawerk, one of the founders of the Austrian School of Economics. Hayek's paternal grandfather, Gustav Edler von Hayek, taught natural sciences at the Imperial Realobergymnasium (secondary school) in Vienna. He wrote works in the field of biological systematics, some of which are relatively well known.
On his mother's side, Hayek was second cousin to the philosopher Ludwig Wittgenstein. His mother often played with Wittgenstein's sisters and had known him well. As a result of their family relationship, Hayek became one of the first to read Wittgenstein's Tractatus Logico-Philosophicus when the book was published in its original German edition in 1921. Although he met Wittgenstein on only a few occasions, Hayek said that Wittgenstein's philosophy and methods of analysis had a profound influence on his own life and thought. In his later years, Hayek recalled a discussion of philosophy with Wittgenstein when both were officers during World War I. After Wittgenstein's death, Hayek had intended to write a biography of Wittgenstein and worked on collecting family materials and later assisted biographers of Wittgenstein. He was related to Wittgenstein on the non-Jewish side of the Wittgenstein family. Since his youth, Hayek frequently socialized with Jewish intellectuals and he mentions that people often speculated whether he was also of Jewish ancestry. That made him curious, so he spent some time researching his ancestors and found out that he has no Jewish ancestors within five generations. The surname Hayek uses the German spelling of the Czech surname Hájek. Hayek traced his ancestry to an ancestor with the surname "Hagek" who came from Prague.
Hayek displayed an intellectual and academic bent from a very young age and read fluently and frequently before going to school. However, he did quite poorly at school, due to lack of interest and problems with teachers. He was at the bottom of his class in most subjects, and once received three failing grades, in Latin, Greek and mathematics. He was very interested in theater, even attempting to write some tragedies, and biology, regularly helping his father with his botanical work. At his father's suggestion, as a teenager he read the genetic and evolutionary works of Hugo de Vries and August Weismann and the philosophical works of Ludwig Feuerbach. He noted Goethe as the greatest early intellectual influence. In school, Hayek was much taken by one instructor's lectures on Aristotle's ethics. In his unpublished autobiographical notes, Hayek recalled a division between him and his younger brothers who were only a few years younger than him, but he believed that they were somehow of a different generation. He preferred to associate with adults.
In 1917, Hayek joined an artillery regiment in the Austro-Hungarian Army and fought on the Italian front. Hayek suffered damage to his hearing in his left ear during the war and was decorated for bravery. He also survived the 1918 flu pandemic.
Hayek then decided to pursue an academic career, determined to help avoid the mistakes that had led to the war. Hayek said of his experience: "The decisive influence was really World War I. It's bound to draw your attention to the problems of political organization". He vowed to work for a better world.
Education
At the University of Vienna, Hayek initially studied mostly philosophy, psychology and economics. The university allowed students to choose their subjects freely and there wasn't much obligatory written work, or tests except main exams at the end of the study. By the end of his studies Hayek became more interested in economics, mostly for financial and career reasons; he planned to combine law and economics to start a career in diplomatic service. He earned doctorates in law and political science in 1921 and 1923 respectively.
For a short time, when the University of Vienna closed he studied in Constantin von Monakow's Institute of Brain Anatomy, where Hayek spent much of his time staining brain cells. Hayek's time in Monakow's lab and his deep interest in the work of Ernst Mach inspired his first intellectual project, eventually published as The Sensory Order (1952). It located connective learning at the physical and neurological levels, rejecting the "sense data" associationism of the empiricists and logical positivists. Hayek presented his work to the private seminar he had created with Herbert Furth called the Geistkreis.
During Hayek's years at the University of Vienna, Carl Menger's work on the explanatory strategy of social science and Friedrich von Wieser's commanding presence in the classroom left a lasting influence on him. Upon the completion of his examinations, Hayek was hired by Ludwig von Mises on the recommendation of Wieser as a specialist for the Austrian government working on the legal and economic details of the Treaty of Saint-Germain-en-Laye. Between 1923 and 1924, Hayek worked as a research assistant to Professor Jeremiah Jenks of New York University, compiling macroeconomic data on the American economy and the operations of the Federal Reserve. He was influenced by Wesley Clair Mitchell and started a doctoral program on problems of monetary stabilization but didn't finish it. His time in America wasn't especially happy. He had very limited social contacts, missed the cultural life of Vienna, and was troubled by his poverty. His family's financial situation deteriorated significantly after the War.
Initially sympathetic to Wieser's democratic socialism he found Marxism rigid and unattractive, and his mild socialist phase lasted until he was about 23. Hayek's economic thinking shifted away from socialism and toward the classical liberalism of Carl Menger after reading von Mises' book Socialism. It was sometime after reading Socialism that Hayek began attending von Mises' private seminars, joining several of his university friends, including Fritz Machlup, Alfred Schutz, Felix Kaufmann and Gottfried Haberler, who were also participating in Hayek's own more general and private seminar. It was during this time that he also encountered and befriended noted political philosopher Eric Voegelin, with whom he retained a long-standing relationship.
London School of Economics
With the help of Mises, in the late 1920s he founded and served as director of the Austrian Institute for Business Cycle Research before joining the faculty of the London School of Economics (LSE) in 1931 at the behest of Lionel Robbins. Upon his arrival in London, Hayek was quickly recognised as one of the leading economic theorists in the world and his development of the economics of processes in time and the co-ordination function of prices inspired the ground-breaking work of John Hicks, Abba P. Lerner and many others in the development of modern microeconomics.
In 1932, Hayek suggested that private investment in the public markets was a better road to wealth and economic co-ordination in Britain than government spending programs as argued in an exchange of letters with John Maynard Keynes, co-signed with Lionel Robbins and others in The Times. The nearly decade long deflationary depression in Britain dating from Winston Churchill's decision in 1925 to return Britain to the gold standard at the old pre-war and pre-inflationary par was the public policy backdrop for Hayek's dissenting engagement with Keynes over British monetary and fiscal policy. Keynes called Hayek's book Prices and Production "one of the most frightful muddles I have ever read", famously adding: "It is an extraordinary example of how, starting with a mistake, a remorseless logician can end in Bedlam".
Notable economists who studied with Hayek at the LSE in the 1930s and 1940s include Arthur Lewis, Ronald Coase, William Baumol, John Maynard Keynes, CH Douglas, John Kenneth Galbraith, Leonid Hurwicz, Abba Lerner, Nicholas Kaldor, George Shackle, Thomas Balogh, L. K. Jha, Arthur Seldon, Paul Rosenstein-Rodan and Oskar Lange. Some were supportive and some were critical of his ideas. Hayek also taught or tutored many other LSE students, including David Rockefeller.
Unwilling to return to Austria after the Anschluss brought it under the control of Nazi Germany in 1938, Hayek remained in Britain. Hayek and his children became British subjects in 1938. He held this status for the remainder of his life, but he did not live in Great Britain after 1950. He lived in the United States from 1950 to 1962 and then mostly in Germany, but also briefly in Austria.
In 1947, Hayek was elected a Fellow of the Econometric Society.
The Road to Serfdom
Main article: The Road to Serfdom
Hayek was concerned about the general view in Britain's academia that fascism was a capitalist reaction to socialism and The Road to Serfdom arose from those concerns. The title was inspired by the French classical liberal thinker Alexis de Tocqueville's writings on the "road to servitude". It was first published in Britain by Routledge in March 1944 and was quite popular, leading Hayek to call it "that unobtainable book" also due in part to wartime paper rationing. When it was published in the United States by the University of Chicago in September of that year, it achieved greater popularity than in Britain. At the instigation of editor Max Eastman, the American magazine Reader's Digest also published an abridged version in April 1945, enabling The Road to Serfdom to reach a far wider audience than academics. The book is widely popular among those advocating individualism and classical liberalism.
Chicago
In 1950, Hayek left the London School of Economics. After spending the 1949–1950 academic year as a visiting professor at the University of Arkansas, Hayek was conferred professorship by the University of Chicago, where he became a professor in the Committee on Social Thought. Hayek's salary was funded not by the university, but by an outside foundation, the William Volker Fund.
Hayek had made contact with many at the University of Chicago in the 1940s, with Hayek's The Road to Serfdom playing a seminal role in transforming how Milton Friedman and others understood how society works. Hayek conducted a number of influential faculty seminars while at the University of Chicago and a number of academics worked on research projects sympathetic to some of Hayek's own, such as Aaron Director, who was active in the Chicago School in helping to fund and establish what became the "Law and Society" program in the University of Chicago Law School. Hayek, Frank Knight, Friedman and George Stigler worked together in forming the Mont Pèlerin Society, an international forum for neoliberals. Hayek and Friedman cooperated in support of the Intercollegiate Society of Individualists, later renamed the Intercollegiate Studies Institute, an American student organisation devoted to libertarian ideas.
Although they shared most political beliefs, disagreeing primarily on question of monetary policy, Hayek and Friedman worked in separate university departments with different research interests and never developed a close working relationship. According to Alan O. Ebenstein, who wrote biographies of both of them, Hayek probably had a closer friendship with Keynes than with Friedman.
Hayek received a Guggenheim Fellowship in 1954.
Another influential political philosopher and German-speaking exile at the University of Chicago at the time was Leo Strauss, but according to his student Joseph Cropsey who also knew Hayek, there was no contact between the two of them.
After editing a book on John Stuart Mill's letters he planned to publish two books on the liberal order, The Constitution of Liberty and "The Creative Powers of a Free Civilization" (eventually the title for the second chapter of The Constitution of Liberty). He completed The Constitution of Liberty in May 1959, with publication in February 1960. Hayek was concerned that "with that condition of men in which coercion of some by others is reduced as much as is possible in society". Hayek was disappointed that the book did not receive the same enthusiastic general reception as The Road to Serfdom had sixteen years before.
He left Chicago mostly because of financial reasons, being concerned about his pension provisions. His primary source of income was his salary and he received some additional money from book royalties, but avoided other lucrative sources of income for academics such as writing textbooks. He spent a lot on his frequent travels. He regularly spent summers in Austrian Alps, usually in the Tyrolean village Obergurgl where he enjoyed mountain climbing, and also visited Japan four times with additional trips to Tahiti, Fiji, Indonesia, Australia, New Caledonia and Ceylon. After his divorce, his financial situation worsened.
Freiburg and Salzburg
From 1962 until his retirement in 1968, he was a professor at the University of Freiburg, West Germany, where he began work on his next book, Law, Legislation and Liberty. Hayek regarded his years at Freiburg as "very fruitful". Following his retirement, Hayek spent a year as a visiting professor of philosophy at the University of California, Los Angeles, where he continued work on Law, Legislation and Liberty, teaching a graduate seminar by the same name and another on the philosophy of social science. Preliminary drafts of the book were completed by 1970, but Hayek chose to rework his drafts and finally brought the book to publication in three volumes in 1973, 1976 and 1979.
Hayek became a professor at the University of Salzburg from 1969 to 1977 and then returned to Freiburg. When Hayek left Salzburg in 1977, he wrote: "I made a mistake in moving to Salzburg". The economics department was small and the library facilities were inadequate.
Although Hayek's health suffered, and he fell into a depressionary bout, he continued to work on his magnum opus, Law, Legislation and Liberty in periods when he was feeling better.
Nobel Memorial Prize
On 9 October 1974, it was announced that Hayek would be awarded the Nobel Memorial Prize in Economics with Swedish economist Gunnar Myrdal, with the reasons for selection being listed in a press release. He was surprised at being given the award and believed that he was given it with Myrdal to balance the award with someone from the opposite side of the political spectrum. The Sveriges-Riksbank Nobel Prize in Economics was established in 1968, and Hayek was the first non-Keynesian economist to win it.
Among the reasons given, the committee stated, Hayek "was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929." The following year, Hayek further confirmed his original prediction. An interviewer asked, "We understand that you were one of the only economists to forecast that America was headed for a depression, is that true?" Hayek responded, "Yes." However, no textual evidence has emerged of "a prediction". Indeed, Hayek wrote on 26 October 1929, three days before the crash, "at present there is no reason to expect a sudden crash of the New York stock exchange. ... The credit possibilities/conditions are, at any rate, currently very great, and therefore it appears assured that an outright crisis-like destruction of the present high [price] level should not be feared."
During the Nobel ceremony in December 1974, Hayek met the Russian dissident Aleksandr Solzhenitsyn. Hayek later sent him a Russian translation of The Road to Serfdom. He spoke with apprehension at his award speech about the danger the authority of the prize would lend to an economist, but the prize brought much greater public awareness to the then controversial ideas of Hayek and was described by his biographer as "the great rejuvenating event in his life".
British politics
In February 1975, Margaret Thatcher was elected leader of the British Conservative Party. The Institute of Economic Affairs arranged a meeting between Hayek and Thatcher in London soon after.
During Thatcher's only visit to the Conservative Research Department in the summer of 1975, a speaker had prepared a paper on why the "middle way" was the pragmatic path the Conservative Party should take, avoiding the extremes of left and right. Before he had finished, Thatcher "reached into her briefcase and took out a book. It was Hayek's The Constitution of Liberty. Interrupting our pragmatist, she held the book up for all of us to see. 'This', she said sternly, 'is what we believe', and banged Hayek down on the table".
Despite the media depictions of him as Thatcher's guru and power behind the throne, the communication between him and the Prime Minister was not very regular, they were in contact only once or twice a year. Besides Thatcher, Hayek also made a significant influence on Enoch Powell, Keith Joseph, Nigel Lawson, Geoffrey Howe and John Biffen.
Hayek gained some controversy in 1978 by praising Thatcher's anti-immigration policy proposal in an article which ignited numerous accusations of anti-Semitism and racism because of his reflections on the inability of assimilation of Eastern European Jews in the Vienna of his youth. He defended himself by explaining that he made no racial judgements, only highlighted the problems of acculturation.
In 1977, Hayek was critical of the Lib–Lab pact in which the British Liberal Party agreed to keep the British Labour government in office. Writing to The Times, Hayek said: "May one who has devoted a large part of his life to the study of the history and the principles of liberalism point out that a party that keeps a socialist government in power has lost all title to the name 'Liberal'. Certainly no liberal can in future vote 'Liberal'". Hayek was criticised by Liberal politicians Gladwyn Jebb and Andrew Phillips, who both claimed that the purpose of the pact was to discourage socialist legislation.
Lord Gladwyn pointed out that the German Free Democrats were in coalition with the German Social Democrats. Hayek was defended by Professor Antony Flew, who stated that—unlike the British Labour Party—the German Social Democrats had since the late 1950s abandoned public ownership of the means of production, distribution and exchange and had instead embraced the social market economy.
In 1978, Hayek came into conflict with Liberal Party leader David Steel, who claimed that liberty was possible only with "social justice and an equitable distribution of wealth and power, which in turn require a degree of active government intervention" and that the Conservative Party were more concerned with the connection between liberty and private enterprise than between liberty and democracy. Hayek claimed that a limited democracy might be better than other forms of limited government at protecting liberty, but that an unlimited democracy was worse than other forms of unlimited government because "its government loses the power even to do what it thinks right if any group on which its majority depends thinks otherwise".
Hayek stated that if the Conservative leader had said "that free choice is to be exercised more in the market place than in the ballot box, she has merely uttered the truism that the first is indispensable for individual freedom while the second is not: free choice can at least exist under a dictatorship that can limit itself but not under the government of an unlimited democracy which cannot".
Hayek supported Britain in the Falklands War, writing that it would be justified to attack Argentinian territory instead of just defending the islands, which earned him a lot of criticism in Argentina, a country which he also visited several times. He was also displeased by the weak response of the United States to the Iran hostage crisis, claiming that an ultimatum should be issued and Iran bombed if they do not comply. He supported Ronald Reagan's decision to keep high defence spending, believing that a strong US military is a guarantee of world peace and necessary to keep the Soviet Union under control. President Reagan listed Hayek as among the two or three people who most influenced his philosophy and welcomed him to the White House as a special guest. Senator Barry Goldwater listed Hayek as his favourite political philosopher and congressman Jack Kemp named him an inspiration for his political career.
Recognition
In 1980, Hayek was one of twelve Nobel laureates to meet with Pope John Paul II "to dialogue, discuss views in their fields, communicate regarding the relationship between Catholicism and science, and 'bring to the Pontiff's attention the problems which the Nobel Prize Winners, in their respective fields of study, consider to be the most urgent for contemporary man'"
Hayek was appointed a Companion of Honour (CH) in the 1984 Birthday Honours by Elizabeth II on the advice of British Prime Minister Margaret Thatcher for his "services to the study of economics". Hayek had hoped to receive a baronetcy and after being awarded the CH sent a letter to his friends requesting that he be called the English version of Friedrich (i.e. Frederick) from now on. After his twenty-minute audience with the Queen, he was "absolutely besotted" with her according to his daughter-in-law Esca Hayek. Hayek said a year later that he was "amazed by her. That ease and skill, as if she'd known me all my life". The audience with the Queen was followed by a dinner with family and friends at the Institute of Economic Affairs. When later that evening Hayek was dropped off at the Reform Club, he commented: "I've just had the happiest day of my life".
In 1991, President George H. W. Bush awarded Hayek the Presidential Medal of Freedom, one of the two highest civilian awards in the United States, for a "lifetime of looking beyond the horizon".
Death
Hayek died on 23 March 1992, aged 92, in Freiburg, Germany and was buried on 4 April in the Neustift am Walde cemetery in the northern outskirts of Vienna according to the Catholic rite. In 2011, his article "The Use of Knowledge in Society" was selected as one of the top 20 articles published in The American Economic Review during its first 100 years.
The New York University Journal of Law and Liberty holds an annual lecture in his honor.
Work and views
Business cycle
Main article: Austrian business cycle theory
Ludwig von Mises had earlier applied the concept of marginal utility to the value of money in his Theory of Money and Credit (1912) in which he also proposed an explanation for "industrial fluctuations" based on the ideas of the old British Currency School and of Swedish economist Knut Wicksell. Hayek used this body of work as a starting point for his own interpretation of the business cycle, elaborating what later became known as the Austrian theory of the business cycle. Hayek spelled out the Austrian approach in more detail in his book, published in 1929, an English translation of which appeared in 1933 as Monetary Theory and the Trade Cycle. There, Hayek argued for a monetary approach to the origins of the cycle. In his Prices and Production (1931), Hayek argued that the business cycle resulted from the central bank's inflationary credit expansion and its transmission over time, leading to a capital misallocation caused by the artificially low interest rates. Hayek claimed that "the past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process".
Hayek's analysis was based on Eugen Böhm von Bawerk's concept of the "average period of production" and on the effects that monetary policy could have upon it. In accordance with the reasoning later outlined in his essay "The Use of Knowledge in Society" (1945), Hayek argued that a monopolistic governmental agency like a central bank can neither possess the relevant information which should govern supply of money, nor have the ability to use it correctly.
In 1929, Lionel Robbins assumed the helm of the London School of Economics (LSE). Eager to promote alternatives to what he regarded as the narrow approach of the school of economic thought that then dominated the English-speaking academic world (centered at the University of Cambridge and deriving largely from the work of Alfred Marshall), Robbins invited Hayek to join the faculty at LSE, which he did in 1931. According to Nicholas Kaldor, Hayek's theory of the time-structure of capital and of the business cycle initially "fascinated the academic world" and appeared to offer a less "facile and superficial" understanding of macroeconomics than the Cambridge school's.
Also in 1931, Hayek crititicized John Maynard Keynes's Treatise on Money (1930) in his "Reflections on the pure theory of Mr. J.M. Keynes" and published his lectures at the LSE in book form as Prices and Production. For Keynes, unemployment and idle resources are caused by a lack of effective demand, but for Hayek they stem from a previous unsustainable episode of easy money and artificially low interest rates. Keynes asked his friend Piero Sraffa to respond. Sraffa elaborated on the effect of inflation-induced "forced savings" on the capital sector and about the definition of a "natural" interest rate in a growing economy (see Sraffa–Hayek debate). Others who responded negatively to Hayek's work on the business cycle included John Hicks, Frank Knight and Gunnar Myrdal, who, later on, would share the Sveriges-Riksbank Prize in Economics with him. Kaldor later wrote that Hayek's Prices and Production had produced "a remarkable crop of critics" and that the total number of pages in British and American journals dedicated to the resulting debate "could rarely have been equalled in the economic controversies of the past".
Hayek's work, throughout the 1940s, was largely ignored, except for scathing critiques by Nicholas Kaldor. Lionel Robbins himself, who had embraced the Austrian theory of the business cycle in The Great Depression (1934), later regretted having written the book and accepted many of the Keynesian counter-arguments.
Hayek never produced the book-length treatment of "the dynamics of capital" that he had promised in the Pure Theory of Capital. At the University of Chicago, Hayek was not part of the economics department and did not influence the rebirth of neoclassical theory that took place there (see Chicago school of economics). When in 1974 he shared the Nobel Memorial Prize in Economics with Myrdal, the latter complained about being paired with an "ideologue". Milton Friedman declared himself "an enormous admirer of Hayek, but not for his economics. Milton Friedman also commented on some of his writings, saying "I think Prices and Production is a very flawed book. I think his [Pure Theory of Capital] is unreadable. On the other hand, The Road to Serfdom is one of the great books of our time".
Economic calculation problem
Main article: Economic calculation problem
Building on the earlier work of Mises and others, Hayek also argued that while in centrally planned economies an individual or a select group of individuals must determine the distribution of resources, these planners will never have enough information to carry out this allocation reliably. This argument, first proposed by Max Weber and Ludwig von Mises, says that the efficient exchange and use of resources can be maintained only through the price mechanism in free markets (see economic calculation problem).
In 1935, Hayek published Collectivist Economic Planning, a collection of essays from an earlier debate that had been initiated by Mises. Hayek included Mises's essay in which Mises argued that rational planning was impossible under socialism.
Socialist Oskar Lange responded by invoking general equilibrium theory, which they argued disproved Mises's thesis. They noted that the difference between a planned and a free market system lay in who was responsible for solving the equations. They argued that if some of the prices chosen by socialist managers were wrong, gluts or shortages would appear, signalling them to adjust the prices up or down, just as in a free market. Through such a trial and error, a socialist economy could mimic the efficiency of a free market system while avoiding its many problems.
Hayek challenged this vision in a series of contributions. In "Economics and Knowledge" (1937), he pointed out that the standard equilibrium theory assumed that all agents have full and correct information, and how, in his mind, in the real world different individuals have different bits of knowledge and furthermore some of what they believe is wrong.
In "The Use of Knowledge in Society" (1945), Hayek argued that the price mechanism serves to share and synchronise local and personal knowledge, allowing society's members to achieve diverse and complicated ends through a principle of spontaneous self-organization. He contrasted the use of the price mechanism with central planning, arguing that the former allows for more rapid adaptation to changes in particular circumstances of time and place. Thus, Hayek set the stage for Oliver Williamson's later contrast between markets and hierarchies as alternative co-ordination mechanisms for economic transactions. He used the term catallaxy to describe a "self-organizing system of voluntary co-operation". Hayek's research into this argument was specifically cited by the Nobel Committee in its press release awarding Hayek the Nobel prize.
Criticism of collectivism
Hayek was one of the leading academic critics of collectivism in the 20th century. In Hayek's view, the central role of the state should be to maintain the rule of law, with as little arbitrary intervention as possible. In his popular book The Road to Serfdom (1944) and in subsequent academic works, Hayek argued that socialism required central economic planning and that such planning in turn leads towards totalitarianism.
Hayek posited that a central planning authority would have to be endowed with powers that would impact and ultimately control social life because the knowledge required for centrally planning an economy is inherently decentralised, and would need to be brought under control.
Though Hayek did argue that the state should provide law centrally, others have pointed out that this contradicts his arguments about the role of judges in "discovering" the law, suggesting that Hayek would have supported decentralized provision of legal services.
"The Denationalization of Money" is one of his literary works, in which he advocated the establishment of competitions in issuing moneys.
Investment and choice
Hayek made breakthroughs in the choice theory, and examined the inter-relations between non-permanent production goods and "latent" or potentially economic permanent resources, building on the choice theoretical insight that "processes that take more time will evidently not be adopted unless they yield a greater return than those that take less time".
Philosophy of science
See also: The Counter-Revolution of Science
During World War II, Hayek began the Abuse of Reason project. His goal was to show how a number of then-popular doctrines and beliefs had a common origin in some fundamental misconceptions about the social science.
Ideas were developed in The Counter-Revolution of Science in 1952 and in some of Hayek's later essays in the philosophy of science such as "Degrees of Explanation" (1955) and "The Theory of Complex Phenomena" (1964).
He notes that these are mutually exclusive and that social sciences should not attempt to impose positivist methodology, nor to claim objective or definite results:
Psychology
Hayek's first academic essay was a psychological work titled 'Contributions to the Theory of the Development of Consciousness' (Beiträge zur Theorie der Entwicklung des Bewußtseins) In The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology (1952), Hayek independently developed a "Hebbian learning" model of learning and memory—an idea he first conceived in 1920 prior to his study of economics. Hayek's expansion of the "Hebbian synapse" construction into a global brain theory received attention in neuroscience, cognitive science, computer science, and evolutionary psychology by scientists such as Gerald Edelman, Vittorio Guidano and Joaquin Fuster.
The Sensory Order can be viewed as a development of his attack on scientism. Hayek posited two orders, namely the sensory order that we experience and the natural order that natural science revealed. Hayek thought that the sensory order actually is a product of the brain. He described the brain as a very complex yet self-ordering hierarchical classification system, a huge network of connections. Because of the nature of the classifier system, richness of our sensory experience can exist. Hayek's description posed problems to behaviorism, whose proponents took the sensory order as fundamental.
International Relations
Hayek was a lifelong federalist. He joined several pan-European and pro-federalist movements throughout his career, and called for federal ties between the U.K. and Europe, and between Europe and the United States. After the 1950s, when the Cold War began in earnest, Hayek largely kept his federalist proposals out of the public sphere, although he did propose to federate Jerusalem as late as the 1970s.
Hayek argued that closer economic ties without closer political ties would lead to more problems because interest groups in nation-states would best be able to counter the internationalization of markets that comes with closer economic ties by appealing to nationalism. Much of his time in the pro-federalist and pan-European groups was spent arguing with pro-federal and pan-European democratic socialists over the proper extent of a world federal government. Hayek argued that such a world government should do little more than act as a negative check on national sovereignties and serve as a focal point for collective defense.
As the Cold War heated up, Hayek grew more hawkish and he pushed his federal proposals onto the backburner in favor of more traditional public policy proposals that acknowledged and respected the sovereignty of nation-states. Yet Hayek never disavowed his famous call for "the abrogation of national sovereignties" and his lifetime of work in the area of international relations continues to attract attention from scholars searching for federalist answers to contemporary problems in international relations.
Social and political philosophy
In the latter half of his career, Hayek made a number of contributions to social and political philosophy which he based on his views on the limits of human knowledge and the idea of spontaneous order in social institutions. He argues in favour of a society organised around a market order in which the apparatus of state is employed almost (though not entirely) exclusively to enforce the legal order (consisting of abstract rules and not particular commands) necessary for a market of free individuals to function. These ideas were informed by a moral philosophy derived from epistemological concerns regarding the inherent limits of human knowledge. Hayek argued that his ideal individualistic and free-market polity would be self-regulating to such a degree that it would be "a society which does not depend for its functioning on our finding good men for running it".
Although Hayek believed in a society governed by laws, he disapproved of the notion of "social justice". He compared the market to a game in which "there is no point in calling the outcome just or unjust" and argued that "social justice is an empty phrase with no determinable content". Likewise, "the results of the individual's efforts are necessarily unpredictable, and the question as to whether the resulting distribution of incomes is just has no meaning". He generally regarded government redistribution of income or capital as an unacceptable intrusion upon individual freedom, saying that "the principle of distributive justice, once introduced, would not be fulfilled until the whole of society was organized in accordance with it. This would produce a kind of society which in all essential respects would be the opposite of a free society".
Spontaneous order
Main article: Spontaneous order
Hayek viewed the free price system not as a conscious invention (that which is intentionally designed by man), but as spontaneous order or what Scottish philosopher Adam Ferguson referred to as "the result of human action but not of human design". For instance, Hayek put the price mechanism on the same level as language, which he developed in his price signal theory.
Hayek attributed the birth of civilisation to private property in his book The Fatal Conceit (1988). He explained that price signals are the only means of enabling each economic decision maker to communicate tacit knowledge or dispersed knowledge to each other to solve the economic calculation problem. Alain de Benoist of the Nouvelle Droite (New Right) produced a highly critical essay on Hayek's work in an issue of Telos, citing the flawed assumptions behind Hayek's idea of "spontaneous order" and the authoritarian and totalising implications of his free-market ideology.
Hayek's concept of the market as a spontaneous order was recently applied to ecosystems to defend a broadly non-interventionist policy. Like the market, ecosystems contain complex networks of information, involve an ongoing dynamic process, contain orders within orders and the entire system operates without being directed by a conscious mind. On this analysis, species takes the place of price as a visible element of the system formed by a complex set of largely unknowable elements. Human ignorance about the countless interactions between the organisms of an ecosystem limits our ability to manipulate nature.
Hayek's price signal concept is in relation to how consumers are often unaware of specific events that change market, yet change their decisions, simply because the price goes up. Thus pricing communicates information.
Social safety nets
Main articles: Social insurance and Social safety net
With regard to a social safety net, Hayek advocated "some provision for those threatened by the extremes of indigence or starvation due to circumstances beyond their control" and argued that the "necessity of some such arrangement in an industrial society is unquestioned—be it only in the interest of those who require protection against acts of desperation on the part of the needy". Summarizing Hayek's views on the topic, journalist Nicholas Wapshott has argued that "[Hayek] advocated mandatory universal health care and unemployment insurance, enforced, if not directly provided, by the state". Critical theorist Bernard Harcourt has argued further that "Hayek was adamant about this".
Political theorist Adam James Tebble has argued that Hayek's concession of a social minimum provided by the state introduces a conceptual tension with his epistemically derived commitment to private property rights, free markets, and spontaneous order.
Liberalism and skepticism
Arthur M. Diamond argues Hayek's problems arise when he goes beyond claims that can be evaluated within economic science.
Chandran Kukathas argues that Hayek's defence of liberalism is unsuccessful because it rests on presuppositions that are incompatible. The unresolved dilemma of his political philosophy is how to mount a systematic defence of liberalism if one emphasizes the limited capacity of reason. Norman P. Barry similarly notes that the "critical rationalism" in Hayek's writings appears incompatible with "a certain kind of fatalism, that we must wait for evolution to pronounce its verdict". Milton Friedman and Anna Schwartz argue that the element of paradox exists in the views of Hayek. Noting Hayek's vigorous defense of "invisible hand" evolution that Hayek claimed created better economic institutions than could be created by rational design, Friedman pointed out the irony that Hayek was then proposing to replace the monetary system thus created with a deliberate construct of his own design. John N. Gray summarized this view as "his scheme for an ultra-liberal constitution was a prototypical version of the philosophy he had attacked". Bruce Caldwell wrote that "[i]f one is judging his work against the standard of whether he provided a finished political philosophy, Hayek clearly did not succeed", although he thinks that "economists may find Hayek's political writings useful".
Dictatorship and totalitarianism
Hayek sent António de Oliveira Salazar a copy of The Constitution of Liberty (1960) in 1962. Hayek hoped that his book—this "preliminary sketch of new constitutional principles"—"may assist" Salazar "in his endeavour to design a constitution which is proof against the abuses of democracy".
Hayek visited Chile in the 1970s and 1980s during the Government Junta of general Augusto Pinochet and accepted being appointed Honorary Chairman of the Centro de Estudios Públicos, the think tank formed by the economists who transformed Chile into a free market economy.
In a letter to the London Times, he defended the Pinochet regime and said that he had "not been able to find a single person even in much maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende". Hayek admitted that "it is not very likely that this will succeed, even if, at a particular point in time, it may be the only hope there is", but he explained that "[i]t is not certain hope, because it will always depend on the goodwill of an individual, and there are very few individuals one can trust. But if it is the sole opportunity which exists at a particular moment it may be the best solution despite this. And only if and when the dictatorial government is visibly directing its steps towards limited democracy".
For Hayek, the distinction between authoritarianism and totalitarianism has much importance and he was at pains to emphasise his opposition to totalitarianism, noting that the concept of transitional dictatorship which he defended was characterised by authoritarianism, not totalitarianism. For example, when Hayek visited Venezuela in May 1981, he was asked to comment on the prevalence of totalitarian regimes in Latin America. In reply, Hayek warned against confusing "totalitarianism with authoritarianism" and said that he was unaware of "any totalitarian governments in Latin America. The only one was Chile under Allende". For Hayek, the word "totalitarian" signifies something very specific, namely the intention to "organize the whole of society" to attain a "definite social goal" which is stark in contrast to "liberalism and individualism". He claimed that democracy can also be repressive and totalitarian; in The Constitution of Liberty he often refers to Jacob Talmon's concept of totalitarian democracy.
Immigration, nationalism and race
Hayek was skeptical about international immigration and supported Thatcher's anti-immigration policies.
He was not sympathetic to nationalist ideas and was afraid that mass immigration might revive nationalist sentiment among domestic population and ruin the postwar progress that was made among Western nations. Despite his opposition to nationalism, Hayek made numerous controversial and inflammatory comments about specific ethnic groups. Answering an interview question about people he cannot deal with he mentioned his dislike of Middle Eastern populations, claiming they were dishonest, and also expressed "profound dislike" of Indian students at London School of Economics, saying that were usually "detestable sons of Bengali moneylenders". He claimed that his attitude is not based on any racial feeling. During World War II he discussed the possibility of sending his children to the United States, but was concerned that they might be placed with a "coloured family". In a later interview, questioned about his attitude towards Black people, he said laconically that he "did not like dancing Negroes" and on another occasion he ridiculed the decision to award the Nobel Peace Prize to Martin Luther King Jr. He also made negative comments about awarding the Prize to Ralph Bunche, Albert Luthuli, and his LSE colleague W. Arthur Lewis who he described as an "unusually able West Indian negro". In 1978 Hayek made a month-long visit to South Africa (his third) where he gave numerous lectures, interviews, and met prominent politicians and business leaders, unconcerned about possible propagandistic effect of his tour for Apartheid regime. He expressed his opposition to some of the government policies, believing that publicly funded institutions should treat all citizens equally, but also claimed that private institutions have the right to discriminate. Additionally, he condemned the "scandalous" hostility and interference of the international community in South African internal affairs. While Hayek gave somewhat ambiguous comments on the injustices of Apartheid and proper role of the state, some of his Mont Pelerin colleagues, such as John Davenport and Wilhelm Röpke, were more ardent supporters of South African government and criticized Hayek for being too soft on the subject.
Inequality and class
Hayek claimed that the idea that "all men are born equal" is untrue because evolution and genetic differences have created "boundless variety of human nature". He emphasized the importance of nature, complaining that it became too fashionable to ascribe all human differences to environment. Hayek defended economic inequality, believing that the existence of wealthy class is important not only for economic reasons—accumulating capital and directing investments—but also for political, cultural, scientific and conservationist goals which are often financed and promoted by philanthropists. Since the market mechanism cannot provide for all societal needs, some of which are outside of economic calculation, existence of wealthy individuals guarantees the efficiency and pluralism in their development and realization, which could not be guaranteed in the case of state monopoly. Individual wealth offers independence and can create intellectual, moral, political and artistic leaders which are not employed and influenced by the state. According to Hayek the society benefits from having a hereditary wealthy class because individuals born in it don't have to devote their energy to earning a living and can devote themselves to other purposes such as experimenting with different ideas, hobbies and lifestyles which can later be adopted by broader society.
He contrasted individuals who inherited wealth, with upper class values and education, with the nouveau riche who often use their wealth in more vulgar ways. He decried the disappearance of such leisured aristocratic class, claiming that contemporary Western elites are usually business groups that lack intellectual leadership and coherent "philosophy of life" and use their wealth mostly for economic purposes.
Hayek was against high taxes on inheritance, believing that it is natural function of the family to transmit standards, traditions and material goods. Without transmission of property, parents might try to secure the future of their children by placing them in prestigious and high-paying positions, as was customary in socialist countries, which creates even worse injustices. He was also strongly against progressive taxation, noting that in most countries additional taxes paid by the rich amount to insignificantly small amount of total tax revenue and that the only major result of the policy is "gratification of the envy of the less-well-off". He also claimed that it is contrary to idea of equality under law and against democratic principle that majority should not impose discriminatory rules against minority.
Influence and recognition
Hayek's influence on the development of economics is widely acknowledged. With regard to the popularity of his Nobel acceptance lecture, Hayek is the second-most frequently cited economist (after Kenneth Arrow) in the Nobel lectures of the prize winners in economics. Hayek wrote critically there of the field of orthodox economics and neo-classical modelisation. A number of Nobel Laureates in economics, such as Vernon Smith and Herbert A. Simon, recognise Hayek as the greatest modern economist. Another Nobel winner, Paul Samuelson, believed that Hayek was worthy of his award, but nevertheless claimed that "there were good historical reasons for fading memories of Hayek within the mainstream last half of the twentieth century economist fraternity. In 1931, Hayek's Prices and Production had enjoyed an ultra-short Byronic success. In retrospect hindsight tells us that its mumbo-jumbo about the period of production grossly misdiagnosed the macroeconomics of the 1927–1931 (and the 1931–2007) historical scene". Despite this comment, Samuelson spent the last 50 years of his life obsessed with the problems of capital theory identified by Hayek and Böhm-Bawerk, and Samuelson flatly judged Hayek to have been right and his own teacher Joseph Schumpeter to have been wrong on the central economic question of the 20th century, the feasibility of socialist economic planning in a production goods dominated economy.
Hayek is widely recognised for having introduced the time dimension to the equilibrium construction and for his key role in helping inspire the fields of growth theory, information economics and the theory of spontaneous order. The "informal" economics presented in Milton Friedman's massively influential popular work Free to Choose (1980) is explicitly Hayekian in its account of the price system as a system for transmitting and co-ordinating knowledge. This can be explained by the fact that Friedman taught Hayek's famous paper "The Use of Knowledge in Society" (1945) in his graduate seminars.
In 1944, he was elected as a Fellow of the British Academy after he was nominated for membership by Keynes.
Harvard economist and former Harvard University President Lawrence Summers explains Hayek's place in modern economics: "What's the single most important thing to learn from an economics course today? What I tried to leave my students with is the view that the invisible hand is more powerful than the [un]hidden hand. Things will happen in well-organized efforts without direction, controls, plans. That's the consensus among economists. That's the Hayek legacy".
By 1947, Hayek was an organiser of the Mont Pelerin Society, a group of classical liberals who sought to oppose socialism. Hayek was also instrumental in the founding of the Institute of Economic Affairs, the right-wing libertarian and free-market think tank that inspired Thatcherism. He was in addition a member of the conservative and libertarian Philadelphia Society.
Hayek had a long-standing and close friendship with philosopher of science Karl Popper, who was also from Vienna. In a letter to Hayek in 1944, Popper stated: "I think I have learnt more from you than from any other living thinker, except perhaps Alfred Tarski". Popper dedicated his Conjectures and Refutations to Hayek. For his part, Hayek dedicated a collection of papers, Studies in Philosophy, Politics, and Economics, to Popper and in 1982 said that "ever since his Logik der Forschung first came out in 1934, I have been a complete adherent to his general theory of methodology". Popper also participated in the inaugural meeting of the Mont Pelerin Society. Their friendship and mutual admiration do not change the fact that there are important differences between their ideas.
Hayek also played a central role in Milton Friedman's intellectual development. While Friedman often mentioned Hayek as an important influence, Hayek rarely mentioned Friedman. He deeply disagreed with Chicago School methodology, quantitative and macroeconomic focus, and claimed that Friedman's Essays in Positive Economics was as dangerous a book as Keynes' General Theory. Friedman also claimed that despite some Popperian influence Hayek always retained basic Misesian praxeological view which he found "utterly nonsensical". He also noted that he admired Hayek only for his political works, and disagreed with his technical economics; he called Prices and Production a "very flawed book" and The Pure Theory of Capital "unreadable". There were occasional tensions at the Mont Pelerin meetings between the Hayek's and Friedman's followers that sometimes threatened to split the Society. Although they worked at the same university and shared political beliefs, Hayek and Friedman rarely collaborated professionally and were not close friends.
Hayek's greatest intellectual debt was to Carl Menger, who pioneered an approach to social explanation similar to that developed in Britain by Bernard Mandeville and the Scottish moral philosophers in the Scottish Enlightenment. He had a wide-reaching influence on contemporary economics, politics, philosophy, sociology, psychology and anthropology. For example, Hayek's discussion in The Road to Serfdom (1944) about truth, falsehood and the use of language influenced some later opponents of postmodernism.
Some radical libertarians had a negative view of Hayek and his milder form of liberalism. Ayn Rand disliked him, seeing him as a conservative and compromiser. Hayek made no known written references to Rand.
Wikipedia co-founder Jimmy Wales was influenced by Hayek's ideas on spontaneous order and the Austrian School of economics, after being exposed to these ideas by Austrian economist and Mises Institute Senior Fellow Mark Thornton.
Hayek and conservatism
Hayek received new attention in the 1980s and 1990s with the rise of conservative governments in the United States, United Kingdom and Canada. After winning the 1979 United Kingdom general election, Margaret Thatcher appointed Keith Joseph, the director of the Hayekian Centre for Policy Studies, as her secretary of state for industry in an effort to redirect parliament's economic strategies. Likewise, David Stockman, Ronald Reagan's most influential financial official in 1981, was an acknowledged follower of Hayek.
Hayek wrote an essay, "Why I Am Not a Conservative" (included as an appendix to The Constitution of Liberty). In it he disparaged conservatism for its inability to adapt to changing human realities or to offer a positive political program, remarking: "Conservatism is only as good as what it conserves". Although he noted that modern day American and British conservatism share many opinions on economics with classical liberals, particularly a belief in the free market, he believed it is because conservatism wants to "stand still" whereas liberalism embraces the free market because it "wants to go somewhere". He was much more critical of conservativism in continental Europe which he saw as more similar to socialism. European conservatives, according to Hayek, are similar to socialists in their belief that social and political problems can be solved by placing right people in governmental positions and giving them the opportunity to rule without much restrictions. Both are less concerned with "limiting state power" and more concerned with "arbitrarily" using that power to promote their own goals and "force" their values on other people. Hayek also disliked what he saw as a conservative tendency to obscurantism, such as rejection of theory of evolution and naturalistic explanations of life because of moral consequences that follow from them. He opposed conservatism for "its hostility to internationalism and its proneness to a strident nationalism", with its frequent association with imperialism. Hayek identified himself as a classical liberal, but noted that in the United States it had become almost impossible to use "liberal" in its original definition and the term "libertarian" was used instead. He also found libertarianism as a term "singularly unattractive" and offered the term "Old Whig" (a phrase borrowed from Edmund Burke) instead. In his later life, he said: "I am becoming a Burkean Whig". Whiggery as a political doctrine had little affinity for classical political economy, the tabernacle of the Manchester School and William Gladstone.
Samuel Brittan, concluded in 2010 that "Hayek's book [The Constitution of Liberty] is still probably the most comprehensive statement of the underlying ideas of the moderate free market philosophy espoused by neoliberals". Brittan adds that although Raymond Plant (2009) comes out in the end against Hayek's doctrines, Plant gives The Constitution of Liberty a "more thorough and fair-minded analysis than it has received even from its professed adherents". As a neo-liberal, he helped found the Mont Pelerin Society, a prominent neo-liberal think tank where many other minds, such as Mises and Friedman gathered.
Although Hayek is likely a student of the neo-liberal school of libertarianism, he is nonetheless influential in the conservative movement, mainly for his critique of collectivism.
Hayek and policy discussions
Hayek's ideas on spontaneous order and the importance of prices in dealing with the knowledge problem inspired a debate on economic development and transition economies after the fall of the Berlin wall. For instance, economist Peter Boettke elaborated in detail on why reforming socialism failed and the Soviet Union broke down. Economist Ronald McKinnon uses Hayekian ideas to describe the challenges of transition from a centralized state and planned economy to a market economy. Former World Bank Chief Economist William Easterly emphasizes why foreign aid tends to have no effect at best in books such as The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good.
Since the 2007–2008 financial crisis, there is a renewed interest in Hayek's core explanation of boom-and-bust cycles, which serves as an alternative explanation to that of the savings glut as launched by economist and former Federal Reserve Chair Ben Bernanke. Economists at the Bank for International Settlements, e.g. William R. White, emphasize the importance of Hayekian insights and the impact of monetary policies and credit growth as root causes of financial cycles. Andreas Hoffmann and Gunther Schnabl provide an international perspective and explain recurring financial cycles in the world economy as consequence of gradual interest rate cuts led by the central banks in the large advanced economies since the 1980s. Nicolas Cachanosky outlines the impact of American monetary policy on the production structure in Latin America.
In line with Hayek, an increasing number of contemporary researchers sees expansionary monetary policies and too low interest rates as mal-incentives and main drivers of financial crises in general and the subprime market crisis in particular. To prevent problems caused by monetary policy, Hayekian and Austrian economists discuss alternatives to current policies and organizations. For instance, Lawrence H. White argued in favor of free banking in the spirit of Hayek's "Denationalization of Money". Along with market monetarist economist Scott Sumner, White also noted that the monetary policy norm that Hayek prescribed, first in Prices and Production (1931) and as late as the 1970s, was the stabilization of nominal income.
Hayek's ideas find their way into the discussion of the post-Great Recession issues of secular stagnation. Monetary policy and mounting regulation are argued to have undermined the innovative forces of the market economies. Quantitative easing following the financial crises is argued to have not only conserved structural distortions in the economy, leading to a fall in trend-growth. It also created new distortions and contributes to distributional conflicts.
Central European politics
In the 1970s and 1980s, the writings of Hayek were a major influence on some of the future postsocialist economic and political elites in Central and Eastern Europe.
Critiques
Hayek's work has attracted criticism from a variety of sources. One critique has been that Hayek's defense of capitalism is based on a flawed understanding of human nature, which critics claim is overly reliant on a primarily individualistic and self-interested picture. Critics argue that this view fails to account for the role of social and cultural factors in shaping human behavior and interactions.
Hayek's views on social welfare policies have also been the subject of criticism. Critics contend that his opposition to government intervention in the economy fails to recognize the need for social safety nets and other forms of support for vulnerable populations. Furthermore, it has been argued that his views on welfare policy contradict his views on social justice.
Hayek's argument in The Road to Serfdom has been criticized as a slippery slope argument and therefore falacious. However, others have argued this is a fundamental misunderstanding of the book and Hayek's point is about what central planning directly entails, not what it is likely to lead to.
Some critics have argued that Hayek's advocacy of free markets and limited government has contributed to the rise of neoliberalism and the erosion of social welfare policies in many countries. They argue that his ideas have been used to justify policies that benefit the wealthy at the expense of the poor and vulnerable.
Personal life
In August 1926, Hayek married Helen Berta Maria von Fritsch (1901–1960), a secretary at the civil service office where he worked. They had two children together. Upon the close of World War II, Hayek restarted a relationship with an old girlfriend, who had married since they first met, but kept it secret until 1948. Hayek and Fritsch divorced in July 1950 and he married his cousin Helene Bitterlich (1900–1996) just a few weeks later, after moving to Arkansas to take advantage of permissive divorce laws. His wife and children were offered settlement and compensation for accepting a divorce. The divorce caused some scandal at LSE, where certain academics refused to have anything to do with Hayek. In a 1978 interview to explain his actions, Hayek stated that he was unhappy in his first marriage and as his wife would not grant him a divorce he had taken steps to obtain one unilaterally.
For a time after his divorce, Hayek rarely visited his children, but kept up more regular contact with them in his older years after moving to Europe. Hayek's son, Laurence Hayek (1934–2004) was a distinguished microbiologist. His daughter Christine was an entomologist at the British Museum of Natural History, and she cared for him during his last years, when he had declining health.
Hayek had a lifelong interest in biology and was also concerned with ecology and environmental protection. After being awarded his Nobel Prize, he offered his name to be used for endorsements by World Wildlife Fund, National Audubon Society, and the National Trust, a British conservationist organisation. Evolutionary biology was simply one of his interests in natural sciences. Hayek also had an interest in epistemology, which he often applied to his own thinking, as a social scientist. He held that methodological differences in the social sciences and in natural sciences were key to understanding why incompetent policies are often allowed.
Hayek was brought up in a non-religious setting and decided from age 15 that he was an agnostic.
He died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. Despite his advanced age by the 1980s, he continued to write, even purportedly finishing a book, The Fatal Conceit, in 1988, although its actual authorship is unclear.
Legacy and honours
Hayek's intellectual presence has remained evident in the years following his death, especially in the universities where he had taught, namely the London School of Economics, the University of Chicago and the University of Freiburg. His influence and contributions have been noted by many. A number of tributes have resulted, many established posthumously:
The Hayek Society, a student-run group at the London School of Economics, was established in his honour.
The Oxford Hayek Society, founded in 1983, is named after Hayek.
The Cato Institute named its lower level auditorium after Hayek, who had been a Distinguished Senior Fellow at Cato during his later years.
The auditorium of the school of economics in Universidad Francisco Marroquín in Guatemala is named after him.
The Hayek Fund for Scholars of the Institute for Humane Studies provides financial awards for academic career activities of graduate students and untenured faculty members.
The Ludwig von Mises Institute holds a lecture named after Hayek every year at its Austrian Scholars Conference and invites notable academics to speak about subjects relating to Hayek's contributions to the Austrian School.
George Mason University has an economics essay award named in honour of Hayek.
The Mercatus Center, a free-market think tank also at George Mason University, who has a philosophy, politics and economics program of study named for Hayek.
The Mont Pelerin Society has a quadrennial economics essay contest named in his honour.
Hayek was awarded honorary degrees from Rikkyo University, University of Vienna and University of Salzburg.
Hayek has an investment portfolio named after him. The Hayek Fund invests in corporations who financially support free market public policy organisations
1974: Austrian Decoration for Science and Art
1974: Nobel Memorial Prize in Economic Sciences (Sweden)
1977: Pour le Mérite for Science and Art (Germany)
1983: Honorary Ring of Vienna
1984: Honorary Dean of WHU – Otto Beisheim School of Management
1984: Hanns Martin Schleyer Prize
1984: Companion of Honour (United Kingdom)
1990: Grand Gold Medal with Star for Services to the Republic of Austria
1991: Presidential Medal of Freedom (United States)
1994: The FA Hayek Scholarship in Economics or Political Science, University of Canterbury. The scholarship supports students toward study for an honours or master's degree in the Economics or Political Science at the university. It was established in 1994 by a gift from entrepreneur Alan Gibbs.
Notable works
Main article: Friedrich Hayek bibliography
The Road to Serfdom, 1944.
Individualism and Economic Order, 1948.
The Constitution of Liberty, 1960. The Definitive Edition, 2011. Description and preview.
Law, Legislation and Liberty (3 volumes)
Volume I. Rules and Order, 1973.
Volume II. The Mirage of Social Justice, 1976.
Volume III. The Political Order of a Free People, 1979.
The Fatal Conceit: The Errors of Socialism, 1988. Note that the authorship of The Fatal Conceit is under scholarly dispute. The book in its published form may actually have been written entirely by its editor W. W. Bartley III and not by Hayek.
See also
In Spanish: Friedrich Hayek para niños
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2014-11-09T17:43:59+00:00
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We publish articles around emotional education: calm, fulfilment, perspective and self-awareness. | Friedrich Hayek — Read now
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en
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The School of Life
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https://www.theschooloflife.com/article/friedrich-hayek/
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Friedrich August von Hayek (1899-1992) was a political economist who had a tremendous influence upon how people in capitalist societies understand the concept of liberty. Controversially, for Hayek ‘liberty’ did not mean democracy or a commitment to a set of ‘liberal’ ideals. Rather, Hayek believed that liberty was ‘a policy which deliberately adopts competition, markets and prices as its ordering principles’. To Hayek’s way of thinking, it was markets that guaranteed individual liberty. And, by contrast, it was the interference of the state in markets that disrupted the operation of liberty and started society down, as he famously put it, the road to serfdom.
Hayek was born into a minor part of the Austro-Hungarian aristocracy. His father, who came from a line of scholars, was a medical doctor and part time lecturer in botany. Hayek’s childhood was filled with consideration of philosophy and economics. After a brief stint in the Austro-Hungarian army during the First World War, Hayek took up studies at the University of Vienna, obtaining doctorates in law and political science, and afterwards he became an academic economist.
Hayek’s career can be divided into two periods. The first, which ended towards the end of the 1940s, was spent mainly at the London School of Economics where Hayek concerned himself with many of the macroeconomic debates of the day. The second half of Hayek’s career was much more varied. From 1945 onwards in, first, Chicago and, later, Freiberg, Los Angeles, and Salzburg, Hayek wrote and lectured on a whole range of subjects – economics, yes, but also politics, psychology, philosophy, and the philosophy of science. And whilst he officially retired in 1968, it was actually in the 1970s and 1980s that Hayek enjoyed his greatest moments of influence, being awarded the Nobel Prize in Economic Sciences in 1974 and subsequently being influential upon the governments of Ronald Reagan and Margaret Thatcher.
Development of Key Ideas
During Hayek’s stay at the London School of Economics, which he joined in 1931, he wrestled with a number of the then contemporary debates within economic theory. Much of this revolved around the business cycle which, put simply, is the way in which economies grow and contract. Traditional economic theory held that, over time, economies find themselves in equilibrium. In short, gluts and shortages should balance out via market mechanisms, leading to the optimal distribution of resources within an economy. The problem was that the economic peaks and troughs seemed to keep occurring and they also seemed to be more dramatic than they should be. When the world economy stagnated and then crashed in the late 1920s and during the 1930s, fierce debate began as to why this had occurred.
Coming at economics from a fairly classical position, Hayek focussed on issues of supply. Hayek noticed that when economies were in a recession, central banks often artificially injected more money into the economy by printing cash or else (or in addition) by holding interest rates low to encourage investment, rather than saving. Hayek argued that this was a mistake. When money was too readily available, entrepreneurs invested in products which were not necessarily desired by consumers. When these products went unsold, companies went bankrupt leaving industrial capacity invested where it need not be. In addition, cheap credit incentivised long-term capital investment and Hayek argued that this too was a problem because it limited the possibility of entrepreneurs attempting to realise short-term gains which could kick-start the economy. Resisting the temptation to meddle in the money supply was, for Hayek, crucial to solving the problems of the Great Depression.
Rivalry with Keynes
Hayek’s colleagues at the London School of Economics were receptive to his more classical approach to economics. But, up the road in Cambridge, a very different set of ideas was emerging, centred on the thought of John Maynard Keynes. Keynes argued that the problems of the 1930s economy were located not so much in issues of supply, but rather demand. For Keynes, the role of government was to invest in public works, the building of roads for example, which would create employment and therefore give people money to spend, stimulating economic growth. For Keynes, full employment was, therefore, not only a laudable social goal but vital for the economy too.
Keynes’s demand-led economics was fundamentally at odds with Hayek’s ideas. Hayek felt that Keynes’s focus on full employment would require governments to keep increasing money supply. This, in turn, would create severe inflation of the kind that had wiped out his family’s savings when 1920s Austria suffered a bout of hyperinflation. Throughout the 1930s Hayek and Keynes corresponded with each other, argued bitterly and found very little common ground. During the Second World War, they even met, under bizarre circumstances. Because of the German bombing campaign against London, the LSE had been evacuated to Cambridge. One night, Keynes and Hayek were assigned to fire watch duty together on the roof of the chapel of King’s College. Sadly, we do not know what it was that they talked about throughout that night.
The Road to Serfdom
The opening of the second half of Hayek’s career is marked by his first foray out from dry economic arguments and the publication of what is probably his most famous work, The Road to Serfdom. Hayek saw the writing of this book as a form of war work, forced upon him because, as a former enemy combatant, Hayek was refused official service in the British war effort. Against the backdrop of Keynes’s ideas on planning, which had become accepted within British government circles, The Road to Serfdom was an attempt to save people from themselves, or more accurately, from government.
Hayek put forward several key arguments:
1. That there was nothing intrinsic to Germans as a race of people that had caused them to adopt authoritarian forms of government. Hayek rejected the idea, somewhat popular at the time, that there was something about German culture, or indeed inherent to Germans as a race, which predisposed them to authoritarian and expansionist forms of government.
2. Hayek argued that where Germany, and the Soviet Union too for that matter, had gone wrong was in undertaking state planning that interfered in the natural operation of markets. For Hayek, the problem with state planning was that it necessarily involved offering up responsibility for deciding upon a plan to a single individual. In a bureaucratic system, such as the state, Hayek argued, someone had to ultimately decide on what course of action should be taken. And that person’s judgement would necessarily have to be deferred to and deferred to repeatedly over a given period of time. In this sense, planning led societies to sleepwalk into dictatorship.
3. Not only did Hayek worry about the inherent need for planners to defer to a single individual, but also he was concerned that fundamentally no one individual could actually make rational choices in regards to economic problems due to them not having enough information to base decisions upon. To be clear, it was not that Hayek necessarily condemned dictatorship. After all, his vision of liberty was a society in which markets were the principle method of economic organisation, not necessarily one where society collectively decided upon governments via the ballot box. To this end, Hayek was comfortable with dictators who adopted free market economic policies involving minimal state intervention in a nation’s economy. But dictators who undertook economic planning were, for Hayek, a great evil.
Hayek saw it like this; markets are extremely complicated networks with millions if not billions of transactions going on all the time. Even consideration of some of the basics of market transactions shows this – items are bought and sold, commodities are invested in and divested from, and famines and bumper crop yields affect how much there is to eat and how much it will cost to acquire it, in keeping with the laws of supply and demand. When individuals make choices as to whether or not to buy a commodity, they affect that commodity’s price. If it becomes scarce, its price increases. If it becomes plentiful, its price falls. In this sense, the free market acts as a kind of constant referendum on the value of goods within an economy. For Hayek, the market represented a form of collective agreement, made amongst all of the people operating in that market, as to the value of particular goods and services. And against the collective wisdom of hundreds, or thousands, or millions of people, what could one single planner hope to offer that represented a superior form of wisdom? Liberty, therefore, was to be found by letting the market do its work.
Later Career
The Road to Serfdom launched Hayek’s later career. Instantly, it became a bestseller (during the Second World War its print run was limited due to paper shortages and obtaining a copy was nigh-on impossible due to sheer demand). In the United States, a condensed Readers’ Digest version of the book brought the message to the public at large. So too did a series of lectures delivered by Hayek during 1945 at various venues in the United States. Hayek, cold shouldered by British policy makers and economists, was delighted at the reception he received in the US and in 1950 he moved to the University of Chicago, which became the centre of neoliberal economic thinking, with which Hayek was closely associated, much as Cambridge had been the locus for Keynesian economics.
But despite the popular acclaim of The Road to Serfdom, two negative reactions irked him. First of all, some of his own colleagues, normally sympathetic to the ideas he put forward, saw The Road to Serfdom as a kind of light-weight form of journalism, rather than as a form of scholarship. Second, Keynes, who read The Road to Serfdom, sent Hayek what was, for the most part, a complementary message about its content. However, towards the end, and in quick order, Keynes challenged Hayek as to where he would draw the line on government planning. Some planning was clearly needed, Hayek was not an economic anarchist after all, but, Keynes challenged, where would the line be drawn?
It took Hayek many years to work out his response to Keynes (who died in 1946) but the response eventually came in 1960 in Hayek’s book The Constitution of Liberty. The book laid out Hayek’s practical vision for where the line between the state and market should be drawn and was highly influential amongst the political right. In an anecdote with, admittedly, somewhat apocryphal tinges to it, a story is told that at a meeting with the Conservative Research Department in 1975, Margaret Thatcher responded to a policy paper on political philosophy by reaching into her handbag and withdrawing a copy of The Constitution of Liberty. Holding it aloft, Thatcher declared “This is what we believe”.
Legacy
As the twentieth century unfolded, Hayek’s ideas gained more common currency. The idea that the state should limit itself to providing a legal framework within which entrepreneurs can engage with free markets is at the heart of much of economic thinking in the world today. Many politicians, and large sections of the public too, are sceptical about the ability of the state to plan and undertake anything but the most simple of economic tasks, and this owes much to Hayek’s warnings about the anti-libertarian perils of planning and the inability of planners to truly understand the world around them.
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https://www.econlib.org/library/Enc/bios/BohmBawerk.html
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en
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Eugen von Böhm
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2018-02-05T01:45:34+00:00
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Eugen von Böhm-Bawerk was one of the leading members of the Austrian school of economics—an approach to economic thought founded by Carl Menger and augmented by Knut Wicksell, Ludwig von Mises, Friedrich A. Hayek, and Sir John Hicks. Böhm-Bawerk’s work became so well known that before World War I, his Marxist contemporaries regarded the Austrians […]
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en
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Econlib
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https://www.econlib.org/library/Enc/bios/BohmBawerk.html
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Eugen von Böhm-Bawerk was one of the leading members of the Austrian school of economics—an approach to economic thought founded by Carl Menger and augmented by Knut Wicksell, Ludwig von Mises, Friedrich A. Hayek, and Sir John Hicks. Böhm-Bawerk’s work became so well known that before World War I, his Marxist contemporaries regarded the Austrians as their typical bourgeois, intellectual enemies. His theories of interest and capital were catalysts in the development of economics, but today his original work receives little attention.
Böhm-Bawerk gave three reasons why interest rates are positive. First, people’s marginal utility of income will fall over time because they expect higher income in the future. Second, for psychological reasons the marginal utility of a good declines with time. For both reasons, which economists now call “positive time-preference,” people are willing to pay positive interest rates to get access to resources in the present, and they insist on being paid interest if they are to give up such access. Economists have accepted both as valid reasons for positive time-preference.
But Böhm-Bawerk’s third reason—the “technical superiority of present over future goods”—was more controversial and harder to understand. Production, he noted, is roundabout, meaning that it takes time. It uses capital, which is produced, to transform nonproduced factors of production—such as land and labor—into output. Roundabout production methods mean that the same amount of input can yield a greater output. Böhm-Bawerk reasoned that the net return to capital is the result of the greater value produced by roundaboutness.
An example helps illustrate the point. As the leader of a primitive fishing village, you are able to send out the townspeople to catch enough fish, with their bare hands, to ensure the village’s survival for one day. But if you forgo consumption of fish for one day and use that labor to produce nets, hooks, and lines—capital—each fisherman can catch more fish the following day and the days thereafter. Capital is productive.
Further investment in capital, argued Böhm-Bawerk, increases roundaboutness; that is, it lengthens the production period. On this basis Böhm-Bawerk concluded that the net physical productivity of capital will lead to positive interest rates even if the first two reasons do not hold.
Although his theory of capital is one of the cornerstones of Austrian economics, modern mainstream economists pay no attention to Böhm-Bawerk’s analysis of roundaboutness. Instead, they accept Irving Fisher’s approach of just assuming that there are investment opportunities that make capital productive. Nevertheless, Böhm-Bawerk’s approach helped to pave the way for modern interest theory.
Böhm-Bawerk was also one of the first economists to discuss Karl Marx’s views seriously. He argued that interest does not exist due to exploitation of workers. Workers would get the whole of what they helped produce only if production were instantaneous. But because production is roundabout, he wrote, some of the product that Marx attributed to workers must go to finance this roundaboutness, that is, must go to capital. Böhm-Bawerk noted that interest would have to be paid no matter who owned the capital. Mainstream economists still accept this argument.
Böhm-Bawerk was born in Vienna and studied law at the university there. After teaching at the University of Innsbruck and serving in the civil service, he was appointed minister of finance during the years 1895, 1897, and 1900. He left the ministry in 1904 and taught economics at the University of Vienna until his death in 1914.
About the Author
David R. Henderson is the editor of The Concise Encyclopedia of Economics. He is also an emeritus professor of economics with the Naval Postgraduate School and a research fellow with the Hoover Institution at Stanford University. He earned his Ph.D. in economics at UCLA.
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https://hayek-institut.at/bericht-mark-skousen-on-carl-menger/
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en
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Bericht: Mark Skousen: Carl Menger, The Greatest Economist
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2022-08-22T16:12:38+02:00
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Mark Skousen talks about the economist Carl Menger, who became the founder of the Austrian School of Economics.
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de
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Hayek Institut
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https://hayek-institut.at/bericht-mark-skousen-on-carl-menger/
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Mark Skousen
Carl Menger, the Greatest Economist
The Austrian Economics Center and the Hayek Institut continue to celebrate the 150th anniversary of the publication of Carl Menger’s „Principles of Political Economy“. On this occasion, Mark Skousen gave an online presentation on the founder of the Austrian School of Economics and his revolutionary role in economic thought.
The lecture was presented by the Director and Founder of the Austrian Economics Center, Dr. Barbara Kolm, who highlighted the events held this year in honor of Menger and the publication of our books „Carl Menger – Forscher, Lehrer und Revolutionär der Wirtschaftswissenschaft“ and „Austrian Economics 150 years after Carl Menger. 10th International Conference: The Austrian School of Economics in the 21st century“.
Skousen explained how Carl Menger revolutionized microeconomics and macroeconomics and how it became a great feat that no other economist has accomplished. He highlighted that the basic influences of Menger’s “Principles…” and the application of Mengerian economics were significant factors in his works.
After highlighting the place of Menger in the history of thought and economics through the words of great economists such as Knut Wicksell, Ludwig von Mises, Friedrich Hayek, and Sir John Hicks, Skousen told us that the founder of Austrian economics was one of the economists who built – and perfected – Adam Smith’s system of natural freedom. Menger’s revolutionary treatise contains the correct views on microeconomics through the marginal and subjective analysis of prices and costs, on macroeconomics through the time structure of production, and on the origin and use of money.
In this sense, he explained that Menger’s general theory of good is relevant to analyzing various current problems. When individual goods and services are analyzed through their quantity, quality, and variety, a very different image of the complexity of the economy can be observed.
Later, Skousen emphasized the theory of imputation and its relevance. It was explained that Menger reversed the direction of causality and showed that a consumer good is not valued for the labor and means of production that is used to produce it, but rather that the means of production are valued for needs and wants of the consumer.
Finally – as part of the Austrian economics tradition – Skousen’s model of the stages of production was presented. Complex economics requires an analysis of resources, production, distribution, and final output (GDP). Through concrete cases he demonstrated that GDP is not the final key element of the economy, it only measures final production. The first three stages are not counted in GDP, but they are an essential part of the functioning of the economy.
All the elements of the Mergerian approach allow us to understand that they reflect more deeply the economic reality since it is the only one that includes all the stages of production. The time structure of the economy matters!
***
Download Mark Skousen’s Power Point Presentation:
Mark Skousen – Why Carl Menger is the Greatest Economist of All Time
***
Here is the Recording for the event:
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https://www.spectator.co.uk/article/friedrich-hayek-a-great-political-thinker-rather-than-a-great-economist/
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Friedrich Hayek: a great political thinker rather than a great economist
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"Robert Skidelsky"
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2022-11-30T09:36:56+00:00
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Despite being awarded a Nobel in economics in 1974, Friedrich Hayek was a great thinker rather than a great economist. He called himself a ‘muddler’. His own attempt to build an economic theory floundered. His major contribution was to emphasise the limitations of economic knowledge, and thus the inevitable frustration of efforts to build economic
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en
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The Spectator
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https://www.spectator.co.uk/article/friedrich-hayek-a-great-political-thinker-rather-than-a-great-economist/
|
Despite being awarded a Nobel in economics in 1974, Friedrich Hayek was a great thinker rather than a great economist. He called himself a ‘muddler’. His own attempt to build an economic theory floundered. His major contribution was to emphasise the limitations of economic knowledge, and thus the inevitable frustration of efforts to build economic utopias. His theorising was abstract, but his purpose was practical: to make the case for a liberal economic order which would be proof against the political and economic wickedness and madness through which he lived: the two world wars, the Great Depression and the rise and fall of fascism and communism.
Hayek’s was a slow-burning flame. He hit the intellectual jackpot with his 1944 book The Road to Serfdom, a dire warning that western democracies were on a slippery slope to despotism, a book which influenced Margaret Thatcher. He was also an adroit academic politician and fundraiser, and left an enduring institutional legacy in the Mont Pelerin Society, a sanctuary for free-market thinkers.
This is not the first biography of Hayek. Alan Ebenstein and Bruce Caldwell himself have written intellectual ones. But Caldwell and his German-speaking co-author Hansjoerg Klausinger wanted to write the last one, at least ‘for this generation’. The result of ten years’ toil is a first volume of 800 pages, which takes Hayek’s life up to the age of 50, with a second one – presumably of similar weight – to cover his remaining 44 years. No one is likely to repeat this feat: all the materials are assembled under one roof. It is only interpretations which will shift. This is the definitive Hayek for our times.
Inevitably, it raises a question about the purpose of biography. In reviewing the first volume of my own life of Keynes, the economist Maurice Peston wrote: ‘What help is knowledge of the lives of Newton and Einstein in predicting the movement of the planets?’ To which the answer is that economics is not a natural science like physics. One needs to know the economist, and his location in the flow of events, not to test his theories but to judge their value for our own time.
The context of Hayek’s thinking here revealed is usually illuminating, but occasionally details of the ‘times’ overwhelm the ‘life’. One rather despairs when one reads sentences such as:‘Fritz entered the university to study law, but to trace his subsequent path we must first delve into the complexities of the law curriculum at the University of Vienna.’ With an effort (and some prior knowledge) the reader can trace a clear personal and intellectual thread from birth onwards, but one could have wished for a more skilful integration of background and foreground.
Friedrich von Hayek was born in Vienna in 1899 into a conservative, Christian, German, professional, mildly anti-Semitic family of lower nobility (hence the ‘von’, rather like the British ‘Sir’). Pre-war Vienna was both the cultural capital of Europe – mainly because of its brilliant, recently emancipated Jewish intelligentsia – and the home of destructive racial, religious and social conflicts. This background offers a key to understanding Hayek’s intellectual journey, which was a lifelong quest for a theory of economic order invulnerable to the destructive tendencies of democratic politics. This gave ‘Austrian economics’ its rigid, Platonic character, at odds with the ‘pragmatic’ approach of the politically more secure Anglo-Americans.
However, the theoretical case for entrusting to the free market exclusive direction of the flow of society’s goods and services depended heavily on demonstrating its god-like capacity for rapid adjustment to changing conditions, and it is here that the Austrian School fell short. Hayek inherited from Eugen Böhm-Bawerk a theory of ‘inter-temporal equilibrium’. Adjustment between the consumer and capital goods sectors is secured by movements in real interest rates, reflecting changing consumers’ ‘time-preferences’. But Hayek also inherited from Ludwig von Mises a theory of money and credit, in which money was the ‘loose joint’ in this system of automatic adjustment. This is because banks could finance investment from credit rather than from the voluntary saving of the public. This produced the ‘wrong’ discount rate between present and future goods. Hence the importance of keeping the devil of money creation under the strict control of the gold standard.
In Hayek’s view, slumps were caused by excessive credit creation, leading to a distorted structure of production, which was bound to collapse when the economy ran out of the savings to complete the investments. To inject more credit into a diseased system would only make the disease worse. The malinvestments had to be liquidated for healthy growth to resume. Slumps had to be allowed to run their course.
This left the Austrians without a sensible policy in the face of the Great Depression of 1929-32. They were like Protestants preaching rigid virtue in a situation which called for a large dose of Catholic forgiveness. Lionel Robbins had brought Hayek from Vienna to the LSE in 1931, to counter the dominance of the ‘Cambridge school’ of economists. The battle between Hayek and Keynes over the causes of, and cures for, the Great Depression is well told, but is also well known. Both were political liberals, but whereas Keynes believed that the preservation of political liberty required substantial modification of economic liberty, Hayek thought that the two had to be tightly tethered together to prevent the slide into totalitarianism.
Hayek’s first sortie to Cambridge to explain the slump left his audience baffled. Eventually, Keynes’s assistant Richard Kahn asked: ‘Is it your view that if I went out tomorrow and bought a new overcoat that would increase unemployment?’ ‘Yes,’ Hayek replied, pointing to a blackboard full of triangles, ‘but it would take a very long mathematical argument to explain why.’ Mystification was increased by the fact that students could never tell whether Hayek was speaking English with a strong German accent or German with an English accent.
Over the 1930s most of Hayek’s students at the LSE, notably Nicky Kaldor, defected to the Keynesian camp. The reason is obvious: in the face of the greatest economic catastrophe of modern times, he had no policy to offer except general belt-tightening. The softly spoken, reasonable sounding professor from Vienna with the ambiguous smile turned out to be a sadistic deflationist. Even his patron Lionel Robbins deserted him, writing in his memoirs that Hayek’s attitude ‘was as unsuitable as denying blankets and stimulus to a drunk who had fallen into any icy pond, on the ground that his original trouble was overheating’. Yet Hayek never changed his tune. In the early 1980s he told Thatcher that the only way to kill inflation was to have 20 per cent unemployment for six months.
He more or less gave up technical economics after his battles with Keynes and the Keynesians, and switched to the intellectual course which would eventually bring about his apotheosis. His target this time was the planning movement, then very much in vogue among left-leaning intellectuals. ‘Socialist planning’, boosted by its ‘success’ in the Soviet Union, was their answer to capitalism’s distempers. Against this, Hayek claimed that ‘economic calculation’ required prices; prices reflected individual choices; those choices could not be known in advance by the planners; they were ‘discovered’ by market transactions, which co-ordinated them.
Hayek’s shift was a retreat from economics to political economy. Rather than trying to ‘prove’ the theoretical perfection of the market system, he started to argue that, imperfect though the market system was, in the long run central planning systems were bound to be worse: worse for efficiency and much worse for liberty. It was the ‘fatal conceit’ of the planner to believe he could somehow hoover up all the dispersed knowledge (including the subjective preferences) of millions of people into a central planning ministry and apply it to solve economic problems. Rather, it was the price system itself which ‘discovered’ this knowledge and coordinated individual plans. He called his own ‘discovery’ that social knowledge is subjective and dispersed the ‘most exciting moment’ of his life. Caldwell agrees: Hayek’s discovery of the ‘knowledge problem’ was his ‘most enduring legacy in economics’.
However, while powerful, the contrast he offered between individualism and collectivism was too restrictive. It omitted the fact that a great deal of dispersed (or ‘tacit’) knowledge was to be found in local communities, which are not market actors. Both conservative and socialist communitarian critiques of central planning escaped Hayek’s gaze.
While the Keynesian revolution seized control of Cambridge economics, the LSE became the site of the battle between the planners and market liberals. ‘Imagine the lucky student,’ the authors enthuse, ‘who in the summer term of 1936-7 could watch Hayek lecture on why a collectivist economic system could not work from 5-6 on Thursday evenings, and then hear [Evan] Durbin explain how to run a collectivist economy from 6-7!’
Hayek’s classic The Road to Serfdom was the outcome of the ‘socialist calculation’ debate. His polemical point was that while the democratic powers believed they were battling for freedom against tyranny, their commitment to ‘democratic’ planning would inevitably lead to the same result, since it would progressively impair the market system. Churchill claimed in his losing general election campaign of 1945 that a Labour party victory would lead to a ‘kind of Gestapo’; but Hayek’s main popular appeal was to the anti-Roosevelt right in the USA. He never considered that Roosevelt’s New Deal might have been an antidote to serfdom rather than a prelude to it. As an American reviewer pointed out acidly: ‘The preparation for an electrocution and an electrocardiogram is the same, up to a point.’
The last five years covered by this volume saw Hayek build an institutional basis for free market economics. Influenced by the experience of intellectual life in pre-first world war Vienna, he had always been a man of circles and groups on the edge of standard university courses. Thus in the second world war he proposed an ‘English Speaking College of Social Studies for Central Europe’, located in Vienna, to educate ‘an elite with a certain common tradition of ideas, values and forms of discourse’: that is, a post-war Europe instructed by philosopher kings. More immediately successful and enduring was the Mont Pelerin Society, which he started in 1947 as an academy for liberal thought. This institution-building took place against the background of Hayek’s relocation from the LSE to Chicago University, where an American businessman guaranteed his salary, his messy divorce from Helena Fritsch, his marriage to his first love ‘Lenerl’ Bitterlich and his break with his English patron Lionel Robbins.
Hayek once said that for your ideas to succeed you had to outlive those who hate them. He died in 1992, aged 92, at the height of his fame. The second volume of this biography promises to be a vindication of his dictum.
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John Hicks
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https://en.wikipedia.org/wiki/John_Hicks
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British economist (1904–1989)
For other people named John Hicks, see John Hicks (disambiguation).
Sir John Richard Hicks (8 April 1904 – 20 May 1989) was a British economist. He is considered one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS–LM model (1937), which summarised a Keynesian view of macroeconomics. His book Value and Capital (1939) significantly extended general-equilibrium and value theory. The compensated demand function is named the Hicksian demand function in memory of him.
In 1972 he received the Nobel Memorial Prize in Economic Sciences (jointly) for his pioneering contributions to general equilibrium theory and welfare theory.[1]
Early life
[edit]
Hicks was born in 1904 in Warwick, England, and was the son of Edward Hicks, editor and part proprietor of the Warwick and Leamington Spa Courier newspaper, and Dorothy Catherine, née Stephens, daughter of a non-conformist minister.[2][3]
He was educated at Clifton College (1917–1922)[4] and at Balliol College, Oxford (1922–1926), and was financed by mathematical scholarships. During his school days and in his first year at Oxford, he specialised in mathematics but also had interests in literature and history. In 1923, he moved to Philosophy, Politics and Economics, the "new school" that was just being started at Oxford. He graduated with second-class honours and, as he stated, "no adequate qualification in any of the subjects" that he had studied.[5]
Career
[edit]
From 1926 to 1935, Hicks lectured at the London School of Economics and Political Science.[6] He started as a labour economist and did descriptive work on industrial relations but gradually, he moved over to the analytical side, where his mathematics background returned to the fore. Hicks's influences included Lionel Robbins and such associates as Friedrich von Hayek, R.G.D. Allen, Nicholas Kaldor, Abba Lerner and Ursula Webb, the last of whom, in 1935, became his wife.
From 1935 to 1938, he lectured at Cambridge where he was also a fellow of Gonville & Caius College. He was occupied mainly in writing Value and Capital, which was based on his earlier work in London. From 1938 to 1946, he was Professor at the University of Manchester. There, he did his main work on welfare economics, with its application to social accounting.
In 1946, he returned to Oxford, first as a research fellow of Nuffield College (1946–1952) then as Drummond Professor of Political Economy (1952–1965) and finally as a research fellow of All Souls College (1965–1971), where he continued writing after his retirement.
Later life
[edit]
Hicks was knighted in 1964 and became an honorary fellow of Linacre College. He was co-recipient of the Nobel Prize in Economic Sciences (with Kenneth J. Arrow) in 1972. He donated the Nobel Prize to the London School of Economics and Political Science's Library Appeal in 1973.[6] He died on 20 May 1989 at his home in the Cotswold village of Blockley.[7]
Contributions to economic analysis
[edit]
Hicks's early work as a labour economist culminated in The Theory of Wages (1932, 2nd ed. 1963), still considered standard in the field. He collaborated with R.G.D. Allen in two seminal papers on value theory published in 1934.
His magnum opus is Value and Capital published in 1939. The book built on ordinal utility and mainstreamed the now-standard distinction between the substitution effect and the income effect for an individual in demand theory for the 2-good case. It generalised the analysis to the case of one good and a composite good, that is, all other goods. It aggregated individuals and businesses through demand and supply across the economy. It anticipated the aggregation problem, most acutely for the stock of capital goods. It introduced general equilibrium theory to an English-speaking audience, refined the theory for dynamic analysis, and for the first time attempted a rigorous statement of stability conditions for general equilibrium. In the course of analysis Hicks formalised comparative statics. In the same year, he also developed the famous "compensation" criterion called Kaldor–Hicks efficiency for welfare comparisons of alternative public policies or economic states.
Hicks's most familiar contribution in macroeconomics was the Hicks–Hansen IS–LM model,[8] published in his paper “Mr. Keynes and the "Classics"; a suggested interpretation”. This model formalised an interpretation of the theory of John Maynard Keynes (see Keynesian economics), and describes the economy as a balance between three commodities: money, consumption and investment. Hicks himself wavered in his acceptance of his IS–LM formulation; in a paper published in 1980 he dismissed it as a ‘classroom gadget’.[9]
Contributions to interpretation of income for accounting purposes
[edit]
Hicks's influential discourse on income sets the basis for its subjectivity but relevancy for accounting purposes. He aptly summarized it as follows. “The purpose of income calculations in practical affairs is to give people an indication of the amount they can consume without impoverishing themselves”.[10]
Formally, he defined income precisely in three measures:
Hicks's number 1 measure of income: “the maximum amount, which can be spent during a period if there is to be an expectation of maintaining intact the capital value of prospective receipts (in money terms)” (Hicks, 1946, p. 173)[11]
Hicks's number 2 measure of income (market price-neutral): "the maximum amount the individual can spend during a week, and still expect to be able to spend the same amount in each ensuing week” (Hicks, 1946, p. 174).[11]
Hicks's number 3 measure of income (takes into account market prices): “the maximum amount of money which an individual can spend this week, and still expect to be able to spend the same amount in real terms in each ensuing week” (Hicks, 1946, p. 174)[11]
See also
[edit]
Hicksian demand function
Hicks optimality
Hicks-neutral technical change
List of economists
Nobel Prize in Economics
Selected publications
[edit]
1932, 2nd ed., 1963. The Theory of Wages. London, Macmillan.
1934. "A Reconsideration of the Theory of Value," with R. G. D. Allen, Economica.
1937. "Mr. Keynes and the Classics: A Suggested Interpretation," Econometrica.
1939. "The Foundations of Welfare Economics", Economic Journal.
1939, 2nd ed. 1946. Value and Capital. Oxford: Clarendon Press.
1940. "The Valuation of Social Income," Economica, 7:105–24.
1941. "The Rehabilitation of Consumers' Surplus," Review of Economic Studies.
1942. The Social Framework: An Introduction to Economics.
1950. A Contribution to the Theory of the Trade Cycle. Oxford: Clarendon Press.
1956. A Revision of Demand Theory. Oxford: Clarendon Press.
1958. "The Measurement of Real Income," Oxford Economic Papers.
1959. Essays in World Economics. Oxford: Clarendon Press.
1961. "Measurement of Capital in Relation to the Measurement of Other Economic Aggregates", in Lutz and Hague, editors, Theory of Capital.
1965. Capital and Growth. Oxford: Clarendon Press.
1969. A Theory of Economic History. Oxford: Clarendon Press. Scroll to chapter-preview links.
1970. "Review of Friedman", Economic Journal.
1973. "The Mainspring of Economic Growth", Nobel Lectures, Economics 1969–1980, Editor Assar Lindbeck, World Scientific Publishing Co., Singapore, 1992.
1973. Autobiography for Nobel Prize
1973. Capital and Time: A Neo-Austrian Theory. Oxford, Clarendon Press.
1974. "Capital Controversies: Ancient and Modern", American Economic Review.
1974. The Crisis in Keynesian Economics. New York, Basic Books.
1975. "What Is Wrong with Monetarism", Lloyds Bank Review.
1977. Economic Perspectives. Oxford: Clarendon Press. LCCN 77-5770
1979. "The Formation of an Economist." Banca Nazionale del Lavoro Quarterly Review, no. 130 (September 1979): 195–204.
1979. Causality in Economics. Oxford: Basil Blackwell.
1980. "IS-LM: An Explanation," Journal of Post Keynesian Economics.
1981. Wealth and Welfare: Vol I. of Collected Essays in Economic Theory. Oxford: Basil Blackwell.
1982. Money, Interest and Wages: Vol. II of Collected Essays in Economic Theory. Oxford: Basil Blackwell.
1983. Classics and Moderns: Vol. III of Collected Essays in Economic Theory. Oxford: Basil Blackwell.
1989. A Market Theory of Money. Oxford University Press.
References
[edit]
Further reading
[edit]
Christopher Bliss, [1987] 2008. "Hicks, John Richard (1904–1989)", The New Palgrave: A Dictionary of Economics. Abstract.
Sen, Amartya; Zamagni, Stefano; Scazzieri, Roberto (2008). Markets, money and capital: Hicksian economics for the twenty-first century. Cambridge, UK New York: Cambridge University Press. ISBN 9780521873215.
John R. Hicks on Nobelprize.org
John Hicks page on the History of Economic Thought website.
Works by or about John Hicks at the Internet Archive
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John Maynard Keynes, 1st Baron Keynes, CB, FBA (pron.: / ˈ k eɪ n z / KAYNZ; 5 June 1883 – 21 April 1946) was a British economist whose ideas have affected the theory and practice of modern macroeconomics, and informed the economic policies of governments. He built on and greatly refined earlier work on the causes of business cycles, and is widely considered to be one of the founders of modern macroeconomics and the most influential economist of the 20th century. His ideas are the basis for the school of thought known as Keynesian economics, as well as its various offshoots.
In the 1930s, Keynes spearheaded a revolution in economic thinking, overturning the older ideas of neoclassical economics that held that free markets would, in the short to medium term, automatically provide full employment, as long as workers were flexible in their wage demands. Keynes instead argued that aggregate demand determined the overall level of economic activity, and that inadequate aggregate demand could lead to prolonged periods of high unemployment. He advocated the use of fiscal and monetary measures to mitigate the adverse effects of economic recessions and depressions. Following the outbreak of the Second World War, Keynes's ideas concerning economic policy were adopted by leading Western economies. In 1942, Keynes was awarded a hereditary peerage as Baron Keynes of Tilton in the County of Sussex. During the 1950s and 1960s, the success of Keynesian economics resulted in almost all capitalist governments adopting its policy recommendations.
Keynes's influence waned in the 1970s, partly as a result of problems that began to afflict the Anglo-American economies from the start of the decade, and partly because of critiques from Milton Friedman and other economists who were pessimistic about the ability of governments to regulate the business cycle with fiscal policy. However, the advent of the global financial crisis in 2007 caused a resurgence in Keynesian thought. Keynesian economics provided the theoretical underpinning for economic policies undertaken in response to the crisis by Presidents George W. Bush and Barack Obama of the United States, Prime Minister Gordon Brown of the United Kingdom, and other heads of governments.
In 1999, Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century, commenting that: "His radical idea that governments should spend money they don't have may have saved capitalism." In addition to being an economist, Keynes was also a civil servant, a director of the British Eugenics Society, a director of the Bank of England, a patron of the arts and an art collector, a part of the Bloomsbury Group of intellectuals, an advisor to several charitable trusts, a writer, a philosopher, a private investor, and a farmer.
Early life and education
John Maynard Keynes was born in Cambridge, Cambridgeshire, England, to an upper-middle-class family. His father John Neville Keynes was an economist and a lecturer in moral sciences at the University of Cambridge and his mother Florence Ada Keynes a local social reformer. Keynes was the first born, and was followed by two more children – Margaret Neville Keynes in 1885 and Geoffrey Keynes in 1887.
According to the economist and biographer Robert Skidelsky, Keynes's parents were loving and attentive. They remained in the same house throughout their lives, where the children were always welcome to return. Keynes would receive considerable support from his father, including expert coaching to help him pass his scholarship exams and financial help both as a young man and when his assets were nearly wiped out at the onset of Great Depression in 1929. Keynes's mother made her children's interests her own, and according to Skidelsky, "because she could grow up with her children, they never outgrew home".
Keynes had his early education at home and at nursery. He attended The Perse School nursery in 1890 before becoming a day pupil at St Faith's preparatory school in 1892. Teachers described Keynes as brilliant, but on occasion, careless and lacking in determination. His health was often poor during this period, leading to several long absences.
Keynes won a scholarship to Eton College in 1897, where he displayed talent in a wide range of subjects, particularly mathematics, classics and history. At Eton, Keynes experienced the first "love of his life" in Dan Macmillan, older brother of the future Prime Minister Harold Macmillan. Despite his middle-class background, Keynes mixed easily with upper-class pupils. In 1902 Keynes left Eton for King's College, Cambridge after receiving a scholarship for this also to study mathematics. Alfred Marshall begged Keynes to become an economist, although Keynes's own inclinations drew him towards philosophy – especially the ethical system of G. E. Moore. Keynes was an active member of the semi-secretive Cambridge Apostles society, a debating club largely reserved for the brightest students. Like many members, Keynes retained a bond to the club after graduating and continued to attend occasional meetings throughout his life. Before leaving Cambridge, Keynes became the President of the Cambridge Union Society and Cambridge University Liberal Club. In May 1904 he received a first class B.A. in mathematics. Aside from a few months spent on holidays with family and friends, Keynes continued to involve himself with the university over the next two years. He took part in debates, further studied philosophy and attended economics lectures informally as a graduate student. He also studied for his 1905 Tripos and 1906 civil service exams.
The economist Harry Johnson wrote that the optimism imparted by Keynes's early life is key to understanding his later thinking. Keynes was always confident he could find a solution to whatever problem he turned his attention to, and retained a lasting faith in the ability of government officials to do good. Keynes's optimism was also cultural, in two senses – he was of the last generation raised by an empire still at the height of its power, in its own eyes and by much of the world (at least outwardly) seen as preeminent in both power and benevolence. Keynes was also of the last generation who felt entitled to govern by culture, rather than by expertise. According to Skidelsky, the sense of cultural unity current in Britain from the 19th century to the end of World War I provided a framework with which the well-educated could set various spheres of knowledge in relation to each other and to life, enabling them to confidently draw from different fields when addressing practical problems.
Career
Keynes's Civil Service career began in October 1906, as a clerk in the India Office. He enjoyed his work at first, but by 1908 had become bored and resigned his position to return to Cambridge and work on probability theory, at first privately funded only by two dons at the university – his father and the economist Arthur Pigou. In 1909 Keynes published his first professional economics article in the Economics Journal, about the effect of a recent global economic downturn on India. Also in 1909, Keynes accepted a lectureship in economics funded personally by Alfred Marshall. Keynes's earnings rose further as he began to take on pupils for private tuition, and on being elected a fellow. In 1911 Keynes was made editor of The Economic Journal. By 1913 he had published his first book, Indian Currency and Finance. He was then appointed to the Royal Commission on Indian Currency and Finance – the same topic as his book – where Keynes showed considerable talent at applying economic theory to practical problems.
World War I
The British Government called on Keynes's expertise during the First World War. While he did not formally re-join the civil service in 1914, Keynes travelled to London at the government's request a few days before hostilities started. Bankers had been pushing for the suspension of specie payments – the convertibility of banknotes into gold – but with Keynes's help the Chancellor of the Exchequer (then Lloyd George) was persuaded that this would be a bad idea, as it would hurt the future reputation of the city if payments were suspended before absolutely necessary.
In January 1915 Keynes took up an official government position at the Treasury. Among his responsibilities were the design of terms of credit between Britain and its continental allies during the war, and the acquisition of scarce currencies. According to economist Robert Lekachman, Keynes's "nerve and mastery became legendary" because of his performance of these duties, as in the case where he managed to assemble – with difficulty – a small supply of Spanish pesetas. The secretary of the Treasury was delighted to hear Keynes had amassed enough to provide a temporary solution for the British Government. But Keynes did not hand the pesetas over, choosing instead to sell them all to break the market: his boldness paid off, as pesetas then became much less scarce and expensive. In the 1917 King's Birthday Honours, Keynes was appointed Companion of the Order of the Bath for his wartime work, and his success led to the appointment that would have a huge effect on Keynes's life and career; Keynes was appointed financial representative for the Treasury to the 1919 Versailles peace conference. He was also appointed Officer of the Belgian Order of Leopold.
Versailles peace conference
Keynes's experience at Versailles was influential in shaping his future outlook, yet it was not a successful one for him. Keynes's main interest had been in trying to prevent Germany's compensation payments being set so high it would traumatise innocent German people, damage the nation's ability to pay and sharply limit her ability to buy exports from other countries – thus hurting not just Germany's own economy but that of the wider world. Unfortunately for Keynes, conservative powers in the coalition that emerged from the 1918 coupon election were able to ensure that both Keynes himself and the Treasury were largely excluded from formal high-level talks concerning reparations. Their place was taken by the Heavenly Twins – the judge Lord Sumner and the banker Lord Cunliffe whose nickname derived from the "astronomically" high war compensation they wanted to demand from Germany. Keynes was forced to try to exert influence mostly from behind the scenes.
The three principal players at Versailles were Britain's Lloyd George, France's Clemenceau and America's President Wilson. It was only Lloyd George to whom Keynes had much direct access; until the 1918 election he had some sympathy with Keynes's view but while campaigning had found his speeches were only well received by the public if he promised to harshly punish Germany, and had therefore committed to extracting high payments. Lloyd George did however win some loyalty from Keynes with his actions at the Paris conference by intervening against the French to ensure the dispatch of much-needed food supplies to German civilians. Clemenceau also pushed for high reparations; generally France argued for an even more severe settlement than Britain. Wilson initially favoured relatively lenient treatment of Germany – he feared too harsh conditions could foment the rise of extremism, and wanted Germany to be left sufficient capital to pay for imports. To Keynes's dismay, Lloyd George and Clemenceau were able to pressure Wilson to agree to very high repayments being imposed. Towards the end of the conference, Keynes came up with a plan that he argued would not only help Germany and other impoverished central European powers but also be good for the world economy as a whole. It involved the writing down of war debts which would have the effect of increasing international trade all round. Lloyd George agreed it might be acceptable to the British electorate. However, America was against it; the US was then the largest creditor and by this time Wilson had started to believe in the merits of a harsh peace as a warning to future aggressors. Hence despite his best efforts, the end result of the conference was a treaty which disgusted Keynes both on moral and economic grounds, and led to his resignation from the Treasury.
In June 1919 he turned down an offer to become chairman of the British Bank of Northern Commerce, a job that promised a salary of £2000 in return for a morning per week of work.
Keynes's analysis on the predicted damaging effects of the treaty appeared in the highly influential book, The Economic Consequences of the Peace, published in 1919. This work has been described as Keynes's best book, where he was able to bring all his gifts to bear – his passion as well as his skill as an economist. In addition to economic analysis, the book contained pleas to the reader's sense of compassion:
I cannot leave this subject as though its just treatment wholly depended either on our own pledges or on economic facts. The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable, –abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilised life of Europe.
Also present was striking imagery such as "...that year by year Germany must be kept impoverished and her children starved and crippled..." along with bold predictions which were later justified by events:
If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for very long that final war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing.
Keynes's predictions of disaster were borne out when the German economy suffered the hyperinflation of 1923, and again by the collapse of the Weimar Republic and the outbreak of World War II. Only a fraction of reparations were ever paid. The Economic Consequences of the Peace gained Keynes international fame, but also caused him to be regarded as anti-establishment – it was not until after the outbreak of World War II that Keynes was offered a directorship of a major British Bank, or an acceptable offer to return to government with a formal job. However, Keynes was still able to influence government policy making through his network of contacts, his published works and by serving on government committees; this included attending high-level policy meetings as a consultant.
In the 1920s
Keynes had completed his A Treatise on Probability before the war, but published it in 1921. The work was a notable contribution to the philosophical and mathematical underpinnings of probability theory, championing the important view that probabilities were no more or less than truth values intermediate between simple truth and falsity. Keynes developed the first upper-lower probabilistic interval approach to probability in chapters 15 and 17 of this book, as well as having developed the first decision weight approach with his conventional coefficient of risk and weight, c, in chapter 26. In addition to his academic work, the 1920s saw Keynes active as a journalist selling his work internationally and working in London as a financial consultant. In 1924 Keynes wrote an obituary for his former tutor Alfred Marshall which Schumpeter called "the most brilliant life of a man of science I have ever read." Marshall's widow was "entranced" by the memorial, while Lytton Strachey rated it as one of Keynes's "best works".
In 1922 Keynes continued to advocate reduction of German reparations with A Revision of the Treaty. He attacked the post World War I deflation policies with A Tract on Monetary Reform in 1923 – a trenchant argument that countries should target stability of domestic prices, avoiding deflation even at the cost of allowing their currency to depreciate. Britain suffered from high unemployment through most of the 1920s, leading Keynes to recommend the depreciation of sterling to boost jobs by making British exports more affordable. From 1924 he was also advocating a fiscal response, where the government could create jobs by spending on public works. During the 1920s Keynes's pro stimulus views had only limited effect on policy makers and mainstream academic opinion – according to Hyman Minsky one reason was that at this time his theoretical justification was "muddled" . The Tract had also called for an end to the gold standard. Keynes advised it was no longer a net benefit for countries such as Britain to participate in the gold standard, as it ran counter to the need for domestic policy autonomy. It could force countries to pursue deflationary policies at exactly the time when expansionary measures were called for to address rising unemployment. The Treasury and Bank of England were still in favour of the gold standard and in 1925 they were able to convince the then Chancellor Winston Churchill to re-establish it, which had a depressing effect on British industry. Keynes responded by writing The Economic Consequences of Mr. Churchill and continued to argue against the gold standard until Britain finally abandoned it in 1931.
During the Great Depression
Keynes had begun a theoretical work to examine the relationship between unemployment, money and prices back in the 1920s. The work, Treatise on Money, was published in 1930 in two volumes. A central idea of the work was that if the amount of money being saved exceeds the amount being invested – which can happen if interest rates are too high – then unemployment will rise. This is in part a result of people not wanting to spend too high a proportion of what employers pay out, making it difficult, in aggregate, for employers to make a profit.
Keynes was deeply critical of the British government's austerity measures during the Great Depression. He believed that budget deficits were a good thing, a product of recessions. He wrote, "For Government borrowing of one kind or another is nature's remedy, so to speak, for preventing business losses from being, in so severe a slump as to present one, so great as to bring production altogether to a standstill."
At the height of the Great Depression, in 1933, Keynes published The Means to Prosperity, which contained specific policy recommendations for tackling unemployment in a global recession, chiefly counter cyclical public spending. The Means to Prosperity contains one of the first mentions of the multiplier effect. While it was addressed chiefly to the British Government, it also contained advice for other nations affected by the global recession. A copy was sent to the newly elected President Roosevelt and other world leaders. The work was taken seriously by both the American and British governments, and according to Skidelsky, helped pave the way for the later acceptance of Keynesian ideas, though it had little immediate practical influence. In the 1933 London Economic Conference opinions remained too diverse for a unified course of action to be agreed upon.
Keynesian-like policies were adopted by Sweden and Germany, but Sweden was seen as too small to command much attention, and Keynes was deliberately silent about the successful efforts of Germany as he was dismayed by their imperialist ambitions and their treatment of Jews. Apart from Great Britain, Keynes's attention was primarily focused on the United States. In 1931, he received considerable support for his views on counter-cyclical public spending in Chicago, then America's foremost centre for economic views alternative to the mainstream. However, orthodox economic opinion remained generally hostile regarding fiscal intervention to mitigate the depression, until just before the outbreak of war. In late 1933 Keynes was persuaded by Felix Frankfurter to address President Roosevelt directly, which he did by letters and face to face in 1934, after which the two men spoke highly of each other. However according to Skidelsky, the consensus is that Keynes's efforts only began to have a more than marginal influence on US economic policy after 1939.
Keynes's magnum opus, The General Theory of Employment, Interest and Money was published in 1936. It was researched and indexed by one of Keynes's favourite students, later the economist David Bensusan-Butt. The work served as a theoretical justification for the interventionist policies Keynes favoured for tackling a recession. The General Theory challenged the earlier neo-classical economic paradigm, which had held that provided it was unfettered by government interference, the market would naturally establish full employment equilibrium. In doing so Keynes was partly setting himself against his former teachers Marshall and Pigou. Keynes believed the classical theory was a "special case" that applied only to the particular conditions present in the 19th century, his own theory being the general one. Classical economists had believed in Say's law, which, simply put, states that " supply creates its own demand", and that in a free market workers would always be willing to lower their wages to a level where employers could profitably offer them jobs. An innovation from Keynes was the concept of price stickiness – the recognition that in reality workers often refuse to lower their wage demands even in cases where a classical economist might argue it is rational for them to do so. Due in part to price stickiness, it was established that the interaction of "aggregate demand" and "aggregate supply" may lead to stable unemployment equilibria – and in those cases, it is the state, and not the market, that economies must depend on for their salvation.
The General Theory argues that demand, not supply, is the key variable governing the overall level of economic activity. Aggregate demand, which equals total un-hoarded income in a society, is defined by the sum of consumption and investment. In a state of unemployment and unused production capacity, one can only enhance employment and total income by first increasing expenditures for either consumption or investment. Without government intervention to increase expenditure, an economy can remain trapped in a low employment equilibrium – the demonstration of this possibility has been described as the revolutionary formal achievement of the work. The book advocated activist economic policy by government to stimulate demand in times of high unemployment, for example by spending on public works. "Let us be up and doing, using our idle resources to increase our wealth," he wrote in 1928. "With men and plants unemployed, it is ridiculous to say that we cannot afford these new developments. It is precisely with these plants and these men that we shall afford them."
The General Theory is often viewed as the foundation of modern macroeconomics. Few senior American economists agreed with Keynes through most of the 1930s. Yet his ideas were soon to achieve widespread acceptance, with eminent American professors such as Alvin Hansen agreeing with the General Theory before the outbreak of World War II.
Keynes himself had only limited participation in the theoretical debates that followed the publication of the General Theory as he suffered a heart attack in 1937, requiring him to take long periods of rest. Hyman Minsky and other post-Keynesian economists have argued that as result of this, Keynes's ideas were diluted by those keen to compromise with classical economists or to render his concepts with mathematical models like the IS/LM model (which, they argue, distort Keynes's ideas). Keynes began to recover in 1939, but for the rest of his life his professional energies were largely directed towards the practical side of economics – the problems of ensuring optimum allocation of resources for the War efforts, post-War negotiations with America, and the new international financial order that was presented at Bretton Woods, New Hampshire.
World War II
During World War II, Keynes argued in How to Pay for the War, published in 1940, that the war effort should be largely financed by higher taxation and especially by compulsory saving (essentially workers lending money to the government), rather than deficit spending, in order to avoid inflation. Compulsory saving would act to dampen domestic demand, assist in channelling additional output towards the war efforts, would be fairer than punitive taxation and would have the advantage of helping to avoid a post war slump by boosting demand once workers were allowed to withdraw their savings. In September 1941 he was proposed to fill a vacancy in the Court of Directors of the Bank of England, and subsequently carried out a full term from the following April. In June 1942, Keynes was rewarded for his service with a hereditary peerage in the King's Birthday Honours. On 7 July his title was gazetted as "BARON KEYNES, of Tilton, in the County of Sussex" and he took his seat in the House of Lords on the Liberal Party benches.
As the Allied victory began to look certain, Keynes was heavily involved, as leader of the British delegation and chairman of the World Bank commission, in the mid-1944 negotiations that established the Bretton Woods system. The Keynes-plan, concerning an international clearing-union argued for a radical system for the management of currencies. He proposed the creation of a common world unit of currency, the bancor, and new global institutions – a world central bank and the International Clearing Union. Keynes envisaged these institutions managing an international trade and payments system with strong incentives for countries to avoid substantial trade deficits or surpluses. The USA's greater negotiating strength, however, meant that the final outcomes accorded more closely to the more conservative plans of Harry Dexter White. According to US economist Brad Delong, on almost every point where he was overruled by the Americans, Keynes was later proved correct by events.
The two new institutions, later known as the World Bank and International Monetary Fund (IMF), were founded as a compromise that primarily reflected the American vision. There would be no incentives for states to avoid a large trade surplus; instead, the burden for correcting a trade imbalance would continue to fall only on the deficit countries, which Keynes had argued were least able to address the problem without inflicting economic hardship on their populations. Yet, Keynes was still pleased when accepting the final agreement, saying that if the institutions stayed true to their founding principles, "the brotherhood of man will have become more than a phrase."
Postwar
After the war, Keynes continued to represent the United Kingdom in international negotiations despite his deteriorating health. He succeeded in obtaining preferential terms from the United States for new and outstanding debts to facilitate the rebuilding of the British economy.
Just before his death in 1946, Keynes told Henry Clay, a professor of Social Economics and Advisor to the Bank of England of his hopes that Adam Smith's ' invisible hand' can help Britain out of the economic hole it is in: "I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago."
Legacy
The Keynesian ascendancy 1939–1979
From the end of the Great Depression to the mid-1970s, Keynes provided the main inspiration for economic policy makers in Europe, America and much of the rest of the world. While economists and policy makers had become increasingly won over to Keynes's way of thinking in the mid and late 1930s, it was only after the outbreak of World War II that governments started to borrow money for spending on a scale sufficient to eliminate unemployment. According to economist John Kenneth Galbraith (then a US government official charged with controlling inflation), in the rebound of the economy from wartime spending, "one could not have had a better demonstration of the Keynesian ideas."
The Keynesian Revolution was associated with the rise of modern liberalism in the West during the post-war period. Keynesian ideas became so popular that some scholars point to Keynes as representing the ideals of modern liberalism, as Adam Smith represented the ideals of classical liberalism. After the war Winston Churchill attempted to check the rise of Keynesian policy-making in the United Kingdom, and used rhetoric critical of the mixed economy in his 1945 election campaign. Despite his popularity as a war hero Churchill suffered a landslide defeat to Clement Attlee whose government's economic policy continued to be influenced by Keynes's ideas.
Neo-Keynesian economics
In the late 1930s and 1940s, economists (notably John Hicks, Franco Modigliani, and Paul Samuelson) attempted to interpret and formalise Keynes's writings in terms of formal mathematical models. In a process termed "the neoclassical synthesis", they combined Keynesian analysis with neo-classical economics to produce Neo-Keynesian economics, which came to dominate mainstream macroeconomic thought for the next 40 years.
By the 1950s, Keynesian policies were adopted by almost the entire developed world and similar measures for a mixed economy were used by many developing nations. By then, Keynes's views on the economy had become mainstream in the world's universities. Throughout the 1950s and 1960s, the developed and emerging free capitalist economies enjoyed exceptionally high growth and low unemployment. Professor Gordon Fletcher has written that the 1950s and 1960s, when Keynes's influence was at its peak, appear in retrospect as a Golden Age of Capitalism.
In late 1965 Time magazine ran a cover article with the title inspired by a possibly tongue-in-cheek comment from Milton Friedman, a comment later echoed by U.S. President Richard Nixon, that " We are all Keynesians now". The article described the exceptionally favourable economic conditions then prevailing, and reported that "Washington's economic managers scaled these heights by their adherence to Keynes's central theme: the modern capitalist economy does not automatically work at top efficiency, but can be raised to that level by the intervention and influence of the government." The article also states that Keynes was one of the three most important economists who ever lived, and that his General Theory was more influential than the magna opera of other famous economists, like Smith's The Wealth of Nations.
Economics: out of favour 1979–2007
Keynesian economics were officially discarded by the British Government in 1979, but forces had begun to gather against Keynes's ideas over 30 years earlier. Friedrich Hayek had formed the Mont Pelerin Society in 1947, with the explicit intention of nurturing intellectual currents to one day displace Keynesianism and other similar influences. Its members included Austrian School economist Ludwig von Mises along with the then young Milton Friedman. Initially the society had little impact on the wider world – Hayek was to say it was as if Keynes had been raised to sainthood after his death and that people refused to allow his work to be questioned. Friedman however began to emerge as a formidable critic of Keynesian economics from the mid-1950s, and especially after his 1963 publication of A Monetary History of the United States.
On the practical side of economic life, big government had appeared to be firmly entrenched in the 1950s but the balance began to shift towards private power in the 1960s. Keynes had written against the folly of allowing "decadent and selfish" speculators and financiers the kind of influence they had enjoyed after World War I. For two decades after World War II public opinion was strongly against private speculators, the disparaging label Gnomes of Zürich being typical of how they were described during this period. International speculation was severely restricted by the capital controls in place after Bretton Woods. Journalists Larry Elliott and Dan Atkinson say 1968 was a pivotal year when power shifted in the favour of private agents such as currency speculators. They pick out a key 1968 event as being when America suspended the conversion of the dollar into gold except on request of foreign governments, which they identify as when the Bretton Woods system first began to break down.
Criticisms of Keynes's ideas had begun to gain significant acceptance by the early 1970s as they were able to make a credible case that Keynesian models no longer reflected economic reality. Keynes himself had included few formulas and no explicit mathematical models in his General Theory. For commentators such as economist Hyman Minsky, Keynes's limited use of mathematics was partly the result of his scepticism about whether phenomena as inherently uncertain as economic activity could ever be adequately captured by mathematical models. Nevertheless, many models were developed by Keynesian economists, with a famous example being the Phillips curve which predicted an inverse relationship between unemployment and inflation. It implied that unemployment could be reduced by government stimulus with a calculable cost to inflation. In 1968 Milton Friedman published a paper arguing that the fixed relationship implied by the Philips curve did not exist. Friedman suggested that sustained Keynesian policies could lead to both unemployment and inflation rising at once – a phenomenon that soon became known as stagflation. In the early 1970s stagflation appeared in both the US and Britain just as Friedman had predicted, with economic conditions deteriorating further after the 1973 oil crisis. Aided by the prestige gained from his successful forecast, Friedman led increasingly successful criticisms against the Keynesian consensus, convincing not only academics and politicians but also much of the general public with his radio and television broadcasts. The academic credibility of Keynesian economics was further undermined by additional criticism from other Monetarists trained in the Chicago school of economics, by the Lucas Critique and by criticisms from Hayek's Austrian School. So successful were these criticisms that by 1980 Robert Lucas was saying economists would often take offence if described as Keynesians. Keynesian principles fared increasingly poorly on the practical side of economics – by 1979 they had been displaced by Monetarism as the primary influence on Anglo-American economic policy. However many officials on both sides of the Atlantic retained a preference for Keynes, and in 1984 the Federal Reserve officially discarded monetarism, after which Keynesian principles made a partial comeback as an influence on policy making. Not all academics accepted the criticism against Keynes – Minsky has argued that Keynesian economics had been debased by excessive mixing with neo-classical ideas from the 1950s, and that it was unfortunate the branch of economics had even continued to be called "Keynesian". Writing in The American Prospect Robert Kuttner argued it was not so much excessive Keynesian activism that caused the economic problems of the 1970s but the breakdown of the Bretton Woods system of capital controls, which allowed capital flight from regulated economies into unregulated economies in a fashion similar to Gresham's Law (where weak currencies undermine strong currencies). Historian Peter Pugh has stated a key cause of the economic problems afflicting America in the 1970s was the refusal to raise taxes to finance the Vietnam War, which was against Keynesian advice.
A more typical response was to accept some elements of the criticisms while refining Keynesian economic theories to defend them against arguments that would invalidate the whole Keynesian framework – the resulting body of work largely composing New Keynesian economics. In 1992 Alan Blinder was writing about a "Keynesian Restoration" as work based on Keynes's ideas had to some extent become fashionable once again in academia, though in the mainstream it was highly synthesised with Monetarism and other neo-classical thinking. In the world of policy making, free-market influences broadly sympathetic to Monetarism remained very strong at government level – in powerful normative institutions like the World Bank, IMF and US Treasury, and in prominent opinion-forming media such as the Financial Times and The Economist.
Economics: the Keynesian resurgence of 2008–2009
The 2007–2012 global financial crisis led to public skepticism about the free market consensus even from some on the economic right. In March 2008, Martin Wolf, chief economics commentator at the Financial Times, announced the death of the dream of global free-market capitalism. In the same month macroeconomist James K. Galbraith used the 25th Annual Milton Friedman Distinguished Lecture to launch a sweeping attack against the consensus for monetarist economics and argued that Keynesian economics were far more relevant for tackling the emerging crises. Economist Robert Shiller had begun advocating robust government intervention to tackle the financial crises, specifically citing Keynes. Nobel laureate Paul Krugman also actively argued the case for vigorous Keynesian intervention in the economy in his columns for the New York Times. Other prominent economic commentators arguing for Keynesian government intervention to mitigate the financial crisis include George Akerlof, Brad Delong, Robert Reich, and Joseph Stiglitz. Newspapers and other media have also cited work relating to Keynes by Hyman Minsky, Robert Skidelsky, Donald Markwell and Axel Leijonhufvud.
A series of major bail-outs were pursued during the financial crisis, starting on 7 September with the announcement that the U.S. government was to nationalise the two government-sponsored enterprises which oversaw most of the U.S. subprime mortgage market – Fannie Mae and Freddie Mac. In October, the British Chancellor of the Exchequer referred to Keynes as he announced plans for substantial fiscal stimulus to head off the worst effects of recession, in accordance with Keynesian economic thought. Similar policies have been adopted by other governments worldwide. This is in stark contrast to the action permitted to Indonesia during its financial crisis of 1997, when it was forced by the IMF to close 16 banks at the same time, prompting a bank run. Much of the recent discussion reflected Keynes's advocacy of international coordination of fiscal or monetary stimulus, and of international economic institutions such as the IMF and the World Bank, which many had argued should be reformed at a "new Bretton Woods" even before the crises broke out. IMF and United Nations economists advocated a coordinated international approach to fiscal stimulus. Donald Markwel argued that in the absence of such an international approach, there would be a risk of worsening international relations and possibly even world war arising from similar economic factors to those present during the depression of the 1930s.
By the end of December 2008, the Financial Times reported that "the sudden resurgence of Keynesian policy is a stunning reversal of the orthodoxy of the past several decades." In December 2008, Paul Krugman released his book, The Return of Depression Economics and the Crisis of 2008, arguing that economic conditions similar to what existed during the earlier part of the 20th century had returned, making Keynesian policy prescriptions more relevant than ever. In February 2009 Shiller and George Akerlof published Animal Spirits, a book where they argue the current US stimulus package is too small as it does not take into account Keynes's insight on the importance of confidence and expectations in determining the future behaviour of businessmen and other economic agents.
In a March 2009 speech entitled Reform the International Monetary System, Zhou Xiaochuan, the governor of the People's Bank of China came out in favour of Keynes's idea of a centrally managed global reserve currency. Zhou argued that it was unfortunate that part of the reason for the Bretton Woods system breaking down was the failure to adopt Keynes's bancor. Zhou proposed a gradual move towards increased use of IMF special drawing rights (SDRs). Although Zhou's ideas have not yet been broadly accepted, leaders meeting in April at the 2009 G-20 London summit agreed to allow $250 billion of special drawing rights to be created by the IMF, to be distributed globally. Stimulus plans have been credited for contributing to a better than expected economic outlook by both the OECD and the IMF, in reports published in June and July 2009. Both organisations warned global leaders that recovery is likely to be slow, so counter recessionary measures ought not be rolled back too early.
While the need for stimulus measures has been broadly accepted among policy makers, there has been much debate over how to fund the spending. Some leaders and institutions such as Angela Merkel and the European Central Bank have expressed concern over the potential impact on inflation, national debt and the risk that a too large stimulus will create an unsustainable recovery.
Among professional economists the revival of Keynesian economics has been even more divisive. Although many economists, such as George Akerlof, Paul Krugman, Robert Shiller, and Joseph Stiglitz, support Keynesian stimulus, over 300 economists signed a petition stating that they do not believe higher government spending will help the United States economy recover from the Great Recession. Some economists, such as Robert Lucas, questioned the theoretical basis for stimulus packages. Others, like Robert Barro and Gary Becker, say that the empirical evidence for beneficial effects from Keynesian stimulus does not exist. However, there is a growing academic literature that shows that fiscal expansion helps an economy grow in the near term, and that certain types of fiscal stimulus are particularly effective.
Reception
Praise
Keynes's economic thinking only began to achieve close to universal acceptance in the last few years of his life. On a personal level, Keynes's charm was such that he was generally well received wherever he went – even those who found themselves on the wrong side of his occasionally sharp tongue rarely bore a grudge. Keynes's speech at the closing of the Bretton Woods negotiations was received with a lasting standing ovation, rare in international relations, as delegates acknowledged the scale of his achievements made despite poor health.
Hayek
Austrian School economist Friedrich Hayek was Keynes's most prominent contemporary critic, with sharply opposing views on the economy. Yet after Keynes's death he wrote:
He was the one really great man I ever knew, and for whom I had unbounded admiration. The world will be a very much poorer place without him.
For his part, Keynes praised Hayek's book The Road to Serfdom, writing to the Austrian economist that, "Morally and philosophically I find myself in agreement with virtually the whole of it."
Lionel Robbins
Lionel Robbins, former head of the economics department at the London School of Economics, who had many heated debates with Keynes in the 1930s, had this to say after observing Keynes in early negotiations with the Americans while drawing up plans for Bretton Woods:
This went very well indeed. Keynes was in his most lucid and persuasive mood: and the effect was irresistible. At such moments, I often find myself thinking that Keynes must be one of the most remarkable men that have ever lived – the quick logic, the birdlike swoop of intuition, the vivid fancy, the wide vision, above all the incomparable sense of the fitness of words, all combine to make something several degrees beyond the limit of ordinary human achievement.
LePan
Douglas LePan, an official from the Canadian High Commission, wrote:
I am spellbound. This is the most beautiful creature I have ever listened to. Does he belong to our species? Or is he from some other order? There is something mythic and fabulous about him. I sense in him something massive and sphinx like, and yet also a hint of wings.
Russell
Bertrand Russell named Keynes one of the most intelligent people he had ever known, commenting:
Every time I argued with Keynes, I felt that I took my life in my hands and I seldom emerged without feeling something of a fool.
The Times
Keynes's obituary in The Times included the comment:
There is the man himself – radiant, brilliant, effervescent, gay, full of impish jokes ... He was a humane man genuinely devoted to the cause of the common good.
Critiques
As a man of the centre described as undoubtedly having the greatest impact of any 20th-century economist, Keynes attracted considerable criticism from both sides of the political spectrum. In the 1920s, Keynes was seen as anti-establishment and was mainly attacked from the right. In the "red 1930s", many young economists favoured Marxist views, even in Cambridge, and while Keynes was engaging principally with the right to try to persuade them of the merits of more progressive policy, the most vociferous criticism against him came from the left, who saw him as a supporter of capitalism. From the 1950s and onwards, most of the attacks against Keynes have again been from the right.
Hayek
In 1931 Friedrich Hayek extensively critiqued Keynes's 1930 Treatise on Money. After reading Hayek's The Road to Serfdom, Keynes wrote to Hayek saying: "Morally and philosophically I find myself in agreement with virtually the whole of it" but concluded the same letter with the recommendation:
What we need therefore, in my opinion, is not a change in our economic programmes, which would only lead in practice to disillusion with the results of your philosophy; but perhaps even the contrary, namely, an enlargement of them. Your greatest danger is the probable practical failure of the application of your philosophy in the United States.
On the pressing issue of the time, whether deficit spending could lift a country from depression, Keynes replied to Hayek's criticism in the following way:
I should... conclude rather differently. I should say that what we want is not no planning, or even less planning, indeed I should say we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers wholly share your own moral position. Moderate planning will be safe enough if those carrying it out are rightly oriented in their own minds and hearts to the moral issue.
Hayek explained the letter by saying:
Because Keynes believed that he was fundamentally still a classical English liberal and wasn't quite aware of how far he had moved away from it. His basic ideas were still those of individual freedom. He did not think systematically enough to see the conflicts.
Hayek felt that application of Keynes's policies would give too much power to the state and would lead to socialism.
Friedman
While Milton Friedman described The General Theory as "a great book", he argues that its implicit separation of nominal from real magnitudes is neither possible nor desirable. Macroeconomic policy, Friedman argues, can reliably influence only the nominal. He and other monetarists have consequently argued that Keynesian economics can result in stagflation, the combination of low growth and high inflation that developed economies suffered in the early 1970s. More to Friedman's taste was the Tract on Monetary Reform (1923), which he regarded as Keynes's best work because of its focus on maintaining domestic price stability.
Schumpeter
Joseph Schumpeter was an economist of the same age as Keynes and one of his main rivals. He was among the first reviewers to argue that Keynes's General Theory was not a general theory, but was in fact a special case. He said the work expressed "the attitude of a decaying civilisation". After Keynes's death Schumpeter wrote a brief biographical piece called Keynes the Economist – on a personal level he was very positive about Keynes as a man ; praising his pleasant nature, courtesy and kindness. He assessed some of Keynes biographical and editorial work as among the best he'd ever seen. Yet Schumpeter remained critical about Keynes's economics, linking Keynes's childlessness to what Schumpeter saw as an essentially short term view. He considered Keynes to have a kind of unconscious patriotism that caused him to fail to understand the problems of other nations. For Schumpeter "Practical Keynesianism is a seedling which cannot be transplanted into foreign soil: it dies there and becomes poisonous as it dies."
Hazlitt
Austrian School economic commentator and journalist Henry Hazlitt's The Failure of the New Economics is a paragraph-by-paragraph refutation of The General Theory. In 1960 he published the book The Critics of Keynesian Economics where he gathered together the major criticisms of Keynes made up to that year.
Harry Truman
President Harry Truman was skeptical of Keynesian theorizing. "Nobody can ever convince me that Government can spend a dollar that it's not got," he told Leon Keyserling, a Keynesian economist who chaired Truman's Council of Economic Advisers.
Allegations of racism
Keynes was on occasion heard making statements which could be perceived as racist: for example, he would use the word "niggers" to refer to black people in casual conversations. This term was often used neutrally in British circles at that time, and was not necessarily an expression of negative feelings, as when, for example, he wrote to Duncan Grant that “the only really sympathetic and original thing in America are the niggers, who are charming”. Nonetheless fellow British observers recount being shocked by some statements he made, such as the following, apropos the Washington summer: "It's far too hot. Much too hot for white men. All right for niggers." He also wrote that there was "beastliness in the Russian nature” as well as "cruelty and stupidity”, and other comments which may be construed as anti-Russian. Some critics, such as Rothbard, have sought to infer that Keynes had sympathy with Nazism, and a number of writers have described him as anti-Semitic. Keynes's private letters express portraits and descriptions some of which can be characterised as anti-Semitic, others as pro-Semitic. Scholars have suggested that these reflect clichés current at the time that he accepted uncritically, rather than any racism. Keynes had many Jewish friends, including Isaiah Berlin and Piero Sraffa. Keynes several times used his influence to help his Jewish friends, most notably when he successfully lobbied for Ludwig Wittgenstein to be allowed residency in the United Kingdom explicitly in order to rescue him from being deported to Nazi-occupied Austria. Keynes was, furthermore, a supporter of Zionism, serving on committees supporting the cause.
Allegations that he was racist or had totalitarian beliefs have been rejected by biographers such as Robert Skidelsky. Professor Gordon Fletcher writes that "the suggestion of a link between Keynes and any support of totalitarianism cannot be sustained". Once the aggressive tendencies of the Nazis towards Jews and other minorities became apparent, Keynes made clear his loathing of Nazism. As a lifelong pacifist he had initially favoured peaceful containment, yet he began to advocate a forceful resolution while many conservatives were still arguing for appeasement. After the war started he roundly criticised the Left for losing their nerve to confront Hitler.
The intelligentsia of the Left were the loudest in demanding that the Nazi aggression should be resisted at all costs. When it comes to a showdown, scarce four weeks have passed before they remember that they are pacifists and write defeatist letters to your columns, leaving the defence of freedom and civilisation to Colonel Blimp and the Old School Tie, for whom Three Cheers.
Allegations of pro-inflationary views
Keynes has been characterised as being indifferent or even positive about inflation. Keynes had indeed expressed a preference for inflation over deflation, saying that if one has to choose between the two evils it is "better to disappoint the rentier" than to inflict pain on working-class families. However, Keynes was consistently adamant about the need to avoid inflation where possible.
In The Economic Consequences of the Peace, Keynes had written:
Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
Keynes remained convinced of the dangers of inflation to the end of his life; during World War II he argued strongly for policies that would minimise post-war inflation.
Personal life
Keynes's early romantic and sexual relationships were almost exclusively with men. At Eton and at Cambridge, Keynes had been prolific in his homosexual activity; significant among these early partners were Dilly Knox and Daniel Macmillan. Keynes was open about his homosexual affairs, and between 1901 to 1915, kept separate diaries in which he tabulated his many sexual encounters. Keynes's relationship and later close friendship with Macmillan was to be fortuitous; through Dan, Macmillan & Co first published his Economic Consequences of the Peace. Attitudes in the Bloomsbury Group, in which Keynes was avidly involved, were relaxed about homosexuality. Keynes, together with writer Lytton Strachey, had reshaped the Victorian attitudes of the influential Cambridge Apostles; "since [their] time, homosexual relations among the members were for a time common", wrote Bertrand Russell. One of Keynes's greatest loves was the artist Duncan Grant, whom he met in 1908. Like Grant, Keynes was also involved with Lytton Strachey, though they were for the most part love rivals, and not lovers. Keynes had won the affections of Arthur Hobhouse, as well as Grant, both times falling out with a jealous Strachey for it. Strachey had previously found himself put off by Keynes, not least because of his manner of "treat[ing] his love affairs statistically".
Ray Costelloe (who would later marry Oliver Strachey) was an early heterosexual interest of Keynes. Of this infatuation, Keynes had written "I seem to have fallen in love with Ray a little bit, but as she isn't male I haven't [been] able to think of any suitable steps to take."
Marriage
In 1921, Keynes fell "very much in love" with Lydia Lopokova, a well-known Russian ballerina, and one of the stars of Sergei Diaghilev's Ballets Russes. For the first years of the courtship, Keynes maintained an affair with a younger man, Sebastian Sprott, in tandem with Lopokova, but eventually chose Lopokova exclusively, on marrying her. They married in 1925. The union was happy, with biographer Peter Clarke writing that the marriage gave Keynes "a new focus, a new emotional stability and a sheer delight of which he never wearied". Lydia became pregnant in 1927 but miscarried. Among Keynes's Bloomsbury friends, Lopokova was, at least initially, subjected to criticism for her manners, mode of conversation and supposedly humble social origins – the latter of the ostensible causes being particularly noted in the letters of Vanessa and Clive Bell, and Virginia Woolf. In her novel Mrs Dalloway (1925), Woolf bases the character of Rezia Warren Smith on Lopokova. E. M. Forster would later write in contrition: "How we all used to underestimate her".
Support for the arts
Keynes was interested in literature in general and drama in particular and supported the Cambridge Arts Theatre financially, which allowed the institution, at least for a while, to become a major British stage outside of London.
Keynes's personal interest in classical opera and dance led him to support the Royal Opera House at Covent Garden and the Ballet Company at Sadler's Wells. During the War as a member of CEMA (Council for the Encouragement of Music and the Arts) Keynes helped secure government funds to maintain both companies while their venues were shut. Following the War Keynes was instrumental in establishing the Arts Council of Great Britain and was the founding Chairman in 1946. Unsurprisingly from the start the two organisations that received the largest grant from the new body were the Royal Opera House and Sadler's Wells.
Like several other notable British authors of his time, Keynes was a member of the Bloomsbury Group. Virginia Woolf's biographer tells an anecdote on how Virginia Woolf, Keynes and T. S. Eliot would discuss religion at a dinner party, in the context of their struggle against Victorian era morality. Keynes had attended church up to his teens, but by university he had become agnostic, which he remained until his death.
Investments
Keynes was ultimately a successful investor, building up a private fortune. His assets were nearly wiped out following the Wall Street Crash of 1929, which he did not foresee, but he soon recouped. At Keynes's death, in 1946, his worth stood just short of £500,000 – equivalent to about £11 million ($16.5 million) in 2009. The sum had been amassed despite lavish support for various causes and his personal ethic which made him reluctant to sell on a falling market when if too many did it could deepen a slump.
Keynes built up a substantial collection of fine art, including works, not all of them minor, by Paul Cézanne, Edgar Degas, Amedeo Modigliani, Georges Braque, Pablo Picasso, and Georges Seurat (some of which can now be seen at the Fitzwilliam Museum). He enjoyed collecting books: for example, he collected and protected many of Isaac Newton's papers. It is in part on the basis of these papers that Keynes wrote of Newton as "the last of the magicians."
Political causes
Keynes was a lifelong member of the Liberal party, which until the 1920s had been one of the two main political parties in the United Kingdom, and as late as 1916 had often been the dominant power in government. Keynes had helped campaign for the Liberals at elections from as early as 1906, yet he always refused to run for office himself, despite being asked to do so on three separate occasions in 1920. From 1926 when Lloyd George became leader of the Liberals, Keynes took a major role in defining the party's economics policy, but by then the Liberals had been displaced into third party status by the Labour party.
In 1939 Keynes had the option to enter Parliament as an independent MP with the University of Cambridge seat. A by-election for the seat was to be held due to the illness of an elderly Tory, and the master of Magdalene College had obtained agreement that none of the major parties would field a candidate if Keynes chose to stand. Keynes declined the invitation as he felt he would wield greater influence on events if he remained a free agent.
Keynes was a proponent of eugenics. He served as Director of the British Eugenics Society from 1937 to 1944. As late as 1946, shortly before his death, Keynes declared eugenics to be "the most important, significant and, I would add, genuine branch of sociology which exists."
Keynes once remarked that "the youth had no religion save Communism and this was worse than nothing." Marxism "was founded upon nothing better than a misunderstanding of Ricardo", and, given time, he, Keynes, "would deal thoroughly with the Marxists" and other economists to solve the economic problems their theories "threaten[ed] to cause".
In 1931 Keynes went on to write the following on Marxism:
How can I accept the Communist doctrine, which sets up as its bible, above and beyond criticism, an obsolete textbook which I know not only to be scientifically erroneous but without interest or application to the modern world? How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeoisie and the intelligentsia, who with all their faults, are the quality of life and surely carry the seeds of all human achievement? Even if we need a religion, how can we find it in the turbid rubbish of the red bookshop? It is hard for an educated, decent, intelligent son of Western Europe to find his ideals here, unless he has first suffered some strange and horrid process of conversion which has changed all his values.
Death
Throughout his life Keynes worked energetically for the benefit both of the public and his friends – even when his health was poor he laboured to sort out the finances of his old college, and at Bretton Woods, he worked to institute an international monetary system that would be beneficial for the world economy. Keynes suffered a series of heart attacks, which ultimately proved fatal, beginning during negotiations for an Anglo-American loan in Savannah, Georgia, where he was trying to secure favourable terms for the United Kingdom from the United States, a process he described as "absolute hell." A few weeks after returning from the United States, Keynes died of a heart attack at Tilton, his farmhouse home near Firle, East Sussex, England, on 21 April 1946 at the age of 62. A member of a very long-lived family (his parents, two grandparents and his brother all lived into their nineties), he died surprisingly young, apparently the result of overwork and childhood illness. Both of Keynes's parents outlived him: father John Neville Keynes (1852–1949) by three years, and mother Florence Ada Keynes (1861–1958) by twelve. Keynes's brother Sir Geoffrey Keynes (1887–1982) was a distinguished surgeon, scholar and bibliophile. His nephews include Richard Keynes (1919–2010) a physiologist; and Quentin Keynes (1921–2003), an adventurer and bibliophile. His widow, Lydia Lopokova, died in 1981.
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https://ecotalker.wordpress.com/2014/09/13/sir-john-hicks/
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SIR JOHN HICKS
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Born: 8 April 1904 Died: 20 May 1989 Nationality: British Field: Economist Early life and Education: Hicks was born in 1904 at Warwick, England. His father was a journalist at a local newspaper. He was educated at Clifton College (1917–22) and at Balliol College, Oxford (1922–26), financed by mathematical scholarships. During his school days, and…
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https://ecotalker.wordpress.com/2014/09/13/sir-john-hicks/
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Born: 8 April 1904
Died: 20 May 1989
Nationality: British
Field: Economist
Early life and Education:
Hicks was born in 1904 at Warwick, England. His father was a journalist at a local newspaper.
He was educated at Clifton College (1917–22) and at Balliol College, Oxford (1922–26), financed by mathematical scholarships.
During his school days, and in his first year at Oxford, he specialised in mathematics but also had interests in literature and history. In 1923, he moved to Philosophy, Politics and Economics, the “new school” just being started at Oxford, graduating with second-class honors and, so he states, “no adequate qualification in any of the subjects” that he had studied.
Career, Influences and Honours:
From 1926 to 1935 Hicks lectured at the London School of Economics and Political Science. He started as a labour economist and did descriptive work on industrial relations but gradually he moved over to the analytical side, where his mathematics background returned to the fore.
Hick’s influences included Lionel Robbins and such associates as Friedrich von Hayek, R.G.D. Allen, Nicholas Kaldor, and Abba Lerner – and Ursula Webb, who, in 1935, became his wife.
From 1935 to 1938, he lectured at Cambridge where he was also a fellow of Gonville and Caius College. He was mainly occupied in writing Value and Capital, which was based on the work he had done in London.
From 1938 to 1946, he was Professor at the University of Manchester. It was there that he did his main work on welfare economics, with its application to social accounting.
In 1946 he returned to Oxford, first as a research fellow of Nuffield College (1946–52), then as Drummond Professor of Political Economy (1952–65), and finally as a research fellow of All Souls College (1965–71) where he continued writing after retirement. He was also an honorary fellow of Linacre College. He died in 1989.
Hicks was knighted in 1964 and was co-recipient of the Nobel Prize in Economic Sciences (with Kenneth J. Arrow) in 1972. He donated the Nobel Prize to the London School of Economics and Political Science’s Library Appeal in 1973.
Contributions:
Hicks’s early work as a labour economist culminated in The Theory of Wages (1932, 2nd ed. 1963), still considered standard in the field. He collaborated with R.G.D. Allen in two seminal papers on value theory published in 1934.
It introduced general equilibrium theory to an English-speaking audience, refined the theory for dynamic analysis, and for the first time attempted a rigorous statement of stability conditions for general equilibrium.
Hicks formalized comparative statistics.
In the same year, he also developed the famous “compensation” criterion called Kaldor-Hicks efficiency for welfare comparisons of alternative public policies or economic states.
Hicks’s most familiar contribution in macroeconomics was the Hicks-Hansen IS-LM Model, which formalised an interpretation of the theory of John Maynard Keynes.The model describes the economy as a balance between three commodities: money, consumption and investment. Hicks himself did not embrace the theory as he interpreted it; and, in a paper published in 1980, Hicks asserted that it had omitted some crucial components of Keynes’s arguments, especially those related to uncertainty.
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https://lithub.com/friedrich-hayek-not-exactly-the-libertarian-darling-hes-claimed-as/
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Friedrich Hayek: Not Exactly the Libertarian Darling He’s Claimed As
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2019-09-25T08:46:31+00:00
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In 1974, the Austrian-born British economist Friedrich Hayek was as surprised to receive the Nobel Prize in Economics as the Swedish economist Gunnar Myrdal was to have to share it with him. Hayek …
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In 1974, the Austrian-born British economist Friedrich Hayek was as surprised to receive the Nobel Prize in Economics as the Swedish economist Gunnar Myrdal was to have to share it with him. Hayek was the first champion of free markets to win the prize, which was established in 1969. So controversial was he at the time that the Nobel Committee felt compelled to divide the prize between Hayek and Myrdal, a champion of social democracy and the welfare state.
Gunnar Myrdal was a “Keynesian” advocate of government interventions to stabilize the economy by means of fiscal and monetary policy, even before the pioneering British economist John Maynard Keynes. Hayek, by contrast, was the leading intellectual opponent of Keynesian macroeconomic policies—policies that had been adopted by virtually all post-war democratic nations. In 1974, even US Republican President Richard Nixon was reported to have quipped, “we are all Keynesians now.”
In the heyday of Keynesian optimism about the ability of the government to manage the economy, Hayek’s strong defense of free markets seemed decidedly out of date. Myrdal later ungraciously called for the Nobel Prize in Economics to be abolished rather than given to such a “reactionary” as Hayek. Yet Hayek had not claimed that the government should never interfere in the economy: he endorsed the public provision of social insurance to protect all citizens from dire poverty. If a pure libertarian restricts government to police and military services, then Hayek was a moderate libertarian.
Although Hayek was influenced by some currents of conservative thought, he rejected the label of “conservative” and considered himself to be a “classical liberal” in the tradition of Adam Smith. Denounced by social democrats as a reactionary, Hayek was not libertarian enough for many purists. Indeed, the leading libertarian writer of his day, Ayn Rand, denounced Hayek as “our most pernicious enemy.”
Friedrich August von Hayek was a man of the 20th century: born in Vienna in 1899, he taught in England and the United States, and died in Freiburg, Germany, in 1992. He always swam against the main currents of his day. In a century consumed by catastrophic nationalism, Hayek remained a cosmopolitan internationalist; in a century of communist, fascist and social-democratic management of the economy, Hayek remained an advocate of free markets; in a century of political centralization, Hayek remained a champion of decentralized political and economic power.
Where did 20th-century fascists and communists get the idea that they could run the entire economy of a large industrial society? Not from Karl Marx, but from the experience of the First World War: totalitarianism was born from total war. During that conflict, governments both democratic and autocratic imposed draconian controls on political and economic activity in the name of military necessity. The entire economy was conscripted, managed and directed to provide men and material.
The realization that a vast, complex modern economy could be run like a single company and turned into an instrument of governmental power changed politics for ever. Dictators found a new source of political power, and social democrats found a new way to promote economic equality. Rather than let markets decide what to produce and at what price, why not let the government make these decisions—for the good of the state, or the party, or the workers?
Where did 20th-century fascists and communists get the idea that they could run the entire economy of a large industrial society? Not from Marx, but from the experience of WWI: totalitarianism was born from total war.
The experience of another wartime economy—Britain during the Second World War—convinced Hayek that even democratic countries were becoming totalitarian by manipulating the economy and society for political purposes. George Orwell came to the same conclusion from his own experience working for the British government during the war: we should recall that 1984, Orwell’s nightmare vision of the totalitarian future, was inspired less by Hitler or Stalin than by wartime Britain.
Hayek’s warning about creeping totalitarianism came in the form of his own best-selling book, The Road To Serfdom (1944). The temptation to manage the economy for political purposes, argued Hayek, leads us eventually to despotism. Hayek considered plans for the post-war welfare state to be especially insidious because they restricted economic freedom in the name of housing, education and healthcare: the road to serfdom is paved with good intentions.
At the time Hayek wrote his book, he was known by economists mostly for his sharp attacks on the new macroeconomics of Keynes. But despite their differences in economic theory and policy, Keynes shared Hayek’s concerns for the future of economic and political liberty in the post-war world. Indeed, Keynes enthusiastically praised The Road to Serfdom for its robust defense of markets and freedom. Yet, in a letter to Hayek, Keynes pointed out that by rejecting pure libertarianism and permitting a fairly extensive program of social insurance, Hayek was also on the same slippery slope to serfdom. Hayek, said Keynes, had no principle by which to distinguish between governmental policies that promote freedom and those that destroy it.
In the wake of Keynes’s critique, Hayek abandoned economics for the study of political and legal philosophy—through which he hoped to discover a theoretical basis for distinguishing good public law and policy from bad. This inquiry led him into the study of the very foundations of human society, culture and institutions. Hayek rejects the view that human culture is immensely complex because human beings are so intelligent. Rather, he says, the reverse is true: human beings are intelligent (though fallible) mainly because we participate in a complex language and culture. Reason is a social institution, embodied in myriad cultural practices. Hayek agreed with Edmund Burke that individuals are foolish but the species is wise: our own private stock of rationality is puny; we ought to draw upon the bank and capital of our cultural traditions. Our institutions embody much more knowledge and wisdom than we can individually understand or are willing to admit.
Hayek’s Burkean argument that markets are wiser than individuals is the basis of his critique of economic planning: no planner (even if armed with super-computers) can ever know as much as all the myriad buyers and sellers. The market incorporates the economic knowledge of millions of producers and consumers: how could a planner have access to all that local, individual knowledge? Consumers know what they want and what they can afford; producers know their costs and supplies. Much of our economic knowledge is tacit knowledge embodied in our trades, local customs and individual habits. A central planner cannot capture this diverse range of knowledge, which escapes the awareness of individual agents.
Hayek distinguished two kinds of order: the spontaneous order we find in both nature and in culture and then the designed order we find in artifacts or armies. Spontaneous order grows up organically, as does language or morals, while designed order is always deliberately made or imposed. In a spontaneous order, such as the formation of a crystal or a market, we can predict patterns of growth but not where any particular individual element will end up. According to Hayek, this explains why economics will never have the predictive power of physics. Economics is more like biology, which cannot predict the survival of any particular organism but can predict patterns of speciation and extinction. Economists, says Hayek, cannot even predict economic performance, let alone plan for economic targets.
Economists, says Hayek, cannot even predict economic performance, let alone plan for economic targets.
How do these different kinds of order relate to human liberty? A spontaneous order, such as language or the market, has no purpose of its own but merely serves to facilitate the purposes of the individuals who use it. It thus promotes the freedom of individual choice. The designed order of an organization, however, embodies the purposes of its designer: a company or an army imposes the purposes of its leaders upon all its members.
Hayek thus attempts to show that his preference for individual liberty is grounded in the very structure of human knowledge and social order. Free markets create social ecologies of infinite complexity; we should be extremely wary of attempting to manipulate them for transient political purposes, when we don’t even understand fully how they function. For example, the global financial crisis of 2008 stemmed in part from the inability of monetary regulators to understand the new kinds of money generated by complex financial instruments. The history of the 20th century shows how fragile is the ecology of markets, which can easily be destroyed by passing political passions.
Hayek often describes spontaneous and designed social order as if they were mutually exclusive. He tells us that spontaneous order includes “morals, religion and law, language and writing, money and the market,” while designed order includes “the family, the farm, the plant, the firm, the corporation, and the government.”
Hayek argues that markets grow up spontaneously, while governments are the product of deliberate design. He compares the growth of spontaneous order to the growth of a crystal. Hayek is right that we cannot make a crystal in the sense of putting every molecule into place, but we can create the conditions under which a crystal will form itself. Crystals are deliberately designed as much as they are grown. To grow a crystal in a laboratory, a researcher first designs a matrix in which to structure the growth. That matrix does not determine precisely where each new molecule will be located, but it provides a pattern for their spontaneous growth. In short, a crystal is at once grown and made, spontaneous and designed.
In the same way, constitutions and legislation, by telling us what can be bought and sold (ranging from land to ideas), provide the matrix within which markets can grow—meaning that markets are both spontaneous and designed. Unless we know what can be legally bought and sold, we will ordinarily not risk buying and selling. Modern markets in land, labor and capital were made possible by deliberate legislation abolishing primogeniture, freeing workers from landowners and permitting usury. Markets are created every day by new legislation or regulations: markets in pollution, or in health insurance, or in home schooling. Yes, markets do grow up spontaneously, but only when a legal matrix defining property rights is deliberately made.
According to Hayek, markets promote human liberty because they arise spontaneously to serve our individual purposes; government programs, by contrast, are deliberately designed to serve the purposes of the governors, constraining individual liberty. Yet Hayek’s own example of the growth of crystals shows that social order is always both designed and spontaneous. Modern markets are partly created by legislation, and the modern welfare state itself grew up spontaneously over the past century as a piecemeal response to perceived market failures. Markets and governments are not as sharply opposed as are liberty and coercion.
Hayek is right that the ecology of markets places constraints upon feasible kinds of public policy. But those constraints are consistent with a wide range of policies, ranging from Hayek’s own moderate libertarianism to robust social democracy. Hayek rightly warns us against attempting to turn markets into governmental organizations, as tends to happen in wartime. Markets and the economic freedom they make possible will wither in the face of totalitarian centralized planning. At the same time, markets and common law cannot grow up without governments, legislation and courts to enforce property and other rights. But between anarchy and totalitarianism there is a wide range of feasible mixtures of law and legislation, markets and welfare, private initiative and public administration.
Hayek challenges us today to find ways to protect the basic human needs of all citizens without undermining the efficiency of markets.
Hayek challenges us today to find ways to protect the basic human needs of all citizens without undermining the efficiency of markets. For example, because of rapid technological developments, workers in particular industries often become redundant. What can we do to help them? Governments often attempt to help by offering public subsidies to support the prices of goods produced by those workers or by imposing tariffs on the importation of foreign goods that compete with domestic goods.
Hayek insisted that these public policies grossly distort the natural equilibrium of supply and demand, causing great inefficiency. Instead of using price supports or import tariffs to protect domestic industry or agriculture, he argued that we simply guarantee all citizens a basic minimum income. We should protect workers rather than attempt to protect their obsolete jobs. In this way, a dynamic market economy is made compatible with economic security for all.
Hayek claimed that centralized economic planning could never match the sheer productivity of free enterprise – with the possible exception of wartime mobilization. Because Hayek made these arguments during the collapse of capitalism in the Great Depression, he was often ridiculed or ignored. But he lived long enough to see his views vindicated by the collapse of state communism in the Soviet Union, Eastern Europe and China. When it comes to acknowledging the indispensability of markets, we are all Hayekians now.
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F. A. Hayek and the Rebirth of Classical Liberalism, Bibliography
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2018-02-05T02:14:26+00:00
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BIBLIOGRAPHY OF FRIEDRICH A. HAYEK The following bibliography of the writings by and about Friedrich A. Hayek was compiled near the end of 1982 by John Cody assisted by Nancy Ostrem. We gratefully acknowledge the helpful suggestions of Kurt R. Leube (Editor-in-chief of the International Carl Menger Library, Vienna), Prof. Albert H. Zlabinger of Jacksonville […]
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https://www.econlib.org/book-chapters/chapter-f-a-hayek-and-the-rebirth-of-classical-liberalism-bibliography/
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BIBLIOGRAPHY OF FRIEDRICH A. HAYEK
The following bibliography of the writings by and about Friedrich A. Hayek was compiled near the end of 1982 by John Cody assisted by Nancy Ostrem. We gratefully acknowledge the helpful suggestions of Kurt R. Leube (Editor-in-chief of the International Carl Menger Library, Vienna), Prof. Albert H. Zlabinger of Jacksonville University (and co-editor with Kurt Leube of Philosophia Verlag), Prof. Paul Michelson of Huntington College, Paul Varnell of Chicago, and members of the Institute for Humane Studies staff, including Leonard P. Liggio, Walter Grinder, and John Blundell.
While aiming to be the most comprehensive, accurate, and up-to-date listing of Hayekian scholarship yet assembled, this bibliography—owing to the prolific and dispersed nature of the materials involved—must unavoidably contain errors, incomplete citations, and omissions. Among the omissions are a great many of Hayek’s voluminous letters-to-editors, short notes or comments, interviews (including tape recordings, video-cassettes, and films), and book reviews. Such journals as the Schriften des Vereins für Sozialpolitik, Jahrbücher für Nationalökonomie und Statistik, Zeitschrift für Volkswirtschaft und Sozialpolitik (after 1927 superseded by Zeitschrift für Nationalökonomie), and Economica contain many items not listed in this edition of the bibliography. Many additional bibliographical items by or about Hayek came to our attention only after our typesetting deadline precluded further citations. To remedy our omissions and to emend our inaccuracies for a possible subsequent publication of an enlarged Hayek bibliography we welcome our readers’ comments and assistance.
Earlier bibliographical orientations to Hayek’s writings that proved helpful in creating the present Bibliography are:
Erich Streissler, Gottfried Haberler, Friedrich A. Lutz, and Fritz Machlup, eds. “Bibliography of the Writings of Friedrich A. von Hayek,” in Roads to Freedom: Essays in Honour of Friedrich A. von Hayek. London: Routledge & Kegan Paul, 1969, pp. 309-315.
Walter Eucken Institut. “Bibliographie der Schriften von F. A. von Hayek.” [“Bibliography of the Writings of F. A. von Hayek.”] in Freiburger Studien. Gesammelte Aufsätze von F. A. Hayek. Tübingen: J.C.B. Mohr/Paul Siebeck (Wirtschaftswissenschaftliche und wirtschaftsrechtliche Untersuchungen 5), 1969, pp. 279-284.
Fritz Machlup, “Friedrich von Hayek’s Contribution to Economics.” The Swedish Journal of Economics 76 (December 1974): 498-531.
——. “Hayek’s Contribution to Economics,” in Essays on Hayek. Edited by Fritz Machlup. Foreword by Milton Friedman. New York: New York University Press, 1976, pp. 13-39. [Machlup’s 1974 and his updated 1976 bibliographical essays are indispensable guides to Hayek’s writings through the mid-1970s. Adhering to the fourfold classification system of Hayek’s writings laid out in the Streissler 1969 Roads to Freedom, Hayek “Bibliography,” Machlup devised an alphabetical and numerical identification code for easy reference to Hayek’s books (B- ), pamphlets (P- ), edited or introduced books (E- ), and articles in learned journals or collections of essays (A- ).]
——. Würdigung der Werke von Friedrich August von Hayek. Translated by Kurt R. Leube. Tübingen: Walter Eucken Institut (Vorträge and Aufsätze 62), 1977, pp. 63-75. [This “Assessment of the Works of Friedrich August von Hayek is the German translation of the preceding Machlup Bibliography of Hayek.]
Leube, Kurt R. “Anhang: Bibliographie der Schriften von F. A. von Hayek,” [“Appendix: Bibliography of the Writings of F. A. von Hayek”] in: F. A. von Hayek. Geldtheorie und Konjunkturtheorie. Reprint of the first edition (Vienna, 1929; see B-1). Salzburg: Philosophia Verlag, 1976, pp. 148-160. This is identical to Leube’s Hayek Bibliography in: Friedrich A. von Hayek. Individualismus und wirtschaftliche Ordnung. Reprint of the first German edition (Erlenbach-Zurich, 1952; see B-7). Salzburg: Philosophia Verlag, 1976, pp. 345-357.
——. “Ausgewählte Bibliographie der Arbeiten F. A. Hayeks zu verwandten Problemkreisen” [“Selected Bibliography of the Works of F. A. Hayek to Related Problem Areas”], in the German reprint of the first edition (Vienna, 1931; see B-2) of Preise und Produktion. Vienna: Philosophia Verlag, 1976, pp. 13-18.
Books
B-1Geldtheorie und Konjunkturtheorie. (Beitrage zur Konjunkturforschung, herausgegeben vom österreichisches Institut für Konjunkturforschung, No. 1). Vienna and Leipzig: Hölder-Pichler-Tempsky, 1929/2, xii, 147 pp. (England 1933, Japan 1935, Spain 1936.) Translated into English by N. Kaldor and H. M. Croome with an “Introduction to the Series, Library of Money and Banking History” by Lionel Robbins as Monetary Theory and the Trade Cycle. London: Jonathan Cape, 1933, 244 pp. American edition, New York: Harcourt Brace & Co., 1933. Reprinted New York: Augustus M. Kelley, 1966. The German first edition of Geldtheorie is described as “Contributions to Trade Cycle Research, published by The Austrian Institute for Trade Cycle Research, No. 1.” This Institute was founded by Ludwig von Mises, and Hayek was its Director from 1927-1931.
See also foreword and bibliography to the 2nd German edition by Kurt R. Leube, “Vorwort und Bibliographie zur Weiderauflage F. A. Hayek: Geldtheorie und Konjunkturtheorie.” Salzburg: (W. Neugebauer) Philosophia Verlag, 1976.
[Hayek’s Geldtheorie (1929) together with its English translation (1933) is an expanded version of the paper (A-7a) delivered at a meeting of the Verein für Sozialpolitik, held in Zurich, in September 1928 (See A-7a with annotations). Hayek cites earlier studies as the foundations for his Geldtheorie: A-2a, A-6, A-7a, A-9a, A-13. Hayek presents, from the Austrian School perspective, a critical assessment of rival theories on the cause of trade cycle. He argues that the cause of all significant trade cycle fluctuations are monetary interventions which distort relative price relationships.].
B-2Prices and Production. (Studies in Economics and Political Science, edited by the director of the London School of Economics and Political Sciences. No. 107 in the series of Monographs by writers connected with the London School of Economics and Political Science.) London: Routledge & Sons, 1931/2, xv, 112 pp. 2nd revised and enlarged edition, London: Routledge & Kegan Paul, 1935/9, also 1967 edition, xiv, 162 pp. American edition, New York: Macmillan, 1932. German edition. Preise und Produktion. Vienna, 1931/2, also 1976 edition. (Japan 1934, China [Taipei] 1966, France 1975).
See also the selected bibliography to the 2nd German edition: Kurt R. Leube, “Ausgewählte Bibliographie zur Wiederauflage F. A. Hayek: Preise und Produktion.” Philosophia Verlag, 1976.
[The 1st edition of Prices (1931) literally reproduced Hayek’s four lectures on industrial fluctuations presented at the University of London (LSE) during the session 1930-1931. The “Preface to the Second Edition” of Prices (1935) states how Hayek developed Austrian capital theory following the four lectures. These developments were contained in the 2nd edition and prepared for by A-11a, A-12, A-13, A-14, A-21, A-22, A-23, A-24a, as well as by the first German edition of Preise (1931), the English version (B-1), and A-9a. Economist Sudha R. Shenoy, in an unpublished manuscript, has done a detailed comparative analysis of the differences between the 1931 and 1935 editions of Prices.]
B-3Monetary Nationalism and International Stability. Geneva, 1937; London: Longmans, Green (The Graduate Institute of International Studies, Geneva, Publication Number 18), 1937, xiv, 94 pp. Reprinted New York: Augustus M. Kelley, 1964, 1971, 1974.
[Revised version of five lectures delivered at the Institute Universitaire de Hautes études Internationales at Geneva. Hayek surveys the consequence of alternative monetary arrangements, such as gold vs. paper currency and flexible vs. fixed exchange rates.]
B-4 Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939/3, viii, 266 pp., also 1969 edition. Reprinted New York: Augustus M. Kelley, 1969, 1970; Clifton, New Jersey: Augustus M. Kelley, 1975.
[Collection of essays, mostly reprints or revised versions of earlier essays, which are attempts “to improve and develop the outline of a Theory of Industrial Fluctuations contained in” B-1 and B-2. The first chapter, “Profits, Interest and Investment” is new; the other chapters are revisions of A-37a, A-27a, A-26, A-19, A-21, A-14, A-9a. Hayek’s essays defend the Austrian School’s theory of the trade cycle. He argues that monetary interventions cause far-ranging economic distortions that bring about malinvestment and unemployment.]
B-5The Pure Theory of Capital. London: Routledge & Kegan Paul, 1941/2 (also 1950 edition); Chicago: University of Chicago Press, 1941 (also 1950, 1952 and 1975 editions); xxxi, 454 pp. (Spain 1946, Japan 1951 and 1952).
[Growing out of Hayek’s concern for the causes of the trade cycle or industrial fluctuations, this work deals with capital, interest, and time components in the structure of production.]
B-6The Road to Serfdom. London: George Routledge & Sons, 1944/1945/20 (also 1969 edition); Chicago: University of Chicago Press, 1944/1945/20 (also 1969 edition), 250 pp. (Sweden 1944; France 1945; German version 1945: Der Weg zur Knechtschaft. Zurich 1945/3 (also 1952 edition); the German translation by Eva Röpke is available in paperback from Deutscher Taschenbuch Verlag (Munich, 1976); Denmark, Portugal, and Spain 1946; Netherlands 1948; Italy 1948; Norway 1949; Japan 1954; China [Taipei] 1956/1965/1966; Iceland 1980).
Reprinted in two different paperback versions with new Prefaces by F. A. H. Chicago: University of Chicago Press, Phoenix Books, 1956 (see B-13, chapt. 15) and also 1976 paperback edition by University of Chicago Press and Routledge and Kegan Paul.
[Hayek wrote The Road to Serfdom in his “spare time from 1940 to 1943” while he was engaged in pure economic theory. The central argument was first sketched in A-37b (1938) and expanded in P-2 (1939). Hayek’s thesis is that social-political planning endangers both political and economic liberties of the individual.]
B-7Individualism and Economic Order. London: George Routledge & Sons, 1948/5, also 1960, 1976; Chicago: University of Chicago Press, 1948/5, also 1969, 1976, vii, 272 pp. Paperback edition, Chicago: Henry Regnery Co., Gateway edition 1972 (out of print), but now available in a University of Chicago paperback edition; (German edition, Zurich, 1952, Norway [shortened version] 1953, Spain 1968, Netherlands no date.)
See also bibliographic postscript in the German reprint of the 1st edition, Erlenbach-Zurich: 1952: Kurt R. Leube, “Bibliographisches Nachwort zur Wiederauflage F. A. Hayek: Individualismus und wirtschaftliche Ordnung.” Salzburg: Philosophia Verlag, 1977.
[Individualism reprints P-5, A-34, A-49, A-50, E-5 (Chapt. 1: “The Nature of the Problem”), E-5 (Chapt. 5: “The (Present) State of the Debate”), A-41, A-48, A-45, A-38; and some previously unpublished lectures: Chapt. 5: “The Meaning of Competition” and Chapt. 6 ” ‘Free’ Enterprise and Competitive Order.” These articles and speeches sound the Hayekian warning against economic and social planning.]
B-8John Stuart Mill and Harriet Taylor: Their Friendship and Subsequent Marriage. London: Routledge & Kegan Paul, 1951/1969; Chicago: University of Chicago Press, 1951/1969, 320 pp.
[During the 1920s the Mill-Taylor correspondence became available for scholarly assessment of how much ideological influence Harriet Taylor exerted on the political, economic, and social ideas of her intimate friend and eventual husband, John Stuart Mill. Hayek’s volume presenting their correspondence allows the reader to judge the nature of their relationship.]
B-9The Counter-Revolution of Science: Studies on the Abuse of Reason. Glencoe, Illinois: The Free Press, 1952, 255 pp; new edition New York, 1964; 2nd edition with 1959 Preface to German edition, Indianapolis, Indiana: LibertyPress, 1979, also available in LibertyPress paperback. (Germany 1959, Frankfürt am Main edition published under the title Missbrauch und Verfall der Vernunft or “The Abuse and Decline of Reason”; German reprint of Frankfurt edition, Salzburg: Philosophia Verlag, 1979; France excerpts, 1953; Italy 1967.)
[The two major sections of this volume first appeared as articles in Economica as A-46 (1942-1944) and A-42 (1941), respectively: the third study first appeared as A-70 (1951). Hayek analyzes the intellectual origins of social planning and engineering. Topics covered include: scientism and the methodology of studying society, collectivism, historicism, non-spontaneous or rationalistic social planning, as well as the role of Saint-Simon, Comte, and Hegel in legitimizing scientistic sociology.]
B-10The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology. London: Routledge & Kegan Paul, 1952; Chicago: University of Chicago Press, 1952, xxii, 209 pp; new edition 1963/1976. Reprinted Chicago: University of Chicago Press, Phoenix Book paperback, 1963 (out of print). University of Chicago Press has reissued the paperback in a Midway Reprint, 1976, with the Heinrich Klüver Introduction.
[Though published in 1952, the “whole principle” of The Sensory Order was conceived 30 years earlier by Hayek in a draft of a student paper composed around 1919-1920, while he was still uncertain whether to become a psychologist or an economist. Three decades later his concern about the logical character of social theory led him to reexamine favorably his youthful conclusions on certain topics of epistemology and theoretical psychology: concepts of mind, classification, and the ordering of our mental and sensory world. In his 1952 Preface Hayek acknowledges his indebtedness “particularly” to Ernst Mach and his analysis of perceptual organization.]
B-11The Political Ideal of the Rule of Law. Cairo: National Bank of Egypt, Fiftieth Anniversary Commemorative Lectures, 1955, 76 pp. [Publication of four lectures Hayek delivered at the invitation of the National Bank of Egypt. These essays form a historical survey of the evolution of freedom and the rule of law in Britain, France, Germany, and America.]
[Reprinted in a revised, edited, and abridged format as Chapters 11 and 13-16 of Hayek’s B-12; Chapters 11 and 16 of the B-12 version were reprinted under the title, The Rule of Law. Menlo Park, California: Institute for Humane Studies (Studies in Law, No. 3), 1975.]
B-12The Constitution of Liberty. London: Routledge and Kegan Paul, 1960; Chicago: University of Chicago Press, 1960/1963/5 (also 1969 edition); Toronto: The University of Toronto Press, 1960, x, 570 pp. Also available in paperback: Chicago: Henry Regnery Co. Gateway Edition, 1972.
German translation: Die Verfassung der Freiheit. Tübingen: Walter Eucken Institut (Wirtschaftswissenschaftliche and wirtschaftrechtliche Untersuchungen No. 7), [J. C. B. Mohr/P. Siebeck], 1971. (Spain 1961, Italy 1971, China [Taipei] 1975).
[Hayek composed the Preface of The Constitution of Liberty on his 60th birthday (May 8, 1959). He intended this survey of the ideals of freedom in Western civilization to commemorate the centenary of John Stuart Mill’s On Liberty (1859). In “Acknowledgments and Notes” he describes the various preliminary drafts and versions he incorporated into this volume; also see B-11. Hayek stresses the working of the liberal, spontaneous order of society, which is too complex to be subjected to social planning and engineering.]
B-13Studies in Philosophy, Politics and Economics. London: Routledge & Kegan Paul, 1967/1969; Chicago: University of Chicago Press, 1967/1969; Toronto: University of Toronto Press, 1967/1969; x, 356 pp. Reprinted in paperback New York: Simon and Schuster Clarion Book, 1969.
[This volume of 25 essays contains reprints of articles and speeches by F. A. H. as well as previously unpublished writing and speeches over a 20-year period preceding 1967. Reprints (often revised) include: A-76, A-102, A-103b, A-112, A-108, A-115, A-65, A-68, A-99a, etc. Consult volume to determine other essays published for the first time. The scope of topics includes essays on epistemology, history of ideas, specialization, Hume, spontaneous order, the liberal social order, the transmission of liberal economic ideas, and a variety of other topics on philosophy, politics, and economics.]
B-14 Freiburger Studien. Gesammelte Aufsätze. Tübingen: Walter Eucken Institut (Wirtschaftswissenschaftliche und wirtschaftsrechtliche Untersuchungen 5) J.C.B. Mohr/P. Siebeck, 1969, 284 pp.
[“Freiburg Studies. Collected Essays.” German anthology of Hayek’s essays. Contains German versions of such items as P-9 and P-10.]
B-15Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. I, Rules and Order. London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1973, xi, 184 pp.
A trilogy published in the following sequence:
Vol. I, Rules and Order, 1973
Vol. II, The Mirage of Social Justice, 1976
Vol. III, The Political Order of a Free People, 1979
These volumes are also available in paperback, Phoenix Books editions of the University of Chicago Press. A French translation, Droit, Législation et Liberté, is available from Presses Universitaires de France in the Collection Libre échange, edited by Florin Aftalion and Georges Gallais-Hamonno.
[Vol. I distinguishes between liberal spontaneous order (‘cosmos’) and planned or engineered, rationalistic social orders (‘taxis’). Hayek also traces the changing concept of law, principles vs. expediency in politics, and the ‘law of legislation’.]
B-16Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. II, The Mirage of Social Justice. London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1976, xiv, 195 pp.
[Vol. II outlines the meaning of justice in the free, liberal social order, critiques the notion of ‘social’ or distributive justice, and contrasts it with the market order or ‘catallaxy’, the regime of the Open Society.]
B-17New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul, 1978; Chicago: University of Chicago Press, 1978.
[This volume of 20 essays supplements Hayek’s earlier Studies (B-13) by reprinting in a more accessible form some of his earlier articles and unpublished lectures not reprinted in Studies. Reprints include P-11a, P-9, A-121, P-10, A-127, P-9, A-131a, A-136a, A-116, A-113. Consult New Studies for titles of essays not previously published. Ranging over themes from philosophy, politics, economics, and the history of ideas, Hayek analyzes such topics as constructivism, the ‘atavism of social justice’, liberalism, the dangers of economic planning, and the ideas of Mandeville, Smith, and Keynes. Chapter 2 reprints his 1974 Nobel Prize speech, “The Pretence of Knowledge.”]
B-18Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. III, The Political Order of a Free People. London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1979, xv, 244 pp.
[Vol.III concludes Hayek’s trilogy. Hayek exposes the weakness inherent in most forms of democratic government and outlines his alternative constitutional, political, and legal arrangements to create a democratic order that would be consistent with the free society. The Epilogue, “The Three Sources of Human Values,” reprints Hayek’s Hobhouse Lecture delivered at the London School of Economics, May 17, 1978.]
Pamphlets
P-1Das Mieterschutzproblem, Nationalökonomische Betrachtungen. Vienna: Steyrermuhl-Verlag, Bibliothek für Volkswirtschaft und Politik, No. 2, 1929. [“The Rent Control Problem, Political Economic Considerations.” Hayek’s later article (A-9b) was adapted from P-1 (the more detailed study on the effects of rent control) and both were used to form the substance of Hayek’s “The Repercussions of Rent Restrictions,” in F. A. Hayek, Milton Friedman, et al., Rent Control: A Popular Paradox. Evidence on The Effects of Rent Control. Vancouver: The Fraser Institute, 1975, pp. 67-83; this last volume grew out of an earlier version: Arthur Seldon, ed. Verdict on Rent Control. London: Institute of Economic Affairs, 1972.]
P-2Freedom and the Economic System. University of Chicago Press (Public Policy Pamphlet No. 29. Harry D. Gideonse, editor), 1939, iv, 38 pp.
[Reprinted in an enlarged form from Contemporary Review (April 1938).]
P-3The Case of the Tyrol. London: Committee on Justice for the South Tyrol, 1944. [F. A. H. advocates Tyrolean autonomy independent of Italian hegemony. Compare with Hayek’s article A-53 (1944).]
P-4Report on the Changes in the Cost of Living in Gibraltar 1939-1944 and on Wages and Salaries. Gibraltar, no date (1945).
P-5Individualism: True and False. (The Twelfth Finlay Lecture, delivered at University College, Dublin, on December 17, 1945.) Dublin: Hodges, Figgis & Co. Ltd. 1946; and Oxford: B. H. Blackwell Ltd. 1946, 38 pp.
[Reprinted in Individualism (B-7), chapter 1. German edition: “Wahrer and Falscher Individualismus.” Ordo 1, 1948. Spain, 1968. Also reprinted in the various translations of B-7.]
P-6Two Essays on Free Enterprise. Bombay: Forum of Free Enterprise, 1962.
P-7Wirtschaft, Wissenschaft und Politik. Freiburger Universitätsreden, N.F. Heft 34, Freiburg im Breisgau: H.F. Schulz, 1963, 24 pp.
[English version, “The Economy, Science and Politics,” chapter 18 of B-13. The original (in German) was Hayek’s inaugural lecture on the assumption of the professorship of Political Economy Albert Ludwig University at Freiburg im Breisgau, June 18, 1962.]
P-8Was der Goldwährung geschehen ist. Ein Bericht aus dem Jahre 1932 mit zwei Ergänzungen. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze, 12), 1965, 36 pp. (France 1966): Révue d’Economie Politique 76 (1966), for French version.
[“What Has Happened to the Gold Standard. A Report Beginning with the Year 1932 with Two Supplements.”]
P-9The Confusion of Language in Political Thought With Some Suggestions for Remedying It. London: Institute of Economic Affairs (Occasional Paper 20), 1968/1976, 36 pp.
[Lecture originally delivered in 1967 in German to the Walter Eucken Institut at Freiburg im Breisgau. Reprinted in English as Chapter 6 of B-17, and in German as “Die Sprachverwirrung im politischen Denken” in B-14.]
P-10Der Wettbewerb als Entdeckungsverfahren. Kiel: (Kieler Vorträge, N.S. 56), 1968, 20 pp.
[“Competition as a Discovery Procedure.” Originally delivered in English as a lecture to the Philadelphia Society at Chicago on March 29, 1968 and later on July 5, 1968, in German, to the Institut für Weltwirtschaft of the University of Kiel. The German version was published first, but it lacked the final section found in the English version published in Chapter 12 of New Studies (B-17). The German version also was reprinted in F. A. H.’s German collection of essays entitled Freiburger Studien (B-14), 1979.]
P-11aDie Irrtümer des Konstruktivismus und die Grundlagen legitimer Kritik gesellschaftlicher Gebilde. Munich-Salzburg 1970/2 (also 1975 edition). Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 51), 1975. (Italy, 1971).
[Reprinted with some changes as “The Errors of Constructivism” (Chapt. 1) of B-17.]
P-11bA Tiger by the Tail: The Keynesian Legacy of Inflation. A 40 Years’ Running Commentary on Keynesianism by F. A. Hayek. Compiled and introduced by Sudha R. Shenoy. London: Institute of Economic Affairs (Hobart Paperback #4), 1972; 2nd edition 1978, xii, 124 pp. Also reprinted, San Francisco: The Cato Institute (The Cato Papers, No. 6), 1979. See A-130.
P-11cDie Theorie Komplexer Phänomene. Tübingen: Walter Eucken Institut (Vorträge and Aufsätze 36), 1972.
[English version, “The Theory of Complex Phenomena” appears in Chapter 2 of B-13. This essay originally appeared in English in M. Bunge, ed. The Critical Approach and Philosophy. Essays in Honor of K. R. Popper. New York: The Free Press, 1964.]
P-12Economic Freedom and Representative Government. Fourth Wincott Memorial Lecture delivered at the Royal Society of Arts, Oct. 21, 1973. London: The Institute of Economic Affairs (Occasional Paper 39), 1973, 22 pp.
[Appears as Chapter 8 of B-17.]
P-13Full Employment at Any Price? London: Institute of Economic Affairs (Occasional Paper 45), 1975/1978, (Italy 1975), 52 pp.
[Three Lectures. Lecture 1: “Inflation, The Misdirection of Labour, and Unemployment; Lecture 2: “The Pretence of Knowledge” (Hayek’s 1974 Nobel Prize Speech); Lecture 3: “No Escape: Unemployment Must Follow Inflation.” A Short Note on Austrian Capital Theory is added as an Appendix. Reprinted as Unemployment and Monetary Policy. San Francisco: Cato Institute (Cato Paper No. 3), 1979, 53 pp.]
P-14Choice in Currency. A Way to Stop Inflation. London: Institute of Economic Affairs (Occasional Paper 48), February 1976/1977, 46 pp.
[Based on an Address entitled “International Money” delivered to the Geneva Gold and Monetary Conference on September 25, 1975 at Lausanne, Switzerland.]
P-15Drei Vorlesungen über Demokratie, Gerechtigkeit und Sozialismus. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 63 [J.C.B. Mohr/P. Siebeck]), 1977. [“Three Lectures on Democracy, Justice, and Socialism.”]
P-16aDenationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: The Institute of Economic Affairs (Hobart Paper Special 70), October 1976, 107 pp.
P-16b See, along with P-16a, the revision: Denationalisation of Money—The Argument Refined. An Analysis of the Theory and Practice of Concurrent Currencies. Hobart Paper Special 70, Second (Extended) edition, 1978, 141 pp.
P-17The Reactionary Character of the Socialist Conception, Remarks by F. A. Hayek. Hoover Institution, Stanford University, 1978.
P-18Economic Progress in an Open Society. Seoul, Korea: Korea International Economic Institute (Seminar Series No. 16), 1978.
P-19 “The Three Sources of Human Values.” The Hobhouse Lecture given at the London School of Economics, May 17, 1978. Published in the Epilogue to Law, Legislation and Liberty, Vol. III. London: Routledge & Kegan Paul, 1979 (B-18).
[German translation: “Die drei Quellen der menschlichen Werte.” Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 70) [J. C. B. Mohr/P. Siebeck], 1979.]
P-20Social Injustice, Socialism and Democracy. Sydney, Australia, 1979.
P-21Wissenschaft und Sozialismus. Tübingen: Walter Eucken Institut, (Vorträge und Aufsätze 71) [J. C. B. Mohr/P. Siebeck], 1979.
[“Science and Socialism.”]
P-22Liberalismus. Translated from English by Eva von Malchus. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 72) [J. C. B. Mohr/P. Siebeck 1979], 47 pp.
[“Liberalism”] Reprint-translation into German of article in New Studies (B-17).
Books Edited or Introduced
E-1 Hermann Heinrich Gossen. Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln. Introduced by Friedrich A. Hayek. 3rd edition. Berlin: Prager, 1927, xxiii, 278 pp.
[“The Laws of Human Relationships and of the Rules to be Derived Therefrom for Human Action.” Cf.: A-15. Gossen’s (1810-1858) fame rests on this one book, first published in 1854, in which he developed a comprehensive theory of the hedonistic calculus and postulated the principle of diminishing marginal utility. He thereby anticipated the marginal utility breakthrough in the theory of economic value in 1871 by Menger, Jevons, and Walras.]
E-2 Friedrich Freiherr von Wieser. Gesammelte Abhandlungen. Edited with an introduction by Friedrich A. von Hayek. Tübingen: Mohr, 1929, xxxiv, 404 pp.
[This edition includes von Wieser’s Collected Writings published between 1876 and 1923. Friedrich Freiherr von Wieser (1851-1926) was Hayek’s mentor at the University of Vienna and represented the “older Austrian school” of Economics. See A-4 and A-125b.]
E-3 Richard Cantillon. Abhandlung über die Natur des Handels im Allgemeinen.Translated by Hella von Hayek. Introduction and annotations by F. A. von Hayek. Jena, 1931, xix, 207 pp.
[A French translation of Cantillon’s “Essay on the Nature of Trade in General” appeared as Essai sur la Nature du Commerce en Général in Revue des Sciences économiques (Liège, April-October, 1936). Italian translation by the Italian liberal editor of Il Politico, Luigi Einaudi appeared in Riforma sociale (July 1932).]
E-4Beiträge zur Geldtheorie. Edited and prefaced by Friedrich A. Hayek. Contributions by Marco Fanno, Marius W. Holtrop, Johan G. Koopmans, Gunnar Myrdal, Knut Wicksell. Vienna, 1933, ix, 511 pp.
[“Contributions on Monetary Theory.”]
E-5 Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism. Edited with an Introduction and a Concluding Essay by F. A. Hayek. Contributions by N. G. Pierson, Ludwig von Mises, Georg Halm, and Enrico Barone. London: George Routledge & Sons, 1935, v, 293 pp. (France 1939, Italy 1946.)
[Reprinted New York: Augustus M. Kelley (1967), 1970 from the 1935 edition; reprinted Clifton, New Jersey: Augustus M. Kelley, 1975. Hayek’s Introductory Chapter 1 deals with “The Nature and History of The Problem” of socialist calculation. Hayek’s concluding chapter concerns “The Present State of the Debate.” Mises’ (1881-1973) article “Economic Calculation in the Socialist Commonwealth” (translated from the German by S. Adler), chapter 3, had set off the debate when it appeared originally under the title “Die Wirtschaftsrechnung im sozialstischen Gemeinwesen” in the Archiv für Socialwissenschaften 47 (1920). N.G. Pierson’s (1839-1909) article, “The Problem of Value in the Socialist Community,” chapter 2, originally appeared in Dutch in De Economist 41 (s’Gravenhage, 1902): 423-456.]
E-6 Boris Brutzkus. Economic Planning in Soviet Russia. Edited and prefaced by Friedrich A. Hayek. London: George Routledge & Sons, 1935; xvii, 234 pp.
E-7The Collected Works of Carl Menger. 4 volumes with an Introduction by F. A. von Hayek. London: The London School of Economics and Political Science (Series of Reprints of Scarce Tracts in Economic and Political Science No. 17-20), 1933-1936.
Volume 1: Grundsätze der Volkswirthschaftslehre (1871) 1934.
Volume 2: Untersuchungen über die Methode der Socialwissenschaften (1883) 1933.
Volume 3: Kleinere Shriften zur Methode und Geschichte der Volkswirthschaftlehre (1884-1915) 1935.
Volume 4: Schriften über Geldtheorie und Währungspolitik (1889-1893), 1936.
[Vol. 1 contains a biographical introduction to Menger by Hayek. Vol. 4 contains a complete list of Menger’s known writings.]
Later 2nd German edition: Carl Menger, Gesammelte Werke. 4 vols. Tübingen, 1968-1970.
[“Collected Works”]
E-8 Henry Thornton. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). Edited and introduced by Friedrich A. Hayek. London: Allen and Unwin, 1939, 368 pp.
E-9 John Stuart Mill, The Spirit of the Age. Introduced by F. A. Hayek. Chicago: University of Chicago Press, 1942, xxxiii, 93 pp.
[Hayek’s Introduction is entitled, “John Stuart Mill at the Age of Twenty-Four,” and surveys Mill’s intellectual development at the time of Mill’s famous essay, “The Spirit of the Age,” which represented important deviations from Benthamite Utilitarian liberalism.]
E-10Capitalism and the Historians. Edited and introduced by F. A. Hayek. London: Routledge & Kegan Paul, and Chicago: University of Chicago Press, 1954, 188 pp.
[The inspiration for the several papers presented was The Mont Pélèrin Society meetings held at Beauvallon in France in September 1951 on the distortions of historians and intellectuals in describing Capitalism and The Industrial Revolution. Hayek’s Introduction (pp. 3-29) is entitled “History and Politics” and is reprinted in B-13 and (in German) as “Wirtschaftsgeschichte and Politik” [“Economic History and Politics”] in Ordo 7 (1955): 3-22. T. S. Ashton’s first chapter is “The Treatment of Capitalism by Historians”; L. M. Hacker’s second chapter is entitled “The Anticapitalist Bias of American Historians”; Bertrand de Jouvenel contributed chapter 3, “The Treatment of Capitalism by Continental Intellectuals”; T. S. Ashton’s chapter 4, “The Standard of Life of the Workers in England, 1790-1830,” originally appeared in The Journal of Economic History, Supplement 9, 1949; the final article by W. H. Hutt, “The Factory System of The Early Nineteenth Century,” originally appeared in Economica (March 1926). Hayek’s volume provoked many pro and con reviews. A sampling: Arthur Schlesinger, Jr., The Reporter (March 30, 1954): 38-40; Oscar Handlin, The New England Quarterly (March 1955): 99-107; Charles Wilson, Economic History Review (April 1956); Asa Briggs, The Journal of Economic History (Summer 1954); W. T. Eastbrook, The American Economic Review (September 1954); Max Eastman, The Freeman (February 22, 1954); Helmut Schoek, U.S.A. (July 14, 1954); Eric E. Lampard, The American Historical Review (October 1954); and John Chamberlain, Barron’s (January 4, 1954.)]
E-11 Louis Rougier. The Genius of the West. Introduction by F. A. v. Hayek. Los Angeles: Nash Publishing (published for the Principles of Freedom Committee), 1971, pp. xv-xviii.
E-12 Gerald P. O’Driscoll, Jr. Economics as a Coordination Problem. The Contributions of Friedrich A. Hayek. Foreword by F. A. Hayek. Kansas City: Sheed Andrews and McMeel, Inc., 1977, pp. xi-xii.
E-13 Ludwig von Mises. Socialism: An Economic and Sociological Analysis. Translated by Jacques Kahane. 1981 Introduction by F. A. Hayek. Indianapolis: LibertyClassics, 1981, pp. xix-xxiv. Dated August 1978.
[Hayek’s Foreward pays tribute to Mises for the anti-socialist impact that Mises’ Die Gemeinwirtschaft: Untersuchungen über den Sozialismus (Jena: Gustav Fischer, 1922) created on many intellectuals after the First World War.]
E-14 Ewald Schams. Gesammelte Aufsätze. Prefaced by F. A. Hayek. Ready in Spring 1983. Munich: Philosophia Verlag.
Articles in Journals, Newspapers, or Collections of Essays
A-1a “Das Stabilisierungsproblem in Goldwährungsländern.” Zeitschrift für Volkswirtschaft und Sozialpolitik, N.S. 4 (1924).
[“The Stabilization Problem for Countries on the Gold Standard.” See note A-2a for the biographical context of Hayek’s first two article publications. The journal in which Hayek published some of his first articles was closely associated with the Austrian School of economics through its editorial direction. It underwent several name changes:
1892-1918: The journal was known as Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung. Organ der Gesellschaft österreichischer Volkswirt. [“Journal of Political Economy, Social Policy, and Administration. Publication of the Society of Austrian Political Economy”], and was published in Vienna by F. Tempsky.
1919-1920: Suspended publication.
1921-1927: It was known as Zeitschrift für Volkswirtschaft und Socialpolitik. [“Journal of Political Economy and Social Policy”] and was published in Vienna and Leipsig by F. Deuticke.
After 1927, the journal was superseded by Zeitschrift für Nationalökonomie. [“Journal of National Economy”]. See Bibliography A-22, etc.
The heavily Austrian School of economics-oriented editorial staff included:
1892-1918 Ernst von Plener (1841-1923)
1892-1914 Eugen von Böhm-Bawerk (1851-1914)
1892-1907 Karl Theodor von Inama-Sternegg (1843-1908)
1904-1916 Eugen von Philippovich (1858-1917)
1904-1918 Friedrich Freiherr von Wieser (1851-1926)
1911-1916 Robert Meyer (1855-1914)
1921-1927 R. Reisch (1866-?), Othmar Spann (1878-1950), and others.]
A-1b “Diskontopolitik und Warenpreise.” Der österreichische Volkswirt 17 (1,2), (Vienna 1924).
[“Discount Policy and Commodity Prices.”]
A-2a “Die Währungspolitik der Vereinigten Staaten seit der überwindung der Krise von 1920.” Zeitschrift für Volkswirtschaft und Sozialpolitik. N.S. 5 (1925).
[“The Monetary Policy in the United States Since Overcoming the Crisis of 1920.” Both this article and A-1a grew out of Hayek’s post-graduate studies in America which he pursued from March 1923 to June 1924 at New York University. On the chronology of the Nobel Prize biography of Hayek: Official Announcement of the Royal Academy of Sciences, republished in the Swedish Journal of Economics 76 (December 1974): 469 ff. Also see Machlup, ed. (1976), pp. 16-17, as well as the annotation in the present Hayek Bibliography on item A-64. Hayek’s American academic sojourn took place while he was on a leave of absence from his Austrian civil service position (1921-1926) as a legal consultant (along with Ludwig von Mises) for carrying out the provisions of the Treaty of St. Germain, see Bibliography A-145, p. 1 for Hayek’s anecdote and background for his introduction to von Mises through von Wieser.]
A-2b “Das amerikanische Bankwesen seit der Reform von 1914.” Der österreichische Volkswirt 17 (29-33), (Vienna 1925).
[“The American Banking System since the Reform of 1914.”]
A-3a “Bemerkungen zum Zurechnungsproblem.” Jahrbücher für Nationalökonomie und Statistik 124 (1926): 1-18.
[“Comments on the Problem of Imputation.” On the valuation of Producer goods. Compare Wilhelm Vleugel’s Die Lösung des wirtschaftlichen Zurechnungsproblem bei Böhm-Bawerk und Wieser. Halle: Neimeyer (Königsberger Gelehrte Gesellschaft, Geisteswissenschaftliche Klasse, Shriften, Vol. 7, part 5), 1930.]
A-3b “Die Bedeutung der Konjunkturforschung für das Wirtschaftsleben.” Der österreichische Volkswirt 19 (2), (Vienna 1926).
[“The Meaning of Business Cycle Research for Economic Life.”]
A-4 “Friedrich Freiherr von Wieser.” Jahrbücher für Nationalökonomie und Statistik 125 (1926): 513-530.
[Commemorative article on the occasion of the death of Hayek’s Austrian School of economics mentor, von Wieser (1851-1926). Compare with Hayek’s later article on von Wieser in The International Encyclopaedia of the Social Sciences (1968, 1972). Also see E-2 (1929) Hayek’s German introduction and edition of von Wieser’s Collected Writings. A-4 translated into English in an abridged form appears in The Development of Economic Thought: Great Economists in Perspective. Edited by Henry William Spiegel. New York & London: John Wiley & Sons, Inc. 1952, 1961, pp. 554-567.
A-5a “Zur Problemstellung der Zinstheorie.” Archiv für Sozialwissenschaften und Sozialpolitik 58 (1927): 517-532.
[“On the Setting of the Problem of Rent Theory.”]
A-5b “Konjunkturforschung in österreich.” Die Industrie 32 (30), (Vienna 1927).
[“Business Cycle Research in Austria.”]
A-6 “Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des ‘Geldwertes.’ ” Weltwirtschaftliches Archiv 28 (1928): 33-76.
[“The Intertemporal Equilibrium System of Prices and the Movements of the ‘Value of Money.’ “]
A-7a “Einige Bemerkungen über das Verhältnis der Geldtheorie zur Konjunkturtheorie.” Schriften des Vereins für Sozialpolitik 173/2 (1928): 247-295. Also see same journal, Volume 175, for a discussion.
[“Some Remarks on the Relationship between Monetary Theory and Business Cycle Theory.”]
[See B-1 with annotation. The journal in which Hayek published this article was the publication of the influential Verein für Sozialpolitik, founded in 1872 by (among others) Gustav Schmoller (1838-1917). This organization for social reform did not express a monolithic unity of doctrine, but was, nevertheless, excoriated by its opponents as a union of ‘Professorial Socialists’ (Katheder Sozialisten). See the interesting group photograph of a meeting of the Verein at the University of Zurich, September 11-13, 1928, showing the wonderfully variegated grouping that includes Hayek, von Mises, Machlup, A. Rüstow, Hunold, Morgenstern, Strigl, and Sombart in Albert Hunold, “How Mises Changed My Mind.” The Mont Pélèrin Quarterly 3 (October 1961): 16-19. For background on the Verein, see Haney (1949), pp. 546, 820, 885. It was at the September 1928 meeting of the Verein that Hayek presented his paper, A-7a, which eventually grew into his Geldtheorie (1929).]
A-7b “Diskussionsbemerkungen über ‘Kredit und Konjunktur.’ ” Shriften des Vereins für Sozialpolitik 175, Verhandlungen 1928, (1928).
[“Discussion Comments on ‘Credit and Business Cycle’ “… (Transactions 1928).]
A-8 “Theorie der Preistaxen.” Közgazdasági Enciklopédia, Budapest, 1929.
[In Hungarian-German printing.]
A-9a “Gibt es einen ‘Widersinn des Sparens’? Eine Kritik der Krisentheorie von W.T. Foster und W. Catchings mit einigen Bemerkungen zur Lehre von de Beziehungen zwischen Geld und Kapital.”
[“Is There a ‘Paradox of Saving’? A Critique of the Crises-Theory of W.T. Foster and W. Catchings with some Remarks on the Theory of the Relationship between Money and Capital.”] Zeitschrift für Nationalökonomie 1, no. 3 (1929): 125-169; revised and enlarged edition, Vienna: Springer, 1931.
[English version: “The Paradox of Saving.” Economica 11, no. 32 (May 1931). Reprinted in B-4 (“Appendix”). The English translation was done by Nicholas Kaldor and Georg Tugendhat.]
A-9b “Wirkungen der Mietzinbeschränkungen.” Munich: Schriften des Vereins für Sozialpolitik 182 (1930)
[“The Repercussions of Rent Restrictions.” See P-1 for different treatments of the effects of rent control. A-9b formed the substance of Hayek’s article in the Hayek-Friedman volume mentioned in P-1.]
A-9c “Bemerkungen zur vorstehenden Erwiderung Prof. Emil Lederers.” Zeitschrift für Nationalökonomie 1 (5), (1930).
[“Comments on the Preceding Reply of Prof. Emil Lederer.”]
A-10 “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 11, no. 33 (August 1931—Part I): 270-295.
[See also A-11b.]
A-11a “The Pure Theory of Money: A Rejoinder to Mr. Keynes.” Economica 11, no. 34 (November 1931): 398-403.
[In the same issue of Economica, pp. 387-397, Keynes’ article appears: “A Reply to Dr. Hayek.”]
A-11b “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 12 (February 1932—Part II): 22-44.
[See also A-10 and A-11a.]
A-11c “Das Schicksal der Goldwährung.” Der Deutsche Volkswirt 6 (20), (1932). [“The Fate of the Gold Standard.” See P-8.]
A-11d “Foreign Exchange Restrictions.” The Economist 6 (1932).
A-12 “Money and Capital: A Reply to Mr. Sraffa.” Economic Journal 42 (June 1932): 237-249.
A-13 “Kapitalaufzehrung.” Weltwirtschaftliches Archiv 36 (July 1932/II): 86-108.
[“Capital Consumption.”]
A-14 “A Note on the Development of the Doctrine of ‘Forced Saving’.” Quarterly Journal of Economics 47(November 1932): 123-133.
[Reprinted in B-4.]
A-15 “Gossen, Hermann Heinrich.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1932. Vol. 7, p. 3.
A-16 “Macleod, Henry D.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2, p. 30.
[Henry Dunning Macleod (1821-1902) was a Scottish economist who wrote The Theory and Practice of Banking, 2 vols, (1856) and The Theory of Credit, 2 vols, (1889-1891).]
A-17 “Norman, George W.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2.
A-18 “Philippovich, Eugen von.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 12, p. 116.
A-19 “Saving.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 13, pp. 548-552.
[Reprinted in revised form in B-4.]
A-20 “The Trend of Economic Thinking.” Economica 13 (May 1933): 121-137.
[Hayek’s first inaugural lecture given at the University of London about a year after he assumed the Tooke professorship, in which speech he explained his general economic philosophy. See B-13, p. 254.]
A-21 Contribution to Gustav Clausing, ed. Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff. Munich: Duncker & Humblot, 1933.
[Translated into English in B-4 (Chapter 6) as “The Present State and Immediate Prospects of the Study of Industrial Fluctuations.” Arthur Spiethoff, (1873-1957), who is honored in this Festschrift, was born in 1873, studied under Schmoller, and devised a “non-monetary overinvestment theory” of the business cycle. See Haney (1949), p. 673.]
A-22 “über Neutrales Geld.” Zeitschrift für Nationalökonomie 4 (October 1933).
[“Concerning Neutral Money.”]
A-23 “Capital and Industrial Fluctuations.” Econometrica 2 (April 1934): 152-167.
A-24a “On the Relationship between Investment and Output.” Economic Journal 44 (1934): 207-231.
A-24b “The Outlook for Interest Rates.” The Economist 7 (1934).
A-24c “Stable Prices or Neutral Money.” The Economist 7 (1934).
A-25 “Carl Menger.” Economica N.S. 1 (November 1934): 393-420.
[This is an English translation of Hayek’s Introduction to Menger’s Grundsätze in E-7. Reprinted in The Development of Economic Thought: Great Economists in Perspective. Edited by Henry William Spiegel. New York and London: John Wiley & Sons, Inc. 1952, 527-553. Also reprinted in Principles of Economics by Carl Menger. Translated by James Dingwall and Bert F. Hoselitz. With an Introduction by F. A. Hayek. New York & London: New York University Press, 1981, pp. 11-36. See A-131a.]
A-26 “Preiserwartungen, Monetäre Störungen und Fehlinvestitionen.” Nationalökonomisk Tidsskrift 73, no. 3 (1935).
[Reprinted in a revised form in B-4 as “Price Expectations, Monetary Disturbances and Malinvestments.” Originally delivered as a lecture on December 7, 1933 in the Sozialökonomisk Samfund in Copenhagen. First published in German and later in French in the Revue de Science Economique, Liège (October, 1935).]
A-27a “The Maintenance of Capital.” Economica N.S. 2 (1935): 241-276.
[Reprinted in B-4.]
A-27b “A Regulated Gold Standard.” The Economist (May 11, 1935).
A-28 “Spor miedzy szkola ‘Currency’ i szkola ‘Banking’.” Ekonomista 55 (Warsaw, 1935).
A-29 “Edwin Cannan” (Obituary). Zeitschrift für Nationalökonomie 6 (1935):246-250.
[Cannan (1861-1935) is also celebrated by Hayek in A-72. Cannan associated himself at the London School of Economics with a group who developed liberal theory. This group included Lionel Robbins, Cannan’s successor, and his colleague Sir Arnold Plant (see Plant, 1969), Sir Theodore Gregory (Athens), F.C. Benkam (Singapore), W.H. Hutt (South Africa), and F.W. Paish (Paris).
A-30 “Technischer Fortschritt und überkapazität.” österreichische Zeitschrift für Bankwesen 1 (1936).
[“Technical Progress and Overcapacity.”]
A-31 “The Mythology of Capital.” Quarterly Journal of Economics 50 (1936):199-228.
[Reprinted in William Fellner and Bernard F. Haley, eds., Readings in the Theory of Income Distribution. Philadelphia: 1946.]
A-32 “Utility Analysis and Interest.” Economic Journal 46 (1936): 44-60.
A-33 “La situation monétaire internationale.” Bulletin Périodique de la Societé Belge d’études et d’Expansion (Brussels), No. 103. (1936).
[“The International Monetary Situation.”]
A-34 “Economics and Knowledge.” Economica N.S. 4 (February 1937): 33-54.
[Reprinted in B-7. Also reprinted in J. M. Buchanan and G. F. Thirlby (eds.) L.S.E. Essays on Cost. New York and London: New York University Press, 1981 as chapter 3. Originally presented as a presidential address to the London Economic Club, 10 November 1936.]
A-35 “Einleitung zu einer Kapitaltheorie.” Zeitschrift für Nationalökonomie 8 (1937):1-9.
[“Introduction to a Theory of Capital.”]
A-36 “Das Goldproblem.” österreichische Zeitschrift für Bankwesen 2 (1937).
[“The Gold Problem.”]
A-37a “Investment that Raises the Demand for Capital.” Review of Economic Statistics 19 (November 1937).
[Reprinted in B-4.]
A-37b “Freedom and the Economic System.” Contemporary Review (April 1938).
[Reprinted in enlarged form in P-2.]
A-38 “Economic Conditions of Inter-State Federation.” New Commonwealth Quarterly 5 (London, 1939).
[Reprinted in B-7.]
A-39 “Pricing versus Rationing.” The Banker 51 (London, September 1939).
A-40 “The Economy of Capital.” The Banker 52 (London, October 1939).
A-41 “Socialist Calculation: The Competitive ‘Solution’.” Economica N.S. 7 (May 1940): 125-149.
[Reprinted in B-7.]
A-42 “The Counter-Revolution of Science.” Parts I-III. Economica N.S. 8 (February-August 1941): 281-320.
[Reprinted in B-9.]
A-43 “Maintaining Capital Intact: A Reply [to Professor Pigou.]” Economica N.S. 8 (1941): 276-280.
A-44 “Planning, Science and Freedom.” Nature 148 (November 15, 1941).
A-45 “The Ricardo Effect.” Economica N.S. 9 (1942).
[Reprinted in B-7. See also in B-17, Chapt. 11: “Three Elucidations of the Ricardo Effect,” and A-127.]
A-46 “Scientism and the Study of Society.” Part I: Economica N.S. 9 (1942). Part II: Economica 10 (1943). Part III: Economica 11 (1944).
[Reprinted in B-9.]
A-47 “A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’.” Economica N.S. 9 (November 1942): 383-385.
A-48 “A Commodity Reserve Currency.” Economic Journal 53 (1943).
[Reprinted in B-7 as chapter 10. Also reprinted in part as a pamphlet, “Material Relating to Proposals for an International Commodity Reserve Currency,” submitted to The International Monetary and Financial Conference at Bretton Woods, N.H. by the Committee for Economic Stability (1944). #380 of the F. A. Harper Archives at The Institute for Humane Studies.]
A-49 “The Facts of the Social Sciences.” Ethics 54 (October 1943).
[Reprinted in B-7.]
A-50 “The Geometrical Representation of Complementarity.” Review of Economic Studies 10 (1942-1943): 122-125.
A-51 “Gospodarka planowa a idea planowania prawa.” Economista Polski (London, 1943).
[Cf. Chapter 6 of B-6: “Planning and the Rule of Law.”]
A-52 Edited: “John Rae and John Stuart Mill: A Correspondence.” Economica N.S. 10 (1943): 253-255.
A-53 “The Economic Position of South Tyrol.” In: Justice for South Tyrol. London: 1943.
[Compare with P-3.]
A-54 “Richard von Strigl” (Obituary). Economic Journal 54 (1944): 284-286.
[Strigl who died in 1944 was a “Neo-Austrian” who developed the theory of saving and investment and analyzed monopolistic competition theory.]
A-55“The Use of Knowledge in Society.”American Economic Review 35 (September 1945): 519-530.
[Reprinted in B-7 and in a revised, abridged version as a pamphlet; Menlo Park, CA: Institute for Humane Studies. (Reprint No. 5), no date (1971, 1975).]
A-56 “Time-Preference and Productivity: A Reconsideration.” Economica, N.S. no. 4, 12 (February 1945): 22-25.
A-57 Edited: ” ‘Notes on N.W. Senior’s Political Economy’ by John Stuart Mill.” Economica N.S. 12 (1945): 134-139.
A-58 “Nationalities and States in Central Europe.” Central European Trade Review 3 (London, 1945): 134-139.
A-59 “Fuld Beskaeftigelse.” Nationalökonomisk Tidsskrift 84 (1946): 1-31.
A-60 “The London School of Economics 1895-1945.” Economica N.S. 13 (February 1946): 1-31.
A-61 “Probleme und Schwierigkeiten der englischen Wirtschaft.” Schweizer Monatshefte 27 (1947).
[“Problems and Difficulties of the English Economy.”]
A-62 “Le plein emploi.” Economie Appliquée 1, no. 2-3, (Paris, 1948): 197-210.
[“Full Employment.”]
A-63a “Der Mensch in der Planwirtschaft.” In Simon Moser (ed.) Weltbild und Menschenbild. Innsbruck and Vienna: 1948.
[“Man in the Planned Economy.”]
A-63b “Die politischen Folgen der Planwirtschaft.” Die Industrie. Zeitschrift der Vereinigung österreichischer Industrieller. No. 3 (Vienna, January 1948).
[“The Political Effects of the Planned Economy.”]
A-64 “Wesley Clair Mitchell 1874-1948” (Obituary). Journal of the Royal Statistical Society 111 (1948).
[Compare with Arthur F. Burns’ commemoration of Mitchell in the Twenty-Ninth Report of The National Bureau of Economic Research. New York: 1969; adapted in The Development of Economic Thought. Edited by Henry William Spiegel. New York, 1952, 1961, pp. 414-442. Also note Hayek’s personal association with Mitchell, as indicated in B-17, p. 3, note 3, during Hayek’s stay in America during the early 1920s. Also note the correspondence between Wesley Mitchell and Hayek mentioned in Emil Kauder, A History of Marginal Utility Theory. Princeton University Press, 1965.]
A-65a “The Intellectuals and Socialism.” The University of Chicago Law Review 16, no. 3 (Spring 1949): 417-433. German translation in Schweizer Monatshefte 29 (1944-50); Norwegian translation (1951).
[Reprinted in B-13 and by the Institute for Humane Studies, 1971.]
A-65b “A Levy on Increasing Efficiency. The Economics of Development Charges.” The Financial Times (April 26-28, 1949).
A-66 “Economics.” Chambers’ Encyclopaedia 4 (Oxford 1950).
A-67 “Ricardo, David.” Chambers’ Encyclopaedia 11 (Oxford 1950).
A-68 “Full Employment, Planning and Inflation.” Institute of Public Affairs Review 4 (6) (Melbourne, Australia 1950).
[Reprinted as Chapter 19 in B-13. Also in German (1951) and Spanish (1960).]
A-69a “Capitalism and the Proletariat.” Farmand 7, no. 56 (Oslo: February 17, 1951).
A-69b “Gleichheit und Gerechtigkeit.” Jahresbericht der Züricher Volkswirtschaftlichen Gesellschaft (1951).
[“Equality and Justice.”]
A-70 “Comte and Hegel.” Measure 2 (Chicago, July 1951).
[Reprinted in B-9.]
A-71 “Comments on ‘The Economics and Politics of the Modern Corporation’.” The University of Chicago Law School, Conference Series no. 8, (December 7, 1951).
A-72 “Die überlieferung der Ideale der Wirtschaftsfreiheit.” Schweizer Monatshefte 31, No. 6 (1951).
[“The Transmission of the Ideals of Economic Freedom.” First in German (1951) and later in an English translation as “The Ideals of Economic Freedom: A Liberal Inheritance,” in The Owl (London 1951), pp. 7-12. A “corrected version” in English is reprinted as Chapter 13 of B-13. Published in The Freeman 2 (July 28, 1952): 729-731, as “A Rebirth of Liberalism.” A remarkably similar overview of the various liberal currents that flowed into modern economic liberalism is given by Carlo Mötteli (a financial editor for Neue Zücher Zeitung) in Swiss Review of World Affairs 1, no. 8 (November 1951) and entitled “The Regeneration of Liberalism,” reprinted in The Mont Pélèrin Quarterly 3 (October 1961): 29-30.]
A-73a “Die Ungerechtigkeit der Steuerprogression.” Schweizer Monatshefte 32 (November 1952).
[“The Injustice of the Progressive Income Tax.” cf. A-79 and A-73b of which this is a translation.]
A-73b “The Case Against Progressive Income Taxes.” The Freeman 4 (December 28, 1953): 229-232.
A-74a “Leftist Foreign Correspondent.” The Freeman 3 (January 12, 1953): 275.
A-74b “The Actonian Revival.” Review of Lord Acton by Gertrude Himmelfarb and Acton’s Political Philosophy by G. E. Fasnacht. The Freeman 3 (March 23, 1953): 461-462.
A-74c “Decline of the Rule of Law. Part I.” The Freeman 3 (April 20, 1953):518-520; Part II The Freeman 3 (May 4, 1953): 561-563.
A-74d “Substitute for Foreign Aid.” The Freeman 3 (April 6, 1953): 482-484.
A-74e “Entstehung und Verfall des Rechtsstaatsideales.” In: Albert Hunold (ed.) Wirtschaft ohne Wunder. Volkswirtschaftliche Studien für das Schweizerische Institut für Auslandsforschung. Zurich, 1953.
[“The Rise and Fall of the Ideal of the Constitutional State.”]
A-75a “Marktwirtschaft und Wirtschaftspolitik.” Ordo 6 (February 1954): 3-18.
[“Market Economy and The Economic Policy.”]
A-75b “Wirtschaftsgeschichte and Politik.” Ordo 7 (March 1955).
[“Economic History and Politics.” See E-10.]
A-76 “Degrees of Explanation.” The British Journal for the Philosophy of Science 6, no. 23 (1955): 209-225.
[Received by journal Nov. 11, 1954. Hayek acknowledges indebtedness to Chester Barnand, Heinrich Klüver, Herbert Lamm, Michael Polanyi, Karl Popper, Warren Weaver and the members of a Faculty Seminar of the Committee of Social Thought in the University of Chicago “for reading and commenting on an earlier draft of this paper.” Reprinted in revised form in B-13, Chapter 1.]
A-77 “Towards a Theory of Economic Growth, Discussion of Simon Kuznets’ Paper.” In: National Policy for Economic Welfare at Home and Abroad. New York: Columbia University Bicentennial Conference, 1955.
A-78 “Comments.” In: Congress for Cultural Freedom (ed.) Science and Freedom. London: (Proceedings of the Hamburg Conference of the Congress for Cultural Freedom) 1955.
[Also printed in German.]
A-79 “Progressive Taxation Reconsidered.” In: Mary Sennholz (ed.) On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises. Princeton: D. von Nostrand Co., 1956. Presented on the Occasion of the Fiftieth Anniversary of his [von Mises’] Doctorate, February 26, 1956.
A-80 “The Dilemma of Specialization.” In Leonard D. White (ed.) The State of the Social Sciences. Chicago: University of Chicago Press, 1956.
[Reprinted in B-13, Chapter 8.]
A-81a “über den ‘Sinn’ sozialer Institutionen.” Schweizer Monatshefte 36 (October 1956).
[“On the ‘Meaning’ of Social Institutions.”]
A-81b “Freedom & The Rule of Law.” (The Third Programme, BBC Radio; lst of 2 talks.) The Listener (Dec. 13, 1956).
A-82a “Was ist und was heisst ‘sozial’?” In Albert Hunold (ed.) Masse und Demokratie. Zürich: 1957.
[“What is ‘Social’—What Does It Mean?” Translated in an unauthorized English translation in Freedom and Serfdom (ed. A. Hunold), Dordrecht, 1961. The reprint in B-13, Chapter 17 is a revised version of the unauthorized English translation “which in parts gravely misrepresented the meaning of the original.”]
A-82b Review of Mill and His Early Critics by J. C. Rees. Leicester: University College of Leicester, 1956. In Journal of Modern History (June 1957): 54.
A-83 “Grundtatsachen des Fortschritts.” Ordo 9 (1957): 19-42.
[“The Fundamental Facts of Progress.”]
A-84 “Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147-152.
[Reprinted in B-13, Chapter 21.]
A-85a “La Libertad, La Economia Planificada y el Derecho.” Temas Contemporaneos (Buenos Aires) 3 (1958).
[“Liberty, the Planned Economy, and the Law.”]
A-85b “Das Individuum im Wandel der Wirtschaftsordnung.” Der Volkswirt No. 51-52 (Frankfurt am Main 1958).
[“The Individual and Change of Economic System.”]
A-86 “The Creative Powers of a Free Civilization.” In: Felix Morley (ed.) Essays in Individuality. Philadelphia: University of Pennsylvania Press, 1958.
A-87 “Freedom, Reason, and Tradition.” Ethics 68 (1958).
A-88a “Gleichheit, Wert und Verdienst.” Ordo 10 (1958): 5-29.
[“Equality, Value, and Profit.”]
A-88b “Attualità di un insegnamento,” In: Angelo Dalle Molle, ed. Il Maestro dell’ Economia di Domani (Festschrift for Luigi Einaudi on his 85th Birthday). Verona, 1958, pp. 20-24.
[“The Reality of a Teaching,” In The Master of the Economics of the Future. Luigi Einaudi (1874-1961), who is honored in this Festschrift, was a classical liberal Italian economist and statesman. He was the first president of Italy (1948-1955). Following World War II he was governor of the Bank of Italy and devised programs for monetary stabilization. Einaudi is celebrated by Hayek, in an allusion, in A-72.]
A-89 “Liberalismus (1) Politischer Liberalismus.” Handwörterbuch der Sozialwissenschaften 6 (Stuttgart-Tübingen-Göttingen, 1959).
[“Liberalism (1) Political Liberalism.” See Chapter 9 of B-17.]
A-90 “Bernard Mandeville.” Handwörterbuch der Sozialwissenschaften 7 (Stuttgart-Tübingen-Göttingen, 1959).
A-91 “Unions, Inflation and Profits.” In: Philip D. Bradley (ed.) The Public Stake in Union Power. Charlottesville, University of Virginia Press: 1959.
[Reprinted in B-13.]
A-92 “Freiheit und Unabhängigkeit.” Schweizer Monatshefte 39 (1959).
[“Freedom and Independence.”]
A-93 “Verantwortlichkeit und Freiheit.” In: Albert Hunold (ed.) Erziehung zur Freiheit. Erlenbach-Zürich: E. Rentsch, 1959: 147-170.
[“Responsibility and Freedom.”]
A-94 “Marktwirtschaft und Strukturpolitik.” Die Aussprache 9 (1959).
[“Market Economy and Structural Policy.”]
A-95 “An Röpke.” In Wilhelm Röpke, Gegen die Brandung. Zürich: E. Rentsch, 1959.
[“On Röpke.”]
A-96a “The Free Market Economy: The Most Efficient Way of Solving Economic Problems.” Human Events 16, no. 50 (Dec. 16, 1959).
[Reprinted in P-6.]
A-96b “The Economics of Abundance,” in Henry Hazlitt, ed. The Critics of Keynesian Economics. Princeton and London: Van Nostrand Co., 1960, pp. 126-130.
A-97a “The Social Environment.” In B. H. Bagdikian (ed.) Man’s Contracting World in an Expanding Universe. Providence, R.I.: 1960.
A-97b “Freedom, Reason and Tradition.” Proceedings of the 16th Annual Meeting: The Western Conference of Prepaid Medical Service Plans, (Winnipeg 1960).
A-97c “Progenitor of Scientism.” National Review (1960).
A-97d “Gobierno Democratico y Actividad Economica.” Espejo 1 (Mexico City 1960).
[“Democratic Government and Economic Activity.”]
A-98 “The Corporation in a Democratic Society: In Whose Interest Ought It and Will It Be Run?” In: M. Anshen and G. L. Bach (eds.) Management and Corporations 1985. New York: McGraw-Hill, 1960.
[Reprinted in B-13.]
A-99a “The ‘Non Sequitur’ of the ‘Dependence Effect’.” The Southern Economic Journal 27 (April 1961).
[Reprinted in B-13, Chapter 23.]
A-99b “Freedom and Coercion: Some Comments and Mr. Hamowy’s Criticism.” New Individualist Review 1, no. 2 (Summer 1961): 28-32.
A-100a “Die Ursachen der ständigen Gefährdung der Freiheit.” Ordo 12 (1961):103-112.
[“The Origins of the Constant Danger to Freedom.”]
A-100b “How Much Education at Public Expense?” Context 1 (Chicago 1961).
A-101 “The Moral Element in Free Enterprise.” In: National Association of Manufacturers (eds.) The Spiritual and Moral Significance of Free Enterprise. New York: 1962.
[Reprinted in B-13 as Chapter 16. Originally delivered as an address to the 66th Congress of American Industry organized by the N.A.M. New York, December 6, 1961.]
A-102 “Rules, Perception and Intelligibility.” Proceedings of the British Academy 48 (1962), London, 1963, pp. 321-344.
[Reprinted as Chapter 3 in B-13.]
A-103a “Wiener Schule.” Handwörterbuch der Sozialwissenschaften 12 (Stuttgart-Tübingen-Göttingen, 1962).
[“The Vienna School.”]
A-103b “The Uses of ‘Gresham’s Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).
[Reprinted in B-13, Chapter 24.]
A-104 “Alte Wahrheiten und neue Irrtümer.” In: Internationales Institut der Sparkassen, ed. Das Sparwesen der Welt, Proceedings of the 7th International Conference of Savings Banks. Amsterdam: 1963.
[“Old Truths and New Errors.” Reprinted in B-14; Italian translation in Il Risparmio (Milan) 11 (1963).]
A-105 “Arten der Ordnung.” Ordo 14 (1963).
English version under the title “Kinds of Order in Society.” New Individualist Review (University of Chicago) 3, no. 2 (Winter 1964): 3-12.
[Reprinted in B-14.]
[The five volumes of New Individualist Review (1961-1968) in which “Kinds of Order” appears have been published in one volume as New Individualist Review. Indianapolis: LibertyPress, 1981. Reprinted as pamphlet: Menlo Park, California: The Institute for Humane Studies (Studies in Social Theory No. 5), 1975. Hayek used this essay as the basis of the second chapter of Vol. I of Law, Legislation and Liberty (B-15). Reprinted in German in B-14.]
A-106 “Recht, Gesetz und Wirtschaftsfreiheit.” In: Hundert Jahre Industrie und Handelskammer zu Dortmund 1863-1963. Dortmund, 1963.
[“Right, Law, and Economic Freedom.” Reprinted in B-14.]
A-107 Introduction to “The Earlier Letters of John Stuart Mill.” In F.E. Mineka, ed. John Stuart Mill, Vol. XII. Toronto: Toronto University Press and London: Routledge & Kegan Paul, 1963.
A-108 “The Legal and Political Philosophy of David Hume.” Il Politico 28, no. 4 (December 1963): 691-704.
[Lecture delivered for the Faculty of Law and Political Science of the University of Freiburg im Breisgau on July 18, 1963. Reprinted as chapter 7 of B-13. Also (in German) in B-14.]
A-109 “The Theory of Complex Phenomena.” In Mario A. Bunge (ed.) The Critical Approach to Science and Philosophy: Essays in Honor of Karl R. Popper. New York: The Free Press of Glencoe, Inc., 1964.
[Reprinted in B-13; see P-11c. ]
A-110 Parts of “Commerce, History of.” Encyclopaedia Britannica, vol. VI. Chicago: 1964.
A-111 “Die Anschauungen der Mehrheit und die zeitgenössische Demokratie.” Ordo 15/16 (1965): 19-41.
[“The Perception of the Majority and Contemporary Democracy.” Reprinted in B-14.]
A-112 “Kinds of Rationalism.” The Economic Studies Quarterly 15, no. 3 (Tokyo, 1965). [Reprinted in B-13, Chapter 5. Originally delivered as a lecture on April 27, 1964 at Rikkyo University, Tokyo. German translation in B-14.]
A-113 “Personal Recollections of Keynes and the ‘Keynesian Revolution’.” The Oriental Economist 34 (Tokyo, January 1966).
[German translation in B-14. Reprinted in B-17.]
A-114 “The Misconception of Human Rights as Positive Claims.” Farmand Anniversary Issue II/12 (Oslo, 1966): 32-35.
A-115 “The Principles of a Liberal Social Order.” Il Politico 31, no. 4 (December 1966): 601-618.
[Paper submitted to The Tokyo Meeting of the Mont Pélèrin Society, Sept. 5-10, 1966. German translation in Ordo 18 (1967); also reprinted in B-14. Reprinted as Chapter 11 of B-13 in a slightly altered version, deleting final poem linking spontaneous order to Lao-Tzu’s Taoism of wu-wei. See Chiaki Nishiyama (1967) for a discussion of and reflection on Hayek’s paper.]
A-116 “Dr. Bernard Mandeville.” Proceedings of the British Academy 52 (1966), London 1967.
[“Lecture on a Master Mind” delivered to the British Academy on March 23, 1966. Reprinted as Chapter 15 of B-17. German translation in B-14.]
A-117 “L’Etalon d’Or—Son Evolution.” Revue d’Economie Politique 76 (1966).
[“The Gold Standard—Its Evolution.”]
A-118 “Résultats de l’action des hommes mais non de leurs desseins.” In: Les Fondements Philosophiques des Systèmes Economiques. Textes de Jacques Rueff et essais rédiges en son honneur. (Paris 1967).
[Translated in English in B-13 as “The Results of Human Action but not of Human Design.” German translation in B-14.]
A-119 Remarks on “Ernst Mach und das sozialwissenschaftliche Denken in Wien.” In Ernst Mach Institut (ed.), Symposium aus Anlass des 50. Todestages von Ernst Mach. (Freiburg i. B., 1967.)
[See (B-10) for the influence of Mach (1838-1916) on Hayek. A-119 is part of a symposium commemorating the 50th anniversary of Mach’s death: “Ernst Mach and Social Science Thought in Vienna.”]
A-120 “Rechtsordnung und Handelnsordnung.” In Eric Streissler (ed.), Zur Einheit der Rechts-und Staatswissenschaften,Vol. 27. Karlsruhe, 1967.
[“Legal Order and Commercial Order.” Reprinted in B-14.]
A-121 “The Constitution of A Liberal State.” Il Politico 32, no. 1 (Sept. 1967): 455-461.
[German translation in Ordo 19 (1968) and in B-14.]
A-122a “Bruno Leoni, the Scholar.” Il Politico 33, no. 1 (March 1968): 21-25.
Also translated in the same journal as “Bruno Leoni lo studioso.” (pp. 26-30). In commemoration of Leoni’s death (November 21, 1967).
A-122b “Ordinamento giuridico e ordine sociale.” Il Politico 33, no. 4 (December 1968): 693-724.
[“Juridical Regulation and Social Order.”]
A-123a “A Self-Generating Order for Society.” In John Nef (ed.), Towards World Community. The Hague, 1968.
A-123b Speech on the 70th Birthday of Leonard Reed. In: What’s Past is Prologue. New York: Foundation for Economic Education, 1968.
A-124 “Economic Thought VI: The Austrian School.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & Free Press, 1968, 1972; Volume 4, pp. 458-462.
A-125a “Menger, Carl.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Company & Free Press, 1968, 1972; Volume 10, pp. 124-127.
A-125b ‘Wieser, Friedrich von.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & The Free Press, 1968, 1972; Volumes 15, 16, 17, pp. 549-550.
A-126 “Szientismus.” In W. Bernsdorf (ed.), Wörterbuch der Soziologie, Edited by W. Bernsdorf. 2nd ed. (Stuttgart, 1969).
[“Scientism.”]
A-127 “Three Elucidations of the ‘Ricardo Effect’.” Journal of Political Economy 77 (March-April 1969): 274-285.
[Reprinted in B-13 and (in German) in B-14.]
A-128a “The Primacy of the Abstract.” In Arthur Koestler and J. R. Smythies (eds.), Beyond Reductionism—The Alpbach Symposium. London, 1969.
[Reprinted in B-17.]
A-128b “Marktwirtschaft oder Syndikalismus?” In: Protokoll des Wirtschaftstages der CDU/DSU (Bonn 1969).
[“Market Economy or Syndicalism?”]
A-129a “Il sistema concorrenziale come strumento di conoscenza.” L’industria 1 (Turin, January-March 1970): 34-50.
[Translated with an English summary as “The Competitive System as a Tool of Knowledge.”]
A-129b “Principles or Expediency?” In Toward Liberty: Essays in Honor of Ludwig von Mises on the Occasion of his 90th Birthday, September 29, 1971. Sponsoring Committee F. A. von Hayek et.al; F. A. Harper, Secretary. Menlo Park, California: Institute for Humane Studies, 1971, vol I, pp. 29-45.
A-129c “Nature vs. Nurture Once Again.” A comment on C. D. Darlington, The Evolution of Man and Society, London, 1962 in Encounter (February 1971). [Reprinted as Chapter 19 in B-17.]
A-130 “The Outlook for the 1970’s: Open or Repressed Inflation.” In Sudha R. Shenoy (ed.) A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40-Years’ Running Commentary on Keynesianism. London: Institute of Economic Affairs (Hobart Paperback 4), 1972.
[This actually appeared in a pamphlet format (P-11b) to which Hayek adds a new article, “The Campaign Against Keynesian Inflation.” This article is also reprinted as Chapter 13 of B-17.]
A-131a “Die Stellung von Mengers ‘Grundsätzen’ in der Geschichte der Volkswirtschaftslehre.” Zeitschrift für Nationalökonomie 32, no. 1 (Vienna, 1972.)
English version: “The Place of Menger’s Grundsätze in the History of Economic Thought.” In J. R. Hicks and W. Weber (eds.), Carl Menger and the Austrian School of Economics. Oxford, 1973, pp. 1-14. Reprinted as Chapter 17 in B-17. Compare with E-7.
[The 1934 earlier and distinct biographical study entitled “Carl Menger” found in E-7 was “written as an Introduction to the Reprint of Menger’s Grundsätze der Volkwirtschaftslehre which constitutes the first of a series of four reprints embodying Menger’s chief published contributions to Economic Science and which were published by the London School of Economics as Numbers 17 to 20 of its Series of Reprints of Scarce Works in Economics and Political Science.” An English translation of this earlier “Carl Menger” Introduction can be found in Carl Menger, Principles of Economics. A translation of Menger’s Grundsätze by James Digwall and Bert F. Hoselitz, with an Introduction (“Carl Menger”) by F. A. Hayek. New York and London: New York University Press, 1981, pp. 11-36.
A-131b “In Memoriam Ludwig von Mises 1881-1973.” Zeitschrift für Nationalökonomie 33 (Vienna 1973).
A-131c “Tribute to von Mises, Vienna Years.” National Review (Autumn 1973).
A-131d “Talk at the Mont Pélèrin.” Newsletter of the Mont Pélèrin Society 3 (Luxembourg 1973).
A-132a “Inflation: The Path to Unemployment.” Addendum 2 to Lord Robbins et. al. Inflation: Causes, Consequences, Cures: Discourses on the Debate between the Monetary and the Trade Union Interpretations. London: The Institute for Economic Affairs (IEA Readings, No. 14), 1974, pp. 115-120.
[Reprinted from The Daily Telegraph of London (October 15 and 16, 1974).]
A-132b “Inflation and Unemployment.” New York Times (Nov. 15, 1974).
[Reprinted from The Daily Telegraph of London.]
A-132c Hayek, F. A. “Introduction” to Catallaxy: The Science of Exchange. Paper read at the first meeting of The Carl Menger Society, London, December 1974.
[Hayek did not continue his intention to complete this book. The “Introduction” along with comment and discussion by Hayek, Lionel Robbins, and others is available in transcription at the Institute for Humane Studies.]
A-132d “The Pretence of Knowledge.” An Alfred Nobel Memorial Lecture, delivered December 11, 1974 at the Stockholm School of Economics. In Les Prix Nobel en 1974. Stockholm: Nobel Foundation, 1975.
[Reprinted in Full Employment at Any Price [P-13]. (Occasional Paper 45), Institute of Economic Affairs, London 1975. Also reprinted in Unemployment and Monetary Policy: Government as Generator of the Business Cycle with a foreword by Gerald O’Driscoll Jr. San Francisco: Cato Institute, 1979, pp. 23-36. This has also been reprinted as Chapter 2 of B-17.]
A-132e “Freedom and Equality in Contemporary Society.” PHP 4 (The PHP Institute, Tokyo), (Tokyo 1975).
A-132f “Economics, Politics & Freedom: An Interview with F. A. Hayek.” Interview conducted by Tibor Machan in Salzburg, Austria. Reason 6 (February 1975): 4-12.
A-133a “Die Erhaltung des liberalen Gedankengutes.” In Friedrich A. Lutz (ed.) Der Streit um die Gesellschaftsordnung (Zurich 1975).
[“The Preservation of the Liberal Ideal of Thought.”]
A-133b T.V. interview on “NBC Meet the Press.” Sunday, June 22, 1975. Meet the Press 19, no. 25 (June 22, 1975) Washington, D.C.: Merkle Press, Inc. 1975, 9 pp.
A-133c “The Courage of His Convictions.” In Tribute to Mises 1881-1973. The Session of the Mont Pélèrin Society at Brussels 1974 devoted to the Memory of Ludwig von Mises. Chislehurst, 1975.
A-133d “The Formation of the Open Society.” Address given by Professor Friedrich A. von Hayek at the University of Dallas Commencement Exercises, May 18, 1975.
[Unpublished typescript, available at the Institute for Humane Studies.]
A-134a “Types of Mind.” Encounter 45 (September 1975).
[This was revised and retitled “Two Types of Mind” in Chapter 4 of B-17.]
A-134b “Politicians Can’t Be Trusted with Money.” [(Newspaper editor’s title. Paper delivered in September at the Gold and Monetary Conference in Lausanne, Switzerland.) The Daily Telegraph of London, Part I (September 30, 1975); Part II “Financial Power to the People” (newspaper editor’s title October 1, 1975).]
A-135a “A Discussion with Friedrich Hayek.” American Enterprise Institute. Domestic Affairs Studies 39 (Washington, D.C. 1975).
A-135b “World Inflationary Recession.” Paper presented to the International Conference on World Economic Stabilization, April 17-18, 1975, co-sponsored by the First National Bank of Chicago and the University of Chicago. First Chicago Report 5/1975.
A-136a “The New Confusion about Planning.” The Morgan Guaranty Survey (January 1976): 4-13.
[German translation in Die Industrie 10 (1976).]
A-136b “Institutions May Fail, but Democracy Survives.” U.S. News and World Report (March 8, 1976.)
A-136c “Adam Smith’s Message in Today’s Language.” Daily Telegraph, London (March 9, 1976.)
[Reprinted as Chapter 16 of B-17.]
[The gap in identification number (A-137 through A-141) will be supplied in subsequent revisions of this Hayek bibliography.]
A-142 “Il Problema della Moneta Oggi.” Academia Nationale dei Lincei. Atti de Convegni Rome (1976).
[“The Problem of Money Today.”]
A-143 “Remembering My Cousin Ludwig Wittgenstein.” Encounter (August 1977).
A-144a “Die Illusion der sozialen Gerechtigkeit.” In Schicksal? Grenzen der Machbarkeit. Eine Symposion. Munchen: Deutscher Taschenbuch Verlag, 1977.
[“The Illusion of Social Justice.” Cf. B-16, Vol. II of Law, Legislation and Liberty: The Mirage of Social Justice esp. Chapt. 9, also note Chapter 5 of B-17: “The Atavism of Social Justice.”]
A-144b “Toward Free Market Money.” Wall Street Journal (August 19, 1977).
A-144c “Persona Grata: Interview with Friedrich Hayek.” Interviewed by Albert Zlabinger, World Research INK 1, no. 12 (September, 1977): 7-9. Also available as a 30 minute 16mm color movie, entitled “Inside the Hayek Equation,” from World Research, Inc.; Campus Studies Division; 11722 Sorrento Valley Rd., San Diego, CA 92121.
A-144d “An Interview with Friedrich Hayek.” by Richard Ebeling. Libertarian Review (September 1977): 10-16.
A-144e “Is There a Case for Private Property.” Firing Line. Columbia, S.C.: Southern Educational Communications Association, 1977.
A-145 “Coping with Ignorance.” Ludwig von Mises Memorial Lecture. Imprimis (Hillsdale College) 7 (July 1978) 6 pp.
[Reprinted in Cheryl A. Yurchis (ed.) Champions of Freedom. Hillsdale, Michigan: Hillsdale College Press, (The Ludwig von Mises Lecture Series Vol. 5) 1979.]
A-146a “The Miscarriage of the Democratic Ideal.” Encounter (March 1978).
[A slightly revised version later appeared as Chapter 16 of B-18.]
A-146b “Will the Democratic Ideal Prevail?” In Arthur Seldon, ed. The Coming Confrontation: Will the Open Society Survive to 1989? London: The Institute for Economic Affairs (Hobart Paperback No. 12), 1978, pp. 61-73.
[Revised version of an article which appeared in Encounter (March 1978).]
A-147 “Die Entthronung der Politik.” In überforderte Demokratie? hrsg. von D. Frei, Sozialwissenschaftliche Studien des schweizerischen Instituts für Auslandsforschung, N.F. 7, Zurich 1978.
[“The Dethronement of Politics” in Has Democracy Overextended Itself? See also Chapter 18 of B-18: “The Containment of Power and the Dethronement of Politics.”]
A-148a “Can we still avoid inflation?” In Richard M. Ebeling (ed.) The Austrian Theory of the Trade Cycle and Other Essays. New York: Center for Libertarian Studies (Occasional Paper Series 8) 1978.
A-148b “Exploitation of Workers by Workers.” The last of three talks given by Professor F. A. Hayek under the title, “The Market Economy” (Radio 3, BBC). The Listener (August 17, 1978): 202-203.
A-149 “Notas sobre la Evolución de Sistemas de Reglas de Conducta.” Teorema 9, no. 1 (1979): 57-77.
[“Notes on the Evolution of Systems of Rules of Conduct.” Spanish version of Chapt. 4 of B-13.]
A-150 “Towards a Free Market Monetary System.” The Journal of Libertarian Studies 3, no. 1 (1979): 1-8.
[A lecture delivered at the Gold and Monetary Conference, New Orleans, Louisiana (November 10, 1977).]
A-151a “Freie Wahl de Währungen.” In Geldpolitik, ed. by J. Badura and O. Issing. Stuttgart and New York, 1980, pp. 136-146.
[“Free Choice of Currency Standards.”]
A-151b “An Interview with F. A. Hayek.” Conducted by Richard E. Johns. The American Economic Council Report (May 1980.)
[Reprinted in IRI Insights (publication of Investment Rarities, Inc.) 1 (November-December, 1980): 6-12, 14-15, 32.]
A-151c “Midju-Modid.” Frelsid (Journal of the Freedom Association of Iceland) 1 (1980): 6-15.
[“The Muddle of the Middle.”]
A-151d “Dankadresse.” In Erich Hoppmann, ed. Friedrich A. von Hayek. Baden-Baden: Nomos Verlagsgesellschaft, 1980, pp. 37-42.
[See Hoppmann (1980) in the Bibliography of Works Relating to Hayek.]
A-151e Review of Thomas Sowell’s Knowledge and Decisions. (New York: Basic Books, 1980). In Reason 13 (December 1981): 47-49.
A-151f “L’Hygiène de la démocratie.” French translation of the English text of a speech delivered April 12, 1980 at the 1’Assemblée Nationale in Paris by Friedrich A. Hayek.
[“The Health of Democracy.” In Liberté économique et progrès social (périodique d’information et de liaison des libéraux) No. 40 (December-January 1981): 20-23.]
A-151g “The Ethics of Liberty and Property.” Chapter 4 of a forthcoming book, The Fatal Conceit. Published in the proceedings of the Mont Pélèrin Society 1982 General Meeting, 5-10 September, Berlin. Institut für Wirtschaftspolitik an der Universität zu Kö1n, 1982.
Works about or relevant to Friedrich A. Hayek
Aaron, Raymond. “La Definition Libérale de Liberté.” Archiv europäischer Sociologen II (1961).
[“The Liberal Definition of Liberty.”]
Agonito, Rosemary. “Hayek Revisited: Mind as a Process of Classification.” In: Behaviorism: A Forum for Critical Discussions 3, no. 2 (Spring 1975): 162-171.
Allen, Henry. “Hayek, the Answer Man.” The Washington Post (December 2, 1982), pp. Cl, C17.
Arnold, G. L. “The Faith of a Whig.” Twentieth Century London (August 1960).
Arnold, Roger A. “The Efficiency Properties of Institutional Evolution: With Particular Reference to the Social-Philosophical Works of F. A. Hayek.” Virginia Polytechnic Institute and State University Ph.D. Dissertation, 1979.
[Dissertation supervised by James M. Buchanan.]
——. “Hayek and Institutional Evolution.” The Journal of Libertarian Studies 4, no. 4 (Fall 1980): 341-352.
Barry, Norman P. “Austrian Economists on Money and Society.” National Westminster Bank Quarterly Review (May 1981): 20-31.
——. An Introduction to Modern Political Theory. London: Macmillan, 1981.
——. Hayek’s Social and Economic Philosophy. London: Macmillan, 1979.
——. “The Tradition of Spontaneous Order.”Literature of Liberty 5 (Summer 1982): 7-58.
[A major section of this article deals with Hayek.]
Baumgarth, William P. “The Political Philosophy of F. A. von Hayek.” Harvard University Ph.D. Dissertation in Government, Cambridge, Mass., 1976.
——. “Hayek and Political Order: The Rule of Law.” The Journal of Libertarian Studies 2, no. 1 (Winter 1978): 11-28.
Bay, Christian. “Hayek’s Liberalism: The Constitution of Perpetual Privilege.” Political Science Review 1 (Fall 1971): 93-124.
Bettelheim, Charles. “Freiheit und Planwirtschaft.” In: Die Umschau. Internationale Revue, Mainz, 1 (1946): 83-192.
[“Freedom and the Planned Economy.”]
Bianca, G. Verso la Schiavit�. Replica a von Hayek. Naples, 1979.
[“(The Road) to Serfdom. Reply to von Hayek.”]
Birner, Jack. “Hayek’s Research Program in Economics.” Ph.D. dissertation for Erasmus University in Rotterdam, no date (1982?).
[In Dutch with a 36-page summary in English. The English summary is available at the Institute for Humane Studies, Menlo Park, CA 94025.]
Black, R.D., Collison Coats, A.W., and Goodwin, Craufurd D.W. (eds.) The Marginal Revolution in Economics: Interpretation and Evaluation. Durham, North Carolina: Duke University Press, 1973.
Bohm, Stephan B. “Liberalism and Economics in the Hapsburg Monarchy,” 12 pp. Unpublished typescript. Paper presented to “The History of Economics Society Conference,” Kress Library, Harvard University Graduate School of Business Administration, June 16-19, 1980.
[Paper available at the Institute for Humane Studies]
Boland, L.A. “Time in Economics vs. Economics in Time. The ‘Hayek Problem.’ ” In The Canadian Journal of Economics (Canadian Economic Association) Toronto, 2, no. 2 (1978): 240-262.
Bostaph, Samuel. “The Methodological Debate between Carl Menger and the German Historical School.” Atlantic Economic Journal 6 (September 1978): 3-16.
Bradley, Jr., Robert. “Market Socialism: A Subjectivist Evaluation.” The Journal of Libertarian Studies 5, no. 1 (Winter 1981): 23-40.
Brell, K.H. “Zur Problematik der progressive Einkommensbesteuerung. Eine Antikritik zu F. A. von Hayeks ‘Ungerechtigkeit der Steuerprogression’ und C. Fohls ‘Kritik der progressive Einkommensbesteurung’.” Dissertation Karlsruhe (Berenz) 1957.
[“On the Problematic of the Progressive Income Tax. A Counter-Critique to F. A. von Hayek’s ‘The Injustice of the Progressive Income Tax’ and C. Fohl’s ‘Critique of the Progressive Income Tax.’ “]
Brittan, Samuel. “Hayek and the New Right.” Encounter 54 (January 1980): 30-46.
Broadbeck, M. “On the Philosophy of the Social Sciences.” Philosophy of Science 21, no. 2 (April 1959).
Brown, Pamela. “Constitution or Competition? Alternative Views on Monetary Reform.” Literature of Liberty 5 (Autumn 1982): 7-52.
[A major section of this article surveys Hayek’s proposals for the ‘denationalization’ of money. See Hayek, P-14, P-16a, and P-16b.]
Brozen, Yale M. “The Antitrust Task Force Deconcentration Recommendation.” Journal of Law & Economics 13 (October 1970) 279-292.
Buchanan, James M. “Cultural Evolution and Institutional Reform.” Unpublished manuscript.
——. Cost and Choice. Chicago: Markham Publishing Co., 1969.
[An online edition is available at Econlib]
——. Freedom in Constitutional Contract. College Station, Texas: Texas A & M University Press, 1979.
Buchanan, James M. and Thirlby G.F. (eds.) L.S.E. Essays on Cost. London: Weidenfield Nicolsen, 1973.
[Classic essays on cost from the London School of Economics, including Hayek.]
Buckley, Jr., William F. “The Road to Serfdom: The Intellectuals and Socialism.” In Fritz Machlup, ed. Essays on Hayek. New York: New York University Press, 1976, pp. 95-106.
Business Week. “The Austrian School’s Advice: ‘Hands Off!’ ” Business Week (August 3, 1974).
Campbell, William F. “Theory and History: The Methodology of Ludwig von Mises.” University of Minnesota M.A. thesis. Minneapolis, 1962.
Chambers, Raymond J. Accounting, Evaluation and Economic Behavior. Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1966.
[Also see Thomas Cullom Taylor, Jr. (1970).]
Congdon, Tim. “Is the Provision of a Sound Currency a Necessary Function of the State?” National Westminster Bank Quarterly Review. (London, August 1981): 2-21.
[Deals with the assorted problems of Hayek’s (P-16b). See Norman P. Barry (May, 1981).]
Corbin, Peter D. (Principal Investigator, Research Coordinator, American Geographic Society.) “Geoinflationary Variations in the U.S. Economy.”
[Examination of the Austrian theory of inflation which emphasizes the spatiotemporal aspects of the inflationary process. Available at the Institute for Humane Studies.]
Crespigny, Anthony de. “F. A. Hayek, Freedom for Progress.” In Anthony de Crespigny and Kenneth Minogue (eds.) Contemporary Political Philosophers. New York: Dodd, Mead and Co., 1975; London: Methuen, 1976, pp. 49-66.
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[This conference was structured around Hayek’s newly published New Studies in Philosophy, Politics, Economics and the History of Ideas. In addition to Frankel, it featured Thomas Torrance, Hillel Steiner and Jeremy Shearmur.]
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——. Friedrich A. Hayek. Forthcoming book developed from Fridriksson’s Virginia Polytechnic Institute M.A. thesis in economics.
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[“Individualism: True and False, according to Hayek.”]
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——. Review of 4 books: F. A. Hayek’s The Counter-Revolution of Science; Individualism and Economic Order; Studies in Philosophy, Politics and Economics; and Ludwig M. Lachmann’s The Legacy of Max Weber. In Libertarian Review 4, no. 4 (April 1975): 4-5.
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[Available at the Institute for Humane Studies.]
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[Compare with B. Hoselitz.]
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[See Richard M. Ebeling citation.]
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[Festschrift with bibliography on F. A. Hayek’s 80th birthday presented by the Faculty of Economics of the University of Freiburg. Contributors include: Erich Hoppmann, Berhard Stoeckle, Karl Brandt, Christian Watrin, Hans Otto Lenel, and Klaus Peter Krause. Hayek’s “Dankadresse,” pp. 37-42, surveys highlights in Hayek’s intellectual career and writings from the vantage point of his 80th year. The Hoppmann-edited Festschrift honoring Hayek also lists the contributors to the earlier 1979 Ordo Festschrift for Hayek, edited by Fritz Meyer, et.al (p. 53), and contains valuable updatings on bibliography by and about Hayek (pp. 55-60).]
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[Important along with Carl Schorske’s volume on Fin-de-siècle Vienna for the cultural-historical context in which Hayek and his cousin Wittgenstein lived. See A-143.]
Johnson, Frank. “The Facts of Hayek.” Sunday Telegraph Magazine (London, no date, [1975?]) 30-34.
[Profile and biographical sketch along with photographs of F. A. Hayek.]
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Jones, Harry W. “The Rule of Law and the Welfare State.” Columbia Law Review 58, no. 2 (February 1958).
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Kasp, M.E. Die geldliche Wechsellagenlehre. Darstellung und Kritik de geldlichen Wechsellagentheorien von Hawtrey, Wicksell und Hayek. Jena: Fischer, 1939.
[“Monetary (Exchange) Models. Representation and Critique of the Monetary (Exchange) Theories of Hawtrey, Wicksell, and Hayek.”]
Kauder, Emil. “Intellectual and Political Roots of the Older Austrian School.” Zeitschrift für Nationalökonomie 17 (1957): 411-425.
——. A History of Marginal Utility Theory. Princeton: Princeton University Press, 1965.
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[Cf. Hayek
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Keynes and Hayek: some common elements in business cycle theory Keynes and Hayek: some common elements in business cycle theory
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ABSTRACT Keynes and Hayek are usually perceived in the history of economic thought as...
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INTRODUCTION
In recent years the debate between Keynes and Hayek has resurfaced in light of the economic crisis. The academic attention is indeed well deserved, because, as Robert Skidelsky (2010) said in his speech, “these traditions are the only ones who have anything really interesting to say about the causes of the recent recession”. However, it may be the case that the two schools of thought were antagonized more than it was necessary in certain respects . The reasons for this status quo are many and somewhat ambiguous. First, the dialogues between Keynes and Hayek themselves could hardly be considered constructive (Backhouse, 2002Backhouse, E. R., (2002). The Penguin History of Economics. England: Penguin Books.; Caldwell, 2011Caldwell, B., (2011). Keynes and Hayek: Some Commonalities and Differences. The Journal of Private Enterprise, 27(1), pp. 1-7.) . Secondly, it is of course trivial to point out that the two economists were completely at odds when it came to public policy suggestions. But this does not explain why their subsequent economic theories, which are more or less pieces of abstract thought, should also be considered completely antithetical. In the realm of business cycle explanations, there are surprising similarities in their line of argumentation.
It is also true that the Keynesian revolution shortly ended with the development of the IS-LM Hicks-Hansen approach and that, as Laidler (1999Laidler, D., (1999). Fabricating the Keynesian Revolution: Studies of the Inter-war Literature on Money, the Cycle, and Unemployment. Cambridge : Cambridge University Press ., p. 49) points out “It would be difficult, in the whole history of economic though, to find coexisting two bodies of doctrine which so grossly contradict each other”. But there are numerous critics who argue that the IS-LM is an economic textbook abstraction which may have little to do with Keynes himself (Leijonhufvud, 1979Leijonhufvud, A., (1979). The Wicksell Connection: Variations on a Theme. Working Paper #165 ed. Los Angeles: UCLA, Department of economics.; Backhouse, 2002Backhouse, E. R., (2002). The Penguin History of Economics. England: Penguin Books.; Skidelsky, 2009Skidelsky, R., (2009). Keynes: The Return of the Master. London: Penguin Books.). Usually we are cautiously advised not to push any parallel between Keynes and the Austrians to hard in the realm of cycle theory (Laidler, 1999Laidler, D., (1999). Fabricating the Keynesian Revolution: Studies of the Inter-war Literature on Money, the Cycle, and Unemployment. Cambridge : Cambridge University Press ., p. 329). Neither school of thought appears to whish any such association.
However, we argue that an unorthodox interpretation of Keynes such as that followed by Leijonhufvud (1976Leijonhufvud, A., (1976). On Keynesian Economics and the Economics of Keynes. 6th ed. London: Oxford University Press., 1979) offers us just such an occasion . The aim of the present paper is to highlight the common theoretical elements used by the two economists in the field of business cycle theory. In order to accomplish this task, we will particularly focus on the economic thought of Keynes prior to the development of the General Theory and consider the Treatise on Money to be his fundamental theoretical book.
Given the fact that both authors had significant shifts in opinion during their lifespan, we choose to split the discussion in two periods. The first reading will include the initial version of the theories, as they were presented in the early 1930s. The second reading will contain Keynes’s innovations brought by the General Theory and an attempted reconstruction of Hayek’s opinions from later periods of his life.
Although liquidity preference as the fundamental determinant of the interest rate would probably obscure any similarity between the two, there are enough common elements to suggest a unified theory in which both the Keynesian and the Hayekian scenarios are special cases of the same theory.
1. COMMON THEORETICAL ELEMENTS BETWEEN KEYNES AND HAYEK IN THE EARLY 1930S
The similarities of the theoretical development between Keynes and Hayek in the 1920s were remarkable. Both economists were attracted by monetary theory. Both were dissatisfied with the current state of the quantity theory of money, which they perceived to be static (Nentjes, 1988Nentjes, A., (1988). Hayek and Keynes: A Comparative Analysis of Their Monetary Views. Journal of Economic Studies, 15(3/4), pp. 136-152.). It correctly explained the differences between the two points of equilibrium, but it gave absolutely no information on how exactly the market would get there. They wanted to create a disequilibrium theory which would explain the sequence of modifications in relative prices, which were most of the times obscured by general trends in the price level. Their studies in monetary disequilibrium would turn into business cycle theories in the 1930s.
One could say that the 1930s was “the most exciting period in the development of economic theory” (Caldwell 1995Caldwell, B., (1995). Contra Keynes and Cambridge. Indianapolis: Liberty Fund., p. 49). In 1931 Hayek found a job at the LSE with the help of Lionel Robbins and moved to London. At that point Keynes already published his economics book A Treatise on Money and was already a celebrity in England and most of Western Europe. Hayek naturally clashed with the British economist on issues concerning the business cycle. They entered into a scientific dialog which was generally considered to be of a not so constructive character (Caldwell, 2011Caldwell, B., (2011). Keynes and Hayek: Some Commonalities and Differences. The Journal of Private Enterprise, 27(1), pp. 1-7.). There is some consensus in the history of economic thought that the two economists did not understand each other and that their quarrel did not bring any essential contributions to the general body of economic principles (Backhouse, 2002Backhouse, E. R., (2002). The Penguin History of Economics. England: Penguin Books.).
However, the similarities between the two in the early 1930s were fairly obvious. They both used a Wicksellian approach to explain fluctuations as a consequence of discrepancy between savings and investment. They both lacked automatic equilibrating mechanisms in their models to speedily adjust the two magnitudes. Finally, they both agreed that relative prices are relevant, and that they follow a specific transition in a typical crisis. In the following sections I will briefly analyze each of these claims.
1.1 The Wicksell Connection: A Disequilibrium between Savings and Investment
As mentioned before, the early 1930s found the two economists trying to figure out a solution to the same problem. They agreed that equilibrium in the real economy required equilibrium in the financial market as well. However, the imperfect workings of the interest rate in a monetary economy could frustrate this otherwise efficient self-regulating mechanism. As Nentjes (1988Nentjes, A., (1988). Hayek and Keynes: A Comparative Analysis of Their Monetary Views. Journal of Economic Studies, 15(3/4), pp. 136-152., p. 141) points out “the theories of Hayek and Keynes both contained an analysis of market failure - prices in financial markets disseminate the wrong information about true capital scarcity”.
The idea that saving and investment could diverge, leading to (real) fluctuations in industrial output was a common theme in the 1930s. Basically all the major economic schools of economic thought in the inter-war period, be them Austrian, Keynesian or Swedish (Stockholm School), drew on this common Wicksellian heritage (Leijonhufvud, 1979Leijonhufvud, A., (1979). The Wicksell Connection: Variations on a Theme. Working Paper #165 ed. Los Angeles: UCLA, Department of economics.).
The Swedish economist Knut Wicksell (1989Wicksell, K., (1989). Interest and Prices. New York: Sentry Press.) was the originator of the idea that if the market rate of interest diverges from its “natural” level, saving and investment could temporarily be out of balance leading to a cumulative process of adjustment. In his 1931 Prices and Production Hayek presents the case when investment expands beyond (real) savings due to the influence of the banking system. In A Treatise on Money (1930) Keynes focuses on a case where investment decreases below savings because bearish speculators resist the interest rate adjustment. They are both variations of the same Wicksellian theme (Leijonhufvud, 1979Leijonhufvud, A., (1979). The Wicksell Connection: Variations on a Theme. Working Paper #165 ed. Los Angeles: UCLA, Department of economics.).
It is even more interesting that they were also (partially) aware of this, which made them leave short comments on the issue. Keynes (1930Keynes, J. M., (1930). A Treatise on Money. London: Macmillan and Co.., p. 178), for example, added the following passage in A Treatise on Money:
Hayek also acknowledged that there were similarities between Keynes’s theory and his own. In spite of numerous disagreements raised in his critique on the Treatise, Hayek (2008Hayek, F. A. v., (2008). Prices and Production and Other Works. Auburn:Alabama: The Ludwig von Mises Institute., p. 445) explicitly stated that: “It is even possible that in the end it will turn out that there exists less difference between Mr. Keynes’s views and my own than I am at present inclined to assume”. However, none of the authors made further steps in order to pinpoint the exact similarities. While Keynes made a short comment on the fact that he cannot read (well) in German , Hayek left the reader in suspense regarding where exactly would their theories converge.
It is actually surprising exactly how close the two came to the same solution. The intermediary cause, so to put it, was identical in both models. The only problem was that the two economists had different views on what actually generated the disequilibrium.
Keynes (1930Keynes, J. M., (1930). A Treatise on Money. London: Macmillan and Co.., p. 271) argued that there could be a multitude of factors, both monetary and nonmonetary:
Something happens-of a non-monetary character-to increase the attractions of investment. It may be a new invention, or the development of a new country, or a war, or a return of ‘business confidence’ as the result of many small influences tending the same way. Or the thing may start-which is more likely if it is a monetary cause which is playing the chief part-with a stock exchange boom, beginning with speculation in natural resources or de facto monopolies, but eventually affecting by sympathy the price of new capital goods.
While he mentions the most diverse causes, among which one can count speculation, new inventions, newly discovered resources or techniques or even wars, Keynes considered an artificial increase in credit a possible but extremely unlikely origin for an economic boom. This appears somewhat strange to the reader, because the British economist admits that if banks were to equilibrate savings and investment, no cycle would ever occur. However, he considered that the banks are unwilling or otherwise incapable of fulfilling such a purpose (Keynes, 1930Keynes, J. M., (1930). A Treatise on Money. London: Macmillan and Co.., pp. 261-262):
For Hayek, the fact that monetary institutions can generate a sustained credit expansion is the most essential characteristic of the modern banking system. He seems to look at Keynes with bewilderment because of his insistence on placing the cause of credit cycles elsewhere (Hayek, 2008Hayek, F. A. v., (2008). Prices and Production and Other Works. Auburn:Alabama: The Ludwig von Mises Institute., p. 457):
The most characteristic trait of Mr. Keynes’s explanation of a deviation of the actual short-term rate of interest from the “natural” or equilibrium rate is his insistence on the fact that this may happen independently of whether the effective quantity of money does, or does not, change.
Moreover, he correctly accuses the British economist for implicitly working with this assumption, although explicitly rejecting it (Hayek, 2008Hayek, F. A. v., (2008). Prices and Production and Other Works. Auburn:Alabama: The Ludwig von Mises Institute., p. 457): “Indeed, at all the critical points, the assumption seems to creep in that this divergence is made possible by the necessary change in the supply of money”.
But Keynes indeed maintained the claim that society could be temporarily stuck in a position of partial equilibrium, where the market would “clear” at “false” prices, given the fact that bearish speculators would not permit the interest rate to fully adjust (Leijonhufvud, 1979Leijonhufvud, A., (1979). The Wicksell Connection: Variations on a Theme. Working Paper #165 ed. Los Angeles: UCLA, Department of economics., pp. 34-38).
One would be tempted, knowing his insistence on the possibility of cycles to be created by technological innovations (and other real factors), to link Keynesian with the real business cycle theory of the 1980s. But this would not be the case. While real business cycle theory considers that the market is always in a state of Walrasian general equilibrium (Mankiw, 1989Mankiw, G. N., (1989). Real Business Cycles: A New Keynesian Perspective. Journal of Economic Perspectives, pp. 70-90.), meaning that prices simultaneously equate supply and demand in all markets, both for Hayek and Keynes the market is always in a state of continuous disequilibrium along the evolution of an economic fluctuation. For a short period of time Keynes and Hayek were in complete agreement regarding the fact that imbalances between savings and investment generate economic cycles .
1.2 The Impossibility of Cycle Anticipation: A Lack of Endogenous Automatic Equilibrating Mechanisms
The second important resemblance between the two schools of thought is closely tied up with the Wicksell Connection, but not quite identical with it. It lies in the fact that both economists consider that cycles are impossible to anticipate given normal entrepreneurial foresight. There must be some sort of rigidities or maladjustments in the workings of the price mechanism, otherwise the markets would just speedily equilibrate and no cycles would ever occur . Why would the interest rate fail to correlate saving with investment, both on the real and the financial market? The answer is that both the Keynesian and the Austrian models lack any automatic (direct) mechanism to restore equilibrium once it had been disturbed (Laidler, 1999Laidler, D., (1999). Fabricating the Keynesian Revolution: Studies of the Inter-war Literature on Money, the Cycle, and Unemployment. Cambridge : Cambridge University Press ., p. 328).
This strange similarity between the two schools of thought was perceived, but not followed trough. D. Laidler (1999Laidler, D., (1999). Fabricating the Keynesian Revolution: Studies of the Inter-war Literature on Money, the Cycle, and Unemployment. Cambridge : Cambridge University Press ., pp. 328-329) for example arrives at the same conclusion, but quickly adds that: “[…] we must not push any parallel [of Keynes] with Mises’s reading of Wicksell too hard”. His reason would be that Keynes’s marginal efficiency of capital (MEC) was driven by “animal spirits”, while Austrian agents act by maximization utility in a rational way. Although this is technically true, it implies in my opinion an “unfair” reading of Keynes. If we would interpret his investors not as irrational, but as rational in the face of systemic (irreducible) uncertainty, does this cautious approach towards linking the two economists not lose most of its bite? I believe it does.
Keynes (1930Keynes, J. M., (1930). A Treatise on Money. London: Macmillan and Co.., p. 250) argues in the Treatise that:
It is not surprising that saving and investment should often fail to keep step. In the first place-as we have mentioned already- the decisions which determine saving and investment respectively are taken by two different sets of people influenced by different sets of motives, each not paying very much attention to the other.
The fact that we have two distinct classes of people, respectively all income earners, on the one hand, and all entrepreneurs, on the other, which take two completely different sets of decisions at different points in time, leads Keynes (1930Keynes, J. M., (1930). A Treatise on Money. London: Macmillan and Co.., p. 252) to the conclusion that “the development of disequilibria between the rates of saving and of investment under the existing economic system is nothing to wonder at”. From a Keynesian viewpoint, this is a particular characteristic of the capitalist system, which cannot be overcome by rational forecasting. The “dark forces of time and ignorance” are always at work, clouding entrepreneurial judgement. The total demand price of capital goods is equal to the total volume of shares (or securities as Keynes (1930Keynes, J. M., (1930). A Treatise on Money. London: Macmillan and Co..) mentions in the Treatise). The price of shares, on the other hand is driven by investors’ expectations of future events. Given the fact that the future is uncertain, businessmen do not have any reliable information on which to base their decisions. They can only respond to systemic uncertainty by selling shares and increasing their cash balances. This is why aggregate investment is for Keynes an extremely volatile measure, subject to unforeseeable violent changes. The workings of financial markets resemble the workings of a grand casino (Nentjes, 1988Nentjes, A., (1988). Hayek and Keynes: A Comparative Analysis of Their Monetary Views. Journal of Economic Studies, 15(3/4), pp. 136-152.).
In the case of Hayek, the reason for which entrepreneurs lack the power to foresee general economic fluctuations is event more interesting. In his initial theoretical framework, the market rate of interest is the only systemic signal which gives entrepreneurs the necessary information needed to correctly alter the structure of production (Hayek, 2008Hayek, F. A. v., (2008). Prices and Production and Other Works. Auburn:Alabama: The Ludwig von Mises Institute., p. 264) . Thus, businessmen use the market rate of interest to inter-temporarily adjust the workings of the economy.
But in a fractional reserve banking system based on a central bank, as we have today, banks can lastingly deviate the market rate of interest from the natural/pure rate of interest and create an intertemporal disequilibrium. Businessmen are “misled” by the banks when they expand credit, giving birth to the aforementioned imbalance between saving and investment. In Hayek’s view, this is not the fault of the capitalist system. The market is the same efficient mechanism which liberals consider it to be, but in which false data are fed because of monetary interventions. If entrepreneurs would be able to anticipate monetary variations, no cycle would occur. But for Hayek, we have no reason to assume that they would.
Given these altogether different reasons, both economists would advise us not to expect businessmen to foresee economic cycles and to take measures to smooth them out.
1.3 The Sequence of Relative Prices throughout the Course of Economic Fluctuations
We have already pointed out that since the early 1920s both Keynes and Hayek were increasingly dissatisfied with the quantity theory of money and that they tried, each following his own path, to develop alternative disequilibrium theories to explain business fluctuations. In order to fulfil this task, they had to pay attention not only to the aggregated price level, but also to the movement in relative prices, which were obscured by the standard version of the quantity theory.
It is ironic that the further development of Keynesianism after the death of Keynes appears to have forgotten about the importance of relative price movements. Leijonhufvud (1976Leijonhufvud, A., (1976). On Keynesian Economics and the Economics of Keynes. 6th ed. London: Oxford University Press.), for example, convincingly argues that the standard approach of the IS-LM income expenditure model only uses total output as a variable, while Keynes, both in the Treatise and the General Theory employed a model that distinguished consumer goods from capital goods.
What is indeed noteworthy was how close the two economists actually came with their study regarding the “normal” sequence of relative prices throughout an economic crisis . The dynamic “passage” that the economy must follow is to a significant extent the same. George Selgin (1999Selgin, G., (1999). Hayek versus Keynes on How the Price Level Ought to Behave. History of Political Economy , 31(4), pp. 699-721.) even points out in an article that throughout their lives, the two economists where extremely close to reach an agreement concerning optimal price movements.
In the subchapter entitled The normal course of a credit cycle, Keynes (1930Keynes, J. M., (1930). A Treatise on Money. London: Macmillan and Co.., p. 304) writes:
The order of events is, therefore, as follows. First, a capital inflation leading to an increase of investment, leading to commodity inflation; second, still more capital inflation and commodity inflation for approximately one production period of consumption goods; third, a reaction in the degree of the commodity and capital inflations at the end of this period; fourth, a collapse of the capital inflation; and finally, a decrease of investment below normal, leading to a commodity deflation.
Thus, he argues that the boom stage normally starts with the increase in the price of capital goods. This would in turn lead to a surge in investment, especially in higher order industries, which would also shortly determine an increase in the price of consumer goods. The general rise in prices in the last period leads entrepreneurs to start the second period of production with high hopes. The general tendency of prices to rise is sustained in this second period. Keynes’s third phase leaves some room for interpretation. It brings about a reaction in both categories of prices, which would mean a slowdown in their absolute increase, but also a modification in their relative terms . The fourth stage represents the beginning of the crisis in which the price of capital goods plummets due to a decrease in the marginal efficiency of capital which can be caused either by real factors or the “faltering of financial sentiment” (i.e. pessimistic expectations). This will lead the economy in the final stage of the cycle, when investment will go below its equilibrium level. Savings would in this case be larger than investment.
Let us now turn to the way in which Hayek (2008Hayek, F. A. v., (2008). Prices and Production and Other Works. Auburn:Alabama: The Ludwig von Mises Institute., p. 266) attempted to provide a “rough sketch” and to show what happens in the interval before a new equilibrium is attained. Putting away the subtle complications that the Austrian economist introduces, he points out that the cycle starts with an increase in the price of capital goods . Because of the decrease in the rate of interest due to credit expansion, there is an increase in the demand for higher order goods. This automatically leads to a rise in the price of capital goods relative to that of consumer goods (ibidem). Entrepreneurs use the newly acquired funds from the banks to bid up the prices of original factors of production and nonspecific capital goods, in order to move them upstream, in the higher order stages of the production process. But when consumers find out that their incomes have increased, they will spend their money in the old consumer to savings ratio, which will generate a tendency to increase the price of consumer goods relative to those of capital goods. As Hayek points out (2008, pp. 267-268):
When the reduced output from the stages of production, from which producers’ goods have been withdrawn for use in higher stages, has matured into consumers’ goods, a scarcity of consumers’ goods will make itself felt, and the prices of those goods will rise. [...] There can be little doubt that in the face of rising prices of consumers’ goods these increases will be spent on such goods and so contribute to drive up their prices even faster. [...] But-and this is the fundamental point-it will mean a new and reversed change of the proportion between the demand for consumers’ goods and the demand for producers’ goods in favor of the former. The prices of consumers’ goods will therefore rise relatively to the prices of producers’ goods.
The sequence in the movement of prices is basically the same as in the case of Keynes . Hayek did not believe that it would be mandatory to have an absolute decrease in the price of consumer goods, but of course admitted the possibility.
If the models employed by the two economists are so similar regarding the transition between equilibrium points, where do they fundamentally disagree? The answer lies in the final step in Keynes’s transitional passage. The British economist considered that the descending stage of the cycle would end with a situation of underinvestment, because the interest rate would not fall to the appropriate level (Keynes, 1930Keynes, J. M., (1930). A Treatise on Money. London: Macmillan and Co.., p. 304) and would consequently remain for a considerable period above its equilibrium level. As opposed to Hayek, Keynes introduced the stock-exchange as an active actor in his model. Once the marginal efficiency of capital would decrease, there would be an excess supply of goods coupled with an excess demand for securities. While the prices of securities would increase, the market would turn “bearish” and speculators would sell stocks in order to increase their cash deposits. This would lead to a hording of money out of “active circulation” and would not permit the interest rate to decrease to its equilibrium level. In a nutshell, in the Keynesian model speculators do not permit full interest rate adjustments and the market “clears” at false prices (Leijonhufvud, 1979Leijonhufvud, A., (1979). The Wicksell Connection: Variations on a Theme. Working Paper #165 ed. Los Angeles: UCLA, Department of economics.).
Are the two models to a certain degree compatible? At the level that they were developed in the early 1930s (i.e., before Keynes added liquidity preference into the mix) I would argue that they are. Both lacked direct automatic adjustment mechanisms, but both are compatible with indirect mechanisms which would sooner or later stimulate the culprits to change their behavior (Leijonhufvud, 1979Leijonhufvud, A., (1979). The Wicksell Connection: Variations on a Theme. Working Paper #165 ed. Los Angeles: UCLA, Department of economics.). For Hayek the banks cannot continue to increase lending indefinitely without cumulating serious inflationary pressures. For Keynes speculators could not continue to sell securities at a relative loss in exchange for cash without incurring costs.
Modern Austrian economists are usually extremely reluctant regarding any possible association with Keynes’s work. They generally claim that Hayek’s capital theory is fundamentally different because of the importance that he associates to the composition of a country’s capital stock, or how Austrians refer to it, the structure of production. This is to a certain extent true . As I indicated earlier, it is commonly accepted that Hayek’s approach to relative prices is more complex in this regard (see footnote 12). Keynes used a higher level of aggregation and paid little respect in general to capital specificity. However, if we would accuse Keynes of following F. Knight (1934Knight, F. H., (1934). Capital Time, and the Interest Rate. Economica, 1 (3), pp. 257-286.) in employing a conception of capital as a homogenous mass, I fear we would by in falling into the other extreme. As previously argued, relative prices do play a relevant role in his Treatise and (albeit more obscured) in the General Theory. There are some economic phenomena which are by their very nature macroeconomic, business cycles being the most relevant member of this category, and a certain level of aggregation is, I believe, legitimate for operational purposes. In this sense, the disequilibrium between savings and investment, the lack of endogenous equilibrating tendencies and the sequence of relative prices are uniting theoretical elements, especially if we focus on Keynes’s thought before the elaboration of his General Theory.
2. LATTER AMENDMENTS MADE BY KEYNES AND HAYEK TO THEIR CYCLE THEORIES
It is a well-known fact that ideas were in the 1930s in a constant state of flux among renowned economists. Keynes’s views probably best reflect this principle. By the time Hayek finished his review of the second part of the Treatise, i.e., The Applied Theory on Money, Keynes replied a disarming: “Oh never mind, I no longer believe all that” (Hayek, 1994Hayek, F., (1994). In: S. K. a. L. Wenar, ed. Hayek on Hayek: An Autobiographical Dialogue. Chicago: University of Chicago Press., p. 90). Hayek himself had second thoughts about his theory. Although he was much more consistent than Keynes regarding the explanations of business cycles , there were some notable changes in his position after the 1930s. The following section will comparatively analyze these changes.
2.1 Subsequent Evolutions in Keynes’s Business Cycle Theory
As noted earlier, Keynes’s theory was between 1930 and 1936 a continuous work in progress. This is somewhat understandable, because his Treatise, which appeared in 1930, was widely read and equally widely criticized. Not only F. A. Hayek, D. Robinson and A.C. Pigou raised different concerns regarding it, but also another group of economists known as the Cambridge Circus, namely Richard Kahn, Joan Robinson, Austin Robinson, and Piero Sraffa (Moggridge, 1973Moggridge, D. E., (1973). From the Treatise to The General Theory: An exercise in Chronology. History of Political Economy, 5(1), pp. 72-88., p. 75; Backhouse, 2002Backhouse, E. R., (2002). The Penguin History of Economics. England: Penguin Books.). This latter group of intellectuals had close connections with Keynes and considered that the current state of his work could be vastly improved. The British economist became increasingly dissatisfied with his theoretical apparatus used in the Treatise and decided to modify it accordingly, beginning a slow and cumbersome process which ended up with The General Theory.
The General Theory, although one of the most cited economic books of all times, could hardly be said to have been well received by the intellectual community of its age . Did he renounce to his previous explanation of the business cycle? Unfortunately, the answer is yes and no, as we shall further attempt to show.
There are two fundamental differences in Keynes’s thinking between the Treatise and the General Theory: liquidity preference and the capacity of the system to respond to decreases in MEC through output and employment (Leijonhufvud, 1976Leijonhufvud, A., (1976). On Keynesian Economics and the Economics of Keynes. 6th ed. London: Oxford University Press.; Blaug, 1985Blaug, M., (1985). Economic Theory in Retrospect. 4th ed. Cambridge : Cambridge University Press.; Laidler, 1999Laidler, D., (1999). Fabricating the Keynesian Revolution: Studies of the Inter-war Literature on Money, the Cycle, and Unemployment. Cambridge : Cambridge University Press .) . Let us first discuss the latter (as if it was the only relevant change).
Keynes began to refer to the theory of output as a whole as the theory of employment and considered that the only relevant problems for society were those when unused resources were present. This was probably his most fundamental analytical advance (Nentjes, 1988Nentjes, A., (1988). Hayek and Keynes: A Comparative Analysis of Their Monetary Views. Journal of Economic Studies, 15(3/4), pp. 136-152.). If in the Treatise he mainly used a supposition of fixed output, leaving the price levels of investment, finished goods and factors of production to vary, he totally abandoned this way of thinking in the General Theory (1936). Output as a whole became the independent variable which must be explained during economic fluctuations.
But if this would be the only relevant change, it would still be a Wicksellian variation of the saving-investment model, one which Leijonhufvud (1979Leijonhufvud, A., (1979). The Wicksell Connection: Variations on a Theme. Working Paper #165 ed. Los Angeles: UCLA, Department of economics., pp. 39-43) called the “Z-theory”. In short, if the system responds to the decrease in MEC through a reduction in output and employment this would lead to a decrease in (real) income which would equate savings and investment at a market rate of interest well above the full employment equilibrium rate. Moreover, this is now a stable position since there is no more pressure on the systems’ agents to modify their behavior, like in the Treatise version of the theory. The Keynesian “bear” speculators have no incentive to modify their behavior.
However, the main problem in Keynes’s cycle explanation in the General Theory is his liquidity preference. By using a pure stock analysis, Keynes based his new interest theory on the fact that ex post savings and investment are identical. In that case, the banking system is assumed out of the picture and interest is left without a determinant. As Leijonhufvud (1976Leijonhufvud, A., (1976). On Keynesian Economics and the Economics of Keynes. 6th ed. London: Oxford University Press., p. 45) points out: “The loanable funds interest mechanism is gutted […] Loanable Funds are out; Liquidity preference is in”. If savings and investment do not determine the interest rate, what does? The answer for Keynes in the General Theory is the supply and demand for money (liquidity preference). But in this case, there is nothing linking the interest rate to real productivity. The rate of interest is whatever speculators “agree” it should be.
This is why Keynes (1936Keynes, J. M., (1936). The General Theory of Employment, Interest and Money. London: Macmilan.) attempted to abandon the Wicksellian concept of the natural rate of interest. Consequently, there would be no equilibrium rate of interest, but a set of money interest rates determined by the desire of people to hold liquid assets. But even though he explicitly claimed this in the General Theory, it is debatable whether he successfully exorcised the influence of the natural rate of interest from his thinking. Leijonhufvud (1976Leijonhufvud, A., (1976). On Keynesian Economics and the Economics of Keynes. 6th ed. London: Oxford University Press., pp. 345-349) for example argues that he only banished the natural rate “terminologically”. Keynes continued to consider investment to be interest-elastic in the long run. Moreover, he never denied the possibility that a “neutral rate of interest” which would equate saving and investment at full employment could exist, although he chose not to elaborate on the subject (Keynes, 1936Keynes, J. M., (1936). The General Theory of Employment, Interest and Money. London: Macmilan., p. 121).
In spite of all these new theoretical elements, The General Theory employs “the (essentially) same paradigm of the financial market” (Nentjes, 1988Nentjes, A., (1988). Hayek and Keynes: A Comparative Analysis of Their Monetary Views. Journal of Economic Studies, 15(3/4), pp. 136-152., p. 144) as the one used in the Treatise. Axel Leijonhufvud (1976Leijonhufvud, A., (1976). On Keynesian Economics and the Economics of Keynes. 6th ed. London: Oxford University Press.) actually claims, with convincing arguments, that between the General Theory and the Treatise, the latter is Keynes’s essential book. The General Theory was meant to be more or less a condensed version of the Treatise with few modifications .
But if we take liquidity preference seriously, Keynes’s cycle theory is retrogressive as compared to the Treatise version. It is not a Wicksellian variation any more, since the interest rate is taken out of the picture. All that remains can be easily extracted from his chapter 22 entitled “notes on the trade cycle”, were Keynes (1936Keynes, J. M., (1936). The General Theory of Employment, Interest and Money. London: Macmilan., p. 155) shortly points out that the underlining causes of cyclical fluctuations are vagaries in the marginal efficiency of capital. He does not use the concept “productivity of capital” in a physical sense, as for example earlier generation Austrian economists like Bӧhm-Bawerk would have , but as an eclectic concept which is highly dependent on businessmen’s expectations regarding the prospective yield of capital goods (especially those of a durable character) . Social conventions and expectations become endogenous causes of business fluctuations.
The General Theory becomes a sophisticated way of saying that anticipations are actually the main determinant of business cycles, because the psychology of the business world is as such . Keynes made throughout his lifetime numerous references to the expectation problem although, as mentioned by Meltzer (1989Meltzer, A. H., (1989). Keynes’s Monetary Theory: A Different Interpretation. London: Cambridge University Press., p. 56), “Anticipations, or expectations, are a deus ex machina that enter or leave at convenient places”. In can be argued that this approach did leave Keynes (1936Keynes, J. M., (1936). The General Theory of Employment, Interest and Money. London: Macmilan., p. 156) with the somewhat facile conclusion that the state would do a better job at coping with fluctuations that private investors. And this was indeed his goal all along. He began to be more and more skeptical towards the end of his live about the ability of private investors to effectively manage investment. His idea was to “save” liberalism by giving government control of output as a whole. If the state could influence the direction of aggregated production (and particularly aggregate investment), the other decisions could be safely left in private hands (Skidelsky, 2006Skidelsky, R., (2006). Hayek versus Keynes: The Road to Reconciliation. In: E. Feser, ed. The Cambridge Companion to Hayek. s.l.:Cambridge University Press, pp. 82-110.) . Capitalism’s excesses would be tempered by state intervention.
If anything, after the publication of the General Theory in 1936, the efforts of Keynes to differentiate himself from the loanable funds doctrine actually increased. In his articles from 1937 he explicitly argued that saving plays no role in the determination of the interest rate and, consequently, in the explanation of business cycles (Keynes, 1937bKeynes, J. M., (1937b). The “Ex-Ante” Theory of the Rate of Interest, The Economic Journal , 47 (188), pp. 663-669.). Moreover, he went to great pains to contradict other economists who attempted to claim that his theory was in no sense revolutionary and was just another variant of the application of the savings/investment equation . Whether he managed to succeed in his theoretical endeavor remains, as we have previously mentioned, debatable.
2.2 Subsequent Evolutions in Hayek’s Business Cycle Theory
By the time The Pure Theory of Capital (1941) was completed, Hayek already incorporated some Keynesian elements in his analysis and was still contemplating about others. He started to stress the importance of money as a store of value and assimilated a part of Keynes’s portfolio selection theory. When talking about investment he used the concept of “assets” which is an aggregate of real capital, securities and money balances (Hayek, 2009Hayek, F. A. v., (2009 [1941]). The Pure Theory of Capital. Auburn: Alabama: The Ludwig von Mises Institute., p. 358). The inclusion of money in the individual stock of capital was atypical not only for previous Austrians, but also for Hayek’s earlier works (Nentjes, 1988Nentjes, A., (1988). Hayek and Keynes: A Comparative Analysis of Their Monetary Views. Journal of Economic Studies, 15(3/4), pp. 136-152., p. 145). He also started to take “liquidity preference” seriously. The last part of The Pure Theory is suggestive in this respect. Hayek explicitly splits his analysis on the influences which affect the rate of interest into short and long run factors. He claimed that in the former case liquidity preference is not the only short run factor, but that it can nevertheless have a significant impact (2009, pp. 353-368) . The book ends with Hayek’s relatively well-known discourse on the fact that real underlining factors are more important than monetary ones, but the reader is left with the impression that he conceded much more than suspected to Keynes’s short run analysis.
Another interesting modification in Hayek’s thought occurred in the 1970s, when he began to agree with Keynes on the fact that a “normal” Hayekian crisis of over/malinvestment can be further aggravated by a process of secondary deflation . These views were expressed after Hayek received the Nobel Memorial Prize in 1974. The distinction came to him as a surprise, Hayek being already in his 70s and having largely abandoned the field of economics to explore philosophy and political theory. The new attention focused on him, after Keynes’s death, left the Austrian economist as the leading figure in economics of his time. He began to review his business cycle theory in order to further apply it.
Hayek continued to stick to the same explanations employed in Prices and Production regarding fluctuations, but he reconsidered the fact that an uninterrupted process of deflation was always the cure (Haberler, 1975Haberler, G., (1975). A Discussion With Friedrich von Hayek. Washington, D.C.(United States of America): American Enterprise Institute for Public Policy Research.). A normal crisis caused by the central banks’ ability to create artificial credit expansion, could now be further aggravated by a “Keynesian crisis of oversaving”. Even if the first phase of deflation was normal and beneficial after a credit expansion, a second phase of deflation created by unusual grim expectations on behalf of the entrepreneurial class could generate a situation in which the savings of the population are not invested in their entirety (Magliulo, 2016Magliulo, A., (2016). Hayek and the Great Depression of 1929: Did he really change his mind?. The European Journal of the History of Economic Thought, pp. 31-58.). Shortly put, businessmen would be frightened to invest, in spite of relatively ample capital available, deflating prices under what would be the equilibrium level. It is easy for the accustomed reader to observe that this is nothing other than the situation of abundant unused resources where economic scarcity ceases to play the dominant role, i.e., the Keynesian income-constrained process. It is true that the Austrian economist discussed this case also in 1941 in The Pure Theory, but there he considered it more of a theoretical curiosity .
There were also changes in matters of policy. Hayek began to accept that there are cases, such as the former, where a reduction in aggregate demand could generate unemployment in the short run. In these situations, the Austrian economist would encourage a government stimulus package in order to stop the abnormal deflation (Haberler, 1975Haberler, G., (1975). A Discussion With Friedrich von Hayek. Washington, D.C.(United States of America): American Enterprise Institute for Public Policy Research., p. 12):
The moment there is any sign that the total income stream may actually shrink, I should certainly not only try everything in my power to prevent it from dwindling, but I should announce beforehand that I would do so in the event the problem arose.
For him it was not mandatory for a normal crisis to always end with this sort of deflationary spiral. He did however change his mind regarding deflation and claimed that it is not politically feasible to expect it to break the rigidities of wages (Haberler, 1975Haberler, G., (1975). A Discussion With Friedrich von Hayek. Washington, D.C.(United States of America): American Enterprise Institute for Public Policy Research.). It appears that Hayek started to be more receptive to the idea that a normal (Hayekian) crisis could turn into a Keynesian depression because of a shift in the anticipations of businessmen (Magliulo, 2016Magliulo, A., (2016). Hayek and the Great Depression of 1929: Did he really change his mind?. The European Journal of the History of Economic Thought, pp. 31-58.).
CONCLUSIONS
Could one treat Austrian and Keynesian cycle theories as two sides of the same coin? To a certain extent I argue that the answer is yes. If we would discard liquidity preference as a fundamental determinant of the interest rate and focus on Keynes’s economic thought before the publication of the General Theory , then both theories are Wicksellian variations focusing on complementary cases. Hayek focuses exclusively on a case in which the banking system lowers the market rate of interest below its equilibrium level. This would generate cumulative inflationary pressures and a relative shift of resources from consumer to capital goods industries. But the new structure of goods does not correspond to consumer demand. Readjustments will be necessary.
Keynes focuses on the case where the marginal efficiency of capital decreases (because of real or “psychological” causes). The market rate of interest does not drop quick enough, because speculators on the stock exchange will attempt to stop it above equilibrium level. If the entrepreneurs attempt to adjust production by lowering output and reducing the workforce, they will generate an income constrained process and be caught up in a “partial-equilibrium” with involuntary unemployment. Both economists disagree regarding the empirical relevance of each other’s case. But both have, throughout their life, agreed to their theoretical possibility .
In spite of the fact that Keynes and Hayek are usually presented as intellectual enemies, they have much in common on a theoretical level. Bits and pieces of their pure theories can be used to construct a larger cycle theory which focuses on imbalances between savings and investment and maladjustments of the interest rate. Such an attempt would surely prove beneficial.
The authors themselves did not make this job easy. Their dialogues were not carried out in a constructive manner. In the early 1930s, the similarities were quite clear in spite of this. Both explicitly accepted Wicksell’s works as their starting point and both constructed models in which the interest rate was incapable of equating savings and investments. They even agreed to a certain point on the sequence of the dynamic price adjustments.
By the time the General Theory was completed, Keynes’s liquidity preference almost completely obscured any similarities with Hayek’s work. If anything, his later articles from 1937 exacerbated this tendency. The development of the IS-LM Hicks-Hansen interpretation furthered destroyed any possible association between Keynesians and Austrians. It is however questionable whether Keynes himself would have chosen the same path.
Later in his life Hayek did change his mind about certain aspects. Portfolio selection and liquidity preference theory (as short run price rigidity) are just some examples in this direction. He also started to consider in the 1970s that Keynesian scenarios were more plausible than originally thought and that normal cycles (Hayekian) could degenerate into deeper depressions.
If this particular reading of the two models is correct, what stops us from interpreting both cycle theories as special (and complementary) cases in a general Wicksellian attempt at explaining fluctuations as types of disequilibrium between savings and investments? Such an attempt could only have, in the opinion of the present author, positive spillovers in the realm of economic theory.
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Related Links: Journal: Literature of Liberty: A Review of Contemporary Liberal Thought (1978-1982), 20 vols. ed. Leonard P. Liggio. Source: Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio. Chapter: BIBLIOGRAPHY OF FRIEDRICH A. HAYEK Copyright: This work is copyrighted by the Institute for Humane Studies, George Mason University, Fairfax, Virginia, and is put online with their permission. Fair Use: This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
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https://oll.libertyfund.org/pages/hayek-a-bibliography-of-his-writings
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Source: Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio. Chapter: BIBLIOGRAPHY OF FRIEDRICH A. HAYEK
Copyright: This work is copyrighted by the Institute for Humane Studies, George Mason University, Fairfax, Virginia, and is put online with their permission.
Fair Use: This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
BIBLIOGRAPHY OF FRIEDRICH A. HAYEK
The following bibliography of the writings by and about Friedrich A. Hayek was compiled near the end of 1982 by John Cody assisted by Nancy Ostrem. We gratefully acknowledge the helpful suggestions of Kurt R. Leube (Editor-in-chief of the International Carl Menger Library, Vienna), Prof. Albert H. Zlabinger of Jacksonville University (and co-editor with Kurt Leube of Philosophia Verlag), Prof. Paul Michelson of Huntington College, Paul Varnell of Chicago, and members of the Institute for Humane Studies staff, including Leonard P. Liggio, Walter Grinder, and John Blundell.
While aiming to be the most comprehensive, accurate, and up-to-date listing of Hayekian scholarship yet assembled, this bibliography–owing to the prolific and dispersed nature of the materials involved—must unavoidably contain errors, incomplete citations, and omissions. Among the omissions are a great many of Hayek's voluminous letters-to-editors, short notes or comments, interviews (including tape recordings, video-cassettes, and films), and book reviews. Such journals as the Schriften des Vereins für Sozialpolitik, Jährbucher für Nationalökonomie und Statistik, Zeitschrift für Volkswirtschaft und Sozialpolitik (after 1927 superseded by Zeitschrift für Nationalökonomie), and Economica contain many items not listed in this edition of the bibliography. Many additional bibliographical items by or about Hayek came to our attention only after our typesetting deadline precluded further citations. To remedy our omissions and to emend our in-accuracies for a possible subsequent publication of an enlarged Hayek bibliography we welcome our readers’ comments and assistance.
Earlier bibliographical orientations to Hayek's writings that proved helpful in creating the present Bibliography are:
Erich Streissler, Gottfried Haberler, Friedrich A. Lutz, and Fritz Machlup, eds. “Bibliography of the Writings of Friedrich A. von Hayek,” in Roads to Freedom: Essays in Honour of Friedrich A. von Hayek. London: Routledge & Kegan Paul, 1969, pp. 309–315.
Walter Eucken Institut. “Bibliographie der Schriften von F.A. von Hayek.” [“Bibliography of the Writings of F.A. von Hayek.”] in Freiburger Studien. Gesammelte Aufsätze von F.A. Hayek. Tübingen: J.C.B. Mohr/Paul Siebeck (Wirtschaftswissenschaftliche und wirtschaftsrechtliche Untersuchungen 5), 1969, pp. 279–284.
Fritz Machlup, “Friedrich von Hayek's Contribution to Economics.” The Swedish Journal of Economics 76 (December 1974): 498–531.
———. “Hayek's Contribution to Economics,” in Essays on Hayek. Edited by Fritz Machlup. Foreward by Milton Friedman. New York: New York University Press, 1976, pp. 13–39. [Machlup's 1974 and his updated 1976 bibliographical essays are indispensable guides to Hayek's writings through the mid-1970s. Adhering to the fourfold classification system of Hayek's writings laid out in the Streissler 1969 Roads to Freedom, Hayek “Bibliography,” Machlup devised an alphabetical and numerical identification code for easy reference to Hayek's books (B-), pamphlets (P-), edited or introduced books (E-), and articles in learned journals or collections of essays (A-).]
———. Würdigung der Werke von Friedrich August von Hayek. Translated by Kurt R. Leube. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 62), 1977, pp. 63–75. [This “Assessment of the Works of Friedrich August von Hayek is the German translation of the preceding Machlup Bibliography of Hayek.]
Leube, Kurt R. “Anhang: Bibliographie der Schriften von F.A. von Hayek,” [“Appendix: Bibliography of the Writings of F.A. von Hayek”] in: F.A. von Hayek. Geldtheorie und Konjunkturtheorie. Reprint of the first edition (Vienna, 1929; see B-1). Salzburg: Philosophia Verlag, 1976. pp. 148–160. This is identical to Leube's Hayek Bibliography in: Friedrich A. von Hayek. Individualismus und wirtschaftliche Ordnung. Reprint of the first German edition (Erlenbach-Zurich, 1952; see B-7). Salzburg: Philosophia Verlag, 1976, pp. 345–357.
———. “Ausgewählte Bibliographie der Arbeiten F.A. Hayeks zu verwandten Problemkreisen” [“Selected Bibliography of the Works of F.A. Hayek to Related Problem Areas”], in the German reprint of the first edition (Vienna, 1931; see B-2) of Preise und Produktion. Vienna: Philosophia Verlag, 1976, pp. 13–18.
Books
B-1 Geldtheorie und Konjunkturtheorie. (Beitrage zur Konjunkturforschung, heraus-gegeben vom Österreichisches Institut für Konjunkturforschung, No. 1). Vienna and Leipzig: Hölder-Pichler-Tempsky, 1929/2, xii, 147 pp. (England 1933, Japan 1935, Spain 1936.) Translated into English by N. Kaldor and H. M. Croome with an “Introduction to the Series, Library of Money and Banking History” by Lionel an “Introduction to the Series, Library of Money and Banking History” by Lionel Robbins as Monetary Theory and the Trade Cycle. London: Jonathan Cape, 1933, 244 pp. American edition, New York: Harcourt Brace & Co., 1933. Reprinted New York: Augustus M. Kelley, 1966. The German first edition of Geldtheorie is described as “Contributions to Trade Cycle Research, published by The Austrian Institute for Trade Cycle Research, No. 1.” This Institute was founded by Ludwig von Mises, and Hayek was its Director from 1927–1931.)
See also foreward and bibliography to the 2nd German edition by Kurt R. Leube, “Vorwort und Bibliographie zur Weiderauflage F. A. Hayek: Geldtheorie und Konjunkturtheorie.” Salzburg: (W. Neugebauer) Philosophia Verlag, 1976. [Hayek's Geldtheorie (1929) together with its English translation (1933) is an expanded version of the paper (A-7a) delivered at a meeting of the Verein für Sozialpolitik, held in Zurich, in September 1928 (See A-7a with annotations). Hayek cites earlier studies as the foundations for his Geldtheorie: A-2a, A-6, A-7a, A-9a, A-13. Hayek presents, from the Austrian School perspective, a critical assessment of rival theories on the cause of trade cycle. He argues that the cause of all significant trade cycle fluctuations are monetary interventions which distort relative price relationships.].
B-2 Prices and Production. (Studies in Economics and Political Science, edited by the director of the London School of Economics and Political Sciences. No. 107 in the series of Monographs by writers connected with the London School of Economics and Political Science.) London: Routledge & Sons, 1931/2, xv, 112 pp. 2nd revised and enlarged edition, London: Routledge & Kegan Paul, 1935/9, also 1967 edition, xiv, 162 pp. American edition, New York: Macmillan, 1932. German edition. Preise und Produktion. Vienna, 1931/2, also 1976 edition. (Japan 1934, China [Taipei] 1966, France 1975).
See also the selected bibliography to the 2nd German edition: Kurt R. Leube, “Ausgewählte Bibliographie zur Wiederauflage F. A. Hayek: Preise und Produktion.” Philosophia Verlag, 1976.
[The 1st edition of Prices (1931) literally reproduced Hayek's four lectures on industrial fluctuations presented at the University of London (LSE) during the session 1930–1931. The “Preface to the Second Edition” of Prices (1935) states how Hayek developed Austrian capital theory following the four lectures. These developments were contained in the 2nd edition and prepared for by A-11a, A-12, A-13, A-14, A-21, A-22, A-23, A-24a, as well as by the first German edition of Preise (1931), the English version (B-1), and A-9a. Economist Sudha R. Shenoy, in an unpublished manuscript, has done a detailed comparative analysis of the differences between the 1931 and 1935 editions of Prices.]
B-3 Monetary Nationalism and International Stability. Geneva, 1937; London: Longmans, Green (The Graduate Institute of International Studies, Geneva, Publication Number 18), 1937, xiv, 94 pp. Reprinted New York: Augustus M. Kelley, 1964, 1971, 1974.
[Revised version of five lectures delivered at the Institute Universitaire de Hautes Études Internationales at Geneva. Hayek surveys the consequence of alternative monetary arrangements, such as gold vs. paper currency and flexible vs. fixed exchange rates.]
B-4 Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939/3, viii, 266 pp., also 1969 edition. Reprinted New York: Augustus M. Kelley, 1969, 1970; Clifton, New Jersey: Augustus M. Kelley, 1975.
[Collection of essays, mostly reprints or revised versions of earlier essays, which are attempts “to improve and develop the outline of a Theory of Industrial Fluctuations contained in” B-1 and B-2. The first chapter, “Profits, Interest and Investment” is new; the other chapters are revisions of A-37a, A-27a, A-26, A-19, A-21, A-14, A-9a. Hayek's essays defend the Austrian School's theory of the trade cycle. He argues that monetary interventions cause far-ranging economic distortions that bring about malinvestment and unemployment.]
B-5 The Pure Theory of Capital. London: Routledge & Kegan Paul, 1941/2 (also 1950 edition); Chicago: University of Chicago Press, 1941 (also 1950, 1952 and 1975 editions); xxxi, 454 pp. (Spain 1946, Japan 1951 and 1952).
[Growing out of Hayek's concern for the causes of the trade cycle or industrial fluctuations, this work deals with capital, interest, and time components in the structure of production.]
B-6 The Road to Serfdom. London: George Routledge & Sons, 1944/1945/20 (also 1969 edition); Chicago: University of Chicago Press, 1944/1945/20 (also 1969 edition), 250 pp. (Sweden 1944; France 1945; German version 1945: Der Weg zur Knechtschaft. Zurich 1945/3 (also 1952 edition); the German translation by Eva Röpke is available in paperback from Deutscher Taschenbuch Verlag (Munich, 1976); Denmark, Portugal, and Spain 1946; Netherlands 1948; Italy 1948; Norway 1949; Japan 1954; China [Taipei] 1956/1965/1966; Iceland 1980). Reprinted in two different paperback versions with new Prefaces by F. A. H. Chicago: University of Chicago Press, Phoenix Books, 1956 (see B-13, chapt. 15) and also 1976 paperback edition by University of Chicago Press and Routledge and Kegan Paul.
[Hayek wrote The Road to Serfdom in his “spare time from 1940 to 1943” while he was engaged in pure economic theory. The central argument was first sketched in A-37b (1938) and expanded in P-2 (1939). Hayek's thesis is that social-political planning endangers both political and economic liberties of the individual.]
B-7 Individualism and Economic Order. London: George Routledge & Sons, 1948/5, also 1960, 1976; Chicago: University of Chicago Press, 1948/5, also 1969, 1976, vii, 272 pp. Paperback edition, Chicago: Henry Regnery Co., Gateway edition 1972 (out of print), but now available in a University of Chicago paperback edition; (German edition, Zurich, 1952, Norway [shortened version] 1953, Spain 1968, Netherlands no date.)
See also bibliographic postscript in the German reprint of the 1st edition, Erlenbach-Zurich: 1952: Kurt R. Leube, “Bibliographisches Nachwort zur Wiederauflage F. A. Hayek: Individualismus und wirtschaftliche Ordnung.” Salzburg: Philosophia Verlag, 1977.
[Individualism reprints P-5, A-34, A-49, A-50, E-5 (Chapt. 1: “The Nature of the Problem”), E-5 (Chapt. 5: “The (Present) State of the Debate”), A-41, A-48, A-45, A-38; and some previously unpublished lectures: Chapt. 5: “The Meaning of Competition” and Chapt. 6 “‘Free’ Enterprise and Competitive Order.” These articles and speeches sound the Hayekian warning against economic and social planning.]
B-8 John Stuart Mill and Harriet Taylor: Their Friendship and Subsequent Marriage. London: Routledge & Kegan Paul, 1951/1969; Chicago: University of Chicago Press, 1951/1969, 320 pp.
[During the 1920s the Mill-Taylor correspondence became available for scholarly assessment of how much ideological influence Harriet Taylor exerted on the political, economic, and social ideas of her intimate friend and eventual husband, John Stuart Mill. Hayek's volume presenting their correspondence allows the reader to judge the nature of their relationship.]
B-9 The Counter-Revolution of Science: Studies on the Abuse of Reason. Glencoe, Illinois: The Free Press, 1952, 255 pp; new edition New York, 1964; 2nd edition with 1959 Preface to German edition, Indianapolis, Indiana: Liberty Press, 1979, also available in Liberty Press paperback. (Germany 1959, Frankfurt am Main edition published under the title Missbrauch und Verfall der Vernunft or “The Abuse and Decline of Reason”; German reprint of Frankfurt edition, Salzburg: Philosophia Verlag, 1979; France excerpts, 1953; Italy 1967.)
[The two major sections of this volume first appeared as articles in Economica as A-46 (1942–1944) and A-42 (1941), respectively: the third study first appeared as A-70 (1951). Hayek analyzes the intellectual origins of social planning and engineering. Topics covered include: scientism and the methodology of studying society, collectivism, historicism, non-spontaneous or rationalistic social planning, as well as the role of Saint-Simon, Comte, and Hegel in legitimizing scientistic sociology.]
B-10 The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology. London: Routledge & Kegan Paul, 1952; Chicago: University of Chicago Press, 1952, xxii, 209 pp; new edition 1963/1976. Reprinted Chicago: University of Chicago Press, Phonenix Book paperback, 1963 (out of print). University of Chicago Press has reissued the paperback in a Midway Reprint, 1976, with the Heinrich Klüver Introduction.
[Though published in 1952, the “whole principle” of The Sensory Order was conceived 30 years earlier by Hayek in a draft of a student paper composed around 1919–1920, while he was still uncertain whether to become a psychologist or an economist. Three decades later his concern about the logical character of social theory led him to reexamine favorably his youthful conclusions on certain topics of epistemology and theoretical psychology: concepts of mind, classification, and the ordering of our mental and sensory world. In his 1952 Preface Hayek acknowledges his indebtedness “particularly” to Ernst Mach and his analysis of perceptual organization.]
B-11 The Political Ideal of the Rule of Law. Cairo: National Bank of Egypt, Fiftieth Anniversary Commemorative Lectures, 1955, 76 pp. [Publication of four lectures Hayek delivered at the invitation of the National Bank of Egypt. These essays form a historical survey of the evolution of freedom and the rule of law in Britain, France, Germany, and America.]
[Reprinted in a revised, edited, and abridged format as Chapters 11 and 13 - 16 of Hayek's B-12; Chapters 11 and 16 of the B-12 version were reprinted under the title, The Rule of Law. Menlo Park, California: Institute for Humane Studies (Studies in Law, No. 3), 1975.]
B-12 The Constitution of Liberty. London: Routledge and Kegan Paul, 1960; Chicago: University of Chicago Press, 1960/1963/5 (also 1969 edition); Toronto: The University of Toronto Press, 1960, x, 570 pp. Also available in paperback: Chicago: Henry Regnery Co. Gateway Edition, 1972.
German translation: Die Verfassung der Freiheit. Tübingen: Walter Eucken Institut (Wirtschaftswissenschaftliche und wirtschaftrechtliche Untersuchungen No. 7), [J. C. B. Mohr/P. Siebeck], 1971. (Spain 1961, Italy 1971, China [Taipei] 1975). [Hayek composed the Preface of The Constitution of Liberty on his 60th birthday (May 8, 1959). He intended this survey of the ideals of freedom in Western civilization to commemorate the centenary of John Stuart Mill's On Liberty (1859). In “Acknowledgments and Notes” he describes the various preliminary drafts and versions he incorporated into this volume; also see B-11. Hayek stresses the working of the liberal, spontaneous order of society, which is too complex to be subjected to social planning and engineering.]
B-13 Studies in Philosophy, Politics and Economics. London: Routledge & Kegan Paul, 1967/1969; Chicago: University of Chicago Press, 1967/1969; Toronto: University of Toronto Press, 1967/1969; x, 356 pp. Reprinted in paperback New York: Simon and Schuster Clarion Book, 1969.
[This volume of 25 essays contains reprints of articles and speeches by F. A. H. as well as previously unpublished writing and speeches over a 20-year period preceding 1967. Reprints (often revised) include: A-76, A-102, A-103b, A-112, A-108, A-115, A-65, A-68, A-99a, etc. Consult volume to determine other essays published for the first time. The scope of topics includes essays on epistemology, history of ideas, specialization, Hume, spontaneous order, the liberal social order, the transmission of liberal economic ideas, and a variety of other topics on philosophy, politics, and economics.]
B-14 Freiburger Studien. Gesammelte Aufsätze. Tübingen: Walter Eucken Institut (Wirtschaftswissenschaftliche und wirtschaftsrechliche Untersuchungen 5) J.C.B. Mohr/P. Siebeck, 1969, 284 pp.
[“Freiburg Studies. Collected Essays.” German anthology of Hayek's essays. Contains German versions of such items as P-9 and P-10.]
B-15 Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. I, Rules and Order. London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1973, xi, 184 pp.
A trilogy published in the following sequence:
Vol. I, Rules and Order, 1973
Vol. II, The Mirage of Social Justice, 1976
Vol. III, The Political Order of a Free People, 1979
These volumes are also available in paperback, Phoenix Books editions of the University of Chicago Press. A French translation, Droit, Législation et Liberté, is available from Presses Universitaires de France in the Collection Libre Échange, edited by Florian Aftalion and Georges Gallais-Hamonno.
[Vol. I distinguishes between liberal spontaneous order (‘cosmos’) and planned or engineered, rationalistic social orders (‘taxis’). Hayek also traces the changing concept of law, principles vs. expediency in politics, and the ‘law of legislation’.]
B-16 Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. II, The Mirage of Social Justice. London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1976, xiv, 195 pp.
[Vol. II outlines the meaning of justice in the free, liberal social order, critiques the notion of 'social’ or distributive justice, and contrasts it with the market order or ‘catallaxy’, the regime of the Open Society.]
B-17 New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul, 1978; Chicago: University of Chicago Press, 1978. [This volume of 20 essays supplements Hayek's earlier Studies (B-13) by reprinting in a more accessible form some of his earlier articles and unpublished lectures not reprinted in Studies. Reprints include P-11a, P-9, A-121, P-10, A-127, P-9, A-131a, A-136a, A-116, A-113. Consult New Studies for titles of essays not previously published. Ranging over themes from philosophy, politics, economics, and the history of ideas, Hayek analyzes such topics as constructivism, the ‘atavism of social justice’, liberalism, the dangers of economic planning, and the ideas of Mandeville, Smith, and Keynes. Chapter 2 reprints his 1974 Nobel Prize speech, “The Pretence of Knowledge.”]
B-18 Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. III, The Political Order of a Free People. London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1979, xv, 244 pp. [Vol. III concludes Hayek's trilogy. Hayek exposes the weakness inherent in most forms of democratic government and outlines his alternative constitutional, political, and legal arrangements to create a democratic order that would be consistent with the free society. The Epilogue, “The Three Sources of Human Values,” reprints Hayek's Hobhouse Lecture delivered at the London School of Economics, May 17, 1978.]
Pamphlets
P-1 Das Mieterschutzproblem, Nationalökonomische Betrachtungen. Vienna: Steyrermühl-Verlag, Bibliothek für Volkswirtschaft und Politik, No. 2, 1929. [“The Rent Control Problem, Political Economic Considerations.” Hayek's later article (A-9b) was adapted from P-1 (the more detailed study on the effects of rent control) and both were used to form the substance of Hayek's “The Repercussions of Rent Restrictions,” in F. A. Hayek, Milton Friedman, et al. Rent Control: A Popular Paradox. Evidence on The Effects of Rent Control. Vancouver: The Fraser Institute, 1975, pp. 67–83; this last volume grew out of an earlier version: Arthur Seldon, ed. Verdict on Rent Control. London: Institute of Economic Affairs, 1972.]
P-2 Freedom and the Economic System. University of Chicago Press (Public Policy Pamphlet No. 29. Harry D. Gideonse, editor), 1939, iv, 38 pp.
[Reprinted in an enlarged form from Contemporary Review (April 1938).]
P-3 The Case of the Tyrol. London: Committee on Justice for the South Tyrol, 1944. [F. A. H. advocates Tyrolean autonomy independent of Italian hegemony. Compare with Hayek's artice A-53 (1944).]
P-4 Report on the Changes in the Cost of Living in Gibraltar 1939–1944 and on Wages and Salaries. Gibraltar, no date (1945).
P-5 Individualism: True and False. (The Twelfth Finlay Lecture, delivered at University College, Dublin, on December 17, 1945.) Dublin: Hodges, Figgis & Co. Ltd. 1946; and Oxford: B. H. Blackwell Ltd. 1946, 38 pp.
[Reprinted in Individualism (B-7), chapter 1. German edition: “Wahrer und Falscher Individualismus.” Ordo 1, 1948. Spain, 1968. Also reprinted in the various translation of B-7.]
P-6 Two Essays on Free Enterprise. Bombay: Forum of Free Enterprise, 1962.
P-7 Wirtschaft, Wissenschaft und Politik. Freiburger Universitätsreden, N.F. Heft 34, Freiburg im Breisgau: H.F. Schulz, 1963, 24 pp.
[English version, “The Economy, Science and Politics,” chapter 18 of B-13. The original (in German) was Hayek's inaugural lecture on the assumption of the professorship of Political Economy Albert Ludwig University at Freiburg im Breisgau, June 18, 1962.]
P-8 Was der Goldwährung geschehen ist. Ein Bericht aus dem Jahre 1932 mit zwei Ergänzungen. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze, 12), 1965, 36 pp. (France 1966): Révue d'Economie Politique 76 (1966), for French version. [“What Has Happened to the Gold Standard. A Report Beginning with the Year 1932 with Two Supplements.”]
P-9 The Confusion of Language in Political Thought, With Some Suggestions for Remedying It. London: Institute of Economic Affairs (Occasional Paper 20), 1968/1976, 36 pp.
[Lecture originally delivered in 1967 in German to the Walter Eucken Institut at Freiburg im Breisgau. Reprinted in English as Chapter 6 of B-17, and in German as “Die Sprachverwirrung im politischen Denken” in B-14.]
P-10 Der Wettbewerb als Entdeckungsverfahren. Kiel: (Kieler Vorträge, N.S. 56), 1968, 20 pp.
[“Competition as a Discovery Procedure.” Originally delivered in English as a lecture to the Philadelphia Society at Chicago on March 29, 1968 and later on July 5, 1968, in German, to the Institut für Weltwirtschaft of the University of Kiel. The German version was published first, but it lacked the final section found in the English version published in Chapter 12 of New Studies (B-17). The German version also was reprinted in F. A. H.'s German collection of essays entitled Freiburger Studien (B-14), 1979.]
P-11a Die Irrtümer des Konstruktivismus und die Grundlagen legitimer kritik gesellschaftlicher Gebilde. Munich-Salzburg 1970/2 (also 1975 edition). Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 51), 1975. (Italy, 1971).
[Reprinted with some changes as “The Errors of Constructivism” (Chapt. 1) of B-17.]
P-11b A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40 Years’ Running Commentary on Keynesianism by F. A. Hayek. Compiled and introduced by Sudha R. Shenoy. London: Institute of Economic Affairs (Hobart Paperback #4), 1972; 2nd edition 1978, xii, 124 pp. Also reprinted, San Francisco: The Cato Institute (The Cato Papers, No. 6), 1979. See A-130.
P-11c Die Theorie Komplexer Phänomene. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 36), 1972.
[English version, “The Theory of Complex Phenomena” appears in Chapter 2 of B-13. This essay originally appeared in English in M. Bunge, ed. The Critical Approach and Philosophy. Essays in Honor of K. R. Popper. New York: The Free Press, 1964.]
P-12 Economic Freedom and Representative Government. Fourth Wincott Memorial Lecture delivered at the Royal Society of Arts, Oct. 21, 1973. London: The Institute of Economic Affairs (Occasional Paper 39), 1973, 22 pp.
[Appears as Chapter 8 of B-17.]
P-13 Full Employment at Any Price? London: Institute of Economic Affairs (Occasional Paper 45), 1975/1978, (Italy 1975), 52 pp.
[Three Lectures. Lecture 1: “Inflation, The Misdirection of Labour, and Unemployment; Lecture 2: “The Pretence of Knowledge” (Hayek's 1974 Nobel Prize Speech); Lecture 3: “No Escape: Unemployment Must Follow Inflation.” A Short Note on Austrian Capital Theory is added as an Appendix. Reprinted as Unemployment and Monetary Policy. San Francisco: Cato Institute (Cato Paper No. 3), 1979, 53 pp.]
P-14 Choice in Currency. A Way to Stop Inflation. London: Institute of Economic Affairs (Occasional Paper 48), February 1976/1977, 46 pp.
[Based on an Address entitled “International Money” delivered to the Geneva Gold and Monetary Conference on September 25, 1975 at Lausanne, Switzerland.]
P-15 Drei Vorlesungen über Demokratie, Gerechtigkeit und Sozialismus. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 63 [J.C.B. Mohr/P. Siebeck]), 1977. [“Three Lectures on Democracy, Justice, and Socialism.”]
P-16a Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: The Institute of Economic Affairs (Hobart Paper Special 70), October 1976, 107 pp.
P-16b See, along with P-16a, the revision: Denationalisation of Money—The Argument Refined. An Analysis of the Theory and Practice of Concurrent Currencies. Hobart Paper Special 70, Second (Extended) edition, 1978, 141 pp.
P-17 The Reactionary Character of the Socialist Conception, Remarks by F. A. Hayek. Hoover Institution, Stanford University, 1978.
P-18 Economic Progress in an Open Society. Seoul, Korea: Korea International Economic Institute (Seminar Series No. 16), 1978.
P-19 “The Three Sources of Human Values.” The Hobhouse Lecture given at the London School of Economics, May 17, 1978. Published in the Epilogue to Law, Legislation and Liberty, Vol. III. London: Routledge & Kegan Paul, 1979 (B-18).
[German translation: “Die drei Quellen der menschlichen Werte.” Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 70) [J. C. B. Mohr/P. Siebeck], 1979.]
P-20 Social Injustice, Socialism and Democracy. Sidney, Australia, 1979.
P-21 Wissenschaft und Sozialismus. Tübingen: Walter Eucken Institut, (Vorträge und Aufsätze 71) [J. C. B. Mohr/P. Siebeck], 1979.
[“Science and Socialism.”]
P-22 Liberalismus. Translated from English by Eva von Malchus. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 72) [J. C. B. Mohr/P. Siebeck 1979], 47 pp. [“Liberalism”] Reprint-translation into German of article in New Studies (B-17).
Books Edited or Introduced
E-1 Hermann Heinrich Gossen. Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln. Introduced by Friedrich A. Hayek. 3rd edition. Berlin: Prager, 1927, xxiii, 278 pp.
[“The Laws of Human Relationships and of the Rules to be Derived Therefrom for Human Action.” Cf.: A-15. Gossen's (1810–1858) fame rests on this one book, first published in 1854, in which he developed a comprehensive theory of the hedonistic calculus and postulated the principle of diminishing marginal utility. He thereby anticipated the marginal utility breakthrough in the theory of economic value in 1871 by Menger, Jevons, and Walras.]
E-2 Friedrich Freiherr von Wieser. Gesammelte Abhandlungen. Edited with an introduction by Friedrich A. von Hayek. Tübingen: Mohr, 1929, xxxiv, 404 pp. [This edition includes von Wieser's Collected Writings published between 1876 and 1923. Friedrich Freiherr von Wieser (1851–1926) was Hayek's mentor at the University of Vienna and represented the “older Austrian school” of Economics. See A-4 and A-125b.]
E-3 Richard Cantillon. Abhandlung über die Natur des Handels im Allgemeinen. Translated by Hella von Hayek. Introduction and annotations by F. A. von Hayek. Jena, 1931, xix, 207 pp.
[A French translation of Cantillon's “Essay on the Nature of Trade in General” appeared as Essai sur la Nature du Commerce en Général in Revue des Sciences Économiques (Liège, April-October, 1936). Italian translation by the Italian liberal editor of Il Politico, Luigi Einaudi appeared in Riforma sociale (July 1932).]
E-4 Beiträge zur Geldtheorie. Edited and prefaced by Friedrich A. Hayek. Contributions by Marco Fanno, Marius W. Holtrop, Johan G. Koopmans, Gunnar Myrdal, Knut Wicksell. Vienna, 1933, ix, 511 pp.
[“Contributions on Monetary Theory.”]
E-5 Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism. Edited with an Introduction and a Concluding Essay by F. A. Hayek. Contributions by N. G. Pierson, Ludwig von Mises, Georg Halm, and Enrico Barone. London: George Routledge & Sons, 1935, v, 293 pp. (France 1939, Italy 1946.)
[Reprinted New York: Augustus M. Kelley (1967), 1970 from the 1935 edition; reprinted Clifton, New Jersey: Augustus M. Kelley, 1975. Hayek's Introductory Chapter 1 deals with “The Nature and History of The Problem” of socialist calculation. Hayek's concluding chapter concerns “The Present State of the Debate.” Mises’ (1881–1973) article “Economic Calculation in the Socialist Commonwealth” (translated from the German by S. Adler), chapter 3, had set off the debate when it appeared originally under the title “Die Wirtschaftsrechnung im sozialstischen Gemeinwesen” in the Archiv für Socialwissenschaften 47 (1920). N.G. Pierson's (1839–1909) article, “The Problem of Value in the Socialist Community,” chapter 2, originally appeared in Dutch in De Economist 41 (s'Gravenhage, 1902): 423–456.]
E-6 Boris Brutzkus. Economic Planning in Soviet Russia. Edited and prefaced by Friedrich A. Hayek. London: George Routledge & Sons, 1935; xvii, 234 pp.
E-7 The Collected Works of Carl Menger. 4 volumes with an Introduction by F. A. von Hayek. London: The London School of Economics and Political Science (Series of Reprints of Scarce Tracts in Economic and Political Science No. 17–20), 1933–1936.
Volume 1: Grundsätze der Volkswirthschaftslehre (1871) 1934.
Volume 2: Untersuchungen über die Methode der Socialwissenschaften (1883) 1933.
Volume 3: Kleinere Shriften zur Methode und Geschichte der Volkswirthschaftlehre (1884–1915) 1935.
Volume 4: Schriften über Geldtheorie und Währungspolitik (1889–1893), 1936.
[Vol. 1 contains a biographical introduction to Menger by Hayek. Vol. 4 contains a complete list of Menger's known writings.]
Later 2nd German edition: Carl Menger, Gesammelte Werke. 4 vols. Tübingen, 1968–1970.
[“Collected Works”]
E-8 Henry Thornton. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). Edited and introduced by Friedrich A. Hayek. London: Allen and Unwin, 1939, 368 pp.
E-9 John Stuart Mill, The Spirit of the Age. Introduced by F.A. Hayek. Chicago: University of Chicago Press, 1942, xxxiii, 93 pp.
[Hayek's Introduction is entitled, “John Stuart Mill at the Age of Twenty-Four,” and surveys Mill's intellectual development at the time of Mill's famous essay, “The Spirit of the Age,” which represented important deviations from Benthamite Utilitarian liberalism.]
E-10 Capitalism and the Historians. Edited and introduced by F. A. Hayek. London: Routledge & Kegan Paul, and Chicago: University of Chicago Press, 1954, 188 pp. [The inspiration for the several papers presented was The Mont Pélèrin Society meetings held at Beauvallon in France in September 1951 on the distortions of historians and intellectuals in describing Capitalism and The Industrial Revolution. Hayek's Introduction (pp. 3–29) is entitled “History and Politics” and is reprinted in B-13 and (in German) as “Wirtschaftsgeschichte and Politik” [“Economic History and Politics”] in Ordo 7 (1955): 3–22. T. S. Ashton's first chapter is “The Treatment of Capitalism by Historians”; L. M. Hacker's second chapter is entitled “The Anticapitalist Bias of American Historians”; Bertrand de Jouvenel contributed chapter 3, “The Treatment of Capitalism by Continental Intellectuals”; T. S. Ashton's chapter 4, “The Standard of Life of the Workers in England, 1790–1830,” originally appeared in The Journal of Economic History, Supplement 9, 1949; the final article by W. H. Hutt, “The Factory System of The Early Nineteenth Century,” originally appeared in Economica (March 1926). Hayek's volume provoked many pro and con reviews. A sampling: Arthur Schlesinger, Jr., The Reporter (March 30, 1954): 38–40; Oscar Handlin, The New England Quarterly (March 1955): 99–107; Charles Wilson, Economic History Review (April 1956); Asa Briggs, The Journal of Economic History (Summer 1954); W. T. Eastbrook, The American Economic Review (September 1954); Max Eastman, The Freeman (February 22, 1954); Helmut Schoek, U.S.A. (July 14, 1954); Eric E. Lampard, The American Historical Review (October 1954); and John Chamberlain, Barron's (January 4, 1954.)]
E-11 Louis Rougier. The Genius of the West. Introduction by F.A. v. Hayek. Los Angeles: Nash Publishing (published for the Principles of Freedom Committee), 1971, pp. xv-xviii.
E-12 Gerald P. O'Driscoll, Jr. Economics as a Coordination Problem. The Contributions of Friedrich A. Hayek. Foreward by F.A. Hayek. Kansas City: Sheed Andrews and McMeel, Inc., 1977, pp. xi-xii.
E-13 Ludwig von Mises. Socialism: An Economic and Sociological Analysis. Translated by Jacques Kahane. 1981 Introduction by F.A. Hayek. Indianapolis: LibertyClassics, 1981, pp. xix-xxiv. Dated August 1978.
[Hayek's Foreward pays tribute to Mises for the anti-socialist impact that Mises’ Die Gemeinwirtschaft: Untersuchungen über den Sozialismus (Jena: Gustav Fischer, 1922) created on many intellectuals after the First World War.]
E-14 Ewald Schams. Gesammelte Aufsätze. Prefaced by F.A. Hayek. Ready in Spring 1983. Munich: Philosophia Verlag.
Articles in Journals, Newspapers, or Collections of Essays
A-1a “Das Stabilisierungsproblem in Goldwährungsländern.” Zeitschrift für Volkswirtschaft und Sozialpolitik, N.S. 4 (1924).
[“The Stabilization Problem for Countries on the Gold Standard.” See note A-2a for the biographical context of Hayek's first two article publications. The journal in which Hayek published some of his first articles was closely associated with the Austrian School of economics through its editorial direction. It underwent several name changes:
1892–1918: The journal was known as Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung. Organ der Gesellschaft österreichischer Volkswirt. [“Journal of Political Economy, Social Policy, and Administration. Publication of the Society of Austrian Political Economy”], and was published in Vienna by F. Tempsky.
1919–1920: Suspended publication.
1921–1927: It was known as Zeitschrift für Volkswirtschaft und Socialpolitik. [“Journal of Political Economy and Social Policy”] and was published in Vienna and Leipsig by F. Deuticke.
After 1927, the journal was superseded by Zeitschrift für Nationalökonomie. [“Journal of National Economy”]. See Bibliography A-22, etc.
The heavily Austrian School of economics-oriented editorial staff included:
1892–1918 Ernst von Plener (1841–1923)
1892–1914 Eugen von Böhm-Bawerk (1851–1914)
1892–1907 Karl Theodor von Inama-Sternegg (1843–1908)
1904–1916 Eugen von Philippovich (1858–1917)
1904–1918 Friedrich Freiherr von Wieser (1851–1926)
1911–1916 Robert Meyer (1855–1914)
1921–1927 R. Reisch (1866–?), Othmar Spann (1878–1950), and others.]
A-1b “Diskontopolitik und Warenpreise.” Der Österreichische Volkswirt 17 (1,2), (Vienna 1924).
[“Discount Policy and Commodity Prices.”]
A-2a “Die Währungspolitik der Vereinigten Staaten seit der Überwindung der Krise von 1920.” Zeitschrift für Volkswirtschaft und Sozialpolitik. N.S. 5 (1925).
[“The Monetary Policy in the United States Since Overcoming the Crisis of 1920.” Both this article and A-1a grew out of Hayek's post-graduate studies in America which he pursued from March 1923 to June 1924 at New York University. On the chronology of the Nobel Prize biography of Hayek: Official Announcement of the Royal Academy of Sciences, republished in the Swedish Journal of Economics 76 (December 1974): 469 ff. Also see Machlup, ed. (1976), pp. 16–17, as well as the annotation in the present Hayek Bibliography on item A-64. Hayek's American academic sojourn took place while he was on a leave of absence from his Austrian civil service position (1921–1926) as a legal consultant (along with Ludwig von Mises) for carrying out the provisions of the Treaty of St. Germain; see Bibliography A-145, p. 1 for Hayek's anecdote and background for his introduction to von Mises through von Wieser.]
A-2b “Das amerikanische Bankwesen seit der Reform von 1914.” Der Österreichische Volkswirt 17 (29–33), (Vienna 1925).
[“The American Banking System since the Reform of 1914.”]
A-3a “Bemerkungen zum Zurechnungsproblem.” Jahrbücher für Nationalökonomie und Statistik 124 (1926): 1–18.
[“Comments on the Problem of Imputation.” On the valuation of Producer goods. Compare Wilhelm Vleugel's Die Lösung des wirtschaftlichen Zurechnungsproblem bei Böhm-Bawerk und Wieser. Halle: Neimeyer (Königsberger Gelehrte Gesellschaft, Geisteswissenschaftliche Klasse, Shriften, Vol. 7, part 5), 1930.]
A-3b “Die Bedeutung der Konjunkturforschung für das Wirtschaftsleben.” Der Österreichische Volkswirt 19 (2), (Vienna 1926).
[“The Meaning of Business Cycle Research for Economic Life.”]
A-4 “Friedrich Freiherr von Wieser.” Jahrbücher für Nationalökonomie und Statistik 125 (1926): 513–530.
[Commemorative article on the occasion of the death of Hayek's Austrian School of economics mentor, von Wieser (1851–1926). Compare with Hayek's later article on von Wieser in The International Encyclopaedia of the Social Sciences (1968, 1972). Also see E-2 (1929) Hayek's German introduction and edition of von Wieser's Collected Writings. A-4 translated into English in an abridged form appears in The Development of Economic Thought: Great Economists in Perspective. Edited by Henry William Spiegel. New York & London: John Wiley & Sons, Inc. 1952, 1961, pp. 554–567.]
A-5a “Zur Problemstellung der Zinstheorie.” Archiv für Sozialwissenschaften und Sozialpolitik 58 (1927): 517–532.
[“On the Setting of the Problem of Rent Theory.”]
A-5b “Konjunkturforschung in Osterreich.” Die Industrie 32 (30), (Vienna 1927).
[“Business Cycle Research in Austria.”]
A-6 “Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des ‘Geldwertes.’” Weltwirtschaftliches Archiv 28 (1928): 33–76.
[“The Intertemporal Equilibrium System of Prices and the Movements of the ‘Value of Money.’”]
A-7a “Einige Bemerkungen über das Verhältnis der Geldtheorie zur Konjunkturtheorie.” Schriften des Vereins für Sozialpolitik 173/2 (1928): 247–295. Also see same journal, Volume 175, for a discussion.
[“Some Remarks on the Relationship between Monetary Theory and Business Cycle Theory.”]
[See B-1 with annotation. The journal in which Hayek published this article was the publication of the influential Verein für Sozialpolitik, founded in 1872 by (among others) Gustav Schmoller (1838–1917). This organization for social reform did not express a monolithic unity of doctrine, but was, nevertheless, excoriated by its opponents as a union of ‘Professorial Socialists’ (Katheder Sozialisten). See the interesting group photograph of a meeting of the Verein at the University of Zurich, September 11–13, 1928, showing the wonderfully variegated grouping that includes Hayek, von Mises, Machlup, A. Rüstow, Hunold, Morgenstern, Strigl, and Sombart: in Albert Hunold, “How Mises Changed My Mind.” The Mont Pélèrin Quarterly 3 (October 1961): 16–19. For background on the Verein, see Haney (1949), pp. 546, 820, 885. It was at the September 1928 meeting of the Verein that Hayek presented his paper, A-7a, which eventually grew into his Geldtheorie (1929).]
A-7b “Diskussionsbemerkungen über ‘Kredit und Konjunktur.’” Shriften des Vereins für Sozialpolitik 175, Verhandlungen 1928, (1928). [“Discussion Comments on ‘Credit and Business Cycle’”...(Transactions 1928).]
A-8 “Theorie der Preistaxen.” Közgazdasági Enciklopédia, Budapest, 1929.
[In Hungarian-German printing.]
A-9a “Gibt es einen ‘Widersinn des Sparens’? Eine Kritik der Krisentheorie von W.T. Foster und W. Catchings mit einigen Bemerkungen zur Lehre von de Beziehungen zwischen Geld und Kapital.” [“Is There a ‘Paradox of Saving’? A Critique of the Crises-Theory of W.T. Foster and W. Catchings with some Remarks on the Theory of the Relationship between Money and Capital.”] Zeitschrift für Nationalökonomie 1, no. 3 (1929): 125–169; revised and enlarged edition, Vienna: Springer, 1931. [English version: “The Paradox of Saving.” Economica 11, no. 32 (May 1931). Reprinted in B-4 (“Appendix”). The English translation was done by Nicholas Kaldor and Georg Tugendhat.]
A-9b “Wirkungen der Mietzinbeschränkungen.” Munich: Schriften des Vereins für Sozialpolitik 182 (1930)
[“The Repercussions of Rent Restrictions.” See P-1 for different treatments of the effects of rent control. A-9b formed the substance of Hayek's article in the Hayek-Friedman volume mentioned in P-1.]
A-9c “Bemerkungen zur vorstehenden Erwiderung Prof. Emil Lederers.” Zeitschrift für Nationalökonomie 1 (5), (1930).
[“Comments on the Preceding Reply of Prof. Emil Lederer.”]
A-10 “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 11, no. 33 (August 1931 - Part I): 270–295.
[See also A-11b.]
A-11a “The Pure Theory of Money: A Rejoinder to Mr. Keynes.” Economica 11, no. 34 (November 1931): 398–403.
[In the same issue of Economica, pp. 387–397, Keynes’ article appears: “A Reply to Dr. Hayek.”]
A-11b “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 12 (February 1932 - Part II): 22–44.
[See also A-10 and A-11a.]
A-11c “Das Schicksal der Goldwährung.” Der Deutsche Volkswirt 6 (20), (1932).
[“The Fate of the Gold Standard.” See P-8.]
A-11d “Foreign Exchange Restrictions.” The Economist 6 (1932).
A-12 “Money and Capital: A Reply to Mr. Sraffa.” Economic Journal 42 (June 1932): 237–249.
A-13 “Kapitalaufzehrung.” Weltwirtschaftliches Archiv 36 (July 1932/II): 86–108.
[“Capital Consumption.”]
A-14 “A Note on the Development of the Doctrine of ‘Forced Saving’.” Quarterly Journal of Economics 47 (November 1932): 123–133.
[Reprinted in B-4.]
A-15 “Gossen, Hermann Heinrich.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1932. Vol. 7, p. 3.
A-16 “Macleod, Henry D.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2, p. 30.
[Henry Dunning Macleod (1821–1902) was a Scottish economist who wrote The Theory and Practice of Banking, 2 vols, (1856) and The Theory of Credit, 2 vols, (1889–1891).]
A-17 “Norman, George W.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2.
A-18 “Philippovich, Eugen von.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 12, p. 116.
A-19 “Saving.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 13, pp. 548–552.
[Reprinted in revised form in B-4.]
A-20 “The Trend of Economic Thinking.” Economica 13 (May 1933): 121–137.
[Hayek's first inaugural lecture given at the University of London about a year after he assumed the Tooke professorship, in which speech he explained his general economic philosophy. See B-13, p. 254.]
A-21 Contribution to Gustav Clausing, ed. Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff. Munich: Duncker & Humblot, 1933.
[Translated into English in B-4 (Chapter 6) as “The Present State and Immediate Prospects of the Study of Industrial Fluctuations.” Arthur Spiethoff, (1873–1957), who is honored in this Festschrift, was born in 1873, studied under Schmoller, and devised a “non-monetary overinvestment theory” of the business cycle. See Haney (1949), p. 673.]
A-22 “Über Neutrales Geld.” Zeitschrift für Nationalökonomie 4 (October 1933).
[“Concerning Neutral Money.”]
A-23 “Capital and Industrial Fluctuations.” Econometrica 2 (April 1934): 152–167.
A-24a “On the Relationship between Investment and Output.” Economic Journal 44 (1934): 207–231.
A-24b “The Outlook for Interest Rates.” The Economist 7 (1934).
A-24c “Stable Prices or Neutral Money.” The Economist 7 (1934).
A-25 “Carl Menger.” Economica N.S. 1 (November 1934): 393–420.
[This is an English translation of Hayek's Introduction to Menger's Grundsätze in E-7. Reprinted in The Development of Economic Thought: Great Economists in Perspective. Edited by Henry William Spiegel. New York and London: John Wiley & Sons, Inc. 1952, 527–553. Also reprinted in Principles of Economics by Carl Menger. Translated by James Dingwall and Bert F. Hoselitz. With an Introduction by F. A. Hayek. New York & London: New York University Press, 1981, pp. 11–36. See A-131a.]
A-26 “Preiserwartungen, Monetäre Störungen und Fehlinvestitionen.” Nationalökonomisk Tidsskrift 73, no. 3 (1935).
[Reprinted in a revised form in B-4 as “Price Expectations, Monetary Disturbances and Malinvestments.” Originally delivered as a lecture on December 7, 1933 in the Sozialökonomisk Samfund in Copenhagen. First published in German and later in French in the Revue de Science Economique, Liège (October, 1935).]
A-27a “The Maintenance of Capital.” Economica N.S. 2 (1935): 241–276.
[Reprinted in B-4.]
A-27b “A Regulated Gold Standard.” The Economist (May 11, 1935).
A-28 “Spor miedzy szkola ‘Currency’ i szkola ‘Banking’.” Ekonomista 55 (Warsaw, 1935).
A-29 “Edwin Cannan” (Obituary). Zeitschrift für Nationalökonomie 6 (1935): 246–250.
[Cannan (1861–1935) is also celebrated by Hayek in A-72. Cannan associated himself at the London School of Economics with a group who developed liberal theory. This group included Lionel Robbins, Cannan's successor, and his colleague Sir Arnold Plant (see Plant, 1969), Sir Theodore Gregory (Athens), F.C. Benkam (Singapore), W.H. Hutt (South Africa), and F.W. Paish (Paris).
A-30 “Technischer Fortschritt und Überkapazität.” Österreichische Zeitschrift für Bankwesen 1 (1936).
[“Technical Progress and Overcapacity.”]
A-31 “The Mythology of Capital.” Quarterly Journal of Economics 50 (1936): 199–228.
[Reprinted in William Fellner and Bernard F. Haley, eds., Readings in the Theory of Income Distribution. Philadelphia: 1946.]
A-32 “Utility Analysis and Interest.” Economic Journal 46 (1936): 44–60.
A-33 “La situation monétaire internationale.” Bulletin Périodique de la Societé Belge d'Études et d'Expansion (Brussels), No. 103. (1936).
[“The International Monetary Situation.”]
A-34 “Economics and Knowledge.” Economica N.S. 4 (February 1937): 33–54.
[Reprinted in B-7. Also reprinted in J. M. Buchanan and G. F. Thirlby (eds.) L.S.E. Essays on Cost. New York and London: New York University Press, 1981 as chapter 3. Originally presented as a presidential address to the London Economic Club, 10 November 1936.]
A-35 “Einleitung zu einer Kapitaltheorie.” Zeitschrift für Nationalökonomie 8 (1937): 1–9.
[“Introduction to a Theory of Capital.”]
A-36 “Das Goldproblem.” Österreichische Zeitschrift für Bankwesen 2 (1937).
[“The Gold Problem.”]
A-37a “Investment that Raises the Demand for Capital.” Review of Economic Statistics 19 (November 1937).
[Reprinted in B-4.]
A-37b “Freedom and the Economic System.” Contemporary Review (April 1938).
[Reprinted in enlarged form in P-2.]
A-38 “Economic Conditions of Inter-State Federation.” New Commonwealth Quarterly 5 (London, 1939).
[Reprinted in B-7.]
A-39 “Pricing versus Rationing.” The Banker 51 (London, September 1939).
A-40 “The Economy of Capital.” The Banker 52 (London, October 1939).
A-41 “Socialist Calculation: The Competitive ‘Solution’.” Economica N.S. 7 (May 1940): 125–149.
[Reprinted in B-7.]
A-42 “The Counter-Revolution of Science.” Parts I-III. Economica N.S. 8 (February - August 1941): 281–320.
[Reprinted in B-9.]
A-43 “Maintaining Capital Intact: A Reply [to Professor Pigou.]” Economica N.S. 8 (1941): 276–280.
A-44 “Planning, Science and Freedom.” Nature 148 (November 15, 1941).
A-45 “The Ricardo Effect.” Economica N.S. 9 (1942).
[Reprinted in B-7. See also in B-17, Chapt. 11: “Three Elucidations of the Ricardo Effect,” and A-127.]
A-46 “Scientism and the Study of Society.” Part I: Economica N.S. 9 (1942). Part II: Economica 10 (1943). Part III: Economica 11 (1944).
[Reprinted in B-9.]
A-47 “A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’.” Economica N.S. 9 (November 1942): 383–385.
A-48 “A Commodity Reserve Currency.” Economic Journal 53 (1943).
[Reprinted in B-7 as chapter 10. Also reprinted in part as a pamphlet, “Material Relating to Proposals for an International Commodity Reserve Currency,” submitted to The International Monetary and Financial Conference at Bretton Woods, N.H. by the Committee for Economic Stability (1944). #380 of the F. A. Harper Archives at The Institute for Humane Studies.]
A-49 “The Facts of the Social Sciences.” Ethics 54 (October 1943).
[Reprinted in B-7.]
A-50 “The Geometrical Representation of Complementarity.” Review of Economic Studies 10 (1942–1943): 122–125.
A-51 “Gospodarka planowa a idea planowania prawa.” Economista Polski (London, 1943).
[Cf. Chapter 6 of B-6: “Planning and the Rule of Law.”]
A-52 Edited: “John Rae and John Stuart Mill: A Correspondence.” Economica N.S. 10 (1943): 253–255.
A-53 “The Economic Position of South Tyrol.” In: Justice for South Tyrol. London: 1943.
[Compare with P-3.]
A-54 “Richard von Strigl” (Obituary). Economic Journal 54 (1944): 284–286.
[Strigl who died in 1944 was a “Neo-Austrian” who developed the theory of saving and investment and analyzed monopolistic competition theory.]
A-55 “The Use of Knowledge in Society.” American Economic Review 35 (September 1945): 519–530.
[Reprinted in B-7 and in a revised, abridged version as a pamphlet; Menlo Park, CA: Institute for Humane Studies. (Reprint No. 5), no date (1971, 1975).]
A-56 “Time-Preference and Productivity: A Reconsideration.” Economica, N.S. no. 4, 12 (February 1945): 22–25.
A-57 Edited: “‘Notes on N.W. Senior's Political Economy’ by John Stuart Mill.” Economica N.S. 12 (1945): 134–139.
A-58 “Nationalities and States in Central Europe.” Central European Trade Review 3 (London, 1945): 134–139.
A-59 “Fuld Beskaeftigelse.” Nationalökonomisk Tidsskrift 84 (1946): 1–31.
A-60 “The London School of Economics 1895–1945.” Economica N.S. 13 (February 1946): 1–31.
A-61 “Probleme und Schwierigkeiten der englischen Wirtschaft.” Schweizer Monatshefte 27 (1947).
[“Problems and Difficulties of the English Economy.”]
A-62 “Le plein emploi.” Economie Appliquée 1, no. 2–3, (Paris, 1948): 197–210.
[“Full Employment.”]
A-63a “Der Mensch in der Planwirtschaft.” In Simon Moser (ed.) Weltbild und Menschenbild. Innsbruck and Vienna: 1948.
[“Man in the Planned Economy.”]
A-63b “Die politischen Folgen der Planwirtschaft.” Die Industrie. Zeitschrift der Vereinigung Österreichischer Industrieller. No. 3 (Vienna, January 1948).
[“The Political Effects of the Planned Economy.”]
A-64 “Wesley Clair Mitchell 1874–1948” (Obituary). Journal of the Royal Statistical Society 111 (1948).
[Compare with Arthur F. Burns’ commemoration of Mitchell in the Twenty-Ninth Report of The National Bureau of Economic Research. New York: 1969; adapted in The Development of Economic Thought. Edited by Henry William Spiegel. New York, 1952, 1961, pp. 414–442. Also note Hayek's personal association with Mitchell, as indicated in B-17, p. 3, note 3, during Hayek's stay in America during the early 1920s. Also note the correspondence between Wesley Mitchell and Hayek mentioned in Emil Kauder, A History of Marginal Utility Theory. Princeton University Press, 1965.]
A-65a “The Intellectuals and Socialism.” The University of Chicago Law Review 16, no. 3 (Spring 1949): 417–433. German translation in Schweizer Monatshefte 29 (1944–50); Norwegian translation (1951).
[Reprinted in B-13 and by the Institute for Humane Studies, 1971.]
A-65b “A Levy on Increasing Efficiency. The Economics of Development Charges.” The Financial Times (April 26–28, 1949).
A-66 “Economics.” Chambers’ Encyclopaedia 4 (Oxford 1950).
A-67 “Ricardo, David.” Chambers’ Encyclopaedia 11 (Oxford 1950).
A-68 “Full Employment, Planning and Inflation.” Institute of Public Affairs Review 4 (6) (Melbourne, Australia 1950).
[Reprinted as Chapter 19 in B-13. Also in German (1951) and Spanish (1960).]
A-69a “Capitalism and the Proletariat.” Farmand 7, no. 56 (Oslo: February 17, 1951).
A-69b “Gleichheit und Gerechtigkeit.” Jahresbericht der Züricher Volkswirt-schaftlichen Gesellschaft (1951).
[“Equality and Justice.”]
A-70 “Comte and Hegel.” Measure 2 (Chicago, July 1951).
[Reprinted in B-9.]
A-71 “Comments on ‘The Economics and Politics of the Modern Corporation’.” The University of Chicago Law School, Conference Series no. 8, (December 7, 1951).
A-72 “Die Überlieferung der Ideale der Wirtschaftsfreiheit.” Schweizer Monatshefte 31, No. 6 (1951).
[“The Transmission of the Ideals of Economic Freedom.” First in German (1951) and later in an English translation as “The Ideals of Economic Freedom: A Liberal Inheritance,” in The Owl (London 1951), pp. 7–12. A “corrected version” in English is reprinted as Chapter 13 of B-13. Published in The Freeman 2 (July 28, 1952): 729–731, as “A Rebirth of Liberalism.” A remarkably similar overview of the various liberal currents that flowed into modern economic liberalism is given by Carlo Mötteli (a financial editor for Neue Zücher Zeitung) in Swiss Review of World Affairs 1, no. 8 (November 1951) and entitled “The Regeneration of Liberalism,” reprinted in The Mont Pelerin Quarterly 3 (October 1961): 29–30.]
A-73a “Die Ungerechtigkeit der Steuerprogression.” Schweizer Monatshefte 32 (November 1952).
[“The Injustice of the Progressive Income Tax.” cf. A-79 and A-73b of which this is a translation.]
A-73b “The Case Against Progressive Income Taxes.” The Freeman 4 (December 28, 1953): 229–232.
A-74a “Leftist Foreign Correspondent.” The Freeman 3 (January 12, 1953): 275.
A-74b “The Actonian Revival.” Review of Lord Acton by Gertrude Himmelfarb and Acton's Political Philosophy by G. E. Fasnacht. The Freeman 3 (March 23, 1953): 461–462.
A-74c “Decline of the Rule of Law. Part I.” The Freeman 3 (April 20, 1953): 518–520; Part II The Freeman 3 (May 4, 1953): 561–563.
A-74d “Substitute for Foreign Aid.” The Freeman 3 (April 6, 1953): 482–484.
A-74e “Entstehung und Verfall des Rechtsstaatsideales.” In: Albert Hunold (ed.) Wirtschaft ohne Wunder. Volkswirtschaftliche Studien für das Schweizerische Institut für Auslandsforschung. Zurich, 1953.
[“The Rise and Fall of the Ideal of the Constitutional State.”]
A-75a “Marktwirtschaft und Wirtschaftspolitik.” Ordo 6 (February 1954): 3–18.
[“Market Economy and The Economic Policy.”]
A-75b “Wirtschaftsgeschichte und Politik.” Ordo 7 (March 1955).
[“Economic History and Politics.” See E-10.]
A-76 “Degrees of Explanation.” The British Journal for the Philosophy of Science 6, no. 23 (1955): 209–225.
[Received by journal Nov. 11, 1954. Hayek acknowledges indebtedness to Chester Barnand, Heinrich Klüver, Herbert Lamm, Michael Polanyi, Karl Popper, Warren Weaver and the members of a Faculty Seminar of the Committee of Social Thought in the University of Chicago “for reading and commenting on an earlier draft of this paper.” Reprinted in revised form in B-13, Chapter 1.]
A-77 “Towards a Theory of Economic Growth, Discussion of Simon Kuznets’ Paper.” In: National Policy for Economic Welfare at Home and Abroad. New York: Columbia University Bicentennial Conference, 1955.
A-78 “Comments.” In: Congress for Cultural Freedom (ed.) Science and Freedom. London: (Proceedings of the Hamburg Conference of the Congress for Cultural Freedom) 1955.
[Also printed in German.]
A-79 “Progressive Taxation Reconsidered.” In: Mary Sennholz (ed.) On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises. Princeton: D. von Nostrand Co., 1956. Presented on the Occasion of the Fiftieth Anniversary of his [von Mises'] Doctorate, February 26, 1956.
A-80 “The Dilemma of Specialization.” In Leonard D. White (ed.) The State of the Social Sciences. Chicago: University of Chicago Press, 1956.
[Reprinted in B-13, Chapter 8.]
A-81a “Uber den ‘Sinn’ sozialer Institutionen.” Schweizer Monatshefte 36 (October 1956).
[“On the ‘Meaning’ of Social Institutions.”]
A-81b “Freedom & The Rule of Law.” (The Third Programme, BBC Radio; 1st of 2 talks.) The Listener (Dec. 13, 1956).
A-82a “Was ist und was heisst ‘sozial’?” In Albert Hunold (ed.) Masse und Demokratie. Zürich: 1957.
[“What is ‘Social’—What Does It Mean?” Translated in an unauthorized English translation in Freedom and Serfdom (ed. A. Hunold), Dordrecht, 1961. The reprint in B-13, Chapter 17 is a revised version of the unauthorized English translation “which in parts gravely misrepresented the meaning of the original.”]
A-82b Review of Mill and His Early Critics by J.C. Rees. Leicester: University College of Leicester, 1956. In Journal of Modern History (June 1957): 54.
A-83 “Grundtatsachen des Fortschritts.” Ordo 9 (1957): 19–42.
[“The Fundamental Facts of Progress.”]
A-84 “Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147–152.
[Reprinted in B-13, Chapter 21.]
A-85a “La Libertad, La Economia Planificada y el Derecho.” Temas Contemporaneos (Buenos Aires) 3 (1958).
[“Liberty, the Planned Economy, and the Law.”]
A-85b “Das Individuum im Wandel der Wirtschaftsordnung.” Der Volkswirt No. 51–52 (Frankfurt am Main 1958).
[“The Individual and Change of Economic System.”]
A-86 “The Creative Powers of a Free Civilization.” In: Felix Morley (ed.) Essays in Individuality. Philadelphia: University of Pennsylvania Press, 1958.
A-87 “Freedom, Reason, and Tradition.” Ethics 68 (1958).
A-88a “Gleichheit, Wert und Verdienst.” Ordo 10 (1958): 5–29.
[“Equality, Value, and Profit.”]
A-88b “Attualitá di un insegnamento,” In: Angelo Dalle Molle, ed. Il Maestro dell’ Economia di Domani (Festschrift for Luigi Einaudi on his 85th Birthday). Verona, 1958, pp. 20–24.
[“The Reality of a Teaching,” In The Master of the Economics of the Future. Luigi Einaudi (1874–1961), who is honored in this Festschrift, was a classical liberal Italian economist and statesman. He was the first president of Italy (1948–1955). Following World War II he was governor of the Bank of Italy and devised programs for monetary stabilization. Einaudi is celebrated by Hayek, in an allusion, in A-72.]
A-89 “Liberalismus (1) Politischer Liberalismus.” Handwörterbuch der Sozialwissenschaften 6 (Stuttgart-Tübingen-Göttingen, 1959).
[“Liberalism (1) Political Liberalism.” See Chapter 9 of B-17.]
A-90 “Bernard Mandeville.” Handwörterbuch der Sozialwissenschaften 7 (Stuttgart-Tübingen-Göttingen, 1959).
A-91 “Unions, Inflation and Profits.” In: Philip D. Bradley (ed.) The Public Stake in Union Power. Charlottesville, University of Virginia Press: 1959.
[Reprinted in B-13.]
A-92 “Freiheit und Unabhängigkeit.” Schweizer Monatshefte 39 (1959).
[“Freedom and Independence.”]
A-93 “Verantwortlichkeit und Freiheit.” In: Albert Hunold (ed.) Erziehung zur Freiheit. Erlenbach-Zürich: E. Rentsch, 1959: 147–170.
[“Responsibility and Freedom.”]
A-94 “Marktwirtschaft und Strukturpolitik.” Die Aussprache 9 (1959).
[“Market Economy and Structural Policy.”]
A-95 “An Röpke.” In Wilhelm Röpke, Gegen die Brandung. Zürich: E. Rentsch, 1959.
[On Röpke.”]
A-96a “The Free Market Economy: The Most Efficient Way of Solving Economic Problems.” Human Events 16, no. 50 (Dec. 16, 1959).
[Reprinted in P-6.]
A-96b “The Economics of Abundance,” in Henry Hazlitt, ed. The Critics of Keynesian Economics. Princeton and London: Van Nostrand Co., 1960, pp. 126–130.
A-97a “The Social Environment.” In B. H. Bagdikian (ed.) Man's Contracting World in an Expanding Universe Providence, R.I.: 1960.
A-97b “Freedom, Reason and Tradition.” Proceedings of the 16th Annual Meeting: The Western Conference of Prepaid Medical Service Plans, (Winnipeg 1960).
A-97c “Progenitor of Scientism.” National Review (1960).
A-97d “Gobierno Democratico y Actividad Economica.” Espejo 1 (Mexico City 1960).
[“Democratic Government and Economic Activity.”]
A-98 “The Corporation in a Democratic Society: In Whose Interest Ought It and Will It Be Run?” In: M. Anshen and G. L. Bach (eds.) Management and Corporations 1985. New York: McGraw-Hill, 1960.
[Reprinted in B-13.]
A-99a “The ‘Non Sequitur’ of the ‘Dependence Effect’.” The Southern Economic Journal 27 (April 1961).
[Reprinted in B-13, Chapter 23.]
A-99b “Freedom and Coercion: Some Comments and Mr. Hamowy's Criticism.” New Individualist Review 1, no. 2 (Summer 1961): 28–32.
A-100a “Die Ursachen der ständigen Gefährdung der Freiheit.” Ordo 12 (1961): 103–112.
[“The Origins of the Constant Danger to Freedom.”]
A-100b “How Much Education at Public Expense?” Context 1 (Chicago 1961).
A-101 “The Moral Element in Free Enterprise.” In: National Association of Manufacturers (eds.) The Spiritual and Moral Significance of Free Enterprise. New York: 1962.
[Reprinted in B-13 as Chapter 16. Originally delivered as an address to the 66th Congress of American Industry organized by the N.A.M. New York, December 6, 1961.]
A-102 “Rules, Perception and Intelligibility.” Proceedings of the British Academy 48 (1962), London, 1963, pp. 321–344.
[Reprinted as Chapter 3 in B-13.]
A-103a “Wiener Schule.” Handwörterbuch der Sozialwissenschaften 12 (Stuttgart-Tübingen-Göttingen, 1962).
[“The Vienna School.”]
A-103b “The Uses of ‘Gresham's Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).
[Reprinted in B-13, Chapter 24.]
A-104 “Alte Wahrheiten und neue Irrtümer.” In: Internationales Institut der Sparkassen, ed. Das Sparwesen der Welt, Proceedings of the 7th International Conference of Savings Banks. Amsterdam: 1963.
[“Old Truths and New Errors.” Reprinted in B-14; Italian translation in Il Risparmio (Milan) 11 (1963).]
A-105 “Arten der Ordnung.” Ordo 14 (1963).
English version under the title “Kinds of Order in Society.” New Individualist Review (University of Chicago) 3, no. 2 (Winter 1964): 3–12. [Reprinted in B-14.] [The five volumes of New Individualist Review (1961–1968) in which “Kinds of Order” appears have been published in one volume as New Individualist Review. Indianapolis: Liberty Press, 1981. Reprinted as pamphlet: Menlo Park, California: The Institute for Humane Studies (Studies in Social Theory No. 5), 1975. Hayek used this essay as the basis of the second chapter of Vol. I of Law, Legislation and Liberty (B-15). Reprinted in German in B-14.]
A-106 “Recht, Gesetz und Wirtschaftsfreiheit.” In: Hundert Jahre Industrie und Handelskammer zu Dortmund 1863–1963. Dortmund, 1963.
[“Right, Law, and Economic Freedom.” Reprinted in B-14.]
A-107 Introduction to “The Earlier Letters of John Stuart Mill.” In F.E. Mineka, ed. John Stuart Mill, Vol. XII. Toronto: Toronto University Press and London: Routledge & Kegan Paul, 1963.
A-108 “The Legal and Political Philosophy of David Hume.” Il Politico 28, no. 4 (December 1963): 691–704.
[Lecture delivered for the Faculty of Law and Political Science of the University of Freiburg im Breisgau on July 18, 1963. Reprinted as chapter 7 of B-13. Also (in German) in B-14.]
A-109 “The Theory of Complex Phenomena.” In Mario A. Bunge (ed.) The Critical Approach to Science and Philosophy: Essays in Honor of Karl R. Popper. New York: The Free Press of Glencoe, Inc., 1964.
[Reprinted in B-13; see P-11c.]
A-110 Parts of “Commerce, History of.” Encyclopaedia Britannica, vol. VI. Chicago: 1964.
A-111 “Die Anschauungen der Mehrheit und die zeitgenössische Demokratie.” Ordo 15/16 (1965): 19–41.
[“The Perception of the Majority and Contemporary Democracy.” Reprinted in B-14.]
A-112 “Kinds of Rationalism.” The Economic Studies Quarterly 15, no. 3 (Tokyo, 1965).
[Reprinted in B-13, Chapter 5. Originally delivered as a lecture on April 27, 1964 at Rikkyo University, Tokyo. German translation in B-14.]
A-113 “Personal Recollections of Keynes and the ‘Keynesian Revolution’.” The Oriental Economist 34 (Tokyo, January 1966).
[German translation in B-14. Reprinted in B-17.]
A-114 “The Misconception of Human Rights as Positive Claims.” Farmand Anniversary Issue II/12 (Oslo, 1966): 32–35.
A-115 “The Principles of a Liberal Social Order.” Il Politico 31, no. 4 (December 1966): 601–618.
[Paper submitted to The Tokyo Meeting of the Mont Pélèrin Society, Sept. 5–10, 1966. German translation in Ordo 18 (1967); also reprinted in B-14. Reprinted as Chapter 11 of B-13 in a slightly altered version, deleting final poem linking spontaneous order to Lao-Tzu's Taoism of wu-wei. See Chiaki Nishiyama (1967) for a discussion of and reflection on Hayek's paper.]
A-116 “Dr. Bernard Mandeville.” Proceedings of the British Academy 52 (1966), London 1967.
[“Lecture on a Master Mind” delivered to the British Academy on March 23, 1966. Reprinted as Chapter 15 of B-17. German translation in B-14.]
A-117 “L'Etalon d'Or — Son Evolution.” Revue d'Economie Politique 76 (1966).
[“The Gold Standard—Its Evolution.”]
A-118 “Résultats de l'action des hommes mais non de leurs desseins.” In: Les Fondements Philosophiques des Systèmes Economiques. Textes de Jacques Rueff et essais rédiges en son honneur. (Paris 1967).
[Translated in English in B-13 as “The Results of Human Action but not of Human Design.” German translation in B-14.]
A-119 Remarks on “Ernst Mach und das sozialwissenschaftliche Denken in Wien.” In Ernst Mach Institut (ed.), Symposium aus Anlass des 50. Todestages von Ernst Mach. (Freiburg i. B., 1967.)
[See (B-10) for the influence of Mach (1838–1916) on Hayek. A-119 is part of a symposium commemorating the 50th anniversary of Mach's death: “Ernst Mach and Social Science Thought in Vienna.”]
A-120 “Rechtsordnung und Handelnsordnung.” In Eric Streissler (ed.), Zur Einheit der Rechts-und Staatswissenschaften, Vol. 27. Karlsruhe, 1967.
[“Legal Order and Commercial Order.” Reprinted in B-14.]
A-121 “The Constitution of A Liberal State.” Il Politico 32, no. 1 (Sept. 1967): 455–461.
[German translation in Ordo 19 (1968) and in B-14.]
A-122a “Bruno Leoni, the Scholar.” Il Politico 33, no. 1 (March 1968): 21–25. Also translated in the same journal as “Bruno Leoni lo studioso.” (pp. 26–30). In commemoration of Leoni's death (November 21, 1967).
A-122b “Ordinamento giuridico e ordine sociale.” Il Politico 33, no. 4 (December 1968): 693–724.
[“Juridical Regulation and Social Order.”]
A-123a “A Self-Generating Order for Society.” In John Nef (ed.), Towards World Community. The Hague, 1968.
A-123b Speech on the 70th Birthday of Leonard Reed. In: What's Past is Prologue. New York: Foundation for Economic Education, 1968.
A-124 “Economic Thought VI: The Austrian School.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & Free Press, 1968, 1972; Volume 4, pp. 458–462.
A-125a “Menger, Carl.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Company & Free Press, 1968, 1972; Volume 10, pp. 124–127.
A-125b “Wieser, Friedrich von.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & The Free Press, 1968, 1972; Volumes 15, 16, 17, pp. 549–550.
A-126 “Szientismus.” In W. Bernsdorf (ed.), Wörterbuch der Soziologie, Edited by W. Bernsdorf. 2nd ed. (Stuttgart, 1969).
[“Scientism.”]
A-127 “Three Elucidations of the ‘Ricardo Effect’.” Journal of Political Economy 77 (March-April 1969): 274–285.
[Reprinted in B-13 and (in German) in B-14.]
A-128a “The Primacy of the Abstract.” In Arthur Koestler and J. R. Smythies (eds.), Beyond Reductionism—The Alpbach Symposium. London, 1969.
[Reprinted in B-17.]
A-128b “Marktwirtschaft oder Syndikalismus?” In: Protokoll des Wirtschaftstages der CDU/DSU (Bonn 1969).
[“Market Economy or Syndicalism?”]
A-129a “Il sistema concorrenziale come strumento di conoscenza.” L'industria 1 (Turin, January-March 1970): 34–50.
[Translated with an English summary as “The Competitive System as a Tool of Knowledge.”]
A-129b “Principles or Expediency?” In Toward Liberty: Essays in Honor of Ludwig von Mises on the Occasion of his 90th Birthday, September 29, 1971. Sponsoring Committee F. A. von Hayek et.al; F. A. Harper, Secretary. Menlo Park, California: Institute for Humane Studies, 1971, vol I, pp. 29–45.
A-129c “Nature vs. Nurture Once Again.” A comment on C. D. Darlington, The Evolution of Man and Society, London, 1962 in Encounter (February 1971).
[Reprinted as Chapter 19 in B-17.]
A-130 “The Outlook for the 1970's: Open or Repressed Inflation.” In Sudha R. Shenoy (ed.) A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40-Years’ Running Commentary on Keynesianism. London: Institute of Economic Affairs (Hobart Paperback 4), 1972.
[This actually appeared in a pamphlet format (P-11b) to which Hayek adds a new article, “The Campaign Against Keynesian Inflation.” This article is also reprinted as Chapter 13 of B-17.]
A-131a “Die Stellung von Mengers ‘Grundsätzen’ in der Geschichte der Volkswirtschaftslehre.” Zeitschrift für Nationalökonomie 32, no. 1 (Vienna, 1972.)
English version: “The Place of Menger's Grundsätze in the History of Economic Thought.” In J. R. Hicks and W. Weber (eds.), Carl Menger and the Austrian School of Economics. Oxford, 1973, pp. 1–14. Reprinted as Chapter 17 in B-17. Compare with E-7.
[The 1934 earlier and distinct biographical study entitled “Carl Menger” found in E-7 was “written as an Introduction to the Reprint of Menger's Grundsätze der Volkwirtschaftslehre which constitutes the first of a series of four reprints embodying Menger's chief published contributions to Economic Science and which were published by the London School of Economics as Numbers 17 to 20 of its Series of Reprints of Scarce Works in Economics and Political Science.” An English translation of this earlier “Carl Menger” Introduction can be found in Carl Menger, Principles of Economics. A translation of Menger's Grundsätze by James Digwall and Bert F. Hoselitz, with an Introduction (“Carl Menger”) by F. A. Hayek. New York and London: New York University Press, 1981, pp. 11–36.
A-131b “In Memoriam Ludwig von Mises 1881–1973.” Zeitschrift für Nationalökonomie 33 (Vienna 1973)
A-131c “Tribute to von Mises, Vienna Years.” National Review (Autumn 1973).
A-131d “Talk at the Mont Pélèrin.” Newsletter of the Mont Pélèrin Society 3 (Luxembourg 1973).
A-132a “Inflation: The Path to Unemployment.” Addendum 2 to Lord Robbins et. al. Inflation: Causes, Consequences, Cures: Discourses on the Debate between the Monetary and the Trade Union Interpretations. London: The Institute for Economic Affairs (IEA Readings, No. 14), 1974, pp. 115–120.
[Reprinted from The Daily Telegraph of London (October 15 and 16, 1974).]
A-132b “Inflation and Unemployment.” New York Times (Nov. 15, 1974).
[Reprinted from The Daily Telegraph of London.]
A-132c Hayek, F.A. “Introduction” to Catallaxy: The Science of Exchange. Paper read at the first meeting of The Carl Menger Society, London, December 1974. [Hayek did not continue his intention to complete this book. The “Introduction” along with comment and discussion by Hayek, Lionel Robbins, and others is available in transcription at the Institute for Humane Studies.]
A-132d “The Pretence of Knowledge.” An Alfred Nobel Memorial Lecture, delivered December 11, 1974 at the Stockholm School of Economics. In Les Prix Nobel en 1974. Stockholm: Nobel Foundation, 1975.
[Reprinted in Full Employment at Any Price [P-13]. (Occasional Paper 45), Institute of Economic Affairs, London 1975. Also reprinted in Unemployment and Monetary Policy: Government as Generator of the Business Cycle with a foreward by Gerald O'Driscoll Jr. San Francisco: Cato Institute, 1979, pp. 23–36. This has also been reprinted as Chapter 2 of B-17.]
A-132e “Freedom and Equality in Contemporary Society.” PHP 4 (The PHP Institute, Tokyo), (Tokyo 1975).
A-132f “Economics, Politics & Freedom: An Interview with F. A. Hayek.” Interview conducted by Tibor Machan in Salzburg, Austria. Reason 6 (February 1975): 4–12.
A-133a “Die Erhaltung des liberalen Gedankengutes.” In Friedrich A. Lutz (ed.) Der Streit um die Gesellschaftsordnung (Zurich 1975).
[“The Preservation of the Liberal Ideal of Thought.”]
A-133b T.V. interview on “NBC Meet the Press.” Sunday, June 22, 1975. Meet the Press 19, no. 25 (June 22, 1975) Washington D.C.: Merkle Press, Inc. 1975, 9 pp.
A-133c “The Courage of His Convictions.” In Tribute to Mises 1881–1973. The Session of the Mont Pélèrin Society at Brussels 1974 devoted to the Memory of Ludwig von Mises. Chislehurst, 1975.
A-133d “The Formation of the Open Society.” Address given by Professor Friedrich A. von Hayek at the University of Dallas Commencement Exercises, May 18, 1975. [Unpublished typescript, available at the Institute for Humane Studies.]
A-134a “Types of Mind.” Encounter 45 (September 1975).
[This was revised and retitled “Two Types of Mind” in Chapter 4 of B-17.]
A-134b “Politicians Can't Be Trusted with Money.” [(Newspaper editor's title. Paper delivered in September at the Gold and Monetary Conference in Lausanne, Switzerland.) The Daily Telegraph of London, Part I (September 30, 1975); Part II “Financial Power to the People” (newspaper editor's title October 1, 1975).]
A-135a “A Discussion with Friedrich Hayek.” American Enterprise Institute. Domestic Affairs Studies 39 (Washington, D.C. 1975).
A-135b “World Inflationary Recession.” Paper presented to the International Conference on World Economic Stabilization, April 17–18, 1975, co-sponsored by the First National Bank of Chicago and the University of Chicago. First Chicago Report 5/1975.
A-136a “The New Confusion about Planning.” The Morgan Guaranty Survey (January 1976): 4–13.
[German translation in Die Industrie 10 (1976).]
A-136b “Institutions May Fail, but Democracy Survives.” U.S. News and World Report (March 8, 1976.)
A-136c “Adam Smith's Message in Today's Language.” Daily Telegraph, London (March 9, 1976.)
[Reprinted as Chapter 16 of B-17.]
[The gap in identification number (A-137 through A-141) will be supplied in subsequent revisions of this Hayek bibliography.]
A-142 “Il Problema della Moneta Oggi.” Academia Nationale dei Lincei. Atti de Convegni Rome (1976).
[“The Problem of Money Today.”]
A-143 “Remembering My Cousin Ludwig Wittgenstein.” Encounter (August 1977).
A-144a “Die Illusion der sozialen Gerechtigkeit.” In Schicksal? Grenzen der Machbarkeit. Eine Symposion. Munchen: Deutscher Taschenbuch Verlag, 1977.
[“The Illusion of Social Justice.” Cf. B-16, Vol. II of Law, Legislation and Liberty: The Mirage of Social Justice esp. Chapt. 9, also note Chapter 5 of B-17: “The Atavism of Social Justice.”]
A-144b “Toward Free Market Money.” Wall Street Journal (August 19, 1977).
A-144c “Persona Grata: Interview with Friedrich Hayek.” Interviewed by Albert Zlabinger, World Research INK 1, no. 12 (September, 1977): 7–9. Also available as a 30 minute 16mm color movie, entitled “Inside the Hayek Equation,” from World Research, Inc.; Campus Studies Division; 11722 Sorrento Valley Rd., San Diego, CA 92121.
A-144d “An Interview with Friedrich Hayek.” by Richard Ebeling. Libertarian Review (September 1977): 10–16.
A-144e “Is There a Case for Private Property.” Firing Line. Columbia S.C.: Southern Educational Communications Association, 1977.
A-145 “Coping with Ignorance.” Ludwig von Mises Memorial Lecture. Imprimis (Hillsdale College) 7 (July 1978) 6 pp.
[Reprinted in Cheryl A. Yurchis (ed.) Champions of Freedom. Hillsdale, Michigan: Hillsdale College Press, (The Ludwig von Mises Lecture Series Vol. 5) 1979.]
A-146a “The Miscarriage of the Democratic Ideal.” Encounter (March 1978). [A slightly revised version later appeared as Chapter 16 of B-18.]
A-146b “Will the Democratic Ideal Prevail?” In Arthur Seldon, ed. The Coming Confrontation: Will the Open Society Survive to 1989? London: The Institute for Economic Affairs (Hobart Paperback No. 12), 1978, pp. 61–73.
[Revised version of an article which appeared in Encounter (March 1978).]
A-147 “Die Entthronung der Politik.” In Uberforderte Demokratie? hrsg. von D. Frei, Sozialwissenschaftliche Studien de schweizerischen Instituts für Auslandsforschung, N.F. 7, Zurich 1978.
[“The Dethronement of Politics” in Has Democracy Overextended Itself? See also Chapter 18 of B-18: “The Containment of Power and the Dethronement of Politics.”]
A-148a “Can we still avoid inflation?” In Richard M. Ebeling (ed.) The Austrian Theory of the Trade Cycle and Other Essays. New York: Center for Libertarian Studies (Occasional Paper Series 8) 1978.
A-148b “Exploitation of Workers by Workers.” The last of three talks given by Professor F. A. Hayek under the title, “The Market Economy” (Radio 3, BBC). The Listener (August 17, 1978): 202–203.
A-149 “Notas sobre la Evolución de Sistemas de Reglas de Conducta.” Teorema 9, no. 1 (1979): 57–77.
[“Notes on the Evolution of Systems of Rules of Conduct.” Spanish version of Chapt. 4 of B-13.]
A-150 “Towards a Free Market Monetary System.” The Journal of Libertarian Studies 3, no. 1 (1979): 1–8.
[A lecture delivered at the Gold and Monetary Conference, New Orleans, Louisiana (November 10, 1977).]
A-151a “Freie Wahl de Währungen.” In Geldpolitik, ed. by J. Badura and O. Issing. Stuttgart and New York, 1980, pp. 136–146.
[“Free Choice of Currency Standards.”]
A-151b “An Interview with F. A. Hayek.” Conducted by Richard E. Johns. The American Economic Council Report (May 1980.)
[Reprinted in IRI Insights (publication of Investment Rarities, Inc.) 1 (November—December, 1980): 6–12, 14–15, 32.]
A-151c “Midju—Modid.” Frelsid (Journal of the Freedom Association of Iceland) 1 (1980): 6–15.
[“The Muddle of the Middle.”]
A-151d “Dankadresse.” In Erich Hoppmann, ed. Friedrich A. von Hayek. Baden—Baden: Nomos Verlagsgesellschaft, 1980. pp. 37–42.
[See Hoppmann (1980) in the Bibliography of Works Relating to Hayek.]
A-151e Review of Thomas Sowell's Knowledge and Decisions. (New York: Basic Books, 1980). In Reason 13 (December 1981): 47–49.
A-151f “L'Hygiène de la démocratie.” French translation of the English text of a speech delivered April 12, 1980 at the l'Assemblée Nationale in Paris by Friedrich A. Hayek. [“The Health of Democracy.” In Liberté économique et progrès social (périodique d'information et de liaison des libéraux) No. 40 (December—January 1981): 20–23.]
A-151g “The Ethics of Liberty and Property.” Chapter 4 of a forthcoming book, The Fatal Conceit. Published in the proceedings of the Mont Pélèrin Society 1982 General Meeting, 5–10 September, Berlin. Institut für Wirtschaftspolitik an der Universität zu Köln, 1982.
Works about or relevant to Friedrich A. Hayek
Aaron, Raymond. “La Definition Libérale le Libérté.” Archiv europäischer Sociologen II (1961).
[“The Liberal Definition of Liberty.”]
Agonito, Rosemary. “Hayek Revisited: Mind as a Process of Classification.” In: Behaviorism: A Forum for Critical Discussions 3, no. 2 (Spring 1975): 162–171.
Allen, Henry. “Hayek, the Answer Man.” The Washington Post (December 2, 1982), pp. C1, C17.
Arnold, G. L. “The Faith of a Whig.” Twentieth Century London (August 1960).
Arnold, Roger A. “The Efficiency Properties of Institutional Evolution: With Particular Reference to the Social—Philosophical Works of F. A. Hayek.” Virginia Polytechnic Institute and State University Ph.D. Dissertation, 1979. [Dissertation supervised by James M. Buchanan.]
———. “Hayek and Institutional Evolution.” The Journal of Libertarian Studies 4, no. 4 (Fall 1980): 341–352.
Barry, Norman P. “Austrian Economists on Money and Society.” National Westminster Bank Quarterly Review (May 1981): 20–31.
———. An Introduction to Modern Political Theory. London: MacMillan, 1981.
———. Hayek's Social and Economic Philosophy. London: Macmillan, 1979.
——— “The Tradition of Spontaneous Order.” Literature of Liberty 5 (Summer 1982): 7–58.
[A major section of this article deals with Hayek.]
Baumgarth, William P. “The Political Philosophy of F. A. von Hayek.” Harvard University Ph.D. Dissertation in Government, Cambridge, Mass., 1976
——— “Hayek and Political Order: The Rule of Law.” The Journal of Libertarian Studies 2, no. 1 (Winter 1978): 11–28
Bay, Christian. “Hayek's Liberalism: The Constitution of Perpetual Privilege.” Political Science Review 1 (Fall 1971): 93–124.
Bettelheim, Charles. “Freiheit und Planwirtschaft.” In: Die Umschau. Internationale Revue, Mainz, 1 (1946): 83–192. [“Freedom and the Planned Economy.”]
Bianca, G. Verso la Schiavitù. Replica a von Hayek. Naples, 1979.
[“(The Road) to Serfdom. Reply to von Hayek.”]
Birner, Jack. “Hayek's Research Program in Economics.” Ph.D. dissertation for Erasmus University in Rotterdam, no date (1982?).
[In Dutch with a 36-page summary in English. The English summary is available at the Institute for Humane Studies, Menlo Park, CA 94025.]
Black, R.D., Collison Coats, A. W., and Goodwin, Craufurd D.W. (eds.) The Marginal Revolution in Economics: Interpretation and Evaluation. Durham, North Carolina: Duke University Press, 1973.
Böhm, Stephan B. “Liberalism and Economics in the Hapsburg Monarchy,” 12 pp. Unpublished typescript. Paper presented to “The History of Economics Society Conference,” Kress Library, Harvard University Graduate School of Business Administration, June 16–19, 1980.
[Paper available at the Institute for Humane Studies]
Boland, L.A. “Time in Economics vs. Economics in Time. The ‘Hayek Problem.’” In The Canadian Journal of Economics (Canadian Economic Association) Toronto, 2, no. 2 (1978): 240–262.
Bostaph, Samuel. “The Methodological Debate between Carl Menger and the German Historical School.” Atlantic Economic Journal 6 (September 1978): 3–16.
Bradley, Jr., Robert. “Market Socialism: A Subjectivist Evaluation.” The Journal of Libertarian Studies 5, no. 1 (Winter 1981): 23–40.
Brell, K.H. “Zur Problematik der progressiven Einkommensbesteuerung. Eine Antikritik zu F.A. von Hayeks ‘Ungerechtigkeit der Steuerprogression’ und C. Fohls ‘Kritik der progressiven Einkommensbesteurung’.” Dissertation Karlsruhe (Berenz) 1957. [“On the Problematic of the Progressive Income Tax. A Counter—Critique to F.A. von Hayek's ‘The Injustice of the Progressive Income Tax’ and C. Fohl's ‘Critique of the Progressive Income Tax.’”]
Brittan, Samuel. “Hayek and the New Right.” Encounter 54 (January 1980): 30–46.
Broadbeck, M. “On the Philosophy of the Social Sciences.” Philosophy of Science 21, no. 2 (April 1959).
Brown, Pamela. “Constitution or Competition? Alternative Views on Monetary Reform.” Literature of Liberty 5 (Autumn 1982): 7–52.
[A major section of this article surveys Hayek's proposals for the ‘denationalization’ of money. See Hayek, P-14, P-16a, and P-16b.]
Brozen, Yale M. “The Antitrust Task Force Deconcentration Recommendation.” Journal of Law & Economics 13 (October 1970) 279–292.
Buchanan, James M. “Cultural Evolution and Institutional Reform.” Unpublished manuscript.
———. Cost and Choice. Chicago: Markham Publishing Co., 1969.
———. Freedom in Constitutional Contract. College Station, Texas: Texas A & M University Press, 1979.
Buchanan, James M. and Thirlby G.F. (eds.) L.S.E. Essays on Cost. London: Weidenfield Nicolsen, 1973.
[Classic essays on cost from the London School of Economics, including Hayek.]
Buckley, Jr., William F. “The Road to Serfdom: The Intellectuals and Socialism.” In Fritz Machlup, ed. Essays on Hayek. New York: New York University Press, 1976, pp. 95–106.
Business Week. “The Austrian School's Advice: ‘Hands Off!’” Business Week (August 3, 1974).
Campbell, William F. “Theory and History: The Methodology of Ludwig von Mises.” University of Minnesota M.A. thesis. Minneapolis, 1962.
Chambers, Raymond J. Accounting, Evaluation and Economic Behavior. Englewood Cliffs, New Jersey: Prentice—Hall, Inc., 1966.
[Also see Thomas Cullom Taylor, Jr. (1970).]
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Corbin, Peter D. (Principal Investigator, Research Coordinator, American Geographic Society.) “Geoinflationary Variations in the U.S. Economy.”
[Examination of the Austrian theory of inflation which emphasizes the spatio—temporal aspects of the inflationary process. Available at the Institute for Humane Studies.]
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[A collection of 13 papers delivered at a conference in honor of F.A. Hayek, Jan. 14–18, 1976 in San Francisco. Co—sponsored by Liberty Fund, Inc. and the University of San Francisco.]
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[Outline of Hayek's Social Philosophy on the occasion of the publication of B-12.]
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[“Recent Theories of Economic Crises Based on Disparities in Prices.”]
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———. “From the Constitution of Liberty to its Deconstruction by Liberalist Dissipation, Disintegration, Disassociation, Disorder.” In Fritz Meyer, ed., Zur Verfassung der Freiheit. Festgabe für Friedrich von Hayek. Stuttgart, New York: Gustav Fischer Verlag (Ordo, vol. 30), 1979, pp. 177–197.
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[Exposition by several authors of the history, principles and applications of the Austrian School of Economics. Among the topics of interest are Israel M. Kirzner's “On the Method of Austrian Economics” and “The Theory of Capital;” Murray N. Rothbard's “The Austrian Theory of Money,” and Gerald P. O'Driscoll, Jr.'s and Sudha R. Shenoy's “Inflation, Recession, and Stagflation.”]
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[Available at the Institute for Humane Studies.]
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[“Private Competition in Monetary Affairs. Reflections on a Proposal by F.A. von Hayek.”]
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———. “Reflections on John Hick's ‘The Hayek Story.’” Unpublished manuscript, no date; 23 pp.: Available from the Institute for Humane Studies, Menlo Park, California 94025.
———. “Hayek on Inflation.” Unpublished Paper presented to The Carl Menger Society Conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980.
Ellis, Howard S. German Monetary Theory, 1905–1933. Cambridge, Mass: Harvard University Press, 1934.
Fabrini, L. “La teoria del capitale e dell interesse di F.A. Hayek.” Revista internazionale de scienze sociali. Milano, Anno 58, Series 4, Volume 22 (1950): 250–286.
[“The Theory of Capital and Interest of F.A. Hayek.”]
Falconer, Robert T. “Capital Intensity and the Real Wage: A Critical Evaluation of Hayek's Ricardo Effect.” Texas A & M Ph.D. Dissertation. College Station, Texas, 1971.
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[Reprinted Boston, 1945. Westport, Connecticut: Greenwood Press, 1973.]
Fingleton, Eamonn. “The Guru Who Came In From the Cold.” NOW! (January 30, 1981) 39–41.
Flanagan, T.E. “F.A. Hayek on Property and Justice.” Unpublished manuscript presented at the Theory of Property Summer Workshop at the University of Calgary, July 7–14, 1978.
Frankel, S. H. “Hayek on Money.” Unpublished paper presented to The Carl Menger Society Conference on Hayek at University College, London, October 28, 1978. [This conference was structured around Hayek's newly published New Studies in Philosophy, Politics, Economics and the History of Ideas. In addition to Frankel, it featured Thomas Torrance, Hillel Steiner and Jeremy Shearmur.]
Fridriksson, Fridrik. “Hayek á Íslandi 1940–1980.” Frelsid 3 (1981): 312–336. [“Hayek and Iceland, 1940–1980.”]
———. Friedrich A. Hayek. Forthcoming book developed from Fridriksson's Virginia Polytechnic Institute M.A. thesis in economics.
Garrigues, A. “El individualismo verdadero y falso, segun Hayek.” Moneda y credito, Revista de economie 34 (Madrid, 1950): 3–14.
[“Individualism: True and False, according to Hayek.”]
Garrison, Roger W. “The Austrian—Neoclassical Relation: A Study in Monetary Dynamics.” University of Virginia, Department of Economics, Ph.D. Dissertation, 1981.
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Gerding, R. and Starbatty, J. “Zur ‘Entnationalisierung des Geldes.’ Eine Zwischenbilanz.” Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 78) (J.C.B. Mohr/Paul Siebeck), 1980.
[“On the ‘Denationalisation of Money.’ An Interim Statement.”]
Gilbert, J.C. “Professor Hayek's Contribution to Trade Cycle Theory.” Economic Essays in Commemoration of the Dundee School of Economics, 1931–1955. pp. 51–62.
Glasner, David. “Friedrich Hayek: An Appreciation.” Intercollegiate Review 7 (Summer 1971): 251–255.
Good, D.F. “The Great Depression and Austrian Growth after 1873.” The Economic History Review 31 (1978).
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Graf, Hans-Georg. “Muster-Voraussagen” und “Erklärungen des Prinzips” bei F.A. von Hayek. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 65) (J.C.B. Mohr/P. Siebeck.), 1978.
[“‘Pattern-Prediction’ and'Clarification of Principle’ in F.A. von Hayek.”]
———. “Nicht-nomologische Theorie bei Komplexen Sachverhalten.” Ordo, Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft 26 (1975): 298–308.
[“Non-nomological Theory in Complex Phenomena.”]
Graham, F.D. “Keynes vs. Hayek on a Commodity Reserve Currency.” The Economic Journal 54 (1944): 422–429.
Grant, James. “Hayek: The Road to Stockholm.” The Alternative: An American Spectator 8, no. 8 (May 1975): 10–12.
Gray, John N. “F.A. Hayek on Liberty and Tradition.” The Journal of Libertarian Studies 4 (Spring 1980): 119–137.
———. “Hayek on Spontaneous Order.” Unpublished paper presented to The Carl Menger Society Conference on Hayek, London, Oct. 30, 1982.
Grinder, Walter E. Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation. In Libertarian Review (November 1974): 4–5.
———. Review of 4 books: F.A. Hayek's The Counter-Revolution of Science; Individualism and Economic Order; Studies in Philosophy, Politics and Economics; and Ludwig M. Lachmann's The Legacy of Max Weber. In Libertarian Review 4, no. 4 (April 1975): 4–5.
———. “In Pursuit of the Subjective Paradigm” and “Austrian Economics in the Present Crisis of Economic Thought.” In Capital, Expectations and the Market Process by Ludwig M. Lachmann. Edited by Walter E. Grinder. Kansas City: Sheed, Andrews & McMeel, Inc., 1977.
———. “The Austrian Theory of the Business Cycle: Reflections on Some Socio-Economic Effects.” Unpublished paper presented at The Symposium on Austrian Economics, University of Hartford, June 22–28, 1975.
[Available at the Institute for Humane Studies, Menlo Park, CA 94025.]
Gross, N.T. The Industrial Revolution in the Hapsburg Monarchy, 1750–1914. Fontana Economic History of Europe, vol. 4, Part 1. London, 1973.
Haberler, Gottfried. “Mises’ Private Seminar: Reminiscences.” The Mont Pélèrin Quarterly 3 (October 1961): 20–21.
[See also an expanded version in Wirtschafts Politische Blätter (Journal of Political Economy, Vienna) 28, 4 (1981). A Festschrift issue on the Centennary of Luwig von Mises’ birth (1881–1981).]
Hagel III, John. “From Laissez Faire to Zwangswirtschaft: The Dynamics of Interventionism.” Unpublished paper presented to The Symposium on Austrian Economics. University of Hartford, June 22–28, 1975, 37 pp.
[Available at the Institute for Humane Studies.]
Hamowy, Ronald. “Hayek's Conception of Freedom: A Critique.” New Individualist Review 1, no. 1 (April 1961): 28–31.
———. “Freedom and The Rule of Law in F.A. Hayek.” Il Politico 36, no. 2 (June 1971): 349–377.
———. “Law and the Liberal Society: F.A. Hayek's Constitution of Liberty.” Journal of Libertarian Studies 2, no. 4 (1978): 287–297.
Hampshire, Stuart. Thought and Action. London: Chatto and Windar, 1970.
———. “On Having a Reason.” In G.A. Vesey, ed., Human Values. Royal Institute of Philosophy Lectures, Vol II 1976–1979: Harvester Press, 1976. Chapter 5.
Haney, Lewis H. History of Economic Thought. New York: Macmillan, 1949, 4th edition. [See especially pp. 607–634 (“Fully Developed Subjectivism: The Austrian School.”) and pp. 811–831 (“Economic Thought in Germany and Austria, from 1870 to World War II.”]
Harris, R. “On Hayek.” Swinton Journal (1970).
Harrod, R. Money. London: St. Martin's Press, 1969.
———. “Professor Hayek on Individualism.” In R. Harrod, ed. Economic Essays, 2nd edition. London and New York: 1972. pp. 293–301.
Hart, H.L.A. The Concept of Law. Oxford: Clarendon Press, 1961.
Hartwell, Ronald Max. “Capitalism and the Historians.” In Fritz Machlup, ed. Essays on Hayek. New York: New York University Press, 1976, pp. 73–94.
Hawtrey, Ralph G. Capital and Employment. London, 1937, especially chapter 8: “Professor Hayek's Prices and Production.”
———. “The Trade Cycle and Capital Intensity.” Economica n.s. 7 (February 1940): 1–15. [Hawtrey was an economist connected with the British Treasury from 1919 to 1937. He “developed a purely monetary theory of the business cycle on a macro-economic concept of equilibrium.” See citation under Sennholz.]
———. “Professor Hayek's Pure Theory of Capital.” Economic Journal (Royal Economic Society) 51 (London 1941): 281–290.
———. “Prof. Hayek's ‘Prices and Production’.” In Capital and Employment, 2nd edition. London: Longmans, Green & Co., 1952, pp. 233–267.
Heimann, E. “Professor Hayek on German Socialism.” The American Economic Review. 35 (1945): 935–937.
[Compare with B. Hoselitz.]
Hicks, J.R. “Maintaining Capital Intact: A Further Suggestion.” Economica 9 (1942): 174–179.
———. “The Hayek Story.” In Critical Essays in Monetary Theory. Oxford University Press: 1967.
[See Richard M. Ebeling citation.]
Hicks, J.R. and Weber, W. Carl Menger and the Austrian School of Economics. Oxford: Oxford University Press, 1973.
Hoppmann, Erich (ed.) Friedrich A. von Hayek. Vorträge und Ansprächen auf der Festveranstaltung der Frieburger Wirtschaftswissenschaftlichen Fakultät zum 80. Geburtstag von Friedrich A. von Hayek. Baden-Baden: Nomos Verlagsgesellschaft, 1980.
[Festschrift with bibliography on F.A. Hayek's 80th birthday presented by the Faculty of Economics of the University of Freiburg. Contributors include: Erich Hoppmann, Berhard Stoeckle, Karl Brandt, Christian Watrin, Hans Otto Lenel, and Klaus Peter Krause. Hayek's “Dankadresse,” pp. 37–42, surveys highlights in Hayek's intellectual career and writings from the vantage point of his 80th year. The Hoppmann-edited Festschrift honoring Hayek also lists the contributors to the earlier 1979 Ordo Festschrift for Hayek, edited by Fritz Meyer, et.al (p. 53), and contains valuable updatings on bibliography by and about Hayek (pp. 55–60.)]
Hoselitz, B.F. “Professor Hayek on German Socialism.” The American Economic Review 35 (1945): 926–934.
[Compare with E. Heimann.]
Housinden, Daniel M. Capital, Profits, and Prices: An Essay in The Philosophy of Economics. New York: Columbia University Press, 1981.
Howey, Richard S. The Rise of the Marginal Utility School: 1870–1889. Lawrence, Kansas: The University of Kansas Press, 1960.
Hoy, Calvin M. “Hayek's Philosophy of Liberty.” Columbia University Ph.D. Dissertation. New York, 1982.
Hummel, Jeffrey Roger. “Problems with Austrian Business Cycle Theory.” Reason Papers No. 5 (Winter, 1979): 41–53.
Hunt, Lester. “Toward a Natural History of Morality.” Unpublished essay.
Hutchinson, T.W. The Politics and Philosophy of Economics: Marxians, Keynesians and Austrians. New York and London: New York University Press, 1981.
Janik, Allan and Toulmin, Stephen. Wittgenstein's Vienna. New York: Simon and Schuster, 1973.
[Important along with Carl Schorske's volume on Fin-de-siècle Vienna for the cultural-historical context in which Hayek and his cousin Wittgenstein lived. See A-143.]
Johnson, Frank. “The Facts of Hayek.” Sunday Telegraph Magazine (London, no date, [1975?]) 30–34.
[Profile and biographical sketch along with photographs of F.A. Hayek.]
Johnston, William. The Austrian Mind: An Intellectual and Social History, 1848–1938. Berkeley, Los Angeles, London: University of California Press, 1972.
Johr, W.A. “Note on Professor Hayek's ‘True Theory of Unemployment.’” Kyklos 30, no. 4 (1970): 713–723.
Jones, Harry W. “The Rule of Law and the Welfare State.” Columbia Law Review 58, no. 2 (February 1958).
Kaldor, N. “Prof. Hayek and the Concertina Effect.” In Economica N.S. 9 (1942): 148–176
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GO Beyond GDP: A Breakthrough in Macroeconomics
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"Mark Skousen"
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2020-04-07T00:00:00
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Mark Skousen's Gross Output (GO), the top line of national accounting, slowed dramatically in the 4th quarter 2019, indicating headwinds for the economy.
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Gross Output
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https://www.grossoutput.com/2020/04/07/go-beyond-gdp-a-breakthrough-in-macroeconomics/
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A Paper Presented to the Mont Pelerin Society Meetings
on May 8, 2017, Seoul, Korea
(anniversary of Friedrich Hayek’s birthday)
by Mark Skousen
Presidential Professor,
Chapman University
“Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.” — Dale W. Jorgenson, J. Stephen Landefeld, and William D. Nordhaus (2006)
“This is a great leap forward in national accounting. Gross output, long advocated by Mark Skousen, will have a profound and manifestly positive impact on economic policy.” — Steve Forbes (2014)
The purpose of this paper is to introduce the benefits of gross output (GO), a broader measure of the economy that the federal government began publishing on a quarterly basis along with gross domestic product (GDP) starting in April 2014. I am honored to discuss this new statistic on May 8, 2017, here at the Mont Pelerin Society meeting, which happens to be Friedrich Hayek’s birthday. Hayek is the founder of the Mont Pelerin Society, and GO is a measure of Hayek’s triangle. I believe GO deserves recognition as a major triumph in Austrian economics since Friedrich Hayek won the Nobel Prize in 1974.
In this paper, I argue that GO is more consistent with economic growth theory, and more helpful in measuring and anticipating the ups and downs of the business cycle. GO also demonstrates that, contrary to what is commonly reported in the financial media, business spending is far bigger and more important than consumer spending in the economy. Thus, GO is also a supply-side statistic, and its adoption by the government’s Bureau of Economic Analysis (BEA) is a significant advance in supply-side economics.
It is my contention that GO is a major breakthrough in national income accounting. Just as publicly-traded companies release a quarterly financial statement that highlights revenues/sales as the “top line” and net income or profits as the “bottom line,” so now the economics profession has finally caught up with the accountants and Wall Street finance by identifying GO as the top line in national income accounting to go along with GDP, the bottom line. In fact, it is the intention of the BEA to publish both GO and GDP simultaneously within the next year or two, as publicly-traded companies do.
In sum, GO is one of the most significant innovation in national income accounting since GDP was invented in the 1940s, and a major advance in the development of macroeconomics. It is fertile ground for new research in economic growth in theory and practice.
Why is GO Important?
First, some background:
In the 1980s, I began doing research on an alternative model of macroeconomics that culminated in my book, The Structure of Production, published by New York University Press in 1990. I came to the conclusion that gross domestic product (GDP) was an incomplete and sometimes misleading measure of the economy, and that it told only part of the story of the business cycle.
Over the years, it has become apparent that the introduction of GDP in the 1940s helped support the Keynesian notion that business decision-making to expand or contract is dependent on current aggregate demand and the relatively level of spending by consumers, business and government (C + I + G). Indeed, since consumption expenditures represent by far the largest sector of the economy, as measured by GDP, and business investment as the smallest, the focus by the media and government officials led to the false impression that consumer spending, not business investment, is the main driver of economic growth.
The quarterly release of GDP statistics to the media and the general public perpetuates this Keynesian mindset. The latest GDP statistics (2016) are broken down into these major categories of spending:
Figure 1. Breakdown in GDP, 2016.
Source: Bureau of Economic Analysis, www.bea.gov. 2016
Thus, consumer spending represents 68.9% of GDP in the United States in 2016, followed by government spending, 17.5%; and last, private investment, 16.4%. Net exports is negative at -0.3%.[1]
Based on a superficial reading of GDP data, the financial media is quick to focus on, first, consumer spending, and second, government spending as the key driver of economic growth.
It is not uncommon to see the following statements in the media following the release of GDP data:
“With personal consumption accounting for nearly 70 percent of all economic activity, however, the administration will be hard pressed to lift growth substantially if consumers remain cautious about opening their wallets.” – Nelson D. Schwartz, “Economy Grows at Slowest Rate in 3 Years,” New York Times, April 28, 2017, page 1.
“Consumer spending is the lifeblood of the U. S. economy…” Barron’s, August 15, 2016, p. M1.
“Household spending generates more than two-thirds of total economic output, so sturdy [consumer] spending gains should translate into economic growth.” – “Spending Rises, Inflation Stays Low,” Wall Street Journal, September 30, 2014, p. A2.
“Consumer spending makes up more than 70% of the economy, and it usually drives growth during economic recoveries.” — “Consumers Give Boost to Economy,” New York Times, May 1, 2010, p. B1.
Or as the Wall Street Journal stated a few years ago,
“Consumers are the engine of the U. S. economy, accounting for about 70% of economic demand…” — “Consumers Stepped Up Spending in March,” Wall Street Journal, April 17, 2012, p. A7.
And in a broader context, here’s a report from the New York Times discussing the role of government, investment, and consumer spending in the economy:
“Friday’s estimates of second-quarter gross domestic product [1.3%, well below consensus forecasts] provided a sobering look at how a decline in public spending and investment can restrain growth…The astonishingly slow growth rate from April through June was due in large part to sluggish consumer spending and an increase in imports, which subtract from growth numbers. But dwindling government spending also held back growth.” — “The Role of Government Spending,” New York Times, July 29, 2011
These examples from the national media demonstrate how its conventional interpretation of GDP as the representative of the economy favors a Keynesian perspective that puts consumer spending first, government stimulus second, and business investment a poor third when it comes to economic performance. Trade doesn’t even rate.
The Keynesian Diversion: Pro-Consumption, Anti-Saving
The GDP data is consistently with the Keynesian aggregate demand model, introduce in 1936 with the publication of John Maynard Keynes’s General Theory. The British economist promoted the idea that consumption is more vital, dependable and productive than saving in a mature economy. As noted in the Keynesian cross model developed by Paul Samuelson, an increase in the “propensity to consume” leads to full employment. In his magnum opus, Keynes applauded “all sorts of policies for increasing the propensity to consume,” including confiscatory inheritance taxes and the redistribution of wealth in favor of lower-income groups, who consumed a higher percentage of their income than the wealthy (Keynes 1973 [1936]: 325).
Canadian economist Lorie Tarshis, the first to write a Keynesian textbook in the post-war, warned that a high rate of saving is “one of the main sources of our difficulty,” and one of the goals of the federal government should be to encourage consumption and “reducing incentives to thrift” (Tarshis 1947: 521-22).
MIT professor Paul Samuelson introduced the “paradox of thrift” is his 1948 edition of Economics, the thesis that saving more could result in less income. “Franklin’s old virtues [of thrift] may be modern sins” (Samuelson 1948: 270). As another Keynesian textbook put it more bluntly, “While savings may pave the road to riches for an individual, if the nation as a whole decides to save more, the result could be a recession and poverty for all” (Baumol and Blinder 1988: 192). Even today Keynesian economists content that Asian nations suffer from a “saving glut” and should adopt policies that encourage consumer spending (Bernanke 2015).
The Keynesian anti-saving mentality applied especially during an economic downturn. But even during a recovery, the Keynesians argued that consumption was more significant than saving in promoting growth when resources were “unemployed.” Keynesian economist Hyman Minsky confirmed this unorthodox approach when he wrote, “The policy emphasis should shift from the encouragement of growth through investment to the achievement of full employment through consumption production” (Minksy 1982: 113).
This pro-consumption policy was officially approved during the Kennedy administration when the 1963 Annual Economic Report of the President focused on the demand side to stimulate economic activity via the tax cuts: “The most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual tax rates” (Kennedy 1963: xvii). Thus, according to the Keynesian model, it is through increased personal consumption expenditures that business investment is stimulated.
A Keynesian anti-saving mentality even crept into George W. Bush administration in the 2000s, when Bush pushed through Congress several tax cuts to stimulate spending. As President Bush said in December 2006 at a news conference, “I encourage you all to go shopping more” (new conference transcript, December 20, 2006). Oh, if only the Christmas shopping season could last year around! CNN expressed a similar sentiment a few years later: “The rebates will put about $120 billion in the hands of individuals in the hope that they will spend it and boost a faltering U.S. economy. Economists generally agree that the economy should see a boost from the rebate checks. But most also agree that the full impact will be less than the total value of the stimulus package. That’s because some recipients are expected to save their rebates or use them to pay down credit cards or other debt instead of spending it.” (CNN Report, “Bush signs stimulus bill; rebate checks expected in May,” Feb 13, 2008.) http://www.cnn.com/2008/POLITICS/02/13/bush.stimulus/
Leading Economic Indicators
Contradict Keynesian GDP Model
And yet we continue to see plenty of evidence to support the traditional classical model of economic growth, that growth is dependent on the supply side of the economy: increases in productive savings and capital formation, improved technology and entrepreneurship, and advances in education, training and human capital, have led to higher standards of living over time. According to Robert Solow (1957) and Robert Barro (2011), growth is more a function of technological advances, productive investment, and entrepreneurship than consumer spending. Consumer spending is largely the effect, not the cause, of prosperity (Hanke 2014).
Among the US leading economic indicators published monthly by the Conference Board, most are linked to the earlier stages of production and business activity: Average weekly hours, manufacturing; Average weekly initial claims for unemployment insurance; Manufacturers’ new orders, consumer goods and materials; ISM® Index of New Orders; Manufacturers’ new orders, nondefense capital goods excluding aircraft orders; Building permits, new private housing units; Stock prices, 500 common stocks; Leading Credit Index™; Interest rate spread, 10-year Treasury bonds less federal funds; and Average consumer expectations for business conditions. Note that the highly touted “consumer confidence index” that is highlighted in the media has been changed to the “average consumer expectations for business conditions” (Conference Board 2017).
Similar conclusions can be found looking at the leading economic indicators in other nations. For example, the Conference Board has six indicators to predict economic growth in Korea: Stock Prices, Value of Machinery Orders, Index of Inventories to Shipments, Export FOB, Yield of Government Public Bonds, and Private Construction Orders.
In fact, of the 13 economies in the world covered by the Conference Board, none identify consumer spending and retail sales as leading indicators. As a Forbes economist John Papola recently concluded, “Economic growth (booms) and declines (bust) have always been led by changes in business and durable goods investment, while final consumer goods spending has been relatively stable through the business cycle.” (Papola 2013).
Does increased savings hurt economic growth? A recent econometric study by the St. Louis Fed contradicts this conventional wisdom. Even in the short run, the author concludes, “a higher saving rate in the current quarter is associated with faster (not slower) economic growth in the current and next few quarters” (Thornton 2009)
How do we reconcile the GDP statistics that seem to support the Keynesian model with the historical evidence that reinforces the neo-classical model of economic growth? What’s missing in the macroeconomic model?
Sin of Omission: The Supply Chain.
The paradox is resolved once it is recognized that GDP is an incomplete measure of economic activity. It leaves out a big chunk of the business sector, i.e., the supply chain. By definition, GDP accounts for the value of final products and services only, and omits intermediate inputs, a key ingredient in the macroeconomic landscape.
While GDP is a reasonable estimate of national welfare and economic growth, it is highly misleading in underreporting the role that business plays in economic performance. It vastly underestimates the full contributions of business in the “make” economy, that is, the full value of business-to-business (B2B) transactions that move the supply chain along the intermediate stages of production toward the production of finished goods and services (the “use” economy).
GDP includes only a small portion of the B2B transactions – it only accounts for “gross private fixed investment,” the value of final capital goods, the tools, equipment and machinery used to advance the production process. The value of goods in process – valued at more than GDP itself – is left out, often erroneously dismissed as “double counting.”
A Short History of National Income Accounting
The fateful decision to leave out any calculation of the supply chain in GDP was made decades ago in a debate between two Russian American economists at Harvard: Simon Kuznets and Wassily Leontief. Kuznets did the original work in the 1930s on national income accounting, and determined that national income (“net output”) should be the key indicator (Kuznets 1934: 1). To properly measure national income, he subtracted intermediate production from gross output to come up with a “net output” figure, which he later called Gross National Product (now Gross Domestic Product or GDP).
Leontief, on the other hand, contended that the interrelations between goods was critical to understanding how the economy works, and developed a more complex system of input-output tables under the umbrella of gross output (Leontiff 1966). Both won the Nobel Prize for their work, but ultimately textbook economics and popular economics ended up with the “net” figure, GDP, as the key measure of the economy.
We continue to suffer the consequences. The GDP model has led to much mischief in theory and policy, as we noted above.
In the 1970s and 1980s, economists became disenchanted with the state of macroeconomic theory and practice. I was among them. In my research to find a new macro model, I was particularly impressed with the work of Austrian economist Friedrich Hayek and his small volume of lectures at the London School of Economics, Prices and Production (1931). It introduced Hayek’s triangles, a theoretical measure of spending at all stages of production.
His work was resurrected by the later “neo-Austrian” work of Sir John Hicks. According to Hicks, a nation’s complete measure of capital and the economy must include durable goods as well as “goods that are in the pipeline, goods in process of production” (Hicks 1973a: 191).[2]
In the spirit of Leontief, Hayek, and Hicks, I suggested that we needed a new macro statistic that measured spending at all stages of production, a figure that includes the value of the supply chain. See pp. 178-184 in chapter 6 of The Structure of Production. In this work, I developed a universal 4-stage model of the economy, a modified form of Hayek’s triangle. See figure 2 below.
Figure 2. Universal 4-Stage Model of the Economy
Source: Mark Skoqusen, The Structure of Production (New York University Press, 3rd ed., 2015), p. xviii, and Economic Logic (Capital Press, 2014), p. 58.
I defined spending at all four stages of production gross output (GO), and stage 4 as GDP, and made some initial estimates. (Both Hayek and Hicks’s works were entirely theoretical.) In Structure, I contend that GO is a more comprehensive measure of the economy, serves as a valuable tool in analyzing the business cycle, restores the business sector as the major driver of the economy, and deserves to be updated on a quarterly basis along with GDP. More recently, I contend that GO should be reported as the “top line” in national income accounting, and GDP as the “bottom line.”
Surprise Announcement by the BEA
A giant step forward occurred in national income accounting when in early 2014, the Bureau of Economic Analysis (BEA) of the
S. Department of Commerce (under the creative leadership of the director Steve Landefeld) announced it would begin publishing Gross Output, along with Gross Output by Industry, on a quarterly basis. It is the first new measure of the economy to be published quarterly since GDP was invented in the 1940s.[3]
This new macro statistic includes intermediate inputs for the first time, defined by the BEA as “the value of both foreign and domestically produced goods and services which are used as energy, materials, and purchased services as part of an industry’s production process.” As a result, we now have a more complete picture of the economic structure. The BEA now tracks 402 industries and 69 commodities in its Gross Output by Industry.
To see the latest data on GO, go to https://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5114=q&5102=15
GO does not replace GDP by any means. Both need to be reported. As Dale W. Jorgenson, J. Stephen Landefeld, and William D. Nordhaus state, “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts” (Jorgenson et al 2006: 6).
GDP estimates the value of final use in the economy. It does a consistent job of measuring spending by consumers and government, but does not tell the whole story of commercial activity. GDP includes fixed capital expenditures but omits a critical component–spending by business to move the production process along the supply chain, what economists call goods-in-process or what businesses call B2B spending. This omission of business’s contribution to the supply chain amounted to $21.3 trillion in 2016, substantially larger than GDP itself ($18.7 trillion).
GO Offers a Better Perspective of Total Economic Activity
What can we learn from GO?
First, GO is a much better measure of total economic activity and a better indicator of the business cycle. Figure 3 demonstrates the size and volatility of GO in relationship with GDP.
Figure 3. Adjusted Gross Output (GO*) versus GDP, 2007-2016.
Source: BEA data, plus US Census Bureau data on monthly wholesale and retail trade added to create Adjusted GO.
In the third quarter of 2016, Adjusted GO (GO*) amounted to almost $40 trillion, more than double GDP of $18.7 trillion.[4]
Recently the BEA has published GO data going back to 1947 on an annual basis: http://bea.gov/industry/gdpbyind_data.htm
Figure 4 below shows changes in GO and GDP, demonstrating how GO does a better job of measuring the depth of the recession and recovery. During the 2008-09 financial crisis, nominal GDP decreased only 5%, but Adj. GO fell over 25%. Moreover, during the recovery and expansion phrase, GO tends to rise faster than GDP. See figure 5 below.
Figure 4. Quarterly changes in Adj. Gross Output (GO*) and GDP, 2007-2016.
Source: BEA data, plus US Census Bureau data on monthly wholesale and retail trade added to create Adjusted GO.
Second, GO may also be a good forecaster of the economy’s condition. When GO is falling faster than GDP, a recession is imminent. When GO is moving back up faster than GDP, it suggests a recovery. David Colander (Middlebury) states: “For forecasting, the new measure [gross output] may be more helpful than the GDP measure, because it provides information of goods in process.” (2014: 451) Economic analyst David Ranson adds: “GO is better correlated with financial-price movements than most of the other indicators. It tends to portray the economy as more cyclical than real GDP does, the recession of 2008-09 as deeper, and the recovery as slower. The universal use of real GDP as a measure of the economy’s vitality is subject to misunderstandings, pitfalls, and criticism — especially in the short run. GDP includes only ‘final’ goods and services, leaving out the huge economy that consists of businesses buying and selling intermediate goods to one another.” (2015: 4).[5]
Third, GO by Industry disaggregates the economy into 402 industries and 69 commodities, allowing economists to see more clearly how the structure of the economy is shifting over time. Austrian economists who are critical of aggregate statistics will find this approach appealing and fertile ground for research on potential imbalances and asset bubbles in the economy.
The Importance of Business in the Economy
Fourth, GO shows that business spending is far more important than consumer spending. The overarching view of economic activity changes dramatically when you switch from the narrow GDP model to the broader GO model. See figure 5 below comparing the GO* and GDP models.
Figure 5. GDP Model vs GO Model in 2016 (calculations by author). II stands for Intermediate Inputs.
Source: Bureau of Economic Analysis, www.bea.gov. 2016
The GDP model gives the impression that spending by consumers is the main driver of the economy, representing two thirds of GDP. (See figure 1.) But by using the broader GO model, we can refigure the breakdown in total economic activity and see very different results.
Thus, we can refigure the breakdown of total economic activity as follows:
Figure 6. Breakdown of GO 2016.
Source: www.bea.gov, additions from author.
Using the GO model above, it turns out that consumer spending is only about a third of total economic activity, and business spending (B2B transactions, or I+II in figure 6) is close to 60% and thus far more significant than the retail or consumer market.
From the GO data, I have created the Skousen B2B Index, which measures all business spending throughout the production process. As you can see from figure 7 below, it is almost double the level of consumer spending in the United States and more volatile. B2B is also much more volatile than consumer spending.
Figure 7. US Business Spending and Consumer Spending, 2007-2016.
Source: BEA data, plus US Census Bureau data on monthly wholesale and retail trade to create the Skousen B2B Index.
By incorporating the supply chain, national income accounting gives a full business perspective of the production process. John Hicks recognized this years ago. “It is the typical business man’s viewpoint, nowadays the accountant’s viewpoint, in the old days the merchant’s viewpoint.” (Hicks 1973:12) As former BEA director Steve Landefeld noted when GO was introduced in 2014, “Gross Output provides an important new perspective on the economy and a powerful new set of tools of analysis, one that is closer to the way many businesses see themselves.” (BEA News Conference, 25 April 2014).
CNBC’s Larry Kudlow best reflects the implications of the GO model: “Though not one in a thousand recognizes it, it is business, not consumers, that is the heart of the economy. When businesses produce profitably, they create income-paying jobs and then consumers spend. Profitable firms also purchase new equipment because they need to modernize and update all their tools, structures and software” (Kudlow 2006).
GO Provides a Powerful Link between Micro and Macro
In a very real sense, GO fills in the missing piece of the macroeconomic puzzle. GO is truly a snapshot of the total economy, because it includes both the full production process and the final product (GDP).
In economics, the development of GO provides a vital link between microeconomics, the theory of the firm, to macroeconomics, the theory of the economy as a whole. Here below in figure 8, I reproduce John Taylor’s 4-stage micro model in the production of a cup of espresso.
Figure 8. Four Stages of Production of Espresso Coffee.
Source: John B. Taylor, Economics, 5th ed. (Boston: Houghton Mifflin, 2006)
This is similar to the 4-stage macro model in figure 1. Thus, we see a link between micro and macro.
In microeconomics, profits and losses are derived from a firm’s revenues minus expenses at each stage of production. The final price of the retail good or service is equivalent to the combined profit margins or value added of all the previous stages of production. In macro, we witness a similar phenomenon: GO adds up all the revenues of all firms throughout the stages of production, while GDP determines the value of the final/finished goods and services, or value added (gross profit).[6]
GO as a Unifying Force in Economics
The introduction of GO can be viewed as a unifying force in accounting, finance and economics. Even the varying schools of economics see value in this new macro statistic.
GO appeals to supply-side economists. As Prof. Steve Hanke (Johns Hopkins) states, “With GO, GDP’s monopoly will be broken as the U.S. government will provide official data on the supply side of the economy and its structure” (Hanke 2014). According to Hanke, GO confirms Say’s law, that the business sector of the most important force in the economy. Thus, entrepreneurship, technology, saving and investment, and capital formation form the foundation of economic growth. Accordingly, business activity drives the economy much more so than consumer spending or government stimulus.
Monetarists may find GO a move in the right direction. GO can be viewed as a way to measure Irving Fisher’s famous Equation of Exchange, where MV=PT, in The Purchasing Power of Money (1911).[7] Fisher is the father of monetarism and the Quantity Theory of Money, which argues that price inflation (P) is determined largely by increasing in the money supply (M). As Jeremy Siegel (Wharton) wrote me, “Gross output is truly a measure of the aggregate demand for money (MV).” GO can also be viewed as an attempt to quantify PT, the “volume of trade,” although it omits financial transactions of assets (stocks, bonds, real estate, collectibles, etc.).
Even Keynesians have embraced GO. GO expands J. M. Keynes’s Aggregate Demand function (The General Theory, 1936) to include the demand for all goods and services along the supply chain, not just final effective demand (final use, or GDP). As William D. Nordhaus (Yale) wrote me, “This will open up the potential for new insights into the behavior of the economy.”
Finally, GO can be viewed as a major advance in Austrian economics, since it is a measure of Hayek’s triangle. I consider the BEA’s decision to publish GO every quarter along with GDP as the biggest advance in Austrian economics since Hayek won the Nobel Prize in 1974. Think of it as the Hayek-Keynes Part II debate. This time Hayek wins (or at least ties).
Conclusion: GO Creates a New Paradigm Shift in Macroeconomics
In sum, gross output goes a long way toward completing the macroeconomic puzzle. It links macro with microeconomics. And it is a powerful unifying force – bringing together the disciplines of accounting, finance, business, and economics; and finding common ground in all the major schools of economics.
GO is now being integrated into most of the top economics textbooks. The following textbooks have added or plan to add sections on GO: McConnell Brue Flynn; Roger LeRoy Miller; David Colander; John Taylor; and Glenn Hubbard. Since GO complements GDP, it’s not difficult to integrate GO in the chapter on national income accounting. (To see how this is done, see chapters 14 and 15 of my Economic Logic.)
Other countries are moving ahead with measuring the supply chain in the economy. It has been adopted in the UK on an annual basis (called “Total Output”). The US is in the forefront of this system of national accounts, and I expect the G20 countries to follow within the next ten years.
Double Counting and Other Issues
Although much progress has been made in the acceptance of GO, there is still considerable debate about this new measure. Only a handful of academic journals have discussed it, and the textbooks are just starting to incorporate it. The adoption and approval of GO is far from complete.
Some economists have raised concerns about GO: that it is nothing more than “double counting,” and that mergers, vertical integration, and outsourcing distorts GO. Even the BEA raises doubts about the accuracy of GO, and downplays its significance when it reports every quarter. In frequently asked questions, the BEA states:
“Gross output by industry is an essential statistical tool needed to study and understand the interrelationships of the industries that underlie the overall economy. However, because of its duplicative nature, it may not be a good stand-alone indicator of the overall health of an industry or sector. What can one infer about the economic health of an industry solely from the fact that gross output increases? Nothing, without understanding what happened to the change in intermediate inputs and to value added. Did the increase in gross output simply reflect a change in the extent of outsourcing or could it reflect a more substantive, fundamental change in the economy? Gross output alone does not provide enough information to answer that question. Moreover, focusing solely on gross output is likely to exaggerate the cyclical-nature of the economy, particularly for sectors that are more sensitive to this cyclicality, like manufacturing.” (BEA, “What is gross output by industry and how does it differ from gross domestic product by industry?”, Frequently Asked Questions: https://www.bea.gov/faq/index.cfm?faq_id=1034)
My response: GO does indeed involve the repeatedly sale of a commodity as it goes through the production, while GDP measures value added only and thus avoids double counting. I agree that double counting should be avoided in measuring final output, but that does not mean it is without value and should be ignored. For two reasons, multiple transactions in the supply chain play a vital and necessary role in the capitalist system.
First, products are often transformed as they move along the production process, e.g., iron ore becomes steel; coffee beans are roasted and grounded; cowhide becomes leather and then shoes; wholesalers distribute goods from one location to another – all serving useful, productive purposes that should be measured.
Second, businesses are engaging in real economic activity throughout the “double counting” process. Checks are being written and investment funds are being advanced to pay for gross expenses of a business, including goods-in-process. B2B transactions are the critical steps in moving the production process along the supply chain toward final use. Firms cannot run a business on value added alone. In sum, double counting counts. No analyst on Wall Street can afford to ignore sales, the top line in financial statements, and focus on profits only. Equally the smart economist will look at the direction of GO as well as GDP in determining economic performance.
Outlook for GO
Despite concerns about its efficacy, the BEA continues to publish GO and GO by Industry every quarter, and plans to publish this data simultaneously with GDP in the near future.
GO is a work in progress, and researchers are likely to find fertile ground with this new macro data. The introduction of GO is a paradigm shift in economics, and as such, debates and in-fighting in the profession are common place and will continue in our goal to find a complete and accurate model of the economy. Despite its imperfections, GO is a giant step in the right direction.
Cited Works
Barro, Robert J. 2011. “How to Really Save the Economy.” New York Times (September 10).
Baumol, William J. and Alan S. Blinder. 1988. Economics: Principles and Policies. 4th ed. San Diego: Harcourt Brace Jovanovich.
Bernanke, Ben. 2015. “The Global Savings Glut.” Brookings Institute. https://www.brookings.edu/blog/ben-bernanke/2015/04/01/why-are-interest-rates-so-low-part-3-the-global-savings-glut/
Colander, David. 2014. “Gross Output.” Eastern Economic Journal 40:451-455.
Conference Board. 2017. “The Conference Board Leading Economic Index.” http://www.conference-board.org/data/bcicountry.cfm?cid=1
Forbes, Steve. 2014. “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal.” Forbes Magazine (April 14): http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/
Hanke, Steve. 2014. “GO: J. M. Keynes Versus J.-B. Say,” Globe Asia (July) http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say
Hicks, John R. 1973a. “The Austrian Theory of Capital and Its Rebirth in Modern Economics.” In Carl Menger and the Austrian School of Economics, ed. By J. R. Hicks and W. Weber. Oxford: Oxford University Press.
Hicks, John R. 1973b. Capital and Time. Oxford: Oxford University Press.
Jorgenson, Dale W, J. Stephen Landefeld, and William D. Nordhaus. 2006. A New Architecture for the US National Accounts. Chicago: NBER and University of Chicago Press.
Kennedy, John F. 1963. Economic Report of the President. Washington, DC: US Printing Office.
Keynes, John Maynard. 1973 [1936]. The General Theory of Employment, Interest and Money. New York: Macmillan.
Kudlow, Larry. 2006. “On Jobs, Tax Cuts, and the Democrats.” National Review Online (September 5).
Kuhn, Thomas. 1962. The Structure of Economic Revolution. Chicago: University of Chicago Press.
Kuznets, Simon. 1934. “National Income, 1929-1932.” National Bureau of Economic Research, Bulletin 49 (June 7).
Leontief, Wassily. 1966. Input-Output Economics. New York: Oxford University Press.
Minsky, Hyman. 1982. Can “It” Happen Again? Essays in Instability and Finance. New York: M. E. Sharpe Publishers.
Papola, John. 2013. “Think Consumption is the ‘Engine’ of our Economy? Think Again,” Forbes, January 2, 2013. https://www.forbes.com/sites/beltway/2013/01/30/think-consumption-is-the-engine-of-our-economy-think-again/#54b6956f6497
Ranson, R. David. 2015. “Alternative data to track the economy and better explain capital-market prices,” Economy Watch, HCWE & Co., November 3. http://www.hcwe.com/trials/EW-1015.pdf.
Tarshis, Lorie. 1947. The Elements of Economics. Boston: Houghton Mifflin.
Thornton, Daniel L. 2009. “Personal Saving and Economic Growth,” Economic Synopses, St. Louis Fed, December 17.
Samuelson, Paul A. 1948. Economics: An Introductory Analysis. New York: McGraw Hill.
Mark Skousen, “At Last, a Better Way to Economic Measure” lead op ed, Wall Street Journal, April 23, 2014: http://www.wsj.com/articles/SB10001424052702303532704579483870616640230
Skousen, Mark. 2015 [1990]. The Structure of Production. New York: New York University Press.
Skousen, Mark. 2017 [2008]. Economic Logic. 5th ed. (Washington, DC: Capital Press)
Solow, Robert. 1957. “Technical Change and the Aggregate Production Function.”Review of Economics and Statistics 39 (August): 312–320.
For More Information on Gross Output
“Gross Output” Wikipedia entry: https://en.wikipedia.org/wiki/Gross_output
The GO data released by the BEA can be found at www.bea.gov under “Quarterly GDP by Industry.” Click on interactive tables “GDP by Industry” and go to “Gross Output by Industry.” Or go to this link directly: https://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5114=q&5102=15
For the latest analysis of quarterly gross output statistics, see my press releases at www.mskousen.com.
Mark Skousen, The Structure of Production (New York University Press, 1990), with new introductions in 2007 and 2015.
Mark Skousen, “At Last, a Better Way to Economic Measure” lead op ed, Wall Street Journal, April 23, 2014: http://www.wsj.com/articles/SB10001424052702303532704579483870616640230
Steve Forbes, Forbes Magazine (April 14, 2014): “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal”: http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/
Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”: http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/
Gene Epstein, “A New Way to Gauge the Economy,” Barron’s, April 26, 2014: http://www.barrons.com/articles/SB50001424053111903409104579515671290511580
Steve Hanke, Globe Asia (July 2014): “GO: J. M. Keynes Versus J.-B. Say,”: http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say
David Colander, “Gross Output,” Eastern Economic Journal 40:451-455 (2014): http://www.palgrave-journals.com/eej/journal/v40/n4/full/eej201439a.html
Mark Skousen, rejoinder, “On the GO: De-Mystifying Gross Output,” Eastern Economic Journal 41:284-288 (2015): http://www.palgrave-journals.com/eej/journal/v41/n2/full/eej201465a.html
Mark Skousen, “Linking Austrian Economics to Keynesian Economics,” Journal of Private Enterprise, Winter, 2015: http://journal.apee.org/index.php?title=Parte7_Journal_of_Private_Enterprise_vol_30_no_4.pdf
Footnotes
[1] In addition to overplaying the influence of consumer spending, GDP underplays the role of trade. Trade, measured by the value of exports plus imports, amounted to 26.9% of GDP in the United States in 2016. It’s substantially higher in most other countries, over 58% of world GDP in 2015. It’s 85% in the Republic of Korea. See http://data.worldbank.org/indicator/NE.TRD.GNFS.ZS
[2] Intrigued by their efforts, I traveled to Europe to meet Hayek and Hicks. In 1985, I met with Friedrich Hayek at his summer home in the Austrian Alps, and we discussed his macroeconomic theories of capital and the business cycle, and he expressed hope that someday economists would carry on his Austrian macro model.
Three years later, in the summer of 1988, I met 84-year-old Sir John Hicks, the famed Nobel laureate who transformed Keynesian economics into the grand neoclassical synthesis with his 1937 article in Econometrica, “Mr. Keynes and the ‘Classics’.” Despite his age and physical ailments, his mind was alert and, during our meeting, he recounted how he had gradually become disenchanted with modern economic theory he helped to develop. In particularly, he seemed displeased by the failure of orthodox economists to teach the importance of time and the stages-of-production concept in macroeconomics, a subject he emphasized in his own textbook, The Social Framework (1971), and later in his treatise, Capital and Time (1973b).
[3] Leontief originally estimated gross output (GO) in his input-output tables that came out every five years, and in the early 1990s, the BEA began publishing GO every year, but the data was always several years behind.
[4] Unfortunately, the BEA measure of GO does not include all wholesale and retail trade figures. As a BEA explains, “The output for industries that buy and sell merchandise but do not provide any additional fabrication is measured as margin. By I-O convention, this margin is measured as sales receipts less the cost of goods” (Bureau of Economic Analysis, Concepts and Methods of the U. S. Input-Output Accounts: Measuring the Nation’s Economy. 2nd ed. U. S. Department of Commerce, 2009, pp. 4-5). By the BEA’s measure, GO reached $32.4 trillion in 2016. When you include total wholesale and retail trade, it adds an additional $7.6 trillion to what I now term “adjusted GO” — $40 trillion, more than double GDP ($18.7 trillion).
[5] I send out a press release every quarter analyzing the latest quarter GO data. See www.mskousen.com.
[6] Because GDP includes returns of the factors of production (incomes, rents, interest, and profits), GDP is actually equivalent to the accounting term gross profit, not net income or profits, in a financial statement. I thank David Colander (Middlebury College) for pointing this out.
[7] I thank Vernon Smith (Chapman University) and Jay Carlson (Utah Valley University) for pointing out how GO is an updated version of Fisher’s equation of exchange.
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Buchanan, James M./Richard E. Wagner: Democracy in Deficit - The Political Legacy of Lord Keynes, New York et al. (Academic Press) 1977.
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Elster, Jon: Ulysses and the Sirens, revised edition, Cambridge (Cambridge University Press) 1984.
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Eucken, Walter (1948b): “What Kind of Economic and Social System?”, in: A. Peacock/H. Willgerodt (Eds.): Germany’s Social Market Economy: Origins and Evolution, London (Macmillan) 1989, pp. 27–45 (German publication 1948 ).
Eucken, Walter: “Die Wettbewerbsordnung und ihre Verwirklichung”, Ordo, 2 (1949), pp. 1–99.
Eucken, Walter: This Unsucessful Age - or The Pains of Economic Progress. With an Introduction by J. Jewkes, New York (Oxford University Press) 1952 (first German publication 1951 ).
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Grossekettler, Heinz G.: “On Designing an Economic Order. The Contributions of the Freiburg School”, in: D. A. Walker (Ed.): Twentieth Century Economic Thought, Vol. 2. Aldershot (Elgar) 1989, pp. 38–84.
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De Jasay, Anthony: “The Cart Before the Horse–On Emergent and Constructed Orders, and Their Wherewithal”, in: Ch. Frei and R. Nef (Eds.): Contending with Hayek. On Liberalism, Spontaneous Order and the Post-Communist Societies in Transition, Bern (Peter Lang) 1994, pp. 49–64.
Kasper, Wolfgang/Streit, Manfred E.: Lessons from the Freiburg School - The Institutional Foundations of Freedom and Prosperity, Syndey (Centre for Independent Studies) 1993.
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Mestmäcker, Ernst-Joachim: «Bausteine einer Wirtschaftsverfassung - Franz Böhm in Jena», Max-Planck-Institut zur Erforschung von Wirtschaftssystemen - Lectiones Jenenses, Vol. 4, 1996.
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Müller-Armack, Alfred: “The Meaning of the Social Market Economy”, in: A. Peacock/H. Willgerodt (Eds.): Germany’s Social Market Economy: Origins and Evolution, London (MacMillan) 1989, pp. 82–86 (first publication 1956 ).
Nienhaus, Volker: Persönliche Freiheit und moderne Demokratie - F.A. Hayeks Demokratiekritik und sein Reformvorschlag eines Zweikammersystems, Tübingen ( J.C.B. Mohr [Paul Siebeck] ) 1982.
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Popper, Karl R.: The Open Society and its Enemies, Princeton (Princeton University Press) 1950 (first publication 1945 ).
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Streit, Manfred E.: “The Shadow Economy–A Challenge to the Welfare State?”, Ordo, 35 (1984), pp. 109–119.
Streit, Manfred E.: “Economic Order and Public Policy–Market, Constitution and the Welfare State”, in: R. Pethig, U. Schlieper (Eds.): Efficiency, Institutions, and Economic Policy, Berlin et al.(Springer) 1987, pp. 1–21.
Streit, Manfred E. (1992a): “Economic Order, Private Law, and Public Policy–The Freiburg School of Law and Economics in Perspective”, Journal of Institutional and Theoretical Economics (JITE), 148 (1992), pp. 675–704.
Streit, Manfred E. (1992b): “Das Wettbewerbskonzept der Ordnungstheorie, in: E. Görgens, E. Tuchtfeldt (Eds.): Die Zukunft der wirtschaftlichen Entwicklung–Perspektiven und Probleme, Bern et. al (Haupt) 1992, pp. 83–108.
Streit, Manfred E. (1992c): “Die Interdependenz der Ordnungen - Eine Botschaft und ihre aktuelle Bedeutung”, in: Streit, Manfred E.: Freiburger Beiträge zur Ordnungsökonomik, Tübingen (J.C.B. Mohr [Paul Siebeck]) 1995, pp. 135–158 (first publication 1992 ).
Streit, Manfred E.: “Cognition, Competition, and Catallaxy–In Memory of Friedrich August von Hayek”, Constitutional Political Economy, 4 (1993), pp. 223–262.
Streit, Manfred E.: “The Freiburg School of Law and Economics”, in: P. J. Boettke (Ed.): The Elgar Companion to Austrian Economics, Aldershot (Edward Elgar) 1994.
Streit, Manfred E.: “Competition Among Systems as a Defence of Liberty”, in: H. Bouillon (Ed.): Libertarians and Liberalism–Essays in Honour of Gerard Radnitzky, Aldershot (Avebury) 1996, pp. 236–252.
Streit, Manfred E. (1998a): “Soziale Marktwirtschaft im europäischen Integrationsprozeß: Befund und Perspektiven”, in: D. Cassel (Ed.): 50 Jahre Soziale Marktwirtschaft–Ordnungstheoretische Grundlagen, Realisierungsprobleme und Zukunftsperspektiven einer wirtschaftspolitischen Konzeption, Stuttgart (Lucius 00000 Lucius) 1998, pp. 177–199.
Streit, Manfred E. (1998b): “Constitutional Ignorance, Sponataneous Order and Rule-Orientation: Hayekian Paradigms from a Policy Perspective”, in: St. F. Frowen (Ed.): Hayek: Economist and Social Philosopher–A Critical Retrospect, London (Macmillan) 1998, pp. 37–58.
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Who’s Afraid of Friedrich Hayek? The Obvious Truths and Mystical Fallacies of a Hero of the Right
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Right wingers love Friedrich Hayek. The Austrian-British economist is revered by true believers at the American Enterprise Institute, the Cato Institute, the National Review, and the Weekly Standard. Ronald Reagan and Margaret Thatcher cited his ideas as central to the …
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Who’s Afraid of Friedrich Hayek? The Obvious Truths and Mystical Fallacies of a Hero of the Right
Right wingers love Friedrich Hayek. The Austrian-British economist is revered by true believers at the American Enterprise Institute, the Cato Institute, the National Review, and the Weekly Standard. Ronald Reagan and Margaret Thatcher cited his ideas as central to the social revolutions they hoped to spark. Antigovernment ideologues admire him as one of those few who kept Adam Smith’s fires burning during the dark reign of John Maynard Keynes in the West; his most famous book, The Road to Serfdom, has sold more than 350,000 copies in the United States alone. And the modern right has enlisted Hayek as a political weapon: Why can’t those loony lefties acknowledge the simple and obvious truths that he understood?
I try to keep abreast of right-wing thought, so I’d been aware of Hayek for a long time, and aware of his status in certain circles. Recently I decided I should study his work, much as, in my twenties, I decided I really ought to read the Bible. Influential, whether I like it or not.
Hayek was a surprise, in several ways. He’s nowhere near as extreme as his ideological descendants. He admits that there are a few rare economic circumstances in which market forces cannot deliver the optimum result, and that when these occur, the state may legitimately intervene. He recognizes such a thing as the social interest and will even endorse some limited redistributionalism—he goes so far as to suggest that the state ensure a minimum standard of living, an idea that surely embarrasses the good folks at Cato. Politically, Hayek is not the cynic I had braced for. Plainly, transparently—and in stark contrast to many modern conservative intellectuals—he is a man concerned with human freedom. One of the unexpected things in Road is that he writes with passion against class privilege.
Hayek is by no means as rational and irrefutable as the right would have it. Indeed, he is often eccentric. He is a romantic, a serious deficit in a social theorist. Many of his arguments rest on a reductionist idea of socialism, and his conception of the sources of law can only be called mystical. But Hayek is not merely an eccentric mystic. In Road, first published in 1944, he makes a powerful and far-ranging critique of state control of economic life. At least as far as he takes the argument in this book, there isn’t much that thoughtful modern liberals or even democratic socialists who understand the power of markets would necessarily object to—although they might feel that there is more to the story than Hayek acknowledges.
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The Fortunes of Liberalism1 collects a wide-ranging number of Friedrich. A. Hayek’s articles, reviews, addresses, and even obituaries—35 in total—spanning all seven decades of his scholarly career from the 1920s to the 1980s. To call this collection eclectic is an understatement, but the unifying theme is Hayek’s perspective on thinkers who have some connection to […]
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The editors of this volume of Hayek’s collected works, operating under the unfortunate circumstance of founding Editor William Bartley’s death, organized it into two main parts: one on Austrian economics and one on the titular fortunes of liberalism. Within each part, Hayek’s thoughts are divided into chapters by thinker or theme rather than including a separate chapter for each original piece. So, for instance, the chapter on Carl Menger includes both a biography of Menger and an essay on Menger’s Principles of Economics. Sometimes pieces are folded into chapters as “addenda” that are thematically related. Each section begins with a “prologue,” a particular essay that is meant to set the tone for that part. And the chapter on Wittgenstein is presented as a “Coda” to Part I. While it makes perfect sense that the editors sought to provide some thematic structure to the book, this organization is ultimately bewildering.
Fortunately, the volume includes an appendix that lists the contents by date, making clear what elements constitute each chapter and when they were written. This is how I would recommend interested readers approach the text. Interested readers could either simply read the entries most relevant to their own interests or proceed chronologically. I took the latter approach, and found the contents a fascinating window into Hayek’s intellectual evolution.
It is certainly possible to read these essays in order to learn about their respective subjects. Hayek was himself interested in the history of ideas, and paints fascinating pictures of the state of the economics profession in the 1920’s, Carl Menger’s life and work, and the intellectual climate of interwar Vienna. But it is difficult to separate Hayek’s reconstructions of others’ ideas from his own thoughts. The essays here say as much or more about Hayek as they do about their subjects. Since the collected pieces span the entirety of Hayek’s career, Fortunes serves as a valuable companion piece to intellectual biographies and overviews of Hayek’s thought such as Hayek’s Challenge by Bruce Caldwell or Peter Boettke’s recent F.A. Hayek: Economics, Political Economy, and Social Philosophy.
Fortunes touches on an incredible breadth of topics, and it is impossible to comment on all of them. Here I focus on one theme in particular that recurs throughout this collection: Hayek’s views on the methodology of the social sciences. How can economists and other social scientists generate knowledge about economic and other social phenomena?
The primary figure Hayek engages with in this particular volume is Ludwig von Mises. While he engages with many other thinkers throughout the text, his agreements and disagreements with Mises are spelled out in far more detail. When it comes to other thinkers, Hayek frequently glosses over disagreements—”in a short review… it would not be appropriate to say more about any minor faults” (on Schumpeter, page 162)—or treats them in a sort of totemic fashion, dubbing thinkers like Lord Acton and Alexis de Tocqueville “patron saint[s]” (page 247) of the movement he wishes to build. This is even true of Hayek’s own teacher, Friedrich Wieser. While Hayek’s obituary of Wieser is packed to the brim with admiration, he is (appropriately) coy about points of agreement or disagreement with his former mentor. He engages Mises on a much more substantive level.
The relationship between Mises and Hayek has been hotly debated among economists interested in their ideas. Editor Peter Klein’s introduction surveys some of these debates (pages 9-13). Hayek himself penned “Economics and Knowledge” partly as a critique of what he understood as Mises’s extreme belief that economics was strictly a priori and deductive rather than empirical. In “Economics and Knowledge” Hayek qualifies this view by claiming that part of economics—that part dealing with how knowledge is generated and transmitted by the economic systems—is necessarily empirical. But as Hayek notes, after reading this article, Mises never expressed any disagreement with it (pages 55-56). How did Hayek’s views evolve after 1937?
Hayek’s 1941 review of Nationalökonomiei, the German language predecessor to Human Action, coincides with a crossroads in Hayek’s thought, around the time that he began work on his “Abuse of Reason” project (c.f. Caldwell 2004, Ch. 11). His views on this book are mixed. He expresses dismay that, while Mises’s thought has evolved over the decades, it does not engage seriously enough with contemporary economic theory (page 150). He praises the book on two specific grounds. First, he claims that the central part of the text is not Mises’s ruminations on methodology, but his analysis of an exchange society in terms of what is later called comparative advantage. Second, he admires Mises’s foray outside of economics proper into broader social philosophy (page 151). This would become a theme in all of Hayek’s work from the 1940’s onward. Because Nationalökonomiei is “more like [the work] of an eighteenth-century philosopher than that of a modern specialist… one feels throughout much nearer to reality” (page 152). In line with his own thinking at the time, he sees engagement with law, politics, and philosophy as a virtue rather than a vice. Hayek sums up his feelings thus:
Although the reviewer would put many things differently, he must confess, at the risk of being condemned with Professor Mises as holding views conflicting with the whole trend of modern scientific development, that on the main point Professor Mises’s lone voice seems to him considerably nearer the truth than the commonly accepted views. (page 152)
A 1956 tribute to Mises that Hayek delivered at the Foundation for Economic Education reiterates this appreciation for a broader approach to economics, in line with older thinkers like Adam Smith and Montesquieu (page 133). In a tribute to Wilhelm Röpke published a few years later, Hayek makes his esteem for ‘political economy’ of this sort even more explicit:
One is often more realistic and in closer touch with reality in the social sciences when one does not limit oneself to those facts that are measurable and quantifiable. There is also an intermediate realm between ‘pure’ theory and questions of practical politics where systematic treatment is at least as useful as in pure theory. (page 197)
In March 1964, Hayek reviews an English translation of Mises’s Epistemological Problems of Economics. He defends the contemporary relevance of the book, claiming that “the sort of uncritical empiricism against which this book is mainly directed is today probably found more frequently and in a more naïve form among American social scientists than anywhere else” (page 147). Hayek then goes on to claim that Mises’s view only gives the appearance of being extreme, and that, “on examination, the difference between the views which Professor Mises has long held and the modern ‘hypothetico-deductive’ interpretation of theoretical science (e.g., as stated by Karl Popper in 1935) is comparatively small” (page 148). This claim will surprise those who are familiar with the common reading of Mises as an ‘extreme’ apriorist. But Hayek shares this reading of Mises with Fritz Machlup (1955), a reading that has recently been articulated and defended by Gabriel Zanotti and Nicolas Cachanosky (2015). Hayek in fact sees this view as common to Austrian economics generally, arguing that Menger’s approach to understanding social institutions also has empirical, falsifiable content rather than being merely theoretical (pages 102-103).
Hayek also mentions approvingly Mises’s argument that social science can also lean on our understanding (German Verstehen) of human intentionality (page 148). We understand human values and goals because we ourselves are human. This point is quite similar to Hayek’s own argument that the “facts of the social sciences” consist partly in what people think and believe. A dollar bill, for example, counts as money because we believe that it does.
But Hayek’s thoughts on the role of qualitative understanding, as opposed to a more mathematical approach to human behavior, are muddied by two later entries in Fortunes. In his 1978 chapter on the historical significance of Menger’s Principles of Economics, Hayek expresses sympathy for Menger’s reliance on Verstehen, but wonders whether later mathematical techniques—particularly indifference curve analysis—render this approach unnecessary for economic theory (pages 102-103). In an unfinished essay for the New Palgrave dictionary of economics from the early 1980s, Hayek states that indifference curve analysis as developed by John R. Hicks in the 1930s “may well be regarded as the ultimate statement of more than half a century’s discussion in the tradition of the Austrian school.” (page 54)
I raise these complications not because I think they are particularly important, but as a note of caution. It is tempting to read either too much coherence or too much incoherence into Hayek’s thought, especially when pulling from articles, book reviews, obituaries, and fragments that span seven decades. It is not always clear when Hayek is expressing ecumenical professional judgments independent of his agreement or disagreement, when he is understating his own views, or when he is simply being kind to those he discusses. It is especially unwise to develop a strong impression of Hayek’s views from only considering this volume. So the interpretation I offer here should be taken as leaning on a limited and inconsistent set of observations.
In 1978, Hayek pens the foreword to the Liberty Fund edition of what is his favorite book by Mises, Socialism. He credits this book with a fundamental change in his views. With the benefit of hindsight, Hayek recognizes that Mises’s theory of the market process differed substantially from that of other economists (pages 140-141). This meant that his argument that a socialist planner could not engage in economic calculation fell at least partly on deaf ears. The pushback against Mises in the broader economics profession is, I suspect, what ultimately led both Mises and Hayek to write so much on economic methodology in the ensuing decades. They did not understand why everyone else did not see the point as clearly as they did.
This foreword also includes the most direct critique of Mises in Fortunes. Hayek takes issue with Mises’s claim that liberalism comes from a rational recognition of the benefits of social cooperation (page 142). Rather, says Hayek, human beings stumbled into a liberal, market order largely by accident. We may have come to prefer living in this sort of society ex post, but we did not rationally design it. This claim of course echoes Hayek’s famous view that important social institutions often evolve spontaneously rather than intentionally, one that he associates in this volume primarily with Menger (page 103) and Smith (page 56). Hayek goes on to claim that Mises later “largely emancipated himself from that rationalist-constructivist starting point” (page 142), but does not cite any work in particular. Perhaps he has in mind Human Action, since it post-dates socialism. Without speculating on particular passages Hayek might be thinking of, this book has a number of statements such as “the evolution of reason, language, and cooperation is the outcome of the same process; they were inseparably and necessarily linked together” (1949, page 43). This view is similar to Hayek’s argument in Law, Legislation, and Liberty that reason is a product of social evolution (1973, Ch. 1).
The difference between Mises and Hayek is often portrayed as the difference between an arch-rationalist and a skeptical empiricist. The essays in Fortunes, while not speaking decisively to this view—and obviously not considering Mises’s own words—complicate this simplistic view. It is no accident that both Mises and Hayek wrote so widely on so many topics. For both, understanding the process of social cooperation requires attention to the institutional framework of economic activity. Economists need to interact with diverse disciplines such as law, history, politics, moral philosophy, and psychology. And economics is but one part of a broader social philosophy, a philosophy that both of them identify with liberalism.
In his later work, Hayek does not object to Mises’s methodology so much as his early social rationalism. Time and again Hayek casts Mises in a more nuanced light than either his critics or some of his more enthusiastic followers. Maybe he is wrong. But Hayek takes the work of his revered mentor not as settled doctrine but as a launching pad to develop new and better ways of understanding the world. This is the best any academic mentor can hope for. As Peter Klein quotes in his introduction, Margit von Mises [Mises’s wife] said that “Lu[dwig] met every new student hopeful that one of them might develop into a second Hayek” (page 9).
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partly from Encyclopedia Britannica Sir John R. Hicks, in full Sir John Richard Hicks, (born April 8, 1904, Leamington Spa, Warwickshire, England—died May 20, 1989, Blockley, Gloucestershire), English economist who made pioneering contributions to general economic equilibrium theory and, in 1972, shared (with Kenneth J. Arrow) the Nobel Prize for Economics. He was knighted in…
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partly from Encyclopedia Britannica
Sir John R. Hicks, in full Sir John Richard Hicks, (born April 8, 1904, Leamington Spa, Warwickshire, England—died May 20, 1989, Blockley, Gloucestershire), English economist who made pioneering contributions to general economic equilibrium theory and, in 1972, shared (with Kenneth J. Arrow) the Nobel Prize for Economics. He was knighted in 1964.
Hicks was educated at Clifton College (1917–1922) and at Balliol College, Oxford (1922–1926), and was financed by mathematical scholarships. During his school days and in his first year at Oxford, he specialised in mathematics but also had interests in literature and history. In 1923, he moved to Philosophy, Politics and Economics, the “new school” that was just being started at Oxford. He graduated with second-class honors and, as he stated, “no adequate qualification in any of the subjects” that he had studied.
From 1926 to 1935, Hicks lectured at the London School of Economics and Political Science. He started as a labour economist and did descriptive work on industrial relations but gradually, he moved over to the analytical side, where his mathematics background returned to the fore. Hicks’s influences included Lionel Robbins and such associates as Friedrich von Hayek, R.G.D. Allen, Nicholas Kaldor, Abba Lerner and Ursula Webb, the last of whom, in 1935, became his wife.
From 1935 to 1938, he lectured at Cambridge where he was also a fellow of Gonville & Caius College. He was occupied mainly in writing Value and Capital, which was based on his earlier work in London. From 1938 to 1946, he was Professor at the University of Manchester. There, he did his main work on welfare economics, with its application to social accounting.
In 1946, he returned to Oxford, first as a research fellow of Nuffield College (1946–1952) then as Drummond Professor of Political Economy (1952–1965) and finally as a research fellow of All Souls College (1965–1971), where he continued writing after his retirement.
Hicks made major contributions to many areas of 20th-century economics; four, in particular, stand out. First, he showed that, contrary to what Karl Marx had believed, labour-saving technological progress does not necessarily reduce labour’s share of the income. Second, in his 1937 paper Mr Keynes and the Classics he devised a diagram—the IS-LM diagram—that graphically depicts John M. Keynes’s conclusion that an economy can be in equilibrium with less-than-full employment. Third, through his book Value and Capital (1939), Hicks showed that much of what economists believe about value theory (the theory about why goods have value) can be reached without the assumption that utility is measurable. Fourth, he came up with a way to judge the impact of changes in government policy. He proposed a compensation test that could compare the losses for the losers with the gains for the winners. If those who gain could, in principle, compensate those who lose—even if they do not actually and directly compensate them—then, claimed Hicks, the change in policy would be efficient.
Key Works
1937, “Mr. Keynes and the ‘Classics.’” Econometrica 5 (April): 147–159.
1939, “The Foundations of Welfare Economics.” Economic Journal 49 (December): 696–712.
1939, Value and Capital. Oxford: Clarendon Press.
1940, “The Valuation of the Social Income.” Economica 7 (May): 105–124.
1965. Capital and Growth. Oxford: Clarendon Press.
1973, Capital and Time: A Neo-Austrian Theory. Oxford: Clarendon Press.
1974, The Crisis in Keynesian Economics. Oxford: Basil Blackwell.
Link to Hicks article at the History of Economic Thought Website
Link to Hicks article in the EconLib Concise Encyclopedia of Economics
Link to Wikipedia article on John Richard Hicks
Link to Hicks page at Nobel Foundation
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Sir John Richard Hicks (April 8, 1904 – May 20, 1989) was a British economist, one of the most influential economists of the twentieth century. He contributed to the field of economics with his IS/LM model, which summarized the Keynesian view of macroeconomics in graphical form. He also introduced the idea of elasticity of substitution, which showed that labor-saving technical progress does not reduce labor's share of income. In his book, Value and Capital, one of the first works on general equilibrium theory, Hicks showed that value could be understood without having to quantify utility. He also contributed to welfare economics, developing a way to compare the impact of different policies, regarding the one that produced sufficient gain to compensate for any losses and still provide benefit to be worthy of implementation.
Hicks was not a follower of a particular school of economics, but rather took an eclectic approach, reviving and further developing the best of each school. Thus, his work was an attempt to better understand all types of economic forces and to be better able to establish an economically stable human society, benefiting all people. In 1972, Hicks was awarded the Nobel Prize in Economics, together with Kenneth J. Arrow, for his contributions to general economic equilibrium theory and welfare theory.
Life
John Richard Hicks was born in Leamington Spa, Warwickshire, England, the son of a journalist. He was educated at Clifton College (1917-1922) and later received a mathematical scholarship to study at Balliol College, at the University of Oxford, where he enrolled in 1923.
Although initially specializing in mathematics, Hicks was not content and had a strong interest in literature and history. He transferred in 1923 to the newly opened School of Philosophy, Politics and Economics. However, he did not have adequate qualification in any of the subjects that he studied, and graduated with a second-class degree.
In the 1920s, economists were very scarce and so Hicks picked up a temporary lectureship at the London School of Economics, which was then continued. He started as a labor economist, doing descriptive work on industrial relations, but gradually moved over to the analytical side. He discovered that his knowledge of mathematics, by that time almost forgotten, could be revived, and was sufficient to cope with what anyone used in economics.
In 1935, Hicks married fellow economist, Ursula Webb. At that time he transferred to Cambridge University where he became a lecturer in economics. During his three years in Cambridge, Hicks completed his significant book, Value and Capital, which was based on the work he had done in London. He was also a fellow of Gonville and Caius College, at Cambridge, from 1935 to 1938.
In 1938, Hicks became professor at the University of Manchester. It was there that he started to focus mainly on welfare economics, and its application to social accounting. In 1946, he returned to Oxford, first as a research fellow of Nuffield College (1946-1952), then as Drummond Professor of Political Economy (1952-1965), and finally as a research fellow of All Souls College (1965-1971).
Hicks became a fellow of the British Academy in 1942; a foreign member of the Royal Swedish Academy in 1948, of the Accademia dei Lincei, Italy, in 1952, and of the American Academy in 1958. He was knighted in 1964. He received honorary doctor degrees from several British Universities—Glasgow, Manchester, Leicester, East Anglia, and Warwick—as well as of the Technical University of Lisbon, Portugal.
In 1972, Hicks received the Nobel Prize in Economics, together with Kenneth J. Arrow, for his work on general economic equilibrium theory and welfare theory.
John Hicks died on May 20, 1989 in Blockley, Gloucestershire, Great Britain.
Work
Microeconomics
Hicks' early work was as a labor economist culminated in The Theory of Wages (1932), still considered a standard in the field. In that book he gave his own interpretation of marginal productivity theory, attempting to reinvoke interest in it. In the book he also introduced his famous "elasticity of substitution" which is defined as “the elasticity of the ratio of two inputs to a production (or utility) function with respect to the ratio of their marginal products (or utilities).” Using this, Hicks was able to show that, contrary to Karl Marx's analysis, labor-saving technical progress does not necessarily reduce labor's share of national income.
In the mid-1930s, Hicks worked on a way to unite various theories of imperfect competition, introducing the concept of "conjectural variations." He also attempted to resurrect the Lausanne School of economics developed by Léon Walras and Vilfredo Pareto. The central feature of the Lausanne School was its development of general equilibrium theory, and he attempted to introduce this to the English-speaking world. In 1934, he tried to do the same with his review of Gunnar Myrdal's work, which drew attention to the Stockholm School of economics.
His magnum opus was Value and Capital, published in 1939. This book built upon ordinal utility and mainstreamed the now-standard distinction in demand theory between the substitution effect and the income effect for an individual for the case of two consumer goods. It generalized analysis to the case of one consumer good and a composite good, that is, all other goods. It also aggregated individuals and businesses through demand and supply across the economy, anticipating the aggregation problem most acutely for the stock of capital goods.
Hicks' book introduced general equilibrium theory to an English-speaking audience, refined the theory for dynamic analysis, and for the first time attempted a rigorous statement of stability conditions for general equilibrium. In the course of analysis Hicks formalized comparative statics. In the same year, he also developed the famous "compensation" criteria, called the Kaldor-Hicks efficiency, for welfare comparisons of alternative public policies or economic states. In essence, Hicks suggested the criterion that would judge an outcome to be preferable if those who gain by the measure would still gain if they had to compensate those who would lose. Based on this compensation criterion, policies could be compared and the one leading to the greatest net benefit would be implemented.
Under Pareto efficiency (developed by Vilfredo Pareto), an outcome is more efficient if at least one person is made better off and nobody is made worse off. This seems a reasonable way to determine whether an outcome is efficient or not. However, some believe that in practice it is almost impossible to make any large change such as an economic policy change without making at least one person worse off. Under ideal conditions, exchanges are Pareto efficient since individuals would not voluntarily entered into them unless they were mutually beneficial. Using Kaldor-Hicks efficiency, an outcome is more efficient if those that are made better off could "in theory" compensate those that are made worse off and lead to a Pareto optimal outcome. Thus, a more efficient outcome can in fact leave some people worse off. The criterion is used because it is argued that it is justifiable for society as a whole to be better off, even though it involves making some worse off if this means a greater gain for others.
Macroeconomics
Hicks' most familiar contribution to macroeconomics was the Hicks-Hansen IS-LM model, which formalized the theory of John Maynard Keynes. The model describes the economy as a balance between three commodities: money, consumption, and investment. It can be presented as a graph of two intersecting lines in the first quadrant.
The horizontal axis represents national income or real gross domestic product and is labelled Y. The vertical axis represents the real interest rate, i.
The IS schedule is drawn as a downward-sloping curve. The initials IS stand for "Investment/Saving equilibrium," but since 1937 they have been used to represent the locus of all equilibria where total spending (Consumer spending + planned private Investment + Government purchases + net exports) equals an economy's total output (equivalent to income, Y, or GDP). The level of real GDP (Y) is determined along this line for each interest rate.
The LM schedule is an upward-sloping curve representing the role of finance and money. The initials LM stand for "Liquidity preference/Money supply equilibrium" but is easier to understand as the equilibrium of the demand to hold money as an asset and the supply of money by banks and the central bank. The interest rate is determined along this line for each level of real GDP.
The Hicks-Hansen model illustrates graphically Keynes' conclusion that an economy can be in equilibrium with less than 100 percent employment. This model eventually became the starting point of the Neo-Keynesian synthesis in economic systems which dominated in the mid-twentieth century. It later came under criticism in the early 1970s, when high inflation and growing unemployment seemed to be incompatible with the predictions of the system. In one of his later works, published in 1980, Hicks criticized his own model, asserting it had omitted some crucial components of Keynes' arguments, especially those related to uncertainty.
Among his other contributions to macroeconomics is the concept of "liquidity trap"—which happens in a stagnant economy, when the nominal interest rate is close or equal to zero, and when people start to keep their savings only in short-term bank accounts, expecting a recession. He also developed the concept of "temporary equilibrium," enlarged the "Linear Theory" and elaborated on the von Neumann turnpike.
In the 1970s, Hicks worked to resurrect the Austrian school of economics, attempting to formalize the Austrian theory of capital which included both fixed and circulating capital.
Legacy
John Richard Hicks was one of the most important and influential economists of the twentieth century. He broke with Marshallian tradition that dominated the English-speaking world in the 1930s, in what is commonly known as “Paretian revival,” and reintroduced the theories of Leon Walras, the Austrian school, and the Swedish school based on the work of Gunnar Myrdal and Bertil Ohlin. His work, together with other great economic thinkers such as Paul Samuelson, Oskar Lange, Abba Lerner, Maurice Allais, and Harold Hotellin, helped consolidate the Marginalist revolution, which started some 50 years before.
In many ways, Hicks' work is the standard of how economics should be done: without partisanship for favored theories but learning from all, constantly searching for new ideas and staying attached to none, and his own most severe critic.
Although his work was deep enough, and his influence strong enough to form a school of thought, Hicks never gathered any great number of followers. The reason for this is probably that his approach was critical and eclectic, building upon every school that had something to offer. He did, however, inspire generations of thinkers, especially in the neo-Walrasian tradition, including Michio Morishima, Frank H. Hahn, and Takashi Negishi.
Publications
Hicks, John R. 1932. The Theory of Wages. London: Macmillan.
Hicks, John R. 1939. "The Foundations of Welfare Economics." Economic Journal, 69, 696-712.
Hicks, John R. [1939] 2001. Value and Capital. Oxford University Press. ISBN 0198282699
Hicks, John R. 1940. "The Valuation of Social Income." Economica, 7, 105-24.
Hicks, John R. 1941. "The Rehabilitation of Consumers' Surplus." Review of Economic Studies, 8, 108-16.
Hicks, John R. [1942] 1971. The Social Framework: An Introduction to Economics. Oxford University Press. ISBN 0198281730
Hicks, John R. [1950] 1979. A Contribution to the Theory of the Trade Cycle. Oxford University Press. ISBN 0198284160
Hicks, John R. [1956] 1986. A Revision of Demand Theory. Oxford University Press. ISBN 0198285507
Hicks, John R. 1959. Essays in World Economics. Oxford: Clarendon.
Hicks, John R. 1965. Capital and Growth. Oxford: Clarendon.
Hicks, John R. [1969] 2001. A Theory of Economic History. Oxford University Press. ISBN 0198811632
Hicks, John R. 1975. "The Scope and Status of Welfare Economics." Oxford Economics Papers, Vol. 27, No. 3, 307-26.
Hicks, John R. 1977. Economic Perspectives. Oxford University Press. ISBN 0198284071
Hicks, John R. 1980. "IS-LM: An Explanation." Journal of Post Keynesian Economics, Vol. 3, No. 2, 139-54
Hicks, John R. 1981. Wealth and Welfare: Vol I. of Collected Essays in Economic Theory. Harvard University Press. ISBN 0674137418
Hicks, John R. 1982. Money, Interest and Wages: Vol. II of Collected Essays in Economic Theory. Harvard University Press. ISBN 0674584252
Hicks, John R. 1983. Classics and Moderns: Vol. III of Collected Essays in Economic Theory. Harvard University Press. ISBN 0674137434.
References
ISBN links support NWE through referral fees
Bliss, Christopher. 1987. "Hicks, John Richard." in The New Palgrave: A Dictionary of Economics. edited by Milgate, Murray, and Peter Newman John Eatwell. Vol. 2. 641-46. Macmillan.
Autobiography of John Richard Hicks. NobelPrize.org. Retrieved on June 16, 2007.
Wood, John. Sir John Hicks: Critical Assessments (Second Series). Routledge. ISBN 0415367077
All links retrieved August 3, 2022.
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Hayek, Friedrich August von 1899-1992 BIBLIOGRAPHY [1] F. A. Hayek, as he is known throughout the English-speaking world, is generally considered to be the leading twentieth-century representative of classical, nineteenth-century liberalism and the foremost scourge of socialism.
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Hayek, Friedrich August von 1899-1992
BIBLIOGRAPHY
F. A. Hayek, as he is known throughout the English-speaking world, is generally considered to be the leading twentieth-century representative of classical, nineteenth-century 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.
SEE ALSO Austrian Economics; Great Depression; Hume, David; Individualism; Keynes, John Maynard; Liberty; Markets; Mises, Ludwig Edler von; Mont Pelerin Society; Scottish Moralists; Sraffa, Piero
BIBLIOGRAPHY
PRIMARY WORKS
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.
SECONDARY WORKS
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.
Stephan Boehm
Hayek, Friedrich August von
(b. 8 May 1899 in Vienna, Austria; d. 23 March 1992 in Freiburg, Germany), Nobel laureate in economics (1974), whose many publications included the influential, pro—free enterprise book The Road to Serfdom (1944).
Hayek was the eldest of three sons of August von Hayek, a physician who shifted his interests to botany and became an honorary professor in that discipline at the University of Vienna, and Felicitas von Juraschek, a homemaker. The family was partly of Czech descent; Hayek’s parents, although brought up as Catholics, were nonbelievers as adults. During World War I Hayek served on the Italian front (1917–1918) as a junior artillery officer in the Austro-Hungarian army. He later stated that the experience of serving in a multi-ethnic army, with its complex organizational problems, inspired his interest in economics. In 1918, eight days after the war ended, Hayek entered the University of Vienna, where he studied philosophy, law, and economics. He received his doctorate in law (1921), with specialization in economics, and a second doctorate in political science (1923), with specialization in political economy, while studying under Ludwig von Mises, an older economist with whom Hayek is usually connected because of their similar viewpoints. Under von Mises’s influence, Hayek abandoned his early socialism in favor of the free-market approach for which he became famous. From 1921 to 1926 Hayek worked under von Mises as his legal consultant at the Austrian Office of Accounts, a temporary government agency set up to fulfill the terms of the post-World War I settlement. During 1923-1924 Hayek, on leave of absence from his government post, was a graduate student in economics at New York University.
In 1926 Hayek married Helene (“Hella”) von Fritsch; they had two children. In the following year, he and von Mises founded the Austrian Institute for Business Cycle Research (later renamed the Institute for Economic Research); Hayek was director. From 1929 to 1931 he was also a lecturer in economics at the University of Vienna. His first book, Monetary Theory and the Trade Cycle, in German, appeared in 1929 (the English translation was published in 1933). After attending the London Conference on Economic Statistics in 1928, Hayek was invited to lecture at the London School of Economics; from 1931 to 1950 he was Tooke Professor there. Numerous books on economics, mostly technical, were published during these years. In 1938 he became a naturalized British citizen. Hayek became a close personal friend of John Maynard Keynes, despite strong differences on economic matters. During World War II, when the London School of Economics was evacuated to Cambridge, Hayek decided to write a nontechnical book explaining his economic views. The Road to Serfdom, published in 1944 and arguably the most important nontechnical book on economics of the twentieth century, gives in fewer than two hundred closely argued pages the case for free enterprise. His thesis was that “big government,” which Hayek saw as synonymous with socialism, often results from wartime economic mobilization and leads to loss of freedom and inefficiency. The book became an international best seller and was favorably reviewed even by Keynes. A few months after the book’s publication, Hayek was elected to the British Academy. In 1945 an abridged edition of The Road to Serfdom appeared in Reader’s Digest in the United States. Two years later Hayek founded the Mount Pelerin Society, an organization of pro—free enterprise scholars that became very influential and still exists.
Hayek’s Individualism and Economic Order, which pointed out the difficulties in allocating goods and services without a free price system, appeared in 1949. In the same year, the breakup of his marriage caused a severe depression, which resulted in his leaving England. He married Helene Bitterlich in 1950. That year he was also appointed professor of social and moral science at the University of Chicago, where he inspired the famous “Chicago School” of economics later associated with another Nobel laureate in economics, Milton Friedman. Major books published in those years included The Counter-Revolution of Science (1952), a critical study of the origins of “social engineering.” In collaboration with four other scholars Hayek edited Capitalism and the Historians (1954), which argues against the Marxist theory that the Industrial Revolution “immiserated” England’s working class. The Constitution of Liberty, which Hayek considered his most important book, appeared in 1960. This restatement of the nineteenth-century “classical liberal” argument asserts that society is too complicated for a planned economy to succeed.
Two years later the aging, homesick Hayek, who was becoming increasingly deaf, left Chicago to become professor of economics at the University of Freiburg in Breisgau in West Germany. By this time he was a major influence on the West German minister of economics and then chancellor, Ludwig Erhard, and later on the British prime minister, Margaret Thatcher. Retiring from Freiburg in 1968, Hayek moved to Salzburg in his native Austria, where he held a visiting professorship at the university until 1974. He had already begun to receive honorary degrees from universities around the world, but shortly after his return to the city of Freiburg in 1974, he was surprised to be awarded the Nobel Prize in economics for his work in the theory of business cycles and his advocacy of the freemarket system as an answer to the problems of allocation of goods and services. Hayek continued to publish books on economics, political science, and philosophy such as Law, Legislation and Liberty (3 volumes, 1973–1979) and received honorary degrees from universities around the world, to which he traveled despite his increasing age and deafness. In 1984 Queen Elizabeth II awarded Hayek the Companionship of Honour, and in 1991 George Bush awarded him the Presidential Medal of Freedom, America’s highest civilian award. Germany and Austria honored him with similar awards, and both Pope John Paul II and Mikhail Gorbachev praised Hayek’s achievements.
In his last years Hayek showed signs of returning to his ancestral Catholicism. He died in Freiburg of a heart attack and is buried at Neustift Cemetery in his native Vienna. This “old Whig,” as he called himself, with moustache and spectacles, is reputed to have both looked and acted like a courtly, although somewhat shy, European gentleman.
Hayek’s papers are divided between the family archives in London and the various universities and institutes with which he was affiliated. His complete works in twenty volumes have been published jointly by Routledge (London) and the University of Chicago Press. Autobiographical notes, together with oral history interviews, are published in Stephen Kresge and LeifWenar, eds., Hayek on Hayek: An Autobiographical Dialogue (1994). John Gray, Hayek on Liberty (1984), summarizes his ideas and includes an extensive bibliography of Hayek’s works. Hayek: A Commemorative Album, compiled by John Raybould (1998) is a brief illustrated biography. An obituary is in the New York Times (24 Mar. 1992).
Stephen A. Stertz
HAYEK, FRIEDRICH
(1899–1992), leading proponent of markets as an evolutionary solution to complex social coordination problems.
One of the leaders of the Austrian school of economics in the twentieth century, Friedrich Hayek received the Nobel Memorial Prize in Economic Science in 1974. Born to a distinguished family of Viennese intellectuals, he attended the University of Vienna, earning doctorates in law and economics in 1921 and 1923. He became a participant in Ludwig von Mises's private economics seminar and was greatly influenced by von Mises's treatise on socialism and his argument about the impossibility of economic rationality under socialism due to the absence of private property and markets in the means of production. Hayek developed a theory of credit-driven business cycles, discussed in his books Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933). As a result he was offered a lectureship, and then the Tooke Chair in Economics and Statistics at the London School of Economics and Politics (LSE) in 1931. There he worked on developing an alternative analysis to the nascent Keynesian economic system, which he published in The Pure Theory of Capital in 1941, by which point the Keynesian macro model had already become the accepted and dominant paradigm of economic analysis.
In the 1930s and 1940s, Hayek made his major contribution to the analysis of economic systems, pointing out the role of markets and the price system in distilling, aggregating, and disseminating usable specific knowledge among participants in the economy. The role of markets as an efficient discovery procedure, generating a spontaneous order in the flux of changing and unknowable specific circumstances and preferences, was emphasized in his "Economics and Knowledge" (1937), "The Use of Knowledge in Society" (1945), and Individualism and Economic Order (1948). These arguments provided a fundamental critique of the possibility of efficient economic planning and an efficient socialist system, refining and redirecting the earlier Austrian critique of von Mises. They have also provided the basis for a substantial theoretical literature on the role of prices as a conveyor of information, and for the revival of non-socialist economic thought in the final days of the Soviet Union.
Hayek worked at LSE until 1950 when he moved to Chicago, joining the Committee of Social Thought at the University of Chicago. There Hayek moved beyond economic to largely social and philosophic-historical analysis. His major works in these areas include his most famous defense of private property and decentralized markets, The Road to Serfdom (1944), New Studies in Philosophy, Politics and Economics (1978), and the compilation The Fatal Conceit: The Errors of Socialism (1988). These works, more than his economic studies, provided much of the intellectual inspiration and substance behind the anti-Communist and economic liberal movements in eastern Europe and the Soviet Union in the 1980s and 1990s. In 1962 Hayek left Chicago for the University of Freiburg in Germany, and subsequently for Salzburg, where he spent the rest of his life. The Nobel Prize in 1974 significantly raised interest in his work and in Austrian economics.
See also: liberalism; socialism
bibliography
Bergson, Abram. (1948). "Socialist Economics." In A Survey of Contemporary Economics, ed. H. S. Ellis. Home-wood, IL: Irwin.
Blaug, Mark. (1993). "Hayek Revisited." Critical Review 7(1):51–60.
Caldwell, Bruce. (1997). "Hayek and Socialism." Journal of Economic Literature, 35(4):1856–1890.
Foss, Nicolai J. (1994). The Austrian School and Modern Economics: A Reassessment. Copenhagen, Denmark: Handelshojskolens Forlag.
Lavoie, Don. (1985). Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered. Cambridge, UK: Cambridge University Press.
Machlup, Fritz. (1976). "Hayek's Contributions to Economics." In Buckley, William F., et al., Essays on Hayek, ed. Fritz Machlup. Hillsdale, MI: Hillsdale College Press.
O'Driscoll, Gerald P. (1977). Economics as a Coordination Problem: The Contribution of Friedrich A. Hayek. Kansas City: Sheed, Andrews and McMeel.
Richard E. Ericson
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Britain leads a global push to rethink the way economics is taught | Britain
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/favicon.ico
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The Economist
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https://www.economist.com/britain/2013/11/23/keyness-new-heirs
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FOR economists 2008 was a nightmare. The people who teach and research the discipline mocked by Thomas Carlyle, a 19th-century polemicist, as “the dismal science”, not only failed to spot the precipice, many forecast exactly the opposite—a tranquil stability they called the “great moderation”. While the global economy is slowly healing, the subject is still in a state of flux, with students eager to learn what went wrong, but frustrated by what they are taught. Some bold new projects to retune economics aim to change this.
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https://www.emerald.com/insight/content/doi/10.1108/ECON-10-2022-0139/full/html
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From Austrian theory of capital to dissent: Nicholas Kaldor, Friedrich A. Hayek and the way to disequilibrium
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From Austrian theory of capital to dissent: Nicholas Kaldor, Friedrich A. Hayek and the way to disequilibrium - Author: Keanu Telles
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https://www.emerald.com/insight/content/doi/10.1108/ECON-10-2022-0139/full/html
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Introduction
It is not easy to imagine two more distinct and antagonist economists in the twentieth century than the Hungarian Nicholas Kaldor (1908–1986) and the Austrian Friedrich A. von Hayek (1899–1992). Indeed, Kaldor is widely known as a joint architect and a leading figure – with Richard Kahn, Joan Robinson, Luigi Pasinetti, and others – of the Cambridge school of post-Keynesian economics. In the 1950s and 1960s, this group extended the principles of John Maynard Keynes’ The General Theory of Employment, Interest, and Money (1936) to the long-run analysis of economic growth and income distribution.
Nevertheless, Kaldor started his intellectual career as very sympathetic to the Austrian school as exposed by Lionel Robbins, Hayek, and others. In the 1930s, both Hayek and Kaldor were followers of the so-called Austrian theory of capital, derived from the works of John Stuart Mill, William S. Jevons, Carl Menger, Eugen von Böhm-Bawerk, and Knut Wicksell. It states that the quantity of capital corresponds to the length of time in which primary original factors of production (labor in Böhm-Bawerk’s model and labor and land in Wicksell’s case) are utilized to produce secondary durable and nondurable (i.e. working) capital goods.
This time length is measured by the average production period (the degree of roundaboutness or capital intensity) which is an increasing monotonic function of the total quantity of capital. The quantity of capital is understood as the length of production stages, the length of time contained in the whole production process, a notion introduced by Menger’s Grundsätze der Volkswirtschaftslehre (1871). This allowed the extension of marginal productivity theory to the realms of capital. In equilibrium, the marginal productivity of waiting (i.e. the marginal productivity of the average period of production) will be equal to the interest rate.
In this essay, we reconstruct the similar and intertwined paths of Kaldor and Hayek to disequilibrium economics through the theoretical deficiencies exposed by the Austrian theory of capital and its consequences on equilibrium analysis . The critical reaction to the Austrian business cycle theory presented by Hayek in the 1930s revealed the limitations of its theory of capital. More importantly, however, the Austrian integration of capital theory into a business cycle theory and its shortcomings called attention to the limitation of the theoretical apparatus of equilibrium analysis in dynamic contexts. These limitations exposed in the epitome of the equilibrium theoretical edifice, the neoclassical synthesis of the Austrian theory of capital, contributed to Hayek and Kaldor abandoning the neoclassical equilibrium theory en route toward dissent.
The critiques made by Piero Sraffa and Gunnar Myrdal (in a sense both later incorporated by Keynes in 1936) to Hayek’s business cycle theory emphasized the indeterminateness of equilibrium in a dynamic, monetary, and expectational economy. In particular, Myrdal’s 1933 critique of Wicksell’s three conditions to monetary equilibrium led to a reaction against the notion of perfect foresight (i.e. perfect knowledge) intrinsic in the traditional (dynamic or intertemporal) equilibrium analysis, proper to the capital accumulation and trade cycle phenomena. This is visible in Hayek’s reaction in his Copenhagen lecture in December 1933 and Kaldor’s theoretical emancipation in 1934. The conjunction of the intellectual wars on capital and business cycle theories merged with the economic calculation debate under socialism revealed to Hayek the way to the reformulation of equilibrium analysis in terms of social knowledge coordination in his December 1936 presidential address to the London Economic Club, “Economics and Knowledge” (1937).
In 1937, nevertheless, Kaldor entered into the controversy between Hayek and Frank H. Knight on the theory of capital in a middle-ground position, criticizing the use of production periods and roundaboutness in a trade cycle theory but defending in its own right the Austrian theory of capital. Kaldor (1937b) writes to Knight saying that “I think Hayek’s trade cycle theory is entirely wrong (at any rate in the Prices and Production form); and this is independent of the rights and wrongs of the Austrian theory. That is to say, I don’t think Hayek ‘follows’ from the Austrian theory of capital at all; and would be equally wrong even if Böhm-Bawerk and Wicksell were spotless.”
Kaldor’s position in this debate is interesting because the main point that Hayek stressed in his controversy with Keynes (which was also influenced by Wicksell) in 1931 was the logical consequences of a capital theoretical microfoundation to business cycle research. Soon after Kaldor’s exchange with Knight, he abandoned the Austrian theory of capital in his conversion process to Keynes. However, many implications of the controversies mentioned above will be noted in his mature writings on the construction of the post-Keynesian growth and distribution models in the 1950s and 1960s (such as his Keynesian income distribution theory used as the solution to the Harrodian instability problem), the Cambridge capital controversy, and his critiques to what he called neoclassical equilibrium economics in the 1970s and 1980s.
This story might appear surprising for many since Kaldor is mainly identified with the Cambridge school. Moreover, as a long-time Fabian socialist, he was an influential voice within the Labour Party in England, performing an important role as Special Adviser to the Chancellor of the Exchequer when the Party came to power in 1964 (until 1968) and later in 1974–6. Not to mention his major contributions in making the two William Beveridge Reports, first the White Paper report on Social Insurance in 1942 and later the extremely influential Full Employment in a Free Society (1944). In Beveridge’s 1944 book, Kaldor authored the famous appendix C where quantitative revenue and expenditure estimations of an active fiscal policy aimed at full employment were provided. In Hayek’s view (1983, pp. 111, 183),
Kaldor, through the Beveridge Report, has done more to spread Keynesian thinking than almost anybody else. […] I have reason to say that it probably should be called a Kaldorian revolution, not for anything which is connected with Kaldor’s name, but what spread it was really Lord Beveridge’s book on full employment, and that was written by Mr. Nicholas Kaldor and not by Lord Beveridge, because Lord Beveridge never understood any economics.
Some implications to the long-run analysis of Keynes’ principle of effective demand (i.e. that investment determines savings derived from income variation via the marginal propensity to save), which emerged in the early 1930s, were worked on by Roy F. Harrod’s path-breaking “An Essay in Dynamic Theory” (1939). The same dynamic instability theory was developed and extended independently a few years later by the Russian American economist Evsey Domar (1946) in the context of the post-Second World War secular stagnation thesis propagated by the “American Keynes” Alvin Hansen (1944, part III), his Ph.D. advisor at Harvard University.
Keynes’ short-period income and employment determination analysis ignored the dual character of the investment process, investment both determines present income (present aggregate demand) and increases future productive capacity (future aggregate supply). The attempt of generalizing the General Theory beyond the walls of short-period aggregate demand with given capital stock and fixed prices was largely a challenge to the very foundations of neoclassical marginal productivity theory based on factor substitution and diminishing returns. Something that Keynes himself had accepted at least partially from his teacher Marshall, for instance, in the second chapter of The General Theory. In particular, as the Cambridge capital controversy famously exposed (a controversy in which Kaldor himself was a protagonist), it was a challenge to the existence of a decreasing monotonic function between the aggregate quantity of capital and interest rates. In other words, an inverse relationship between capital intensity and distributive shares.
A lost generation of Hayekians? Kaldor and the London School of Economics (LSE)
In 1981, Hayek and Kaldor exchanged two letters concerning a dispute over Austria’s economic picture. Answering Hayek, Kaldor wrote: “If you talk about the ‘lost generations of Keynesians,’ what about the (even older) ‘lost generations of Hayekians’ (Like myself!) who believed in Prices and Production?” (Ingrao & Ranchetti, 2005, p. 383). This resentment and unfriendly tone marked their mature personal relationship. But it was not always like that. In 1925, Kaldor was enrolled in the Humboldt University of Berlin. In April 1927, he departed for the London School of Economics (LSE) as a visiting general student, officially enrolling for the B.Sc. degree in Economics in October. Until his graduation with first-class honors in 1930, Kaldor attended lectures by, just to mention a few, Hugh Dalton, John Hicks, Allyn Young and Lionel Robbins.
In 1927, the American Young was brought by Beveridge from Harvard to LSE to substitute Edwin Cannan, who retired one year before, as the Chair of the Economics Department. At the height of his influence and intellectual powers, Young was the dominant figure in Kaldor’s second year at the School, while Robbins exerted a major influence on Kaldor’s third and last year. In December 1928, Young had published in the Economic Journal his famous article on “Increasing Returns and Economic Progress” (1928). In Kaldor’s (1986, p. 4) opinion, Young was his “first real teacher in economics, albeit for a brief period,” and caused him a lasting and profound impression. It was due to Young that Kaldor inherited “a basic distrust of abstract systems per se, and an awareness of the need to adapt the tools of theoretical analysis to the practical problems which they are intended to illuminate.”
However, with Young’s sudden death from pneumonia in the winter of 1928–9, Robbins was appointed to the position. Robbins was “young, flamboyant and enthusiastic.” It was natural and inevitable, Kaldor (1986, p. 4) recollects, that Robbins’ first pupils “should fall completely under his spell.” Robbins was very “much influenced by his contacts with Viennese economists, mainly von Mises,” and the Lausanne general equilibrium approach. His lectures followed closely the formulation given by Phillip Wicksteed, Wicksell, and Frank Knight’s Risk, Uncertainty, and Profit (1921) . The neoclassical theoretical keystone in this presentation is the generalized marginal productivity theory of distribution à la Wicksell and Wicksteed. In Kaldor’s (p. 5) view, Robbins absorbed this theory “with the fervency of a convert and propounded it with the zeal of a missionary.”
As a Robbins’ protégee, Kaldor’s first publications were in the context of a two-year research studentship at LSE where, amongst other things, he went to analyze the economic “Problems of the Danubian Succession States.” In researching for his project, Kaldor spent the summer term of 1931 (beginning in May until the end of July) at the University of Vienna as a visiting student. While in Vienna, Kaldor apparently joined the so-called Geist Kreis, a circle composed of young scholars created by Hayek, Gottfried Haberler, and Oskar Morgenstern – with the participation of Alfred Schütz, Fritz Machlup, Felix Kaufmann, Karl Menger, Erich Voegelin, and others. Many of these were also members of the Mises Kreis, the continuation by Ludwig von Mises of the famous seminar held by Böhm-Bawerk. It is presumed that Kaldor and Hayek had been introduced to each other by Robbins before this summer period in 1931.
In December 1930, Kaldor wrote to Hayek regarding his own offer to translate Hayek’s first book, Geldtheorie und Konjunkturtheorie (1929a). Hayek thanked Kaldor for his willingness to translate the book into English and made the arrangements for the translation under Robbins’ supervision. The book was translated by Kaldor and Honoria M. Croome and published in 1933 as Monetary Theory and the Trade Cycle (1933a). Hayek’s main goal in this book was to integrate the study of business cycles and industrial fluctuations within a theoretical equilibrium structure. This effort contrasted with the historicist and empirical approach expressed by Wesley Claire Mitchell. Hayek had entered into contact with this approach during his 1923–4 travel to the United States, where he sat in Mitchell’s “Types of Economic Theory” class at Columbia University. In 1928, Hayek (1928) had just published his innovative paper on intertemporal equilibrium as an attempt to solidify a business cycle theory.
Hayek sought to explain economic cycles as equilibrium phenomena, i.e. as a consequence of the logic of action by economic agents, drawing from the work of the Swedish economist Knut Wicksell and his mentor Mises. Geldtheorie was a product of his initial efforts to enter the German-speaking academic world. To qualify for his Habilitation, which allowed a teaching position at the University of Vienna, Hayek had to write a book and make a public defense in a chosen subject related to the book. The subject of his habilitation lecture to Privatdozent at Vienna was “Gibt es einen ‘Widersinn des Sparens’?” (1929b) published in the first volume of Zeitschrift for Nationalökonomie in June 1929. The paper was translated by Kaldor and Georg Tugendhat as “The Paradox of Savings” (1931a) and was published in Economica in May 1931.
The fact that both the translations of Geldtheorie and “Widersinn des Sparens?” into English were made by Kaldor jointly with other contemporary students at LSE suggests that Robbins was the mind behind the endeavor. Robbins was fluent in German and widely read and acquainted with the Continental economic literature. He was impressed with the critique exposed in “The Paradox of Savings” of some very influential pre-Keynesian American underconsumption theories championed by William Trufant Foster and Waddill Catchings. A similar intellectual attempt, but in terms of monetary theory, had been made by no one other than Keynes himself in the 1920s within the context of a deflationary post-World War I Britain. This led Robbins to suggest to Beveridge, the long-time director of LSE, that Hayek should be invited to give four advanced lectures at the London School of Economics in the lent term of 1930–1.
“Hayek’s triumphal entry on the London stage with his lectures on Prices and Production,” as his former student Ludwig Lachmann (1982, p. 630) writes, was stunning. Soon after the lectures, Lachmann continues, “all important economists there [at the LSE] were Hayekians.” In his monumental History of Economic Analysis (1954, p. 1120), Joseph Schumpeter writes that Hayek’s account of the Austrian business cycle theory in Prices and Production (1931b), “on being presented to the Anglo-American community of economists, met with a sweeping success that has never been equaled by any strictly theoretical book that failed to make amends for its rigors by including plans and policy recommendations or to make contact in other ways with its readers’ loves or hates. A strong critical reaction followed that, at first, but served to underline the success, and then the profession turned away to other leaders and other interests. The social psychology of this is interesting matter for study.”
After the success of the lectures, published in Prices and Production (1931b), Beveridge invited Hayek to spend one year as a visiting professor at LSE using the long-vacant Tooke Chair. With the refusal of Jacob Viner and Hubert Henderson to take the Tooke Chair, the Chair was offered permanently to Hayek in 1932. In his book, Hayek initially describes the working of a barter economy adopting Böhm-Bawerk’s stationary general equilibrium state. Hayek then analyzes the effects of an intertemporal preference change, that is, the transition to a more or less roundabout method of production. In this endeavor, he employs the notion of intertemporal equilibrium under perfect foresight merged with his views on the mechanics of a capital-theoretic barter economy.
In Monetary Theory and the Trade Cycle ([1929] 1933a), a barter economy is characterized by a high price-adjustment velocity to changes in external data. Hayek argued that the standard equilibrium theory cannot explain the business cycle or any kind of disequilibrium phenomena. Indeed, a satisfactory explanation of the business cycle, Hayek sustains, can only be found in an endogenous generating and propagating mechanism of disequilibrium. And this mechanism is money. Therefore, a satisfactory investigation into business cycle theory can only be accomplished by the integration of monetary theory into business cycle research, thus the name of the book. In Hayek’s judgment, the only instruments available to analyze business cycles (the systematic errors made by entrepreneurs) are the methods of static analysis, in particular, the notion of intertemporal equilibrium. This does not necessarily mean equilibrium as a stationary state, since stochastic, exogenous and particular fluctuations or errors can be sufficiently explained by the adjustments process to irregular changes in external data.
Hayek ([1929] 1933a, pp. 69–70) seems to assume a perfect foresight environment in his delineation of a barter economy, arguing that we “have to assume that the price which entrepreneurs expect to result from a change in demand,” which includes the dates and quantities of consumers’ goods for which investment is destined, “will more or less coincide with the equilibrium price.” No systematic error can be made by the entrepreneurs since they “will generally be in a position to estimate the price that will rule after the changes have taken place.” The expected price “is just as likely to be lower than the equilibrium price as to be higher.” Therefore, “on the average, it should more or less coincide, since there is no reason to assume that deviations will take place only in one direction.” After drawing the intertemporal effects in his benchmark economy, Hayek goes on to contrast this case with a monetary economy in which divergences between the money and natural interest rates transmit false price signals to entrepreneurs, resulting in a failed intertemporal transition to a more roundabout method of production .
Kaldor’s initial publications were products derived from his research studentship dealing with the economic problems of Danubian succession states. In fact, although never submitted, Kaldor’s planned Ph.D. dissertation was on this topic, entitled “Commercial Policy of the Danubian States after the War.” In October 1932, Kaldor published in the Harvard Business Review his first paper on “The Economic Situation of Austria” (1932e) employing mainly an Austrian approach to the industrial fluctuations in the region. On the occasion already at Harvard, it was Haberler who initiated the submission of Kaldor’s paper, initially rejected by Keynes in the Economic Journal. The Austrian influence can also be clearly seen in Kaldor’s (1932) first letter to The Times in March 1932 dealing with the dominance of farming in Danubia and in four anonymous articles published between May and June in The Economist on “The Danubian Problem” (Kaldor, 1932b; see also Kaldor, 1932d).
Reviewing Emil Lederer’s 1931 book on technological unemployment, Kaldor (1932c, p. 195) argued that unemployment could only be due to the money wage downward rigidities, a “monopolistic interference with the price system” by trade unions. In his review of Carl Landauers’s 1931 book Planned Economy and Market Economy, which advocated an early German Marktsozialisten solution, Kaldor (1932f, p. 279) maintained that Mises’ economic calculation problem still would be not resolved in the market socialism “competitive” solution. “Even if we assume that a ‘free market’ for consumption goods can be preserved, the methods of producing these goods will have to be decided arbitrarily; as the Socialist producer cannot, even if he tried to, find out the true displacement [i.e. opportunity] costs of the factors of production. This problem, which emerged as soon as the conception of ‘real costs’ was abandoned, has so far proved insoluble.”
At the time when Kaldor was appointed Assistant Lecturer at LSE, in 1932, he could fairly be classified as an adherent of the Austrian approach (see also Kaldor, 1935). In his recollections, Kaldor (1986, p. 7) admitted that “[i]n 1932 I was much under the influence of the views not only of Robbins but also of Hayek.” As Hayek (1994, p. 86) notes, Kaldor “occasionally freely admitted that in his beginnings he was a Hayekian.” In the early 1930s, therefore, Kaldor could be called an Austrian economist. What changed? In Hayek’s (ibid.) impression, “it was Keynes’ Treatise which convinced him, and got him around the other side. And he worked closely with Beveridge. He wrote Beveridge’s book on unemployment.” However, Kaldor declared that “[m]y enthusiasm for the doctrine of Professor Hayek had already suffered a relapse when as a first year research student I undertook to translate his ‘Gibt es einen ‘Widersinn des Sparens’?’ article into English, and in the course of struggling with the translation detected various gaps and flaws in the argument.” Nevertheless, this state of affairs was only really subverted in 1933 due to two main reasons related to the role of capital, interest and equilibrium in a dynamic economy.
First, Piero Sraffa's (1932a) review of Hayek’s Prices and Production was a strong blow to the initial intellectual euphoria created by the lectures at LSE. Sraffa argued that outside the stationary equilibrium there are as many natural interest rates as there are commodities. There are a set of rates in which some will be above, and some will be below, the money rate. Thus, monetary neutrality in Wicksellian terms is far from unproblematic. Second, Hicks introduced Kaldor to the work of the Swedes, particularly Gunnar Myrdal. Kaldor and Hicks were close friends at the time. Kaldor (1983, p. 7) “spent many hours in discussion in our neighbouring flats, on Sunday walks, or occasionally on a Continental holiday.” Kaldor (ibid.) writes that “Hicks (unlike me) was an indefatigable reader of books in at least three foreign languages, and it was owing to him that I was put on the track (among others) of the younger Swedish economists, particularly Myrdal, who first made me realise the shortcomings of the ‘monetarist’ approach of the Austrian School of von Mises and von Hayek and made me such an easy convert to Keynes after the appearance of the General Theory three years later.”
Both Hicks and Kaldor read the German revised version of Myrdal’s “Der Gleichgewichtsberiff als Instrument der Geldtheoretischen Analyse” (1933) published in an “omnibus” book, Beiträge zur Geldtheorie (1933b), edited by Hayek. Indeed, they probably read the original German manuscript when Myrdal was visiting the LSE in 1933. Hicks (1934) wrote a very positive review of the book in the November 1934 issue of Economica. Myrdal’s original article first appeared in 1932 in Swedish under the title “Om penningteoretisk jämvikt” (1932) in Ekonomisk Tidskrift.
Originally, the space in Hayek’s Sammelband book was destined for a contribution by Erik Lindahl but he was unable to deliver the submission in time and suggested Myrdal as a contributor. Although Hayek opposed Myrdal’s argument and its implications, he reluctantly accepted it. Finally, in 1939, an English book translation appeared as Monetary Equilibrium ([1939] 1965) with some modifications, after Keynes’ prophesied revolution. Myrdal’s short book, Kaldor (1986, p. 7) notes, “contained many of the features of Keynes’ system particularly as regards the role of expectations in investment and the relation of the marginal efficiency of capital to the rate of interest.”
Business cycle, capital theory, and equilibrium
In late October 1930, the long-awaited A Treatise on Money (1930) by John Maynard Keynes was finally published. The book received great criticism from the contemporary audience. Even within Cambridge corridors, the Treatise was widely criticized by established figures such as Arthur C. Pigou and Dennis Robertson. In addition, it was also criticized by more sympathetic younger figures such as the members of the Cambridge Circus around Keynes, composed of Sraffa, Kahn, Joan and Austin Robinson, and James Meade. Meanwhile, at LSE, Robbins had in charge Hayek to do a review of the Treatise for Economica, which part I was published as “Reflections on the Pure Theory of Money of Mr. J. M. Keynes” (1931c) in August 1931. This, of course, was the beginning of the famous controversy between Keynes (1931) and Hayek (1931d, 1932a). In his early response to the review in the November issue, Keynes attacked Hayek’s Prices and Production (1931b), published in September 1931, and ultimately asked Sraffa to do a review of the book for the Economic Journal.
Hayek’s main critique of the Treatise is that Keynes attempted to structure a business cycle theory based on monetary causes drawing from Wicksell’s cumulative process without working first in the real-based capital infrastructure of a decentralized economy within a relative price coordination system. In his first book on Value, Capital, and Rent ([1893] 1954), Wicksell integrated Böhm-Bawerk’s capital theory and its average production period into a general equilibrium framework, in what became known as the neoclassical synthesis of the Austrian theory of capital. However, Wicksell’s cumulative process developed and worked in his Geldzins und Güterpreise ([1898] 1936) is only a matter of the effect of changes in the interest rate on prices in the sense of a general price level. The Austrian business cycle theory is concerned with the proper capital micro-foundations and their movements caused by relative prices regarding the macro-phenomena of industrial fluctuations.
This contrasts with the aggregate approach that Keynes employed in his Treatise, as exemplified by the Fundamental Equations and its average macroeconomic definitions (e.g. average entrepreneurial profit or losses). Indeed, it also contrasts in some sense with Wicksell’s (and Keynes’) theoretical corollary regarding the stabilization of the price level. The controversy between Hayek and Keynes in 1931 was a controversy regarding the heritage of the Wicksellian legacy, in what Axel Leijonhufvud (1981) called the “Wicksell connection.” Hayek's (1931c, p. 279) review of Keynes’ Treatise on Money is very clear on this point saying that “[i]n Wicksell’s system these [cumulative processes] are necessary outgrowths of the most elaborate theory of capital we possess, that of Böhm-Bawerk. It is a priori unlikely that an attempt to utilise the conclusions drawn from a certain theory without accepting that theory itself should be successful.”
It is in this context that Sraffa’s review of Prices and Production and Myrdal’s critique of Wicksell’s conditions of monetary equilibrium are relevant. Indeed, in Lachmann’s (1986, p. 226) opinion, “Sraffa’s review was an onslaught conducted with unusual ferocity, somewhat out of keeping with the tone ordinarily adopted by reviewers in the Economic Journal.” According to Sraffa (1932a, b), there is no qualitative difference between ex ante voluntary savings and ex post forced savings. The only difference is in terms of income distribution from which economic participants the new savings appropriate to the new amount of investment will be generated. Indeed, in both cases, the necessary savings will be generated in the same process through income variation if the transition to the new structure of production is completed.
However, Sraffa went further. He sustained that, in a world without money, even in the long run with capital variability the question of traversing to a new intertemporal equilibrium that Hayek posed would not be a problem. Outside stationary equilibrium, Sraffa argued that the natural rate of interest is a fictitious notion. In his view, Hayek misused the Wicksellian long-run natural interest rate in the construction of his cycle theory. Outside the long-run equilibrium, Sraffa continued, there are as many natural rates as commodities so the question of a supposed traverse to a new equilibrium is misplaced. There would be multiple equilibrium positions compatible with the same physical capital structure and capital goods. Therefore, once the long-run equilibrium is perturbed, the equilibrium position itself would be undetermined.
Hayek (1932b, p. 245) conceded Sraffa’s point that there would be as many natural rates as there are commodities, but he maintained his ground that all these would be equilibrium rates. “[T]here would be no single rate,” but “there might, at any moment, be as many ‘natural’ rates as there are commodities, all of which would be equilibrium rates,” in an intertemporal equilibrium view. Sraffa was criticizing the Austrian theory of capital which connects a notion of intertemporal equilibrium between consumers’ time preference – a rising waiting function rate for the ratio between goods in the present (consumers’ goods) and in the future (capital goods) – and the average length of production, which at the margin gives us the marginal productivity of capital of the roundabout period of production. In equilibrium, the marginal productivity of capital is equal to the consumers’ intertemporal preference (the waiting rate), this rate is the natural interest rate. For Hayek, divergences between money and natural interest rates implied misallocation in the real capital structure from intertemporal equilibrium – which was the cause of business cycles.
However, Wicksell’s neoclassical synthesis of the Austrian capital theory derived from Böhm-Bawerk had some restricted assumptions. Wicksell assumes (1) a stationary state (i.e. a long-run equilibrium), (2) a uniform one-year production period, and (3) the technical impossibility of lengthening or shortening the investment period. Wicksell then proceeds to suppose a rise in the natural rate caused by some exogenous factor (e.g. a rise in the rate of technological progress or population growth) while the money rate remains constant to argue that an upward cumulative process would persist until the gap between the two rates continues. As Thomas (1936b, p. 292) noted, Lindahl (1930, pp. 36–7) had already called attention that “if the investment period is technically rigid, there can be no ‘natural’ rate of return on capital which is independent of the loan rate of interest.” The notion of the natural rate in Wicksell’s cumulative process is grown from his capital theory that assumes only one variable factor of production and one product, therefore, the proportion of output to input varies directly with the period of consumers’ waiting.
As Thomas (1936b, p. 292) observed, “a lowering of the money rate brings about a redistribution of income in favour of classes whose ability and willingness to save are relatively high. On this account, therefore, there will be a rise in voluntary saving, while, at the same time, no reduction need necessarily follow a lowering of the rate of interest.” This, of course, is part of Sraffa’s argument discussed above. Thomas continues saying that, echoing Myrdal and the Swedes, “[t]he upward swing can for some time be fed out of this additional saving. Whether it will develop into an inflationary boom depends to a great extent on the state of entrepreneurs’ expectations.”
Sraffa’s criticism of the Wicksellian long-run natural rate is also a critique of Keynes’ Treatise foundations. Indeed, in the famous pivotal chapter 17 on “The Essential Properties of Money and Interest” in The General Theory (1936), Keynes abandoned his earlier notion of a long-run natural interest rate and developed his new theory of interest based on the liquidity preference drawing from Sraffa’s argument against Hayek. Since out of the long-run equilibrium position there are many and different natural rates as there are commodities and capital goods (i.e. many different spots and forward prices for all commodities and heterogeneous capital goods), the greatest of the own-rates is the one that at the margin sets the limit to the level of investment (thus, employment and income). And this rate will always be the money rate due to its low carrying costs and liquidity premium. This allowed Keynes to introduce the essential role of expectations in a radically uncertain environment on the determination of the long-run interest rate in the bonds market. There is no longer a single Wicksellian natural interest rate to conform to some kind of intertemporal equilibrium between consumers’ time preference and marginal productivity of capital. Instead, what we find is an extremely fluid expectational and conventional environment where multiple equilibrium positions can arise (see Telles, 2022).
The Swedish connection: Myrdal’s critique, equilibrium and expectations
In the second volume of his Lectures dealing with money, Wicksell ([1906] 1936) defines the natural rate as being “the rate at which the demand for new capital is exactly covered by simultaneous savings.” That is, the natural rate is the rate at which the ex ante investment (demand for new capital) is exactly covered by simultaneous ex ante savings. Nevertheless, Wicksell did not work out the implications of his new definition (e.g. which necessarily involves anticipations of future prices) to divergences of the natural and money rates. For Wicksell, three conditions to monetary equilibrium are necessary. Namely, (1) the market rate of interest should be equal to the natural rate defined as the technical marginal productivity of the average period of production; (2) the loans fund market should operate as if funds were lent in natura, i.e. “as if no use were made of money, and all lending were effected in the form of real capital goods; ” and (3) the price level should be constant.
Myrdal’s “The Equilibrium Concept as an Instrument of Monetary Analysis” ([1932] 1933) is a devoted, detailed, and immanent critique of Wicksell’s analysis, in particular, his three conditions to monetary equilibrium. In his 1934 review, Hicks (1934, pp. 480–1) classified Myrdal’s little book as “to me quite the most exciting work on monetary theory which has appeared since Mr. Keynes’ Treatise and Professor Hayek’s Prices and Production.” Independent of Myrdal’s conclusions, Hicks argues that it “marks a very definite step in advance. It is even one of those books one feels loath to criticise, for fear that one’s criticisms may perhaps deter some readers from examining the book itself - and that would be a disaster.”
It was natural for Myrdal and others from Sweden to address and develop their theories starting from Wicksell’s framework. Indeed, in the 1933 German version, Myrdal ([1933] 1939, pp. 8–9) complains that in England Wicksell’s framework was highly neglected and misunderstood. He mentions Robertson’s Banking Policy and the Price Level (1926) as an important and “significant little book.” However, Robertson, “too, obviously lacks a thorough knowledge of Wicksell and his pupils, and he has therefore been forced unnecessary to think for himself.” Moreover, Myrdal (ibid.) continues, “J. M. Keynes’ new, brilliant, though not always clear, work A Treatise on Money, is completely permeated by Wicksell’s influence. Nevertheless Keynes’ work, too, suffers somewhat from the attractive Anglo-Saxon kind of unnecessary originality, which has its roots in certain systematic gaps in the knowledge of the German language on the part of the majority of English economists.”
Of course, this was emphasized by Hayek in his position against Keynes. Until 1933, as Hicks (1934, p. 479) pointed out, only two streams of thought originating from Wicksell’s Geldzins were presented and “generally familiar to the English reader. There is the school of Professor Mises and Professor Hayek; there is the school of Mr. Keynes. It is perhaps fortunate that these do not in reality exhaust the list.” This is relevant because it showed that a Wicksellian-inspired theory could be very different from the business cycle theory propagated by Mises and Hayek.
After restating Wicksell’s conditions to monetary equilibrium, Myrdal ([1933] 1939) submits each of the three conditions to several criticisms. First, following Davidson’s argument, he argues that the equality of the money and natural rates and money neutrality does not necessarily imply the price level being unchanged, i.e. conditions (1) and (2) do not necessarily imply condition (3). Second, following Lindahl’s steps, Myrdal states that the seemingly objective and technical quality of the equilibrium natural rate is derived exclusively from the simplicity and irrealism of the assumptions that constituted Wicksell’s theory of capital, namely, one original factor of production and one finished good. Indeed, as Hicks (1934, p. 481) notes, this is “[a]n argument made familiar to us in England by Mr. Sraffa” in his review of Hayek’s Prices and Production.
Once the unrealistic hypothesis of the Austrian theory of capital is dropped, e.g. allowing for a multiplicity of finished products, Myrdal argues that the natural rate of capital goods can only be understood as an expected rate of yield or profit, in monetary terms. The natural rate can only be interpreted as the marginal value product, the result of the marginal physical product of the factor multiplied by the expected average revenue or price of the product. This introduces many new elements to monetary equilibrium, especially psychological and expectational factors regarding future prices. In addition, it means the abandonment of the rigid notion of a capital structure defined by a single natural rate of interest. As Hicks (1934, p. 481) writes, “this interpretation not only makes the natural rate dependent on psychological elements (the expected course of prices), but it also raises serious difficulties about ‘maintaining capital intact,’’’ an expression used by Hayek to design the real capital allocation in a scenario of money neutrality.
In face of these modifications, Myrdal argues that the Wicksellian first condition of monetary equilibrium translates to the equality between the value (the new, expected “natural” rate) and cost (the money rate) of production of new capital goods. This value-cost equation is dependent in both terms on the market rate of interest. Concerning the second condition, Myrdal shows that it can only be interpreted as the equality between savings and investment. Moreover, since the natural rate is the rate at which the ex ante facto demand for new capital is exactly covered by simultaneous savings, this equality necessarily implies the equality in the value-cost equation of the first condition and vice versa. Therefore, Myrdal demonstrates that divergences between savings and investment (i.e. a divergence between the value and cost of capital goods) are always fulfilled by profit and losses by the entrepreneurs.
Savings and investment can be different only ex ante when all the different expectations of entrepreneurs and their action plans are simultaneously aggregated. These expectations encompass, for instance, expected income, i.e. income looked forward and anticipated by entrepreneurs and workers. In the workers’ case, these expected incomes can in general be counted since they are submitted to nominal contractual arrangements. In contrast, the entrepreneurs bear the risk and uncertainty of contracting labor and inputs for pay when there is nothing that guarantees that their expected revenue product value will be concretized. If their revenue is less than expected, they realize a loss – and, in the aggregate, savings proved to be greater than investment. However, quantities that are registered in the bookkeeping records are quantities seen ex post facto. In this sense, savings and investment are always equal by definition and cannot be distinguishable due (in Myrdal’s – and also in Keynes’ Treatise – analysis) to the equilibrating role of variations on prices (profit and losses). In fact, the celebrated Stockholm terms of ex ante and ex post in Myrdal’s analysis were only introduced by the German translator in 1933. This is a rare case of gains of clarity and understanding in translation.
Drawing from his reinterpretation of Wicksell’s natural rate as a monetary yield or profit rate involving expectational and psychological elements, Myrdal concludes that any price level could be compatible with monetary equilibrium . There is an indeterminateness of monetary equilibrium in relation to the price level – even if the amplitude of price-level movements is limited by sticky nominal prices such as long-term contracts, wage rates, etc. This led Myrdal to abandon not only Wicksell’s price-level stabilization but the inverted relation between the price level and productivity gains in productivity norms to the price level defended by Davidson, Lindahl, Hayek, and others. Therefore, Wicksell’s third condition of monetary equilibrium regarding the price-level stability is denied.
For Myrdal, the only concept which is not touched on in his critical remarks is the Wicksellian cumulative process, implied in monetary disequilibrium. However, as Hicks (1934, p. 483) writes in his review, “at the stage he has reached, has he the right to refer back to Wicksell any longer? Just what is the precise difference between such a cumulative process and the sort of inflation which he would consider, theoretically at least, as consistent with monetary equilibrium?” Indeed, Hicks (ibid.) asks, “what is the point of Professor’s Myrdal monetary equilibrium?” After this, Hicks notes that there is “nothing which altogether convinces one that the [monetary equilibrium] concept, in the form in which he has left it, remains an essential part of monetary theory.”
Myrdal’s critique is an imminent criticism of the equilibrium concept as an instrument of monetary analysis. Myrdal emphasizes the fundamental importance of expectations (i.e. anticipations) to the definition of the natural rate of interest. In Myrdal’s hands, Wicksell probably would not recognize the natural rate as being his offspring. The internalization of expectations to the natural rate changed the whole character of a supposed unique, long-run equilibrium stable rate. Any price-level dynamics could be compatible with monetary equilibrium.
After reading Myrdal, Kaldor (1934b) used the ex ante and ex post analysis in his contribution to a debate that occurred in the pages of The Economist concerning the objective of monetary policy, namely, “Stable prices or neutral money.” In a growing economy with increasing productivity, Hayek argued that aiming for general price stability was not sufficient to guarantee the equality between money and natural interest rates. In this case, the average price stability target implies a situation out of monetary equilibrium in the monetary market (the money rate is lower than the natural rate) and in the real-goods market (investment is greater than voluntary savings). Hayek ([1929] 1933a) had argued that this was precisely the case experienced by the United States in the 1920s, where the average price-level stability in a productivity-increasing economy obscured the expansionist monetary policy practiced by the Federal Reserve System in that decade. A monetary expansion that culminated in the 1929 bust and the Great Depression.
Hayek (1931b, p. 126) was opposed to the aims of monetary policy guided by the “widespread illusion that we only have to stabilise the value of money in order to eliminate all monetary influences in production.” Hayek's (1934) policy recommendation was for monetary policy to follow a productivity rule, in which the price level should vary inversely to the productivity gains in a growing economy (e.g. see Selgin, 1999). In Hayek's (1931b, p. 130) framework, neutral money is not necessarily equal to stable prices. Money is neutral if the economic decisions and allocations (in particular, intertemporal decisions and the capital structure) are “as if they were only influenced only by the real factors.”
On the other hand, Harrod (1934) argued that the equality of savings and investment is tautological and always true. In particular, this tautology is also valid in the case of a stable price level. Indeed, Harrod believed that the equality between savings and investment is compatible with any behavior of the price level. Therefore, it is also true in the case of money neutrality and stable price level. Kaldor (1934b) entered the debate in a middle-ground position between Hayek and Harrod. Using Myrdal’s ex ante and ex post analysis, Kaldor (1934b) argued that the compatibility between stable prices and money neutrality depends on the correct foresight by economic agents in relation to the price-level dynamic path.
In this sense, both a falling and a stable price level can preserve money neutrality if this scenario is correctly predicted ex ante. There is a multiplicity of equilibrium positions that combine different price levels with perfect foresight solutions. In this scenario, any policy can be practiced without falling out of the neutrality of money if the banking policy and prices are correctly predicted. Since the natural rate of interest embodies expectations, the only way to have a monetary disequilibrium is if a divergence occurs between ex ante expectations and ex post facts.
Myrdal’s monetary equilibrium was also, in part, a response to the use by Mises and Hayek of the Wicksellian cumulative process in a business cycle theory – beyond the short-period price-level determination. Indeed, Myrdal ([1933] 1939, p. 32) maintained that the main purpose of his work was to “include anticipations in the monetary system.” Something that the recent contributions had completely failed to do – in particular, the theses advanced by Keynes and Hayek. In both Keynes’ Treatise and Hayek’s Prices and Production, in his opinion, there was simply “no place for the uncertainty factor or for anticipations” in their theoretical construction. The Swedes showed that a Wicksell-inspired theoretical framework could be very different from the one propagated by the Austrians. Thus, the policy recommendations could also be radically different.
The Welsh economist Brinley Thomas introduced and spread the word of the Swedes at the LSE and in England in general. Thomas completed his Ph.D. at LSE in 1931, being appointed as Assistant Lecturer in the same year. In 1932, he was awarded an Acland Travelling Scholarship to study in Germany (for nine months) and Sweden (for six months) in the period spanning 1932–4. He would return to Sweden many times thereafter. In this period, Thomas was acquainted with the Swedish developments in monetary theory and practice, mastering the advances made by Wicksell, Davidson (who had played a significant part in Swedish economic policy), Gustav Cassel, Lindahl, Myrdal, and others. Thomas (1936a) propagated Myrdal’s ideas on monetary equilibrium in his lectures at LSE, using the ex ante and ex post terminology and soon converted Hicks, Kaldor, and George L. S. Shackle .
The London reaction: Hayek, Hicks and Kaldor
Written in the spring of 1932, Myrdal’s Monetary Equilibrium ([1933] 1939, p. 32) was a direct attack on the perfect foresight assumption. “The main purpose of the subsequent analysis,” Myrdal writes, “is to include anticipations in the monetary system. A criticism of Keynes and Hayek would have to begin by pointing out the fact that in their theoretical systems there is no place for the uncertainty factor and for anticipations.” In Keynes’ Treatise, this is explicit in his Fundamental Equations equilibrium, in particular, in his notion absorbed from John Bates Clark of windfall profits and unexpected losses.
In Hayek’s theory, although Myrdal (p. 32) concedes that it has “the merit of a more intensive analysis of the roundabout process of production and consequently of the questions of profitability,” the analysis “is stationary or quasi-stationary only.” Indeed, in 1931, Hayek compared two processes of capital accumulation. One is a successful traverse between two stationary states financed by voluntary savings, the other is a failed traverse, initiated by a false intertemporal relative price and drastically interrupted in the process of plans revision. In Myrdal’s (p. 33) opinion, Hayek developed an “abstract case where among other things anticipations are excluded by assumptions which are fundamental to the whole analysis.”
After its publication, Robbins asked Hicks to write a mathematical appendix to Hayek’s Prices and Production. Hicks struggled with this effort since at the core of its difficulties was the appropriate equilibrium concept to represent a disequilibrium development within equilibrium theory. Indeed, as Hayek stressed in many places, his cycle theory is only comprehensible within the notion of intertemporal equilibrium formulated in his 1928 article. This essay is the starting point to a dynamic equilibrium analysis, where the equilibrium price vector is the one in which demand and supply of different commodities at different dates are equal. Thus, to reach equilibrium, this equilibrium price vector must be anticipated by economic actors, resulting in the perfect foresight condition intrinsically connected with intertemporal equilibrium.
In this vein, in June 1933, Hicks published in Zeitschrift fur Nationalokonomie his first work dealing with monetary theory. It was translated into English as “Equilibrium and the Trade Cycle” and published by Robert Clower only in 1980. In this essay, Hicks (1933) tried to generalize an equilibrium notion compatible with money and its relation with the business cycle, beyond stationary equilibrium. Following Frank Knight’s (1921) argument, Hicks concludes that a positive demand for money only is justifiable under imperfect foresight, i.e. under intertemporal disequilibrium. Thus, as it is well known in the case of the Walrasian general equilibrium model, monetary theory stricto sensu is incompatible with equilibrium theory.
Hicks proposed to incorporate money in the sphere of the theory of value instead of the theory of capital. Under Swedish influence, in particular Myrdal, Hicks (1933, p. 143) substituted the notion of intertemporal equilibrium for his notion of temporary short-run equilibrium with given expectations and constant equipment in his 1935 article on “Wages and Interest” (1935b), en route to his “Suggestion to Simplifying Monetary Theory” (1935a). In this temporary sequential equilibrium, expectations are regarded as exogenous, thus the equilibrium in a determined Hicksian week did not imply that individuals’ plans are compatible in the future (i.e. it did not imply intertemporal equilibrium with perfect foresight). In this manner, Hicks adapted the Walrasian equilibrium notion to the short period including nonstationary conditions and the existence of money (as a reserve of value).
In response to Myrdal’s critique, Hayek gave a lecture on “Price Expectations, Monetary Disturbances and Malinvestments” ([1933] 1935) delivered in December 1933 in the Sozialökonomisk Samfund in Copenhagen. The paper was first published in 1935 in German in Nationalokonomisk Tidsskrift, reprinted in French also in 1935 but only translated into English and published in his collection of essays Prices, Interest, and Investment (1939) in 1939. At the end of his lecture, Hayek ([1933] 1939, p. 155) acknowledged that “I cannot quite agree with Professor Myrdal when he alleges that in my theory there is no room for the role played by expectations - to show how important a place they do play was in fact one of the purposes of this lecture.”
It is in his Copenhagen lecture that Hayek first expresses his discontent with the theoretical apparatus of equilibrium analysis to deal with dynamic, expectational, and imperfect foresight situations, problems involved in business cycle theory. In addition, as Nicolai Foss (1995) called attention, it is in this lecture that Hayek first conceptualized the epistemic distinction between individual objective equilibrium and social intersubjective equilibrium. Moreover, he also articulates for the first time the notion of subjectivity of knowledge and expectations. This would be a crucial building block in Hayek’s reformulation of equilibrium analysis in his pivotal essay on “Economics and Knowledge” (1937). As Hayek (1983, p. 425–6) explained in an interview,
It was, as we just discussed, my essays on socialism, the use in my trade-cycle theory of the prices as guides to production, the current discussion of anticipation, particularly in the discussion with the Swedes on that subject, to some extent perhaps Knight’s Risk, Uncertainty and Profit, which contains certain suggestions in that direction -- all that came together. And it was with a feeling of a sudden illumination, sudden enlightenment, that I wrote that lecture in a certain excitement. I was aware that I was putting down things which were fairly well known in a new form, and perhaps it was the most exciting moment in my career when I saw it in print.
The Copenhagen lecture anticipated many of the discussions that Hayek posed in his 1937 critique of the perfect knowledge assumption of standard equilibrium theory. In “Economics and Knowledge,” Hayek (1937, p. 33) begins by reminding the reader of different attempts made “to push theoretical investigation beyond the limits of traditional equilibrium analysis,” whose “answer has soon proved to turn on one question which, if not identical with mine is at least part of it, namely the question of foresight.”
Hayek mentions the discussions concerning foresight in the theory of risk, especially starting with Irving Fisher’s Appreciation and Interest (1896) and developing in Knight’s (1921) profound work. Moreover, such assumptions are of fundamental importance in the “theory of imperfect competition, the questions of duopoly and oligopoly.” This was emphasized by Morgenstern's (1935) famous essay claiming that any perfect foresight process was inconsistent with convergence to equilibrium. Morgenstern illustrates his argument, in this case, a strategic interaction between two agents, with his Holmes-Moriarty paradox.
Hayek (1937, p. 41) refers to this work in his article. More importantly for our purposes, however, is that “it has become more and more obvious that in the treatment of the more ‘dynamic’ questions of money and industrial fluctuations the assumptions to be made about foresight and ‘anticipations’ play an equally central role, and that in particular the concepts which were taken over into these fields from pure equilibrium analysis, like those of an equilibrium rate of interest, could be properly defined only in terms of assumptions concerning foresight. The situation seems here to be that before we can explain why people commit mistakes, we must first explain why they should ever be right” (p. 34).
Hayek reformulates equilibrium analysis in terms of compatibility of action plans conducted by different agents with different subjective, dispersed, and tacit knowledge of the same objective reality. Since individual knowledge is “all facts given to the person in question, the things as they are known to (or believed by) him to exist, and not in any sense objective facts” (p. 36), each individual must take into his own action plan the expectations over the other individuals’ plans as an objective fact. In this sense, social equilibrium means that each agent has correctly predicted in a special sense all the action plans carried over by the rest of society and the external reality. Hayek ([1937] 1948, p. 42) concludes, in consequence, that “[c]orrect foresight is then not, as it has sometimes been understood, a precondition which must exist in order that equilibrium may be arrived at. It is rather the defining characteristic of a state of equilibrium.”
Hayek mentions his Copenhagen lecture in “Economics and Knowledge,” referring to it as a concrete example of the meaning of a state of equilibrium defined as the coordination of plans and how it can be disturbed. The intertemporal coordination problem of savings and investment is, in this sense, “the proportion (in terms of relative cost) in which entrepreneurs provide producers’ goods and consumers’ goods for a particular date, and the proportion in which consumers in general will at this date distribute their resources between producers’ goods and consumers’ goods” (p. 42). As he put it ([1933] 1939, pp. 153–4), the consistency between these two sets of independent decisions made by different agents implies the savings-investment equilibrium and “the idea of an equilibrium rate of interest.” Assuming a unitary elasticity of expectations, a money rate below the natural rate, Hayek argues, creates unfounded expectations in entrepreneurs concerning the intertemporal consumption behaviors of the society.
Until 1933, the subjective element was not present in Hayek’s writings, although the notion of division of knowledge had been incorporated. In his Copenhagen lecture, Hayek ([1933] 1939, p. 139) contrasts individual equilibrium in the realm of the pure logic of choice – something which we can define as “a necessary equilibrium between the decisions which a person will make at a given moment” due to subjective consistency between means and ends – and societal equilibrium, a much more vague notion since individuals’ “successive responses to their fellow-beings necessarily take place in time.”
In 1933, Kaldor was an active participant in the notable weekly seminar organized by Robbins and Hayek at LSE. It was at the seminar that Kaldor read his paper on “A Classificatory Note on the Determinateness of Equilibrium” (1934). In this important essay, Kaldor (1934, p. 125) describes the conditions in which an equilibrium position can be classified as determinate or indeterminate (“according as the final position is independent of the route followed or not”), unique or multiple (“according as there is one, or more than one, system of equilibrium prices, corresponding to a given set of data”), and definite or indefinite (“according as the actual situation tends to approximate a position of equilibrium or not”). Kaldor was searching for a more rigorous definition of the assumptions utilized in which was possible to determine the existence, stability, and uniqueness of the equilibrium position from a system of data (independent variables).
Kaldor (p. 123) makes six general assumptions under which economic theorists had found it necessary to define an equilibrium position taking into consideration the time dimension. (1) A closed economy (either an isolated individual or a closed self-sufficient community); (2) perfect knowledge, i.e. “all the relevant prices quoted in all markets are known to all individuals; ” (3) perfect competition, i.e. “no individual can influence any of the prices which he is confronted; ” (4) direct exchange, with all prices expressed in one good working as the numéraire; (5) all independent variables remain constant through time; (6) no price -changes are anticipated, i.e. the Hicksian elasticity of expectations is unitary.
In relation to the time-dimension assumptions (5) and (6), Kaldor (p. 123) notes that “[t]he only alternative assumption consistent with the degree of abstractness necessary for the generalisations of pure theory would be the assumption of complete foresight: that everybody foresees correctly the future course of prices.” Thus, referring to Hicks’ 1933 essay on “Equilibrium and the Trade Cycle,” Kaldor argues that the complete foresight assumption could be more conveniently adopted as dynamic analysis.
According to Kaldor (1934, pp. 124–5), in the case of determinateness, to secure equilibrium, it is necessary that “(1) an equilibrium system of prices will be established immediately, or (2) the set of prices actually established leaves the conditions of equilibrium unaffected (in which case the final position will be independent of the route followed).” Similar to Hayek (1937), Kaldor distinguishes requirements for equilibrium in the case of the isolated individual and a closed community. In the first, Robinson Crusoe must possess “full experience” or full knowledge of his tastes, preferences and the external world. The word experience is used here merely to relate to Crusoe’s knowledge. “It excludes any accumulation of knowledge which represents a change in the technical terms at which he can obtain various things.”
In a community, the necessary conditions to equilibrium are more rigorous. We must assume not only that all individuals have full knowledge regarding their own tastes, abilities, and external experience, but that “all exchange transactions are undertaken at the same system of prices.” Kaldor mentions the Deus ex machina devices such as Walras’s tâtonnement (excluding ex hypothesis trading at false, nonequilibrium prices) and Francis Y. Edgeworth’s “principle of re-contract” – where provisional contracts operate until no recontracts can be made with advantage to the recontracting parties. Both analytical methods are devices to discover the true equilibrium prices before individuals undertake their exchanges. In this sense, equilibrium will always be determinate if it is immediately reached. Thus, Kaldor (p. 127) concludes that one central problem in equilibrium theory is that “[t]he formation of prices must precede the process of exchange and not be the result of it.”
Kaldor then discusses the implications of the independence of the equilibrium position and the actual path followed to this position for equilibrium to be determinate. At the individual level, Crusoe’s system of data in one period must not be affected by his actions in previous periods. It must be assumed, therefore, that there is no – or constant – carryover and that his effective preferences are unaffected between periods. In contrast, Kaldor (p. 128) argues that the effects of learning and experience through time are the elements “which the ‘causal-genetic-approach’ of the Austrian School ha[ve] been mainly concerned.” This approach was defined by Hans Mayer (1932) in which he contrasted the Austrian approach with the Lausanne general equilibrium functional analysis. Mayer (1932) was also referred to in Hayek’s 1937 article,
Kaldor summarizes the causal-genetic notion writing that its aim is “to show how, in a given situation, a position of equilibrium is reached - the problem of how prices come into being rather than what system of prices will secure equilibrium. It is, however, only under our present very rigid assumptions that a causal-genetic theory can reach the same conclusions concerning the nature of equilibrium as are evolved, by using a different method, by the ‘functional’ theories. In the absence of these conditions it is only by means of a ‘theory of the path’ (a theory showing what determines the actual path followed) that a causal-genetic approach can arrive at generalisations concerning the nature of equilibrium - and such a theory has not hitherto been forthcoming, although the necessity for it has frequently been emphasised by writers of the Austrian School.” Indeed, Hayek’s equilibrium as a coordination problem is devoted to the expression and reformulation of this problem.
It is curious to note that, discussing the additional assumption of constant marginal utility of money introduced by Marshall in the case of a community case, Kaldor writes that “[i]f we assume that individuals accumulate experience relating not only to their own system of data but also to the ‘tastes and obstacles’ of others, they will gradually acquire an ability to judge the ‘equilibrium prices’ of a given market.” Nevertheless, Kaldor is anxious to write that it can be argued “that this alternative assumption - that individuals will be able to judge equilibrium prices before any transactions are made - is inconsistent with one of our initial assumptions since it means that they are influenced by expected future prices rather than by prices already ruling. It all depends on how rigidly this assumption is interpreted, and it can easily be shown that under our present assumption of a ‘constant carry-over’ a very rigid interpretation would lead, by a different route, to the same result.” A constant carryover can be translated in the consistency of ex ante expectations and ex post results, i.e. correct foresight.
In the case of definiteness, not only may equilibrium be “indeterminate” but “if the various forces do not react instantaneously on the incentive of price changes, the economic system need not tend towards a position of equilibrium at all. The successive alterations of prices will then merely represent a constant or an expanding range of fluctuations” (p. 125). In Kaldor’s view, the question if equilibrium is definite or indefinite (i.e. is stable or not) depends on the velocities of adjustment of the factors in the analysis, i.e. the time required for a full quantity adjustment given a price change. For instance, consider an adjustment completely discontinuous where the full quantity adjustment occurs only after a certain period. In this scenario, the equilibrium stability (its definiteness) will depend on the relative elasticities of demand and supply.
It is here that Kaldor (1934, pp. 133–4) pronounces the novel description of the famous ideas advanced by Henry Schultz and Umberto Ricci, coining for the first time the expression “cobweb theorem,” regarding the temporal lag between supply and demand sequential decisions to explain the oscillatory behavior of prices. He concludes that, in this case, “[i]f the velocities of adjustment are greater on the demand side than on the supply side, movements will lead towards an equilibrium, i.e. equilibrium will be ‘definite’” (p. 135). Kaldor gives two agricultural examples, rubber and corn, since in agricultural contexts, there is a lag between planting and harvesting.
In the case of multiple equilibria, Kaldor (pp. 131–2) analyzes the intrinsic connection between stages of increasing returns to single industries (i.e. stages of diminishing technical marginal substitution rates) and the indetermination of equilibrium. In these cases, “the final situation will be ‘indeterminate’ in the sense that it will depend upon the direction which happens to be adopted initially; though equilibrium may still be determinate on our definition of the term, since all the possible equilibrium positions may still be deduced from the data of the initial situation.” Of course, the argument reflects the notion of path dependence in which each action predetermines the possible realms in the future. We should note the intimate relation of Young’s (1928) influential paper on increasing returns here, an idea that will be very dear to Kaldor.
The age of capital
The Age of Capital: 1848–75 ([1975] 2001) is the title of the second book of the trilogy on “the long nineteenth century” by the well-known Marxist historian Eric Hobsbawm. A similar age could be periodized in relation to the age of the theory of capital in “the long twentieth century” in economics, dating from the marginal revolution in 1871. We could argue that this age should be dated from 1871 to 1941, the year that Hayek finally published his The Pure Theory of Capital (1941). In the 1935–6 academic year, Kaldor traveled to the United States on a Rockefeller Research Fellowship, visiting Columbia, Harvard, Chicago and the University of California. He met numerous leading economists, attending the 1935 and 1936 meetings of the Econometric Society. As a product of his fellowship, Kaldor was commissioned to write the 1937 Annual Survey of Economic Theory, published in the Society’s Econometrica.
In the survey, “The Recent Controversy on the Theory of Capital” (1937), Kaldor reviewed Frank Knight's (1932, 1936a, b) criticism of the “traditional theory” of capital, i.e. that a given index or measurement of capital intensity is positively correlated with roundaboutness of production and inversely correlated with interest rates. This “traditional theory” is nothing more than the Wicksellian neoclassical synthesis of Austrian theory of capital. In Kaldor's (1937a, p. 231–2) view, “the material content of the Austrian theory of capital could be equally well expressed by saying that capital accumulation leads to a reduction in the marginal productivity of the services of those factors whose quantity can be augmented by […] accumulation, as by saying that it increases the investment period of the services of those resources whose quantity remains constant.”
With his survey, Kaldor entered into the theory of capital controversy that involved Hayek and Knight in the years before (e.g. see Cohen, 2003). Kaldor adopted the Austrian tradition in the sense that a theory of capital should be characterized by the time dimension of the production period, contrary to Knight’s view of a perpetual fund of goods. Knight was following John Bates Clark’s concept of capital as a homogeneous social value form, an abstract always existing fund (like land) called jelly. Nevertheless, Kaldor (1937a, p. 213) dropped the average period of production (or investment period) as an index of capital intensity in favor of his favorite alternative, the ratio of initial costs to annual (maintenance) costs.
In their controversy, both Kaldor (1938a) and Knight (1938) agreed on the intrinsic problems that arise in general models with heterogeneous inputs and/or outputs so that the results of the simple one homogeneous commodity model – namely, a decreasing monotonic function between capital intensity measured by an index of capital quantity and the interest rate – could not be sustained. Indeed, the existence of a well-behaved index measure for capital quantity in an economy in steady-state equilibrium would be revived in the Cambridge controversy on capital in the 1950s and 1960s (e.g. see Harcourt, 1972; Cohen & Harcourt, 2003). The central problem posed by the Cambridge capital controversy is the circularity of the equilibrium notion involved. The quantum of capital is determined by the marginal productivity principle and, at the same time, the marginal productivity of capital is determined by the quantum of capital. In 1936, Knight (1936a, pp. 434–5) expressed the problem arguing that the
[d]ifficulty and complexity arise because the relation between capital and interest take different forms and especially because of the danger of circular reasoning. On the one hand, capital is usually and properly defined as ‘income’ capitalized at some ‘rate of return’. But the interest rate is usually thought of as the ratio between the net annual yield and a quantity of capital. On the face of this is a vicious circle; interest cannot be a rate of return; i.e. a ratio to a principal, unless the terms of the ratio are definable independently of the rate return itself; yet in the same units of both numerator and denominator.
Hayek (1941, p. 143) was also conscious of these problems but argued that as a process dynamic story, as a causal-genetic notion, the average period of production and the Austrian theory of capital were relevant. In his words, “[i]n order to arrive at an aggregate figure of the amount of waiting involved in each process we have to assign different weights to the different units of input, and these weights must necessarily be expressed in terms of value. But the relative values of the different kinds of input will inevitably depend on the rate of interest, so that such an aggregate cannot be regarded as something that is independent of, or as a datum determining the rate of interest.” Hayek (1994, p. 96) wrote later in life that he “rather hoped that what I’d done in capital theory would be continued by others. […] [Completing it myself] would have meant working for a result which I already knew, but I had to prove .”
In his controversy with Keynes, Hayek criticized Keynes’ failure in ignoring the Wicksellian roots in capital theory. Hayek soon sensed that the main difference between him and Keynes was grounded in the capital theoretical micro-foundations. Hayek was heavily criticized by Sraffa, Myrdal and others for incorporating in his business cycle theory the Austrian theory of capital in the simple Böhm-Bawerkian model with the average period of production. In Hayek’s (1983, p. 46) view, “an elaboration of the still inadequately developed theory of capital was a prerequisite for a thorough disposal of Keynes’ argument.” Therefore, he went up on a big book project in which he planned a new development on capital theory drawing from and systematizing the roots of Böhm-Bawerk, Wicksell, and Mises in Volume I. Volume II was planned to introduce these new capital theoretical foundations into monetary theory and business cycle.
In the writing process, Hayek (1941, p. vi) perceived that the very simplifications that his predecessors made had “such far-reaching consequences as to make their conceptual tools almost useless in the analysis of more complicated situations.” The main deficiency, in his view, was the attempt to introduce the temporal dimension in the capital structure, which resumed in the average period of production. The task showed itself much more painfully difficult than initially foreseen and Hayek did not complete his initial project, only publishing a part of what would be the first part in The Pure Theory of Capital. In the end, Hayek also abandoned the notion of the average period of production in 1941.
In The Pure Theory of Capital (1941, pp. 23–4), Hayek adopts his reformulation of equilibrium analysis in terms of compatibility of plans. The equilibrium is understood as “a state of complete compatibility of ex ante plans,” where in consequence “the ex post situation is identical with the ex ante.” He states, mentioning Myrdal’s Monetary Equilibrium (1939, p. 46), that this causal analysis “is not fundamentally different from the comparison between the prospective and retrospective (or ex ante and ex post) views ·of a particular situation, as used by the younger Swedish economists since the ex post situation can be derived from the ex ante only by reference to the degree of correspondence or non-correspondence between individual intentions.”
In the Kaldor and Knight controversy, as Avi Cohen (2006, p. 156) documented, the debate focused “on three questions: Is capital a distinct factor of production? Is capital quantifiable in a theoretically consistent manner? Do we need process stories around convergence to, or changes in, equilibrium interest rates? To all questions, Kaldor essentially answers ‘yes’ to Knight’s ‘no.’” Kaldor assumed (again) a middle-ground position between Knight and Hayek, but he essentially defended the Austrian capital theory as the only theory known capable of systematizing the causal-genetic relationships and the process dynamic story between the quantity of capital and interest rates. As a positive theory of capital, the Austrian theory was “the only one yet produced.”
In the Kaldor and Knight controversy, the long historical points in dispute in the capital theory wars since the controversy between Clark and Böhm-Bawerk in the early twentieth century moved from the adequacy of periods of production to the production function form; and from roundaboutness as a proper index to capital intensity to diminishing returns. This controversy was pivotal to Kaldor’s conversion concerning the theoretical shortcomings of a pure theory of capital and its interrelations with equilibrium. As Kaldor (1937) wrote to Knight,
[T]he Austrian theory was a grand attempt at a ‘positive’ theory of capital, in fact the only one yet produced. It failed, and the theory must be rejected, for it could not survive the criticisms leveled upon it […]. On the other hand, I do believe that the disappearance of Böhm-Bawerk and his school leaves behind a vacuum in economic theory as we know it and I doubt if it will be filled. To me its failure points to the necessity for the abandonment of the whole system of analysis (of the static equilibrium type) of which the Austrian theory was a part.
Growth, capital accumulation, and distribution
In 1938, Kaldor published “Stability and Full Employment” (1938b) on the question of stability of full employment vis-à-vis the non-variability of the structure of production. He emphasized the crucial aspects of complementarity and specificity of capital goods that composed the structure of the means of production. Indeed, this was precisely the point that Hayek had argued in relation to industrial fluctuations but in terms of the stages of production and capital organicity. As it is well known, in a Leontief production function (which exhibits perfect production factors complementarity), the transition, or the traverse to, different equilibrium states are far from unproblematic and could threaten the possibility of a full employment long-run stability position.
This is precisely the case worked in Harrod's (1939) dynamic instability analysis and posed by the second Harrodian (equilibrium instability) problem. Assuming a complementary production structure, that can be expressed in a Leontief production function, Harrod showed that given the capital–output ratio to be constant there is a unique warranted capital accumulation rate that guarantees the equality between aggregate demand and aggregate supply along the equilibrium dynamic path. However, to secure the full employment position along time with increasing population and technical progress, the warranted growth rate (gW) has to be equal to the natural rate of growth (gN) defined as the rate of growth in which output is constrained at full employment given the population and technological growth rate. Thus, the balanced growth rate with full employment of the labor force and technological progress must satisfy the following condition, gN=sv=gW (1), where s is the marginal propensity to save and v is the capital–output ratio.
However, although possible, there is no economic adjustment mechanism that guarantees that the parameters in the equilibrium condition described in Equation (1) will take the necessary values to match the warranted and natural growth rates. Indeed, as the variables s,v, and gN are determined by different exogenous factors, it is highly improbable that the equilibrium conditions will ever be attended to. Moreover, even if a full employment situation is achieved, this position is unstable since any shock or change in the parameters will launch the economy on a dynamic instability path through time. Harrod conjectured an inherent instability of gW, so even if gN<gW full employment will be achieved but it could not be sustained for a long time. In fact, in this case, if gW is stable, the economy would be in an explosive growth trajectory . The reconciliation of the warranted rate of capital accumulation with the natural rate of growth became the basic dynamic economic problem.
There are only two ways to restore the stability of the equilibrium dynamic path. First, the capital–output ratio (the capital intensity) can be the adjustment variable between differences in the warranted and natural growth rates. This solution was exactly the kind of approach that the Austrian theory of capital predicted and that Hayek had worked on in his business cycle theory. In this theory, divergences between the natural and monetary interest rates distort the intertemporal equilibrium between the capital–output ratios defined as the length of production of the average production period, thus the traverse to the new equilibrium would be aborted because of the capital structure maladjustments due to the new required forced savings. Indeed, it was the endogenization of the capital–output ratio via a Cobb-Douglas production function – with the elasticity of substitution equal to one and diminishing returns – the grand neoclassical solution made by the Solow-Swan model to the Harrodian instability dilemma.
Nevertheless, Kaldor used the same argument of complementarity and specificity of capital goods in the structure of production to state that for these same reasons the capital intensity as measured by the capital-output relation is inelastic as a medium and long-run adjustment mechanism between gW and gN. Anthony Thirlwall (1991, p. 24) writes that “[t]he paper that gave Kaldor the most intellectual satisfaction, however, and his most notable, but neglected, contribution to the immediate Keynesian revolution, was ‘Speculation and Economic Stability’ (including ‘Keynes’s Theory of the Own-Rates of Interest’ originally written as an appendix, but published much later) .” In a private correspondence with Kaldor, Hicks described this article as the “culmination of the Keynesian revolution in theory. You ought to have had more honour for it” (quoted in Targetti and Thirlwall, 1989, p. 4).
In “Speculation and Economic Stability” (1939b), Kaldor argued that the elasticity of demand for holding stocks is distinct from the elasticities of flows of the ultimate buyers and sellers. Due to speculation forces, prices are stabilized; and the greater the stability of prices, the greater the instability of quantities. According to Kaldor, the most important asset in an economy that speculation forces tend to stabilize is the long-term bonds market canalized by savings. With the long-term bonds’ prices stabilized, the adjustment mechanism between savings and investment must be variations in income, securing the conditions for the validity of the income multiplier and Keynes’ principle of effective demand. Thus, Keynes’ multiplier theory is a result of the stabilizing influences of speculative expectations in stocks . As Kaldor (1980, p. xvii) writes, his intention in the paper was
to generalise Keynes’ theory of the multiplier by demonstrating that it results from the stabilising influence of speculative expectations on prices which applies in all cases in which the elasticity of speculative stocks is high … [and] to show that Keynes’ theory of interest contains two separate propositions. The first regards interest as the price to be paid for parting with liquidity, and it arises on account of the uncertainty of the future prices of non-liquid assets. The second concerns the dependence of the current rate of interest on the interest rates expected in the future. While the first proposition provides an explanation of why long-dated bonds should normally command a higher yield than short-term paper, it is the second which explains why the traditional theory of the working of the capital market was inappropriate – why, in other words, savings and investment are brought into equality by movements in the level of incomes, far more than by movements in interest rates. And this second effect will be the more powerful the less is the uncertainty concerning the future, or the greater the firmness with which the idea of ‘a normal price’ is embedded in the minds of professional speculators and dealers.
In 1939, in addition, Kaldor attempted a theoretical and empirical critique of Hayek’s business cycle theory in “Capital Intensity and the Trade Cycle” (1939a), continued in his controversy with Hayek over the so-called Ricardo and Concertina effects in the pages of Economica in 1942 (Kaldor, 1940b, 1942; Hayek, 1942). Kaldor (1939a) addresses what determines the optimum degree of capital intensity and its relation with the trade cycle. In 1937, Kaldor argued that the investment period is only one way of measuring the capital/output ratio. Adopting an ordinal measure, he favored an index of the ratio of the initial cost to annual cost in output production. Therefore, what he called actual capital intensity is defined by the selling prices and costs ratio. In this sense, actual capital intensity must fall in the boom and rise in the bust period, since in the short run, capital stock is fixed and only labor can be incorporated into the production.
In its turn, normal capital intensity increases by more durable equipment and capital goods (which require a lower amortization per unit of output) and more automatic capital goods (which require less labor per unit of output). Kaldor (1939a) maintains that probably the normal capital intensity varies inversely with the trade cycle because real wages fall and the interest rate rises in the boom period, the exact opposite result of the Austrian business cycle theory. Moreover, the optimum capital intensity of new investments is determined by the technique which maximizes the area between the Keynesian marginal efficiency of the capital curve and the supply curve of investible funds . In 1940, in his “A Model of the Trade Cycle,” Kaldor (1940a) utilized nonlinear investment and savings functions to produce limits to the trade cycles.
In 1947, Hayek refused Kaldor’s request for leave of absence, thus Kaldor resigned from LSE to become Director of Research and Planning at the recently founded United Nations Economic Commission for Europe (UNECE) in Geneva . Kaldor was invited by Myrdal, the first Executive Secretary of the Commission. During his time at the Economic Commission for Europe, Kaldor developed with Myrdal the notion of circular cumulative causation (a concept that Myrdal appropriated from Wicksell and that encounters echoes and parallels in Thorstein Veblen’s idea on cumulative causation). While Kaldor applied this notion mainly to the demand–supply relationships in the manufacturing sector, Myrdal concentrated on the political economy and social provisioning aspects of underdeveloped regions, arguing that there is no tendency for automatic self-stabilization in the social system. In the same manner, there is no such tendency in the economic system.
Kaldor’s use of cumulative causation is closely related to the empirical positive linear long-run relationship between productivity growth and output growth, known as Verdoorn’s law. In 1949, drawing from statistics of industrial production, the Dutch economist Petrus J. Verdoorn (1949) argued that output growth increases productivity growth due to increasing returns in an approximate estimated rate of the square root of the output (a Verdoorn coefficient close to 0.5). Verdoorn’s article was written while he was a staff member of the Research and Planning division of the UNECE under Kaldor’s direction. In his 1966 Cambridge inaugural chair lecture on the “Causes of the Slow Rate of Economic Growth in the United Kingdom” (1966), Kaldor regressed the rate of growth of labor productivity on the rate of growth of manufacturing output using data from several industrialized countries from 1953–4 to 1963–4. Using a modified version of Verdoorn’s law, he explained Britain’s poor economic performance – sustaining the strong relationship particularly in manufacturing, public utilities, and construction.
Kaldor argued that the potential productivity growth is limited by the supply of labor which allows the exploration of static and dynamic (on capital accumulation and technical progress) increasing returns. This became known as Kaldor’s second growth law, or Kaldor–Verdoorn law, which establishes a positive deterministic relation between the growth of manufacturing productivity and the growth of manufacturing output (see Thirlwall, 1983) . The Kaldor–Verdoorn law became a crucial foundation for the cumulative causal model of economic growth, which places in demand instead of supply (e.g. à la Solow-Swan) the drive for growth.
In October 1949, Kaldor would return to academic life at Cambridge University, resuming the offer made after Keynes’ death by the Provost of King’s College in 1947. In the meantime, his interests moved from the trade cycle to economic growth, stimulated by Harrod’s research. The interrelationship between the rate of capital accumulation and the rate of growth of labor productivity led Kaldor (1986, p. 17) to think about the intrinsic connection between technical progress and capital goods investment in the sense that “inventions require to be embodied in ‘machines’ or equipment of some kind.” This means that “it is impossible therefore to isolate the effects of capital accumulation and the effects of ‘technical progress’ on the productivity of labor.” In other words, it is impossible to isolate movements along the production function from shifts of the same function.
Kaldor then used a technical progress function, relating the rate of productivity growth and the rate of new investment per worker, completely rejecting the notion of a production function and the technological frontier of substitution between labor and capital, thus the marginal productivity theory of distribution (between wages and profits). Reflecting on Keynes’ widow’s cruse parable in the Treatise on Money, Kaldor (p. 19) concluded that to aggregate business profits to be positive (an essential fact in a market economy) the outlays of business must largely exceed personal savings and that the “savings out of profits must be large relative both to the total capital outlay and to the total profit.” These two basic inequalities resulted in his Keynesian theory of distribution, namely, (2) sP>sW≥0 and (3) sP>IY>sW.
Kaldor relied on the endogeneity of the marginal propensity to save as a function of the income distribution (between wages and profits) as the solution for the Harrodian instability dilemma. This endogenization is an outgrowth of Kaldor’s perhaps major original contribution, his Keynesian theory of income distribution delineated in the final pages of his “Alternative Theories of Distribution” (1956). Kaldor incorporates Keynes’ savings propensities into a framework of income distribution à la Ricardo. However, using Keynes’ principle of effective demand, Kaldor reversed Ricardo’s causal chains, which take wages as an exogenous magnitude determined by workers’ subsistence and profits as residual, by taking profits as exogenous (at a level determined by full employment investments) and wages as a residual. This reversed the causality chain of the classical Ricardian and neoclassical marginal productivity distribution theory.
In the 1950s and 1960s, Kaldor combined the technical progress function, the Keynesian savings function, and an investment function à la Keynes-Harrod to build his three different versions of a model of economic growth and distribution (Kaldor, 1957, 1961; Kaldor & Mirrlees, 1962), the first with the help of David Champernowne and the last co-authored with James Mirrlees. Kaldor (1986, p. 19) was able to demonstrate that “it is possible to construct a model which has a determinate solution in terms of growth rates, the capital/output ratio, the investment coefficient, the profit share and the profit-rate without involving a ‘production function’ or indeed marginal analysis of any kind.”
The different savings propensities solution proposed by Kaldor (and later Pasinetti) was the building block of the post-Keynesian growth and income distribution models. In this class of models, the aggregate marginal propensity to save is variable because different income recipients such as wage earners or profit recipients (Kaldor) or different social classes (Pasinetti) have different marginal propensities to save. In this manner, changes in the wages or profits participation in total income can change the total propensity to save – since the aggregate propensity to save is nothing more than a ponderate mean weight of the marginal propensities to save of different income components. Therefore, there is a determined income distribution between wages and profits which will generate precisely a corresponding amount of profit share in national income compatible with full employment predetermined investments.
Epilogue
Kaldor’s solution to Harrod’s instability dilemma is the forced savings scenario described by Sraffa’s critique of Hayek’s theory. It is interesting to note that the capital theory wars (between Knight, Hayek and Kaldor) and especially Keynes’ General Theory killed the Austrian theory of (heterogeneous) capital in favor of Bates Clark’s aggregate production function with malleable capital jelly and diminishing returns. Paradoxically, in the Cambridge capital controversy in the 1950s and 1960s, Kaldor and others would deny the existence of a well-behaved inverse relationship between capital accumulation and interest rates in the production function form in growth models, emphasizing capital heterogeneity and capital and labor non-substitutability. However, Kaldor himself abandoned all the capital theoretical issues involved in heterogeneous capital adopting the one good model with flow equilibrium in his models. As Desai (1991, p. 55) wrote, Hayek’s “challenge of integrating money and heterogeneous capital in a dynamic cyclical growth model still remains. Kaldor was one of the few if not the only modern economist who knew all the pieces of the jigsaw puzzle.”
In the early 1930s, Kaldor was a Hayekian economist working within the Austrian theory of capital and business cycle. In their 1931 controversy, Hayek had criticized Keynes’ Treatise for adopting Wicksell’s ideas but not his Austrian theory of capital. However, Sraffa’s (1932a, b) critique of the Wicksellian natural interest rate and the traverse to a new equilibrium in a forced savings scenario, Myrdal’s ([1932] 1933) critique of Wicksell’s three conditions to monetary equilibrium, and Knight's (1935) reaffirmation of Clark’s theory of capital, exposed not only the frailties of the Austrian business cycle theory but the limitations of the Austrian theory of capital.
The Austrian theory of capital was the epitome of the neoclassical generalizing marginal productivity theory, as exposed by Wicksteed and Wicksell. Its limitations revealed in essence the shortcomings of the theoretical apparatus of equilibrium analysis in dynamic contexts, inherent in the theory of capital and business cycle theory. This state of affairs led to Kaldor’s theoretical emancipation in 1934 and later to an early conversion to Keynes’ new ideas, already in circulation. It also led Hayek to his pivotal 1937 essay on “Economics and Knowledge” where he first stated the fundamental problem of social sciences, the problem of knowledge – a problem that will completely shape his entire intellectual development. These controversies also influenced Kaldor’s later dissent developments in the trade cycle theory, the post-Keynesian models of growth and distribution, the Cambridge controversy on capital, and his critical views of neoclassical equilibrium economics.
In the 1970s and 1980s, Kaldor attacked what he called “The Irrelevance of Equilibrium Economics” (1972), claiming that neoclassical equilibrium economics is not a science in the strict sense of the word since the many empirical observations contradicting its assumptions and theoretical hypotheses (e.g. that most firms operate in imperfect markets) are just ignored. Indeed, Kaldor (1986, p. 5) argues that the a priori approach of general equilibrium theory meant that “its followers should be pre-occupied with the properties of the notion of ‘equilibrium,’” resulting in the acceptance that scientific progress “took the form not of removing the scaffolding [of the simplifying and unreal postulates] but of constantly adding to it.” In his Arthur M. Okun Lectures delivered in October 1983 at Yale University, Kaldor rather favored Economics Without Equilibrium (1983).
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https://www.cambridge.org/core/books/welfare-theory-public-action-and-ethical-values/john-hickss-farewell-to-economic-welfarism/E16C1C7CAB52435EA570ABA5D82386B1
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John Hicks’s Farewell to Economic Welfarism (Chapter 7)
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Welfare Theory, Public Action, and Ethical Values - March 2021
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https://www.bbc.com/news/business-19706272
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Masters of Money: Friedrich Hayek
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2012-09-24T15:14:24+00:00
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What makes Hayek a different kind of free-market economist is that he distrusted both sets of policy machinery for guiding the economy - monetary and fiscal.
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BBC News
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https://www.bbc.com/news/business-19706272
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You might think the financial crisis was caused by letting markets get too free - the financial markets, in particular.
Followers of the Austrian economist Friedrich Hayek would say exactly the opposite. In their view, it happened because the markets weren't free enough.
A few of you wrote to say last week's film on Keynes helped convince you of the case for Keynesian policies. I can't decide whether to be flattered or alarmed.
But if you were turned into a Keynesian last week, you should be sure to tune into Hayek. He could well change your mind again.
Hayek was the great free-market thinker who argued with Keynes in the 1930s over government intervention in the economy.
Hayek had the intellectual firepower to take on Keynes. He was often exasperated by the inconsistencies in Keynes' work and his tendency to change his mind - something the Cambridge economist did quite regularly, and not only "when the facts changed".
But Hayek did not have Keynes' charisma and famous powers of persuasion. (The Austrian accent didn't help.)
Also, Keynes was telling politicians that intervention by policymakers could make things better, whereas Hayek was saying they would only make things worse. In the end, that made all the difference.
Hayek wrote a best-selling polemic railing against economic planning, The Road to Serfdom, shortly after World War II.
In it, he warned that the dead hand of the bureaucrat could threaten a free society almost as much as the iron boot of Stalin. (If he had written it today, I suspect modern health and safety regulations would have featured.)
After that, Hayek had years in the intellectual wilderness, while the Keynesians bestrode the world. But there was a last great burst of fame and influence in the 1970s, when he was awarded a Nobel Prize for economics and feted by free-market politicians on both sides of the Atlantic.
Lord Patten reports in the programme how Margaret Thatcher would pull favourite Hayek quotations from her handbag at key moments during cabinet meetings.
So far, so interesting, but what can Hayek say to us right now? And why would I choose him as a Master of Money, not the other great free-market economist, Milton Friedman, who was almost certainly more influential?
In fact, I very much wanted to do a programme on Friedman too. There are modern monetarists who have interesting things to say about the crisis. But, amazingly, BBC Two did not want to broadcast four hours of economics at 21:00 on a Monday. Three was challenging enough.
Friedman has been profiled and lauded many times over the years. For this series I chose Hayek because, like Keynes - and unlike Milton Friedman - he focused on the great complexity of markets and their inherent unpredictability.
And because, unlike Keynes or Friedman, Hayek did not think policymakers could master those complexities well enough to guide the economy in the right direction.
More often than not, Hayek said, politicians would only make things worse.
Politicians had some sympathy with that view in the 1930s, when Hayek's arguments often did get a better hearing than Keynes'. But it has been very hard for post-war leaders to swallow - even, it turns out, politicians who claim to be free-marketers.
These leaders might pay lip service to liberalising the economy and setting markets free, but in practice it has been difficult for them truly to give up the urge to meddle, even when they are convinced of the intellectual case for doing so.
Witness the difficulties that coalition ministers have had letting go of day-to-day power over the NHS, or local councils. Or, to take a very different example, the US government's decision to rescue the people who had invested in Mexican bonds, in the "Tequila Crisis" of 1994.
The free-market economist and then Federal Reserve Chairman, Alan Greenspan, supported that massive US-IMF rescue package for Mexico, even though he had previously warned that protecting investors from the consequences of their mistakes would build up problems for the future, by encouraging institutions and investors to take excessive risks.
Of course, that is what many people think happened in the financial markets generally, in the years leading up to the financial crisis.
The financial system might have seemed free, these critics argue, but it was really a dangerous hybrid. In fact, the banks were free to do anything, except fail in large numbers.
That encouraged them to take out some pretty risky bets, which ended up costing us all dear. And lest there be any doubt that the safety net was there, the massive bailouts of 2008 made it crystal clear.
All of which explains why Hayek and some other Austrian economists have acquired a new generation of fans - including the Republican Congressman and presidential candidate Ron Paul. They find in Hayek's writing both a convincing explanation of the financial crisis and a bracing solution.
The Hayekian explanation for the crisis says it's all down to government meddling, to policymakers not giving markets the benefit of the doubt. And the worst kind of meddling, Hayek thought, came in the government's determination to control the price of money - also known as the interest rate.
In the Austrian view, the US Federal Reserve and other central banks helped cause the financial crisis, by always cutting interest rates when the economy showed signs of faltering; for example, after the bursting of the dotcom bubble.
That might have staved off a more serious downturn. But only at the cost of encouraging people to take on debts they couldn't afford - and giving banks an incentive to take excessive risks.
This, in effect, is the argument that Hayek made against Keynes in the late 1920s and 1930s: he said the Fed caused the crash, by keeping interest rates too low and encouraging a lot of "malinvestment" - investment in projects or assets which were not economically worthwhile.
He also said that further efforts to stimulate the economy would only make things worse - especially if they meant more borrowing by government.
When it comes to the 1930s, history has not looked kindly on Hayek's arguments. The classic study of the depression by Milton Friedman and Anna Schwartz, decades later, made a convincing case that it was caused by the US central bank pumping too little money into the economy, not too much.
What's interesting to note is that Milton Friedman and John Maynard Keynes are on the same side of that argument - united against Friedrich Hayek.
Given a bump in the road, Friedman and Keynes each thought policymakers could come to the rescue. And each thought, in normal times, that monetary policy was the best way to do it.
The difference between them - much exaggerated in the historical record - was that Keynes saw a big role for fiscal policy too, particularly in the aftermath of financial crises.
What makes Hayek a different kind of free-market economist is that he distrusted both sets of policy machinery for guiding the economy - monetary and fiscal.
Maybe it was the hyperinflation he'd lived through as a young adult in Austria, in the 1920s, but he simply did not believe governments should or could iron out the bumps in the economic cycle. The only government power he had confidence in was the power to make things worse, by debauching the currency.
Hayek's view has resonance for anyone who feels uneasy about governments bailing out bankers and central banks pumping hundreds of billions of dollars into the economy.
Whether it's the European central bank lending trillions to European banks, or a third bout of quantitative easing by the Federal Reserve, it feels, to many, like these institutions are simply kicking the can down the road - deferring the moment of truth.
So you can understand why many would be turning to Austrians like Hayek for a different kind of answer. But whether any government or mainstream politician is really prepared to step back, and let the system "heal itself" - whatever the short-term consequences - is another matter. They certainly weren't in 2008.
I asked Ron Paul whether he thought Americans were ready to be "Austrians". He paused. "Well, I think you'd have to change the name," he deadpanned. "But you know, I went to Austria last year. They're completely devoted to their welfare state. I turns out, even the Austrians aren't very Austrian."
Are you? Watch the programme and find out.
Masters of Money was made with help from the Open University and is broadcast at 21:00 on Monday 24 September on BBC Two.
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Hayek in War and Peace
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Austria’s proud intellectual tradition suffered an enormous blow from Nazism and World War II. Kurt T. Leube on the postwar efforts of Friedrich von Hayek to revive that tradition, especially in economics.
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/themes/hoover/favicon.ico
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Hoover Institution
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https://www.hoover.org/research/hayek-war-and-peace
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Like countless members of his generation and social class, Friedrich A. von Hayek had grown to manhood in fin de siècle Vienna and had expected to play a leading role in the mighty Habsburg Empire. However, in the aftermath of World War I—when the vast monarchy collapsed and Austria was reduced to a small, land-locked country—its society had disappeared. The emerging new Austria could not offer the type of opportunities to which he and his contemporaries were accustomed. With little hope for finding a decent position and mindful of the deteriorating political conditions in the 1930s, most of the leading Austrian intellectuals left the country, including the core members of the Austrian School of Economics. With this brain drain—Hayek in London, Joseph Schumpeter in Bonn, Ludwig von Mises in New York, Gottfried von Haberler at Harvard, Fritz Machlup in Buffalo, and numerous others scattered around the world—Vienna ceased to be the stronghold for the Austrian School of Economics.
In April 1939 Hayek ventured a last risky journey to Vienna before the outbreak of war. At the request of Mises, Hayek attempted to reclaim material stolen by the Nazis from Mises’s apartment. (Hayek’s efforts failed, but some 50 years later two Austrian historians discovered most of the stolen documents in a previously secret Soviet archive outside Moscow.)
Only four days after Great Britain (and some allies) declared war on the German Reich, Hayek, frustrated by the unfolding catastrophe, wrote a short memorandum for the BBC in an attempt to improve the BBC’s clumsy anti-Nazi efforts. Hayek tried to show “why, to be effective, propaganda must be based on the most intimate knowledge of German psychology and conditions,” and he explained in detail how to penetrate the Nazi grip on the media and when and where to smuggle disguised anti-Nazi propaganda material into Germany.
The Occupation
Once World War II had ended, a defeated Austria faced the monumental challenge of political reconstruction and economic recovery.
Like Germany and Berlin, Austria and Vienna were divided into four occupation zones. Thus, Vienna, like Berlin, was an isolated island surrounded by Soviet troops in the middle of the larger Soviet occupation zone.
Hayek was finally able to visit surviving family and friends in destroyed and occupied Vienna in early 1946. Shocked and deeply moved by the unbearable conditions under which his countrymen were living, Hayek wrote an article in which he accused the Allies of treating Austria “much worse than Italy or any of the other countries which joined Germany voluntarily.” He strongly argued for an immediate end to the Allied occupation because “the effect . . . of occupation is in the main that the Austrians have been prevented from helping themselves to get out of a desperate economic position.”
Hayek asked several of his friends to help guide Austria’s economic recovery and argued for the formation of a joint commission of economic advisers.
Reconstruction
To Hayek, the intellectual reconstruction of Austria was just as important as its political and economic reconstruction. He worked tirelessly in the postwar years in an attempt to rejuvenate Austria’s proud tradition in economics.
He was drawn to the plight of scholars and students in Austria, particularly in Vienna. He realized that it was essential for them to regain contact with the Western academic world after Austria’s long period of isolation. To that end, back in London, Hayek founded the Austrian Book Committee. As chair, he appealed to prominent Austrians and non-Austrians alike to collect books and funds to assist Austrian libraries in rebuilding their collections in the humanities and social sciences, particularly with items published in the West since 1938. With prominent figures such as Lord Beveridge among the sponsors, by December 1947 the committee had already collected some 2,500 books, and Hayek traveled to Vienna to arrange for the shipment. Although this shipment was received in Vienna with gratitude, the appalling inefficiency of the bureaucracy there eventually forced the committee to wind up its operations in July 1948.
In 1947 Hayek participated in the “International College”—an informal gathering of scholars and students founded in the small mountain village of Alpbach as a forum for philosophical, political, and economic ideas. Hayek inspired many of his Austrian friends to participate, including philosopher Karl Popper, physicist Ernst Schrödinger, and economists Haberler, Machlup, and Mises. (This charming and stimulating “summer school” prospers today as the world-famous European Forum Alpbach.)
Deeply concerned with the large number of eager students in Austria “who receive no adequate teaching but who might well some day continue the Viennese tradition if they were given an opportunity to acquaint themselves with the state of modern economics,” Hayek worked hard to organize a reunion of Austrian economists in the form of a summer school in Vienna and persuaded a number of his friends—including Haberler, Machlup, and Mises—to teach there. Using seed money from the Rockefeller Foundation and funding from a small group of Austrian industrialists, in July 1948 he launched the school, which later developed into the Meinl-Collegium. (Among the students there was Reinhard Kamitz, who became Austria’s minister of finance and was instrumental in the Austrian economic miracle of the 1950s and early 1960s.)
Many of Hayek’s activities in Vienna during the postwar years stirred up controversy and irritated the Austrian Socialist Party, which at the time strongly supported central economic planning.
In 1950 Hayek accepted an appointment at the University of Chicago, which made traveling back to Europe expensive and time-consuming. Still, Hayek did not rest.
In his final attempt to revive Austria’s great academic tradition, Hayek became one of the driving minds behind the founding of the Austrian Institute in New York in 1954. He circulated a detailed assessment of the condition and needs of the University of Vienna, which he opened with a dramatic appeal: “One of the great centers of science and scholarship which during the last 3 or 4 generations has given the world perhaps as many original thinkers of the first rank as any other is in acute danger.” He continued: “There is still a spark glimmering, there is still left an atmosphere and a number of first class men that should make it possible to revive the old tradition. . . . The neutralization of Austria and the traditions of Vienna offer an exceptional opportunity . . . in the present ideological struggle of the world to revive the University of Vienna as a main intellectual fort at the boundaries of the West.” Although an American Committee for Vienna University supported the idea and moved things forward, strong local academic and partisan interference eventually frustrated Hayek’s efforts. To get around the bureaucratic hurdles and resistance, Hayek rephrased his original idea and presented a new proposal for a private research institution in Vienna to several U.S.-based foundations. His proposal outlined the tasks, structure, and academic mission of the institute in great detail, and in 1959 he finally met successfully with several leading Austrian politicians. Thanks to a major contribution by the Ford Foundation, the Institute for Advanced Studies was established in Vienna shortly thereafter; Hayek taught there in the spring of 1963.
After the war, the Austrian economy and political system both made remarkable recoveries, drawing on those who had survived the Nazi terror and on returning émigrés. Yet despite Hayek’s best efforts, the Austrian School of Economics never recovered its prewar glory. Why did the authorities fail to invite Hayek, Mises, and their contemporaries to return to the land of their upbringing? That remains one of the signal mysteries—and indeed tragedies—of Austrian history.
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https://www.nobelprize.org/prizes/economic-sciences/1972/hicks/biographical/
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John R. Hicks – Biographical
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The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1972 was awarded jointly to John R. Hicks and Kenneth J. Arrow "for their pioneering contributions to general economic equilibrium theory and welfare theory"
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NobelPrize.org
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https://www.nobelprize.org/prizes/economic-sciences/1972/hicks/biographical/
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John R. Hicks
Biographical
I was born in 1904 at Warwick, England, where my father was a journalist on a local newspaper. I was educated at Clifton College (1917-22) and at Balliol College, Oxford (1922-26), an expensive education financed by mathematical scholarships. Thus, during my school days, and in my first year at Oxford, I was a mathematical specialist; to the mathematical training I received at Clifton, in particular, I owe a great debt. But I was not contented with mathematics; I had interests in literature and in history which I needed to satisfy. My move (in 1923) to “Philosophy, Politics and Economics”, the “new school” just being started at Oxford, was, however, not a success. I finished with a second-class degree, and no adequate qualification in any of the subjects I had studied.
Economists, in those days, were very scarce, so I did pick up a temporary lecturership at the London School of Economics and managed to get continued. I started as a labour economist, doing descriptive work on industrial relations, but, gradually, I moved over to the analytical side. Then I found that my mathematics, by that time almost forgotten, could be revived, and were sufficient to cope with what anyone (then) used in economics. By 1930, when the economics department at the London School got a new lease of life under Lionel Robbins, I had found my feet. “How wonderful it must have been in those days, when such things could be picked up with so little trouble”, my students have said to me since. They were picked up in discussion, with Robbins and Friedrich von Hayek, with Roy Allen and Nicholas Kaldor, with Abba Lerner and with Richard Sayers – and with Ursula Webb, who, in 1935, became my wife.
By 1935, I had got so much that I needed to go away to put it together. Thus, when an opportunity arose for moving, to a university lecturership at Cambridge (and Fellowship of Gonville and Caius College), I took it. My years at Cambridge (1935-38) were mainly occupied in writing Value and Capital which was based on the work I had done in London, so I was not in a state to learn very much from association with Cambridge economists. From 1938 to 1946 I was Professor at the University of Manchester. It was there that I did my main work on welfare economics, with its application to social accounting. In 1946 I returned to Oxford, first as a research fellow of Nuffield College (1946-52), then as Drummond Professor of Political Economy (1952-65), and finally as a research fellow of All Souls College (1965-71).
During these latter years, I have made contributions to several branches of theoretical economics. I have written on money and on international trade, as well as on growth and fluctuations. I have also done some small pieces of applied economics, especially in relation to problems of “developing” countries, several of which I have visited in company with my wife, much of whose work has been in that field. Thus, in 1950, I was a member of a Revenue Allocation Commission in Nigeria, and in 1954, we both of us made an enquiry into the finances of Jamaica. I have been reluctant to pronounce on larger issues of practical economics since I am convinced that one should not pronounce unless one knows the facts; and to keep abreast of changing facts on a world, or even on a nation scale, is more than can be done by one whose main concern is with principles. A mere familiarity with statistics that have been prepared and digested by others is not sufficient.
We now live in the country (Porch House, Blockley, Gloucestershire) but spend a part of each week in Oxford, where we continue to do a little teaching.
I became a Fellow of the British Academy in 1942; a foreign member of the Royal Swedish Academy in 1948, of the Accademia dei Lincei, Italy, in 1952, and of the American Academy in 1958. I am an honorary fellow of Nuffield College, Oxford, since 1958 and of Gonville and Caius College, Cambridge, since 1971. I was President of the Royal Economic Society, 1960-62, and was knighted in 1964. I am an honorary doctor of several British Universities (Glasgow, Manchester, Leicester, East Anglia and Warwick) as well as of the Technical University of Lisbon. I was made (in 1971) an honorary Senator of the University of Vienna.
From Nobel Lectures, Economics 1969-1980, Editor Assar Lindbeck, World Scientific Publishing Co., Singapore, 1992
This autobiography/biography was written at the time of the award and first published in the book series Les Prix Nobel. It was later edited and republished in Nobel Lectures. To cite this document, always state the source as shown above.
John R. Hicks died on May 20, 1989.
Copyright © The Nobel Foundation 1972
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https://www.econlib.org/library/Essays/LtrLbrty/gryHRC.html
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"F. A. Hayek and the Rebirth of Classical Liberalism"
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2018-02-05T02:14:26+00:00
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In the recent revival of public and scholarly interest in the values of limited government and the market order, no one has been more centrally significant than Friedrich A. Hayek. His works have figured as a constant point of reference in the discussions both of the libertarian and conservative theories of the market economy; they […]
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Econlib
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https://www.econlib.org/library/Essays/LtrLbrty/gryHRC.html
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Introduction:
The Revival of Interest in Hayek—A Unified Research Program in Hayek’s Writings?
In the recent revival of public and scholarly interest in the values of limited government and the market order, no one has been more centrally significant than Friedrich A. Hayek. His works have figured as a constant point of reference in the discussions both of the libertarian and conservative theories of the market economy; they have also provided a focal point of attack for interventionist and collectivist critics of the market. Hayek’s return to such a pivotal position in intellectual life is remarkable when we recall that for several decades his work was subjected to neglect and obscurity. It was not until 1974 at the age of 75 that he was belatedly acknowledged by being awarded the Nobel Memorial Prize in Economic Science. During the three decades after 1945, when certain Keynesian ideas seemed to have been vindicated by the prevailing government policies of economic interventionism, Hayek may have seemed an intransigent and isolated figure, whose chief importance was that of an indefatigable critic of the spirit of the age. It was, however, during these very same years, in which he turned from economic theory to political thought, that Hayek made his greatest contributions thus far to the formulation of a public philosophy, including most notably his Constitution of Liberty (1960), surely the most powerful and profound defense of individual freedom in our time. It is noteworthy that, in the revival of interest in Hayek’s work, his contributions to political philosophy have attracted as much interest as have his works in economic theory.
The Unity and Coherence of Hayek’s Writings: Conception of Mind & Unity of Knowledge
In all of this revival of scholarly interest, however, Hayek’s work has rarely been viewed as a whole. In fact, it has often been suggested that what we find in his writings is a series of unconnected episodes, in which questions are addressed in a variety of disciplines on a number of disparate historical occasions, rather than a coherent research program implemented over the years. Even Hayek’s friends have sometimes discerned important tensions and conflicts in his writings, leading them to argue that his work encompasses methodological and political positions which are in the last resort incompatible. Against this view, to which I once subscribed myself, I want now to submit that Hayek’s work does indeed disclose a coherent system of ideas. Hayek’s system of ideas may not perhaps be wholly stable, but in this system positions covering a range of academic disciplines are in fact informed and unified by a small number of fundamental philosophical conceptions. Identifying these basic philosophical positions, and showing how they infuse his entire work, is the chief aim of this review of Hayek’s work. It will not be my argument that Hayek’s system lacks difficulties or internal tensions. I will try, however, to show that his work is given a cohesive and unitary character by the claims in theory of knowledge and in theoretical psychology which inform and govern his contributions to many specific debates.
My strategy in this survey of Hayek’s work is to seek the unifying wellspring of his thought in his conception of the mind and in his account of the nature and limits of human knowledge. My argument will be that Hayek’s general philosophy—a highly distinctive development of post-Kantian critical philosophy—informs and shapes his contributions to a variety of academic disciplines (jurisprudence and social philosophy as much as economic theory and the history of ideas), and Hayek’s philosophy does so in ways that have been persistently neglected or misunderstood. In particular, Hayek’s account of the structure of the mind, of the nature and limits of human knowledge, and of the use and abuse of reason in human life pervades his writings down to their last details, and gives to his work over the years and across many disciplinary boundaries the character of a coherent system. We can see the structure of Hayek’s system of ideas and we can realize its capacity to yield an integrated view of man and society only when we have adequately specified its philosophical foundations. It is only once we have grasped these philosophical foundations of his thought, again, that we may fully appreciate his originality as a thinker and the measure of his achievement as a social theorist.
Overview of Topics Covered in This Essay
I begin my survey by examining briefly the chief claims Hayek makes in his centrally important but sadly neglected treatise in theoretical psychology, The Sensory Order (1952), where he most systematically and explicitly develops his account of the mind and of human knowledge. Having set out the principal features of Hayek’s view of the mind and of the forms of human knowledge, I shall try to show how these conceptions inform his account of a spontaneous order in society, and how they condition his distinction between ‘economy’ and ‘catallaxy,’ his elaboration of the argument about economic calculation under socialism, and his distinctive position as to the appropriate theory and methods for economics. I proceed then to examine how Hayek applies his general philosophy to the relations of individual liberty with the rule of law. In the course of this survey I will canvass some of the most important criticisms of Hayek’s system, concentrating particularly on the claim that his conception of a spontaneous order in society is unclear, and his use of it objectionable. It is often argued that, when taken in conjunction with its twin idea of cultural evolution by the natural selection of rival social practices, the idea of spontaneous social order has a conservative rather than any liberal or libertarian implication, since it appears to entail blind submission to the result of any unplanned social process. Against this criticism, which expresses the common view that Hayek’s political thought is an unstable compound of conservative or traditionalist and liberal or libertarian elements, I will argue that the idea of spontaneous social order in Hayek’s work is best seen as a value-free explanatory notion and that invoking this idea illuminates rather than undermines the bases for the commitment to liberty.
In developing my argument by way of an examination of the criticisms of a number of writers in opposed intellectual traditions—Michael Oakeshott, James Buchanan, and Irving Kristol, for example—I will conclude that Hayek’s chief achievement is in his reviving the intellectual tradition of classical liberalism of which varied strands in contemporary conservatism and libertarianism are quarreling offspring. In the course of this survey I will, also, identify three principal achievements of Hayek’s social philosophy: (1) his demonstration of the import for social theory of an erroneous Cartesian theory of the mind and the role of this theory in inspiring modern attempts at the rational design of social life; (2) his theory of the liberal order, which is a synthesis of the theories of justice of Immanuel Kant (1724-1804) and David Hume (1711-1776) with a devastating critique of contemporary conceptions of distributive justice; and (3) his proposal for a resolution of a central difficulty of classical liberal theory in the intriguing ideas of a market in traditions.
The upshot of my assessment of Hayek’s thought will be that, whereas his critics have identified ambiguities, tensions, and unclarities in some of his formulations, the interest and appeal of his system remains unimpeached. Despite (or even because of) its problematic aspects, Hayek’s system of ideas remains a powerful and compelling research program—in my own opinion, the most promising we have at our disposal—for classical liberal social philosophy.
Hayek’s General Philosophy—The Kantian Heritage
The entirety of Hayek’s work—and, above all, his work in epistemology, psychology, ethics, and the theory of law—is informed by a distinctively Kantian approach. In its most fundamental aspect, Hayek’s thought is Kantian in its denial of our capacity to know things as they are or this world as it is. It is in his denial that we can know things as they are, and in his insistence that the order we find in our experiences, including even our sensory experiences, is the product of the creative activity of our minds rather than a reality given to us by the world, that Hayek’s Kantianism consists. It follows from this skeptical Kantian standpoint that the task of philosophy cannot be that of uncovering the necessary characters of things. The keynote of critical philosophy, after all, is the impossibility of our attaining any external or transcendental standpoint on human thought from which we could develop a conception of the world that is wholly uncontaminated by human experiences or interest. We find Kant’s own writings—above all the Critique of Pure Reason (1781)—a case against the possibility of speculative metaphysics which Hayek himself has always taken to be devastating and conclusive. It is a fundamental conviction of Hayek’s, and one that he has in common with all those who stand in the tradition of post-Kantian critical philosophy, that we cannot so step out of our human point of view as to attain a presuppositionless perspective on the world as a whole and as it is in itself. The traditional aspiration of western philosophy—to develop a speculative metaphysics in terms of which human thought may be justified and reformed—must accordingly be abandoned. The task of philosophy, for Hayek as for Kant, is not the construction of any metaphysical system, but the investigation of the limits of reason. It is a reflexive rather than a constructive inquiry, since all criticism—in ethics as much as in science—must in the end be immanent criticism. In philosophy as in life, Hayek avers, we must take much for granted, or else we will never get started.
Hayek’s uncompromisingly skeptical Kantianism is strongly evidenced in The Sensory Order (see Hayek bibliography, B-10). There Hayek disavows any concern as to “how things really are in the world,” affirming that “… a question like ‘what is X?’ has meaning only within a given order, and… within this limit it must always refer to the relation of one particular event to other events belonging to the same order.” Above all, the distinction between appearance and reality, which Hayek sees as best avoided in scientific discourse, is not to be identified with the distinction between the mental or sensory order and the physical or material order. The aim of scientific investigation is not, then, for Hayek, the discovery behind the veil of appearance of the natures or essences of things in themselves, for, with Kant and against Aristotelian essentialism, he stigmatizes the notion of essence or absolute reality as useless or harmful in science and in philosophy. The aim of science can only be the development of a system of categories or principles, in the end organized wholly deductively, which is adequate to the experience it seeks to order.
Hayek as a Skeptical Kantian
Hayek is a Kantian, then, in disavowing in science or in philosophy any Aristotelian method of seeking the essences or natures of things. We cannot know how things are in the world, but only how our mind itself organizes the jumble of its experiences. He is Kantian, again, in repudiating the belief, common to empiricists and positivists such as David Hume and Ernst Mach, that there is available to us a ground of elementary sensory impressions, untainted by conceptual thought, which can serve as the foundation for the house of human knowledge. Against this empiricist dogma, Hayek is emphatic that everything in the sensory order is abstract, conceptual and theory-laden in character: “It will be the central thesis of the theory to be outlined that it is not merely a part but the whole of sensory qualities which is… an ‘interpretation’ based on the experience of the individual or the race. The conception of an original pure core of sensation which is merely modified by experience is an entirely unnecessary fiction.” Again, he tells us that “the elimination of the hypothetical ‘pure’ or ‘primary’ core of sensation, supposed not to be due to earlier experience, but either to involve some direct communication of properties of the external objects, or to constitute irreducible mental atoms or elements, disposes of various philosophical puzzles which arise from the lack of meaning of these hypotheses.” The map or model we form of the world, in Hayek’s view, is in no important respect grounded in a basis of sheer sense-data, themselves supposed to be incorrigible. Rather, the picture we form of the world emerges straight from our interaction with the world, and it is always abstract in selecting some among the infinite aspects which the world contains, most of which we are bound to pass by as without interest to us.
Three Influences on Hayek’s Skeptical Kantianism: Mach, Popper, and Wittgenstein
Hayek’s theory of knowledge is Kantian, we have seen, in affirming that the order we find in the world is given to it by the organizing structure of our own mind and in claiming that even sensory experiences are suffused with the ordering concepts of the human mind. His view of the mind, then, is Kantian in that it accords a very great measure of creative power to the mind, which is neither a receptacle for the passive absorption of fugitive sensations, nor yet a mirror in which the world’s necessities are reflected.
1. Ernst Mach and Metaphysical Neutrality
There are a number of influences on Hayek, however, which give his Kantianism a profoundly distinctive and original aspect. The first of these influences is the work of Ernst Mach (1838-1916), the positivist philosopher whose ideas dominated much of Austro-German intellectual life in the decades of Hayek’s youth. Hayek’s debts to Mach are not so much in the theory of knowledge, as in the attitude both take to certain traditional metaphysical questions. I have observed already that Hayek dissented radically from the Humean and Machian belief that human knowledge could be reconstructed on the basis of elementary sensory impressions, and throughout his writings Hayek has always repudiated as incoherent or unworkable the reductionist projects of phenomenalism in the theory of perception and behaviorism in the philosophy of mind. In these areas of philosophy, then, Hayek’s work has been strongly antipathetic to distinctively positivistic ambitions for a unified science. At the same time, while never endorsing the dogma of the Vienna Circle that metaphysical utterances are literally nonsensical, Hayek has often voiced the view that many traditional metaphysical questions express “phantom-problems.”
In both The Sensory Order and later in The Constitution of Liberty, Hayek affirms that the age-old controversy about the freedom of the will embodies such a phantom-problem. Hayek’s ‘compatibilist’ standpoint in respect of freedom of the will—his belief that the casual determination of human actions is fully compatible with ascribing responsibility to human agents for what they do—is analogous with his stance on the mind-body question. In both controversies Hayek is concerned to deny any ultimate dualism in metaphysics or ontology, while at the same time insisting that a dualism in our practical thought and in scientific method is unavoidable for us. Thus he says of the relations of the mental and the physical domains that “While our theory leads us to deny any ultimate dualism of the forces governing the realms of the mind and that of the physical world respectively, it forces us at the same time to recognize that for practical purposes we shall always have to adopt a dualistic view.” And Hayek concludes his study of the foundations of theoretical psychology in The Sensory Order with the claim that “to us mind must remain forever a realm of its own, which we can know only through directly experiencing it, but which we shall never be able to fully explain or to ‘reduce’ to something else.”
Hayek’s thought has a Machian positivist aspect, then, not in the theories of mind or perception, but in its attitude to traditional metaphysical questions, which is dissolutionist and deflationary. There is yet another link with positivism. Notwithstanding Hayek’s opposition to any sort of reductionism, whether sensationalist or physicalist, he seems to be a monist in ontology, averring that “mind is thus the order prevailing in a particular part of the physical universe—that part of it which is ourselves.” Hayek may seem here to be qualifying or withdrawing from that stance of metaphysical neutrality which in Machian spirit he commends, but this appearance may be delusive. There is much to suggest that, when Hayek denies any ultimate dualism in the nature of things, he is not lapsing into an idiom of essences or natural kinds, but simply observing—much in the fashion of the American pragmatist philosopher, W. V. Quine—that nothing in our experience compels us to adopt ideas of mental or physical substance. Though Hayek has not to my knowledge ever pronounced explicitly on the question, the whole tenor of his thought inclines to a Quinean pragmatist view of ontological commitments. In his skeptical and pragmatist attitude to ultimate questions in metaphysics and ontology, Hayek lines up with many positivists rather than with Kantian critical philosophy—though positivists themselves sometimes claim, with some justification, to be treading a Kantian path.
2. Karl Popper: The Growth of Knowledge
A second influence on Hayek’s general philosophy which gives it a distinctive temper is the thought of his friend, Karl Popper (b. 1902). I mean here, not Popper’s hypothetico-deductive account of scientific method, which there is evidence that Hayek held prior to his meeting with Popper, nor yet Popper’s proposal (which Hayek was soon to accept) that falsifiability rather than verifiability should be adopted as a criterion of demarcation between the scientific and the non-scientific. Again, Hayek has under Popper’s influence come to make an important distinction between types of rationalism, such that “critical rationalism” is commended and “constructivistic rationalism” condemned. But this is not what I have in mind. I refer rather to certain striking affinities between Hayek’s view of the growth of knowledge and that adumbrated in Popper’s later writings on “evolutionary epistemology.” As early as the manuscript which later became The Sensory Order (published in 1952, but composed in the twenties), Hayek made it clear that the principles of classification embodied in the nervous system were not for him fixed data; experience constantly forced reclassification on us. In his later writings, Hayek is explicit that the human mind is itself an evolutionary product and that its structure is therefore variable and not constant. The structural principles or fundamental categories which our minds contain ought not, then, to be interpreted in Cartesian fashion as universal and necessary axioms, reflecting the natural necessities of the world, but rather as constituting evolutionary adaptations of the human organism to the world that it inhabits.
The striking similarity between Popper’s later views, and those expounded by Hayek in The Sensory Order, is shown by Popper’s own application of the evolutionist standpoint in epistemology to the theory of perception:
… if we start from a critical commonsense realism… then we shall take man as one of the animals, and human knowledge as essentially almost as fallible as animal knowledge. We shall suppose the animal senses to have evolved from primitive beginnings; and we shall look therefore on our own senses, essentially, as part of a decoding mechanism—a mechanism which decodes, more or less successfully, the encoded information about the world which manages to reach us by sensory means.
J. W. N. Watkins’ comment on this view is as apposite in the respect of Hayek as it is of Popper:
Kant saw very clearly that the empiricist account of sense experience creates and cannot solve the problem of how the manifold and very various data which reach a man’s mind from his various senses get unified into a coherent experience.
Kant’s solution consisted, essentially, in leaving the old quasimechanistic account of sense-organs intact, and endowing the mind with a powerful set of organizing categories—free, universal and necessary—which unify and structure what would otherwise be a mad jumble. Popper’s evolutionist view modifies Kant’s view at both ends: interpretative principles lose their fixed and necessary character, and sense organs lose their merely causal and mechanistic character.
Hayek’s account of sense perception anticipates Popper’s later views in a most striking fashion, because in both sensation is conceived as a decoding mechanism, which transmits to us in a highly abstract fashion information about our external environment. Again, both Hayek and Popper share the skeptical Kantian view that the order we find in the world is given to it by the creative activity of our own minds: as Hayek himself puts it uncompromisingly in The Sensory Order, “The fact that the world which we know seems wholly an orderly world may thus be merely a result of the method by which we perceive it.” One difference between Hayek and Popper is in the fact that, at any rate in his published work to date, Hayek has not followed Popper in his ontological speculations about a world of abstract or virtual entities or intelligibles.
3. Wittgenstein & Hayek
A third influence on Hayek’s thought which gives his view of knowledge and the mind a very distinctive character is that of his relative, Ludwig Wittgenstein (1899-1951). This influence runs deep, and is seen not only in the style and presentation of The Sensory Order, which parallels in an obvious way that of Wittgenstein’s Tractatus, but in many areas of Hayek’s system of ideas. It is shown, for example, in Hayek’s recurrent interest in the way in which the language in which we speak shapes our thoughts and forms our picture of the world. In fact, Hayek’s interest in language, and in a critique of language, predates Wittgenstein’s work, inasmuch as he had an early preoccupation with the work of Fritz Mauthner, the now almost forgotten philosopher of radical nominalism whom Wittgenstein mentions (somewhat dismissively) in the Tractatus. There are, however, many evidences that Wittgenstein’s work reinforced Hayek’s conviction that the study of language is a necessary precondition of the study of human thought, and an indispensable prophylactic to the principal disorders of the intellect. Examples which may be adduced are Hayek’s studies of the confusion of language in political thought and, most obviously, perhaps, of his emphasis on the role of social rules in the transmission of practical knowledge.
It is on this last point that one of the most distinctive features of Hayek’s Kantianism, its pragmatist aspect, is clearest. Of course there is a recognition in Kant himself that knowledge requires judgment, a special faculty, the Urteilskraft, which cannot be given any complete or adequate specification in propositional terms, and whose exercise is necessary for the application of any rule. In the sense that we must exercise this faculty of judgment even before we can apply a rule, it is action which is at the root of our very knowledge itself. Hayek’s concern is not with this ultimate dependency of rule following upon judgment—which the later Wittgenstein, perhaps following Kant, emphasizes—but rather with the way that knowledge of all sorts, but especially social knowledge, is embodied in rules. Our perceptual processes, indeed all our processes of thought, are governed by rules which we do not normally articulate, which in some cases are necessarily beyond articulation by us, but which we rely upon for the efficiency of all our action in the world. Indeed, it is not too much to say that, for Hayek (notwithstanding his stress on the abstract or conceptual character of our sensory knowledge) all our knowledge is at bottom practical or tacit knowledge: it consists, not in propositions or theories, but in habits and dispositions to act in a rule-governed fashion. There is here an interesting parallel with Popper’s view, which sees even our sense organs as being themselves embodied theories.
There is much in Hayek’s writings to suggest that he takes what Gilbert Ryle calls “knowing how,” what Michael Polanyi calls tacit knowing, what Michael Oakeshott calls the traditional knowledge, to be the wellspring of all our knowledge. It is in this sense—in holding the stuff of knowledge to be at bottom practical—that Hayek may be said to subscribe to a thesis of the primacy of practice in the constitution of human knowledge. It is not indeed that Hayek disparages the enterprise of theory-building, but he sees the theoretical reconstruction of our practical knowledge as necessarily incomplete in its achievements.
Why is this? Hayek argues that, not only human social life, but the life of the mind itself is governed by rules, some of which cannot be specified at all. Note that Hayek does not contend merely that we cannot in fact specify all the rules which govern both social and intellectual life: he argues that there must of necessity be an insuperable limit beyond which we are unable to specify the rules by which our lives are governed. As he puts it:
So far our argument has rested solely on the uncontestable assumption that we are not in fact able to specify all the rules which govern our perceptions and actions. We still have to consider the question whether it is conceivable that we should ever be in a position discursively to describe all (or at least any one we like) of these rules, or whether mental activity must always be guided by some rules which we are in principle not able to specify. If it should turn out that it is basically impossible to state or communicate all the rules which govern our actions, including our communications and explicit statements, this would imply an inherent limitation of our possible explicit knowledge and, in particular, the impossibility of ever fully explaining a mind of the complexity of our own.
Hayek goes on to observe of the inability of the human mind reflexively to grasp the most basic rules which govern its operations that “this would follow from what I understand to Georg Cantor’s theorem in the theory of sets according to which in any system of classification there are always more classes than things to be classified, which presumably implies that no system of classes can contain itself.” Again, he remarks that “it would thus appear that Gödel’s theorem is but a special case of a more general principle applying to all conscious and particularly all rational processes, namely the principle that among their determinants there must always be some rules which cannot be stated or even be conscious.” Hayek concludes this development of themes first explored in his Sensory Order with the fascinating suggestion that conscious thought must be presumed to be governed by “rules which cannot in turn be conscious—by a “supraconscious mechanism,” or, as Hayek prefers sometimes to call it, a “meta-conscious mechanism”—”which operates on the contents of consciousness but which cannot itself be conscious.”
The third source of influence on Hayek’s skeptical Kantianism, which I have ascribed primarily to the work of his relative Wittgenstein, plainly comprehends other influences as well. Hayek cites Ryle in support of his observations that ” ‘know how’ consists in the capacity to act according to rules which we may be able to discover but which we need not be able to state in order to obey them,” and glosses the point with reference to Michael Polanyi. Here the insight is that all articulated or propositional knowledge arises out of tacit or practical knowledge, the knowledge of how to do things, which must be taken as fundamental. Nothing is said in Ryle or Polanyi thus far about rule-governedness as a distinctive mark of human (and, it may well be, not only human but also animal) intelligent behavior.
It is for the insight that practical knowledge is transmitted mimetically through the absorption of social rules that we need to turn to Wittgenstein, from whom Hayek may have taken it. (There are, to be sure, contrasts between Hayek’s view of rule-governed behavior and Wittgenstein’s, particularly in regard to the skepticism about rule-following expressed in Wittgenstein’s On Certainty and the dependency of social rules upon forms of life, stressed in Wittgenstein but not discussed by Hayek; but these contrasts need not concern us here.) What is original and novel in Hayek’s account, and (so far as I know) is nowhere to be found in Wittgenstein, is his account, firstly, of the hierarchy of rules in perception and action, with the most fundamental rules being meta-conscious rules beyond the possibility of identification and articulation; and, secondly, Hayek’s systematic exploration of the selection of these rules in a process of evolutionary adaptation. According to Hayek, in other words, the rules of action and of perception by which both intellectual and social life are governed are in the first place stratified or ordered in a hierarchy, with the most fundamental rules (which shape the basic categories of our understanding) always eluding conscious articulation. But secondly, all of these rules, including even the most fundamental of them are products of a process of evolutionary selection, by which they may be further altered or eliminated. Systems of rules conferring successful behavior are adopted by others without conscious reflection. It is this disposition to emulate or copy successful behaviors which explains the cultural evolution of which Hayek speaks, and which (though he recognizes its primitive beginnings in the social lives of animals) Hayek regards as the distinguishing mark of human life.
Hayek on Knowledge and Mind: Implications for Social Theory
Hayek’s Kantian Philosophy of Mind
I began by noting the striking Kantian attributes of Hayek’s epistemology and philosophy of mind—aspects which Hayek himself does not stress, perhaps because he conceives the formative influence of Kantian philosophy on his thought to be self-evident. As he puts it himself in a footnote to his discussion in a recent volume of the government of conscious intellectual life by super-conscious abstract rules: “I did not mention… the obvious relation of all this to Kant’s conception of the categories that govern our thinking—which I took rather for granted.”
Hayek’s Kantianism is seen, first in his repudiation of the empiricist view that knowledge may be constructed from a basis of raw sensory data and, second, in his uncompromising assertion of the view that the order we find in the world is a product of the creative activity of the human mind (rather than a recognition of natural necessity). His Kantian view is distinctive in that it anticipates Popper in affirming that our mental frameworks by which we categorize the world are neither universal nor invariant, but alterable in an evolutionary fashion; his Kantian view also follows Wittgenstein in grasping the role of social rules in the transmission of practical knowledge. Hayek’s Kantian view is original, finally, in recognizing a hierarchy in the rules that govern our perceptions and actions, and in insisting that the most fundamental of these rules are “super-conscious” and beyond any possibility of specification or articulation.
Hayek’s Philosophy of Mind & His Social Theory: Beyond Kantianism
Hayek himself is emphatic that these insights in the theories of mind and knowledge have the largest consequences for social theory. The inaccessability to reflexive inquiry of the rules that govern conscious thought entails the bankruptcy of the Cartesian rationalist project and implies that the human mind can never fully understand itself, still less can it ever be governed by any process of conscious thought. The considerations adduced earlier, then, establish the autonomy of the mind, without ever endorsing any mentalistic thesis of mind’s independence of the material order. Where Hayek deviates from Descartes’ conception of mind, however, is not primarily in his denying ontological independence to mind, but in his demonstration that complete intellectual self-understanding is an impossibility.
Hayek’s conception of mind is a notion whose implications for social theory are even more radical than are those of Hayek’s Kantianism. It is the chief burden of the latter, let us recall, that no external or transcendental standpoint on human thought is achievable, in terms of which it may be supported or reformed. In social theory, this Kantian perspective implies the impossibility of any Archimedean point from which a synoptic view can be gained of society as a whole and in terms of which social life may be understood and, it may be, redesigned. As Hayek puts it trenchantly: “Particular aspects of a culture can be critically examined only within the context of that culture. We can never reduce a system of rules or all values as a whole to a purposive construction, but must always stop with our criticism of something that has no better grounds for existence than that it is the accepted basis of the particular tradition.” This is a useful statement, since it brings out the Kantian implication for social theory: that all criticism of social life must be immanent criticism, just as in all philosophy inquiry can only be reflexive and never transcendental.
Hayek goes beyond Kantianism, however, in his recognition that, just as in the theory of mind we must break off when we come to the region of unknowable ultimate rules, so in social theory we come to a stop with the basic constitutive traditions of social life. These latter, like Wittgenstein’s forms of life, cannot be the objects of further criticism, since they are at the terminus of criticism and justification: they are simply given to us, and must be accepted by us. But this is not to say that these traditions are unchanging, nor that we cannot understand how it is that they do change.
In social theory, Hayek’s devastating critique of Cartesian rationalism entails that, whatever else it might be, social order cannot be the product of a directing intelligence. It is not just that too many concrete details of social life would always escape such an intelligence, which could never, therefore, know enough. Nor (though we are nearer the nub of the matter here) is it that society is not a static object of knowledge which could survive unchanged the investigations of such an intelligence. No, the impossibility of total social planning does not rest for Hayek on such Popperian considerations, or, at any rate, not primarily on them.
Such an impossibility of central social planning rests, firstly, on the primordially practical character of most of the knowledge on which social life depends. Such knowledge cannot be concentrated in a single brain, natural or mechanical, not because it is very complicated, but rather because it is embodied in habits and dispositions and governs our conduct via rules which are often inarticulable. But, secondly, the impossibility of total social planning arises from the fact that, since we are all of us governed by rules of which we have no knowledge, even the directing intelligence itself would be subject to such government. It is naive and almost incoherent to suppose that a society could lift itself up by its bootstraps and reconstruct itself, in part at least because the idea that any individual mind—or any collectivity of selected minds—could do that, is no less absurd.
The Idea of a Spontaneous Social Order
If the order we discover in society is in no important respect the product of a directing intelligence, and if the human mind itself is a product of cultural evolution, then it follows that social order cannot be the product of anything resembling conscious control or rational design. As Hayek puts it:
The errors of constructivist rationalism are closely connected with Cartesian dualism, that is, with the conception of an independently existing mind substance which stands outside the cosmos of nature and which enabled man, endowed with such a mind from the beginning, to design the institutions of society and culture among which he lives… The conception of an already fully developed mind designing the institutions which made life possible is contrary to all we know about the evolution of man.
The master error of Cartesian rationalism lies in its anthropomorphic transposition of mentalist categories to social processes. But a Cartesian rationalist view of mind cannot explain even the order of mind itself. Hayek himself makes this point when he remarks on “the difference between an order which is brought about by the direction of a central organ such as the brain, and the formation of an order determined by the regularity of the actions towards each other of the elements of a structure.” He goes on:
Michael Polanyi has usefully described this distinction as that between a monocentric and a polycentric order. The first point which it is in this connection important to note is that the brain of an organism which acts as the directing centre for the organism is in turn a polycentric order, that is, that its actions are determined by the relation and mutual adjustment to each other of the elements of which it consists.
Hayek states his conception of social theory, and of the central importance in it of undesigned or spontaneous orders, programmatically and with unsurpassable lucidity:
It is evident that this interplay of the rules of conduct of the individuals with the actions of other individuals and the external circumstances in producing an overall order may be a highly complex affair. The whole task of social theory consists in little else but an effort to reconstruct the overall orders which are thus formed… It will also be clear that such a distinct theory of social structures can provide only an explanation of certain general and highly abstract features of the different types of structures… Of theories of this type economic theory, the theory of the market order of free human societies, is so far the only one which has been developed over a long period…
Because it is undesigned and not the product of conscious reflection, the spontaneous order that emerges of itself in social life can cope with the radical ignorance we all share of the countless facts on knowledge of which society depends. This is to say, to begin with, that a spontaneous social order can utilize fragmented knowledge, knowledge dispersed among millions of people, in a way a holistically planned order (if such there could be) cannot. “This structure of human activities” as Hayek puts it “consistently adapts itself, and functions through adapting itself, to millions of facts which in their entirety are not known to everybody. The significance of this process is most obvious and was at first stressed in the economic field.” It is to say, also, that a spontaneous social order can use the practical knowledge preserved in men’s habits and dispositions and that society always depends on such practical knowledge and cannot do without it.
Examples abound in Hayek’s writings of spontaneous orders apart from the market order. The thesis of spontaneous order is stated at its broadest when Hayek says of Bernard Mandeville (1670-1733) that “for the first time [he] developed all the classical paradigmata of the spontaneous growth of orderly social structures: of law and morals, of language, the market and money, and also the growth of technological knowledge.” Note that whereas Hayek acknowledges that spontaneous order emerges in natural processes—it may be observed, he tells us, not only in the population biology of animal species, but in the formation of crystals and even galaxies —it is the role of spontaneous order in human society that Hayek is most concerned to stress. For applying what Hayek illuminatingly terms “the twin ideas of evolution and of the spontaneous formation of an order” to the study of human society enables us to transcend the view, inherited from Greek, and, above all, from Sophist philosophy, that all social phenomena can be comprehended within the crude dichotomy of the natural (physis) and the conventional (nomos). Hayek wishes to focus attention on the third domain of social phenomena and objects, neither instinctual in origin nor yet the result of conscious contrivance or purposive construction, the domain of evolved and self-regulating social structures. It is the emergence of such self-regulating structures in society via the natural selection of rules of action and perception that is systematically neglected in much current sociology (though not, it may be noted, in the writings of Herbert Spencer, one of sociology’s founding fathers). It is because he thinks that the sociobiologists view social order as being a mixture of instinctive behavior and conscious control, and so neglect the cultural selection of systems of rules, that Hayek has subjected this recent strain of speculation to a sharp criticism. It may be noted, finally, that Hayek’s repudiation of the Sophistic nature-convention dichotomy sets him in opposition to Popper and his talk of the critical dualism of facts and decisions and brings him close to the Wittgensteinian philosopher, Peter Winch, for whom the distinction is essentially misconceived.
The Application of Spontaneous Order in Economic Life: The Catallaxy
The central claim of Hayek’s philosophy, as we have expounded it so far, is that knowledge is, at its base, at once practical and abstract. It is abstract inasmuch as even sensory perception gives us a model of our environment which is highly selective and picks out only certain classes of events, and it is practical inasmuch as most knowledge is irretrievably stored or embodied in rules of action and perception. These rules, in turn, are in Hayek’s conception the subject of continuing natural selection in cultural competition. The mechanism of this selection, best described in Hayek’s fascinating “Notes on the Evolution of Systems of Rules of Conduct,” is in the emulation by others of rules which secure successful behavior. It is by a mimetic contagion that rules conferring success—where success means, in the last resort, the growth of human numbers —come to supplant those rules which are maladapted to the environment. Finally, the convergence of many rule-following creatures on a single system of rules creates those social objects—language, money, markets, the law—which are the paradigms of spontaneous social order.
It is a general implication of this conception that, since social order is not a purposive construction, it will not in general serve any specific purpose. Social order facilitates the achievement of human purposes: taken in itself, it must be seen as having no purpose. Just as human actions acquire their meaning by occurring in a framework that can itself have no meaning, so social order will allow for the achievement of human purposes only to the extent that it is itself purposeless. Nowhere has this general implication of Hayek’s conception been so neglected as in economic life. In the history and theory of science, to be sure, where the idea of spontaneous order was (as Hayek acknowledges) put to work by Michael Polanyi, false conceptions were spawned by the erroneous notion that scientific progress could be planned, whereas, on the contrary, any limitation of scientific inquiry to the contents of explicit or theoretical knowledge would inevitably stifle further progress. In economics, however, the canard that order is the result of conscious control had more fateful consequences. It supported the illusion that the whole realm of human exchange was to be understood after the fashion of a household or an hierarchical organization, with limited and commensurable purposes ranked in order of agreed importance.
This confusion of a genuine hierarchical ‘economy’—such as that of an army, a school or a business corporation—with the whole realm of social exchange, the catallaxy, informs many aspects of welfare economics and motivates its interventionist projects via the fiction of a total social product. This confusion between ‘catallaxy’ and ‘economy’ is, at bottom, the result of an inability to acknowledge that the order which is the product of conscious direction—the order of a management hierarchy in a business corporation, for example—itself always depends upon a larger spontaneous order. The demand that the domain of human exchange taken as a whole should be subject to purposive planning is therefore, the demand that social life be reconstructed in the character of a factory, an army, or a business corporation—in the character, in other words, of an authoritarian organization. Apart from the fateful consequences for individual liberty that implementing such a demand inexorably entails, it springs in great measure from an inability or unwillingness to grasp how in the market process itself there is a constant tendency to self-regulation by spontaneous order. When it is unhampered, the process of exchange between competitive firms itself yields a coordination of men’s activities more intricate and balanced than any that could be enforced (or even conceived) by a central planner.
The Catallactic Order, Practical Knowledge, and the Calculation Debate
The relevance of these considerations to Hayek’s contributions to the question of the allocation of resources in a socialist economic order is central, but often neglected. It is, of course, widely recognized that one of Hayek’s principal contributions in economic theory is the refinement of the thesis of his teacher, Ludwig von Mises (1881-1973), that the attempt to supplant market relations by public planning cannot avoid yielding calculational chaos. Hayek’s account of the mechanism whereby this occurs has, however, some entirely distinctive and original features. For Hayek is at great pains to point out that the dispersed knowledge which brings about a tendency to equilibrium in economic life and so facilitates an integration of different plans of life, is precisely not theoretical or technical knowledge, but practical knowledge of concrete situations—”knowledge of people, of local conditions, and of special circumstances.” As Hayek puts it: “The skipper who earns his living from using otherwise empty or half-filled journeys of tramp-steamers, or the estate agent whose whole knowledge is almost exclusively one of temporary opportunities, or the arbitrageur who gains from local differences of commodity prices—are all performing eminently useful functions based on special knowledge of circumstances of the fleeting moment not known to others.” Hayek goes to comment: “It is a curious fact that this sort of knowledge should today be regarded with a kind of contempt and that anyone who by such knowledge gains an advantage over somebody better equipped with theoretical or technical knowledge is thought to have acted almost disreputably.” The “problem of the division of knowledge,” which Hayek describes as “the really central problem of economics as a social science,” is therefore not just a problem of specific data, articulable in explicit terms, being dispersed in millions of heads: it is the far more fundamental problem of the practical knowledge on which economic life depends being embodied in skills and habits, which change as society changes and which are rarely expressible in theoretical or technical terms.
One way of putting Hayek’s point, a way we owe to Israel Kirzner rather than to Hayek himself but which is wholly compatible with all that Hayek has said on these questions, is to remark as follows: if men’s economic activities really do show a tendency to coordinate with one another, this is due in large part to the activity of entrepreneurship. The neglect of the entrepreneur in much standard economic theorizing, the inability to grasp his functions in the market process, may be accounted for in part by reference to Hayek’s description above of the sort of knowledge used by the entrepreneur. As Kirzner puts it, “Ultimately, then, the kind of ‘knowledge’ required for entrepreneurship is ‘knowing’ where to look for ‘knowledge’ rather than knowledge of substantive market information.” It is hard to avoid the impression that the entrepreneurial knowledge of which Kirzner speaks here is precisely that practical or dispositional knowledge which Hayek describes.
It is the neglect of how all economic life depends on this practical knowledge which allowed the brilliant but, in this respect, fatally misguided Joseph Schumpeter (1883-1950) to put a whole generation of economists on the wrong track, when he stated in his Capitalism, Socialism and Democracy (1942) that the problem of calculation under socialism was essentially solved. It is the neglect of the same truth that Hayek expounded which explains the inevitable failure in Soviet-style economies of attempts to simulate market processes in computer modeling. All such efforts are bound to fail, if only because the practical knowledge of which Hayek speaks cannot be programmed into a mechanical device. They are bound to fail, also, because they neglect the knowledge-gathering role of market pricing. Here we must recall that, according to Hayek, knowledge is dispersed throughout society and, further, it is embodied in habits and dispositions of countless men and women. The knowledge yielded by market pricing is knowledge which all men can use, but which none of them would possess in the absence of the market process; in a sense, the knowledge embodied or expressed in the market price is systemic or holistic knowledge, knowledge unknown and unknowable to any of the elements of the market system, but given to them all by the operation of the system itself. No sort of market simulation or shadow pricing can rival the operation of the market order itself in producing this knowledge, because only the actual operation of the market itself can draw on the fund of practical knowledge which market participants exploit in their activities.
Hayek’s Refinements of the Misesian Calculation Debate
Three further points may be worth noting in respect of Hayek’s refinements of the Misesian calculation debate. First, when Hayek speaks of economic calculations under socialism as a practical impossibility, he is not identifying specific obstacles in the way of the socialist enterprise which might someday be removed. Socialist planning could supplant market processes only if practical knowledge could be replaced by theoretical or technical knowledge at the level of society as a whole—and that is a supposition which is barely conceivable. The kind of omniscience demanded of a socialist planner could be possessed only by a single mind, entirely self-aware, existing in an unchanging environment—a supposition so bizarre that we realize we have moved from any imaginable social world to a metaphysical fantasy in which men and women have disappeared altogether, and all that remain are Leibnizian monads, featureless and unhistorical ciphers.
Fortunately, such a transformation is possible, if at all, only as a thought-experiment. In practice, all supposedly socialist economies depend upon precisely that practical knowledge of which Hayek speaks, and which though dispersed through society is transmitted via the price mechanism. It is widely acknowledged that socialist economies depend crucially in their planning policies on price data gleaned from historic and world markets. Less often recognized, and dealt with in detail only, so far as I know, in Paul Craig Roberts’ important Alienation in the Soviet Economy, is that planning policies in socialist economies are only shadows cast by market processes distorted by episodes of authoritarian intervention. The consequence of the Hayekian and Polanyian critiques of socialist planning is not inefficiency of such planning but rather its impossibility: we cannot analyze the “socialist” economies of the world properly, unless we penetrate the ideological veil they secrete themselves behind, and examine the mixture of market processes with command structures which is all that can ever exist in such a complex society.
The third and final implication of Hayek’s contribution to the calculation question is his clear statement of the truth that the impossibility of socialism is an epistemological impossibility. It is not a question of motivation or volition, of the egoism or limited sympathies of men and women, but of the inability of any social order in which the market is suppressed or distorted to utilize effectively the practical knowledge possessed by its citizens. Calculational chaos would ensue, and a barbarization of social life result, from the attempt to socialize production, even if men possessed only altruistic and conformist motives. For, in the absence of the signals transmitted via the price mechanism, they would be at a loss how to direct their activities for the social good, and the common stock of practical knowledge would begin to decay. Only the inventiveness of human beings as expressed in the emergence of black and gray markets could then prevent a speedy regression to the subsistence economy. The impossibility of socialism, then, derives from its neglect of the epistemological functions of market institutions and processes. Hayek’s argument here is the most important application of his fundamental insight into the epistemological role of social institutions—an insight I will need to take up again in the context of certain similarities between Hayek’s conception of liberty under law and Robert Nozick’s meta-utopian framework.
Hayek does not consistently employ the idea of spontaneous social order as an explanatory device of this sort, and some of the difficulties of his thought arise from this ambiguity. At the same time, Hayek’s use of the idea of a spontaneous order in society is his most brilliant use in the context of social theory of his conception of knowledge as at bottom at once conceptual and practical. The spontaneous or undesigned patterns of order in society have the advantage over planned or constructed orders, first and foremost, because planned orders can utilize only explicit or conscious knowledge. Hayek’s great thesis, then, is that, contrary to Descartes’ unwitting interventionist disciples, spontaneous order is the fundamental order in society because it embodies that practical or tacit knowledge of which theory is only a precipitate or an abridgement. If we accept that the Cartesian view of knowledge and mind is in error, we have no alternative but to acknowledge that the constructivist projects of modern interventionism are all attempts to do the impossible—to replace inarticulate and tacit knowledge by articulate theory, and spontaneous order by conscious control.
In attributing a pragmatist aspect to Hayek’s Kantianism, I do not mean to ascribe to Hayek any of the doctrines of modern Pragmatism, but rather to note the sense in which for Hayek action or practice has primacy in the generation of knowledge. For Hayek, in some contrast with Kant, knowledge emanates from practical life in the sense that it is ultimately embodied in judgments and dispositions to act.
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Hayek, Friedrich August von 1899-1992 BIBLIOGRAPHY [1] F. A. Hayek, as he is known throughout the English-speaking world, is generally considered to be the leading twentieth-century representative of classical, nineteenth-century liberalism and the foremost scourge of socialism.
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https://www.encyclopedia.com/people/history/russian-soviet-and-cis-history-biographies/friedrich-hayek
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Hayek, Friedrich August von 1899-1992
BIBLIOGRAPHY
F. A. Hayek, as he is known throughout the English-speaking world, is generally considered to be the leading twentieth-century representative of classical, nineteenth-century 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.
SEE ALSO Austrian Economics; Great Depression; Hume, David; Individualism; Keynes, John Maynard; Liberty; Markets; Mises, Ludwig Edler von; Mont Pelerin Society; Scottish Moralists; Sraffa, Piero
BIBLIOGRAPHY
PRIMARY WORKS
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.
SECONDARY WORKS
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.
Stephan Boehm
Hayek, Friedrich August von
(b. 8 May 1899 in Vienna, Austria; d. 23 March 1992 in Freiburg, Germany), Nobel laureate in economics (1974), whose many publications included the influential, pro—free enterprise book The Road to Serfdom (1944).
Hayek was the eldest of three sons of August von Hayek, a physician who shifted his interests to botany and became an honorary professor in that discipline at the University of Vienna, and Felicitas von Juraschek, a homemaker. The family was partly of Czech descent; Hayek’s parents, although brought up as Catholics, were nonbelievers as adults. During World War I Hayek served on the Italian front (1917–1918) as a junior artillery officer in the Austro-Hungarian army. He later stated that the experience of serving in a multi-ethnic army, with its complex organizational problems, inspired his interest in economics. In 1918, eight days after the war ended, Hayek entered the University of Vienna, where he studied philosophy, law, and economics. He received his doctorate in law (1921), with specialization in economics, and a second doctorate in political science (1923), with specialization in political economy, while studying under Ludwig von Mises, an older economist with whom Hayek is usually connected because of their similar viewpoints. Under von Mises’s influence, Hayek abandoned his early socialism in favor of the free-market approach for which he became famous. From 1921 to 1926 Hayek worked under von Mises as his legal consultant at the Austrian Office of Accounts, a temporary government agency set up to fulfill the terms of the post-World War I settlement. During 1923-1924 Hayek, on leave of absence from his government post, was a graduate student in economics at New York University.
In 1926 Hayek married Helene (“Hella”) von Fritsch; they had two children. In the following year, he and von Mises founded the Austrian Institute for Business Cycle Research (later renamed the Institute for Economic Research); Hayek was director. From 1929 to 1931 he was also a lecturer in economics at the University of Vienna. His first book, Monetary Theory and the Trade Cycle, in German, appeared in 1929 (the English translation was published in 1933). After attending the London Conference on Economic Statistics in 1928, Hayek was invited to lecture at the London School of Economics; from 1931 to 1950 he was Tooke Professor there. Numerous books on economics, mostly technical, were published during these years. In 1938 he became a naturalized British citizen. Hayek became a close personal friend of John Maynard Keynes, despite strong differences on economic matters. During World War II, when the London School of Economics was evacuated to Cambridge, Hayek decided to write a nontechnical book explaining his economic views. The Road to Serfdom, published in 1944 and arguably the most important nontechnical book on economics of the twentieth century, gives in fewer than two hundred closely argued pages the case for free enterprise. His thesis was that “big government,” which Hayek saw as synonymous with socialism, often results from wartime economic mobilization and leads to loss of freedom and inefficiency. The book became an international best seller and was favorably reviewed even by Keynes. A few months after the book’s publication, Hayek was elected to the British Academy. In 1945 an abridged edition of The Road to Serfdom appeared in Reader’s Digest in the United States. Two years later Hayek founded the Mount Pelerin Society, an organization of pro—free enterprise scholars that became very influential and still exists.
Hayek’s Individualism and Economic Order, which pointed out the difficulties in allocating goods and services without a free price system, appeared in 1949. In the same year, the breakup of his marriage caused a severe depression, which resulted in his leaving England. He married Helene Bitterlich in 1950. That year he was also appointed professor of social and moral science at the University of Chicago, where he inspired the famous “Chicago School” of economics later associated with another Nobel laureate in economics, Milton Friedman. Major books published in those years included The Counter-Revolution of Science (1952), a critical study of the origins of “social engineering.” In collaboration with four other scholars Hayek edited Capitalism and the Historians (1954), which argues against the Marxist theory that the Industrial Revolution “immiserated” England’s working class. The Constitution of Liberty, which Hayek considered his most important book, appeared in 1960. This restatement of the nineteenth-century “classical liberal” argument asserts that society is too complicated for a planned economy to succeed.
Two years later the aging, homesick Hayek, who was becoming increasingly deaf, left Chicago to become professor of economics at the University of Freiburg in Breisgau in West Germany. By this time he was a major influence on the West German minister of economics and then chancellor, Ludwig Erhard, and later on the British prime minister, Margaret Thatcher. Retiring from Freiburg in 1968, Hayek moved to Salzburg in his native Austria, where he held a visiting professorship at the university until 1974. He had already begun to receive honorary degrees from universities around the world, but shortly after his return to the city of Freiburg in 1974, he was surprised to be awarded the Nobel Prize in economics for his work in the theory of business cycles and his advocacy of the freemarket system as an answer to the problems of allocation of goods and services. Hayek continued to publish books on economics, political science, and philosophy such as Law, Legislation and Liberty (3 volumes, 1973–1979) and received honorary degrees from universities around the world, to which he traveled despite his increasing age and deafness. In 1984 Queen Elizabeth II awarded Hayek the Companionship of Honour, and in 1991 George Bush awarded him the Presidential Medal of Freedom, America’s highest civilian award. Germany and Austria honored him with similar awards, and both Pope John Paul II and Mikhail Gorbachev praised Hayek’s achievements.
In his last years Hayek showed signs of returning to his ancestral Catholicism. He died in Freiburg of a heart attack and is buried at Neustift Cemetery in his native Vienna. This “old Whig,” as he called himself, with moustache and spectacles, is reputed to have both looked and acted like a courtly, although somewhat shy, European gentleman.
Hayek’s papers are divided between the family archives in London and the various universities and institutes with which he was affiliated. His complete works in twenty volumes have been published jointly by Routledge (London) and the University of Chicago Press. Autobiographical notes, together with oral history interviews, are published in Stephen Kresge and LeifWenar, eds., Hayek on Hayek: An Autobiographical Dialogue (1994). John Gray, Hayek on Liberty (1984), summarizes his ideas and includes an extensive bibliography of Hayek’s works. Hayek: A Commemorative Album, compiled by John Raybould (1998) is a brief illustrated biography. An obituary is in the New York Times (24 Mar. 1992).
Stephen A. Stertz
HAYEK, FRIEDRICH
(1899–1992), leading proponent of markets as an evolutionary solution to complex social coordination problems.
One of the leaders of the Austrian school of economics in the twentieth century, Friedrich Hayek received the Nobel Memorial Prize in Economic Science in 1974. Born to a distinguished family of Viennese intellectuals, he attended the University of Vienna, earning doctorates in law and economics in 1921 and 1923. He became a participant in Ludwig von Mises's private economics seminar and was greatly influenced by von Mises's treatise on socialism and his argument about the impossibility of economic rationality under socialism due to the absence of private property and markets in the means of production. Hayek developed a theory of credit-driven business cycles, discussed in his books Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933). As a result he was offered a lectureship, and then the Tooke Chair in Economics and Statistics at the London School of Economics and Politics (LSE) in 1931. There he worked on developing an alternative analysis to the nascent Keynesian economic system, which he published in The Pure Theory of Capital in 1941, by which point the Keynesian macro model had already become the accepted and dominant paradigm of economic analysis.
In the 1930s and 1940s, Hayek made his major contribution to the analysis of economic systems, pointing out the role of markets and the price system in distilling, aggregating, and disseminating usable specific knowledge among participants in the economy. The role of markets as an efficient discovery procedure, generating a spontaneous order in the flux of changing and unknowable specific circumstances and preferences, was emphasized in his "Economics and Knowledge" (1937), "The Use of Knowledge in Society" (1945), and Individualism and Economic Order (1948). These arguments provided a fundamental critique of the possibility of efficient economic planning and an efficient socialist system, refining and redirecting the earlier Austrian critique of von Mises. They have also provided the basis for a substantial theoretical literature on the role of prices as a conveyor of information, and for the revival of non-socialist economic thought in the final days of the Soviet Union.
Hayek worked at LSE until 1950 when he moved to Chicago, joining the Committee of Social Thought at the University of Chicago. There Hayek moved beyond economic to largely social and philosophic-historical analysis. His major works in these areas include his most famous defense of private property and decentralized markets, The Road to Serfdom (1944), New Studies in Philosophy, Politics and Economics (1978), and the compilation The Fatal Conceit: The Errors of Socialism (1988). These works, more than his economic studies, provided much of the intellectual inspiration and substance behind the anti-Communist and economic liberal movements in eastern Europe and the Soviet Union in the 1980s and 1990s. In 1962 Hayek left Chicago for the University of Freiburg in Germany, and subsequently for Salzburg, where he spent the rest of his life. The Nobel Prize in 1974 significantly raised interest in his work and in Austrian economics.
See also: liberalism; socialism
bibliography
Bergson, Abram. (1948). "Socialist Economics." In A Survey of Contemporary Economics, ed. H. S. Ellis. Home-wood, IL: Irwin.
Blaug, Mark. (1993). "Hayek Revisited." Critical Review 7(1):51–60.
Caldwell, Bruce. (1997). "Hayek and Socialism." Journal of Economic Literature, 35(4):1856–1890.
Foss, Nicolai J. (1994). The Austrian School and Modern Economics: A Reassessment. Copenhagen, Denmark: Handelshojskolens Forlag.
Lavoie, Don. (1985). Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered. Cambridge, UK: Cambridge University Press.
Machlup, Fritz. (1976). "Hayek's Contributions to Economics." In Buckley, William F., et al., Essays on Hayek, ed. Fritz Machlup. Hillsdale, MI: Hillsdale College Press.
O'Driscoll, Gerald P. (1977). Economics as a Coordination Problem: The Contribution of Friedrich A. Hayek. Kansas City: Sheed, Andrews and McMeel.
Richard E. Ericson
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F.A. Hayek's economics, a neglected part of his work
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It is a bit of a paradox that economists have neglected, and continue to neglect, the part of Hayek's work for which he was awarded the Nobel prize in economics and which is characterized by a high level of analytical rigour. The paper compares
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Hayek’s opposition to the historical approach to political economy was unwavering over the course of his career. Drawing on Menger’s Untersuchungen über die Methoden der Sozialwissenschaften, Hayek regarded the Schmollers and Brentanos as foreign to true economics - a dangerous, but transitionary, hiccup in the progression of economic theory. In spite of Hayek’s antagonistic attitude, this article argues that certain elements of his stance after “Economics and Knowledge” (1936) were raised by historical political economists in the final decades of the nineteenth century. The point is not to suggest a direct influence of historical economists on Hayek, but one mediated by the geographical, linguistic, and cultural proximity of Austria and Germany. As documented in section one, plenty of evidence indicates that the Methodenstreit between Menger and Schmoller did not entail a sharp separation between the two camps. The paper focuses on the following facets of Hayek’s thought: his concern with realism; the acknowledgement of complexity; the willingness to address policy issues, drawing on a peculiar history of modern thought; his ambivalence about value judgements; his focus on institutions and social rules; and a view of evolution as regulated by group superiority. It is argued that, in contrast to Hayek who advocated “the primacy of the abstract”, Schmoller can be seen as an upholder of the primacy of the concrete. Looking at Hayek through German lenses has four advantages. First, it widens the historical context of his thought by questioning the supposed gulf between the Austrian and the German schools. Second, it shows that Hayek’s interpretation of the “younger historical school” was severely biased. Third, establishing a link between the historical economists and a now revered author like Hayek may shed a new and favourable light on a group still viewed with disdain. Fourth, there emerges an interpretation of Hayek’s thinking centred on value judgements.
If anything like a change in direction can be distinguished in the development of the work of Friedrich August von Hayek, it does not lie in his supposed abandoning of the idea of equilibrium (which is based on a mistaken interpretation of his work). It is rather the transition of a radically systematic approach to problems and the elaboration of their solution that is characterized by a high level of analytic sophistication to a more associative approach. Examples of the former are Hayek’s theory of mind and his monetary, business cycle and capital theories; his theory of evolution and social and political philosophy are examples of the latter. Hayek’s economics constitutes a research programme. One of the factors that influenced its further development was Sraffa’s criticism of Hayek’s Prices and Production. In reply to this, Hayek developed his highly sophisticated capital theory and his ideas on neutral money and the international monetary order. I intend to show that the development of Hayek’s economic research programme can only be understood if one takes into account his radically systematic and analytical approach. ADDED COMMENT The paper has “radical ECONOMIST” in the title because I wanted to point out to the audience of the Department of Economics of NYU that the almost generally accepted idea that Hayek’s theory of capital is fatally flawed is wrong. It is one of the (alas!) several red herrings that keep freely swimming in the sea of Hayek research. In the early 1930s Piero Sraffa critized Hayek’s Prices and Production. One of his criticisms was that Hayek had not taken account of the fact that every factor of production has its “own rate of interest.” Hayek took this criticism seriously and with the thoroughness that is characteristic of all his work in all of the various disciplines – at least up till the publication of The Sensory Order in 1952 - set out to solve the problem Sraffa had indicated. That led to a series of articles and eventually The Pure Theory of Capital, in which he had meticulously constructed a highly abstract theory takes into account each productive input's own rate of interest. Hayek showed how entrepreneurial decisions on investment process involve all these own rates. The paper shows that this type of radicalism characterizes the rest of Hayek’s work, too. This more than once became a case of the better being the enemy of the good: because Hayek did not succeed in solving the (often very difficult) problems he had put on his agenda at all, or not in time, he either decided not to publish his attempt to solve it (in the case of his reply to Popper’s criticism of The Sensory Order – see my paper on “How artificial is intelligence in AI?”) or it was too late for the scientific community to take notice (the case of Sraffa’s criticism).
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Friedrich August von Hayek (May 8, 1899 in Vienna – March 23, 1992 in Freiburg) was an Austrian economist and political philosopher, noted for his defense of liberal democracy and free-market capitalism against socialist and collectivist thought in the mid-twentieth century. Widely regarded as one of the most influential members of the Austrian School of economics, he also made significant contributions in the fields of jurisprudence and cognitive science. His analysis of socialist economics was proven prescient by the breakup of communist Eastern Europe. He shared the 1974 Nobel Memorial Prize in Economics with ideological rival Gunnar Myrdal, and in 1991 he received the Presidential Medal of Freedom.
Biography
Friedrich August von Hayek was born on May 8, 1899 in Vienna, Austria to a Catholic family of prominent intellectuals. He was a distant cousin of the philosopher Ludwig Wittgenstein. At the University of Vienna he earned doctorates in law and political science in 1921 and 1923 respectively, and also studied psychology and economics with keen interest. He was a student of Friedrich von Wieser. Initially sympathetic to socialism, Hayek's economic thinking was transformed during his student years in Vienna through attending Ludwig von Mises' private seminars along with Fritz Machlup, Oskar Morgenstern, Gottfried Haberler, and other young students.
Hayek worked as a research assistant to Jeremiah Jenks of New York University from 1923 to 1924. He then served as director of the newly formed Austrian Institute for Business Cycle Research before joining the faculty of the London School of Economics (LSE) at the behest of Lionel Robbins in 1931. Unwilling to return to Austria after its annexation to Nazi Germany, Hayek became a British citizen in 1938, a status he held for the remainder of his life.
In the 1930s Hayek enjoyed a considerable reputation as a leading economic theorist. However, he was challenged by followers of John Maynard Keynes, who argued for more active government intervention in economic affairs. The debate between the two schools of thought has continued, with Hayek's position gaining currency since the late 1970s.
By 1947, Hayek was an organizer of the Mont Pelerin Society, a group of classical liberals who sought to oppose what they saw as "socialism" in various areas. In 1950, Hayek left the LSE for the University of Chicago, becoming a professor in the Committee on Social Thought. (NOTE: Hayek was barred from entering the Economics department because of his Austrian economic views by one member, whom he would not name but many have speculated was Frank Hyneman Knight). He found himself at Chicago amongst other prominent economists, such as Milton Friedman, but by this time, Hayek had turned his interests towards political philosophy and psychology.
From 1962 until his retirement in 1968, he was a professor at the University of Freiburg. In 1974, Hayek shared the Nobel Memorial Prize in Economics, causing a revival of interest in the Austrian school of economics. In his speech at the 1974 Nobel Prize banquet, Hayek, whose work emphasized the fallibility of individual knowledge about economic and social arrangements, expressed his misgivings about promoting the perception of economics as a strict science on par with physics, chemistry, or medicine (the scientific disciplines recognized by the original Nobel Prizes).
Margaret Thatcher, the Conservative British prime minister from 1979 to 1990, was an outspoken devotée of Hayek's writings. Shortly after Thatcher became Leader of the party, she "reached into her briefcase and took out a book. It was Friedrich von Hayek's The Constitution of Liberty. Interrupting [the speaker], she held the book up for all to see. "This" she said sternly, "is what we believe" and banged Hayek down on the table.
In 1984 he was appointed as a member of the Order of the Companions of Honour by Queen Elizabeth II on the advice of British Prime Minister Margaret Thatcher for his "services to the study of economics." Later he served as a visiting professor at the University of Salzburg.
Friedrich Hayek died in 1992 in Freiburg, Germany.
Contributions to science
Specialists in business cycle theory recognize Hayek's early work on industrial fluctuations, and modern information theorists often acknowledge his work on prices as signals. Hayek's work is also known in political philosophy (Hayek 1960), legal theory (Hayek 1973-1979), and psychology (Hayek 1952).
The philosopher of science Karl Popper wrote in letter to Hayek in 1944: "I think I have learnt more from you than from any other living thinker, except perhaps Alfred Tarski."
Others have lauded also his achievements in the scientific arena:
The first proponent of cortical memory networks on a major scale was neither a neuroscientist nor a computer scientist but… a Viennese economist: Friedrich von Hayek. A man of exceptionally broad knowledge and profound insight into the operation of complex systems, Hayek applied such insight with remarkable success to economics (Nobel Prize, 1974), sociology, political science, jurisprudence, evolutionary theory, psychology, and brain science. (Fuster 1995, 87)
Hayek made a quite fruitful suggestion, made contemporaneously by the psychologist Donald Hebb, that whatever kind of encounter the sensory system has with the world, a corresponding event between a particular cell in the brain and some other cell carrying the information from the outside word must result in reinforcement of the connection between those cells. These days, this is known as a Hebbian synapse, but von Hayek quite independently came upon the idea. I think the essence of his analysis still remains with us. (Edelman 1987, 25).
"Hayek posited spontaneous order in the brain arising out of distributed networks of simple units (neurons) exchanging local signals" says Harvard psychologist Steven Pinker: "Hayek was way ahead of his time in pushing this idea. It became popular in cognitive science, beginning in the mid-1980s, under the names 'connectionism' and parallel distributed processing." (Postrel 2004).
The economic thinker
Hayek’s argument was always that to fully control the economy meant to control all aspects of life. Economic decisions are not separate from individual values or purposes. They reflect those purposes:
We want money for many different things, and those things are not always, or even rarely, just to have money for its own sake. … We want money for our spouses or our children or to do something in terms of the transformation of ourselves; for everything from plastic surgery to reading intellectual history or building a church. These are all non-economic goals that we express through the common means of money. (Muller 2002).
Consequently, Hayek put the price mechanism on the same level as, for example, language. Such thinking led him to speculate on how the human brain could accommodate this evolved behavior. In The Sensory Order (1952), he proposed the hypothesis that forms the basis of the technology of neural networks and of much of modern neurophysiology.
The business cycle
In Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933) Hayek showed how monetary injections, by lowering the rate of interest below what Ludwig von Mises called its "natural rate," distort the economy's inter-temporal structure of production. Most theories of the effects of money on prices and output (then and since) consider only the effects of the total money supply on the price level and aggregate output or investment. Hayek, instead, focused on the way money enters the economy ("injection effects") and how this affects relative prices and investment in particular sectors.
In Hayek's framework, investments in some stages of production are "malinvestments" if they do not help to align the structure of production to consumers' inter-temporal preferences. The reduction in interest rates caused by credit expansion directs resources toward capital-intensive processes and early stages of production (whose investment demands are more interest-rate elastic), thus "lengthening" the period of production. If interest rates had fallen because consumers had changed their preferences to favor future over present consumption, then the longer time structure of production would have been an appropriate, coordinating response.
A fall in interest rates caused by credit expansion, however, would have been a "false signal," causing changes in the structure of production that do not accord with consumers' inter temporal preferences. The boom generated by the increase in investment is artificial. Eventually, market participants come to realize that there are not enough savings to complete all the new projects; the boom becomes a bust as these malinvestments are discovered and liquidated.
Every artificial boom induced by credit expansion, then, is self-reversing. Recovery consists of liquidating the malinvestments induced by the lowering of interest rates below their natural levels, thus restoring the time structure of production so that it accords with consumers' inter-temporal preferences.
Spontaneous order
In Economics and Knowledge (1937) and The Use of Knowledge in Society (1945) Hayek argued that the central economic problem facing society is not, as is commonly expressed in textbooks, the allocation of given resources among competing ends:
It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only those individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge not given to anyone in its totality. (Hayek 1945, 78).
The efficient exchange and use of resources, Hayek claimed, can be maintained only through the price mechanism in free markets. He argued that the price mechanism serves to share and synchronize local and personal knowledge, allowing society's members to achieve diverse, complicated ends through a principle of spontaneous self-organization. He coined the term "catallaxy" to describe a "self-organizing system of voluntary co-operation." (Hayek 1945)
Much of the knowledge necessary for running the economic system, Hayek contended, is in the form not of
"scientific" or technical knowledge—the conscious awareness of the rules governing natural and social phenomena—but of … knowledge, the idiosyncratic, dispersed bits of understanding of "circumstances of time and place" (Hayek 1968).
This tacit knowledge is often not consciously known even to those who possess it and can never be communicated to a central authority. The market tends to use this tacit knowledge through a type of discovery procedure (Hayek 1968), by which this information is unknowingly transmitted throughout the economy as an unintended consequence of individuals' pursuing their own ends.
Indeed, Hayek's (1948) distinction between the neoclassical notion of "competition," identified as a set of equilibrium conditions (number of market participants, characteristics of the product, and so on), and the older notion of competition as a rivalrous process, has been widely influential in Austrian economics.
On the other side, the key to a functioning economy—or society—is decentralized competition. In a market economy, prices act as a "system of telecommunications," coordinating information far beyond the scope of a single mind. They permit ever-evolving order to emerge from dispersed knowledge. In any complex operation, there is too much relevant information for a single person or small group to absorb and act on.
For Hayek, market competition generates a particular kind of order—an order that is the product "of human action but not human design" (a phrase Hayek borrowed from Adam Smith's mentor Adam Ferguson). This "spontaneous order" is a system that comes about through the independent actions of many individuals, and produces overall benefits unintended and mostly unforeseen by those whose actions bring it about. To distinguish between this kind of order and that of a deliberate, planned system, Hayek (1968b, 72-76) used the Greek terms cosmos for a spontaneous order and taxis for a consciously planned one.
Examples of a "cosmos" include the market system as a whole, money, the common law, and even language. A "taxis," by contrast, is a designed or constructed organization, like a corporation or bureau; these are the "islands of conscious power in [the] ocean of unconscious cooperation like 'lumps of butter coagulating in a pail of buttermilk'.”
Most importantly, however, Hayek always stressed that his moral philosophy has to be backed by “a complex system of moral codes, rules of fairness, as well as an articulated system of punishment for the violators … a system under which a bad man can do the least harm.” (Hayek 1945).
Hayek noted that the market does not always work perfectly. People's plans are not always successfully coordinated, resulting in high unemployment, for example. For Hayek, it was government intervention that served as cause not solution to many market problems. Thus, he argued that increases in the money supply by the central bank led to artificially reduced interest rates which gave false signals to investors, resulting in malinvestments (Hayek 1931). Such an artificial boom necessarily leads to artificial bust as the market spontaneously finds its natural order again. Hayek argued that the way to avoid the busts was therefore to avoid the artificial booms.
Hayek versus Keynes
As one of Keynes' leading professional adversaries, Hayek was well situated to provide a full refutation of Keynes' General Theory. But he never did. Part of the explanation for this no doubt lies with Keynes's personal charm and legendary rhetorical skill, along with Hayek's general reluctance to engage in direct confrontation with his colleagues. Hayek also considered Keynes an ally in the fight against wartime inflation and did not want to detract from that issue (Hayek, 1994, 91).
Caldwell (1988) suggests another reason: it was during this time that Hayek was losing faith in equilibrium theory and moving toward a "market process" view of economic activity, making it difficult for him to engage Keynes on the same terms in which they had debated earlier. Furthermore, as Hayek later explained, Keynes was constantly changing his theoretical framework, and Hayek saw no point in working out a detailed critique of the General Theory, if Keynes might change his mind again (Hayek, 1963, 60; Hayek, 1966, 240-241). Hayek thought a better course would be to produce a fuller elaboration of Eugen von Böhm-Bawerk's capital theory, and he began to devote his energies to this project.
The following quote puts Hayek’s “side” into a proper perspective.
Underlying all this has been a fundamental shift in ideas … The dramatic redefinition of state and marketplace over the last two decades demonstrates anew the truth of Keynes' axiom about the overwhelming power of ideas. For concepts and notions that were decidedly outside the mainstream have now moved, with some rapidity, to center stage and are reshaping economies in every corner of the world. Even Keynes himself has been done in by his own dictum. During the bombing of London in World War II, he arranged for a transplanted Austrian economist, Friedrich von Hayek, to be temporarily housed in a college at Cambridge University. It was a generous gesture; after all, Keynes was the leading economist of his time, and Hayek, his rather obscure critic. In the postwar years, Keynes' theories of government management of the economy appeared unassailable. But a half century later, it is Keynes who has been toppled and Hayek, the fierce advocate of free markets, who is preeminent. (Yergin & Stanislaw 1998 14-15)
Contribution to social and political philosophy
Hayek's most significant contribution,
was to make clear how our present complex social structure is not the result of the intended actions of individuals but of the unintended consequences of individual interactions over a long period of time, the product of social evolution, not of deliberate planning. (Postrel 2004).
Hayek's major insight, which he referred to as his "one discovery" in the social sciences, was to define the central economic and social problem as one of organizing dispersed knowledge. Different people have different purposes. They know different things about the world. Much important information is local and transitory, known only to the man on the spot.
"Some of that knowledge is objective and quantifiable, but much is tacit and unarticulated. Often we only discover what we truly want as we actually make trade-offs between competing goods … The economic problem of society," Hayek wrote in his 1945 article, "is thus not merely a problem of how to allocate `given' resources … if `given' is taken to mean given to a single mind which deliberately solves the problem set by these data. … It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know … Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in totality." (Hayek 1945).
Applying this insight to socialist thought, revealed that central economic planning was doomed to failure.
The economic calculation problem
Hayek was one of the leading academic critics of collectivism in the twentieth century. He believed that all forms of collectivism (even those theoretically based on voluntary cooperation) could only be maintained by a central authority of some kind. In his popular book, The Road to Serfdom (1944) and in subsequent works, Hayek claimed that socialism required central economic planning and that such planning in turn had a risk of leading towards totalitarianism, because the central authority would have to be endowed with powers that would impact social life as well.
Building on the earlier work of Ludwig von Mises and others, Hayek also argued that in centrally-planned economies an individual or a select group of individuals must determine the distribution of resources, but that these planners will never have enough information to carry out this allocation reliably. Hayek maintained that the data required for economic planning do not and cannot exist in a central planner, but rather each individual has information regarding resources and opportunities:
Central to Mises’ thesis was that socialist economy is possible in theory but difficult (if not impossible) in practice because knowledge is decentralized and incentives are weak … and thus it cannot achieve an efficient utilization of resources. (Hayek 1992, 127)
In Hayek's view, the central role of the state should be to maintain the rule of law, with as little arbitrary intervention as possible. It was shocking enough for Britain, where his views were respectfully, though critically, received. But in the United States, where Reader's Digest published a condensed version, The Road to Serfdom was a bestseller and a political lightning rod. It rallied supporters of traditional free enterprise and enraged the intelligentsia to whom it was addressed. How dare this mustachioed Austrian suggest that the ambitions of the New Deal might have anything in common with Hitler or Stalin! (Postrel 2004).
Hayek went eventually as far as to attribute the birth of civilization to private property in his book The Fatal Conceit (1988). According to him, price signals are the only possible way to let each economic decision maker communicate tacit knowledge or dispersed knowledge to each other, in order to solve the economic calculation problem.
Theorem on transitional and developing countries
When we combine Hayek’s key theorems, it emerges that economic development requires (a) the “learning process” of how to play the social roles of which market relations is based on and keeping within the implicit rules and (b) the moral codes of co-operative society (which punishes violators), to form a system marginalizing the opportunities and other elements harmful to the society while forming the ultimate criterion of success.
Such a “learning process” - in which the moral codes are spontaneously achieved - is, however, a function of time usually measured in terms of generations (Dallago 1996, 82, 116-117).
The time-element of this “learning process” is obviously non-existent (at least not spanning generations) in developing and transitional societies. Instead, we see quick "privatizations" (often by the old oligarchy who had the money to buy the bulk of industrial infrastructure) and “quasi-market” relations without sufficient moral scruples, codes of conduct, or functioning legal system.
Attempts to substitute the generations-long “learning process”—of how to achieve at least minimum functioning legal, moral, and co-operative notion in the society—in these new “free market” societies have been based on exogenous inputs. Whether involving the transfer of a whole constitution (or major substantive and civil laws) or just amendments to the existing dysfunctional system, the results have unfortunately, in many cases been unsuccessful, as Hayek's insights predicted.
Thus, Hayek’s theorem of generations-long learning process on the road to full-fledged democracy proved to be one of his most prophetic.
Influence, recognition, and legacy
Hayek's intellectual foundation was based on the ideas of David Hume, Adam Smith, and other Scottish thinkers of the 1700s. Like these great thinkers, Hayek was influential in many fields, not the least of which being economics:
When the definitive history of economic analysis during the 1930s comes to be written … a leading character in the drama (it was quite a drama) will be Professor Hayek. … It is hardly remembered that there was a time when the new theories of Hayek were the principal rival of the new theories of Keynes. (Hicks 1967, 203).
He had a wide-reaching influence on contemporary economics, politics, philosophy, sociology, psychology, and anthropology. For example, Hayek's discussion in The Road to Serfdom (1944) about truth and falsehood in totalitarian systems influenced later opponents of postmodernism (Wolin 2004).
Having heavily influenced Margaret Thatcher's economic approach, and some of Ronald Reagan's economic advisors, in the 1990s Hayek became one of the most-respected economists in Europe. There is a general consensus that his analyses of socialist as well as non-socialist societies were proven prescient by the breakup of communist Eastern Europe.
Hayek shared the 1974 Nobel Memorial Prize in Economics with ideological rival Gunnar Myrdal and in 1991 he received the Presidential Medal of Freedom, one of the two highest civilian awards in the United States, “for a lifetime of looking beyond the horizon.”
After his death, Hayek's intellectual presence continued to be noticeable, especially in the universities where he had taught: the London School of Economics, the University of Chicago, and the University of Freiburg. A student-run group at the LSE Hayek Society, was established in his honor. At Oxford University, there is also a Hayek Society. The Cato Institute, one of Washington, DC's leading think tanks, named its lower level auditorium after Hayek, who had been a Distinguished Senior Fellow at Cato during his later years. Also, the auditorium of the school of economics in Universidad Francisco Marroquín in Guatemala is named after him.
Publications
Hayek, F. A. [1931] 1935. Prices and Production. London: Routledge & Sons, Second revised edition: London: Routledge & Kegan Paul.
Hayek, F. A. 1933. Monetary Theory and the Trade Cycle. London: Jonathan Cape,
Hayek, F. A. [1933] 1991. "The Trend of Economic Thinking." Economica (13), 121-137. Reprinted in Hayek, 1948, 17-34.
Hayek, F. A. 1937. "Economics and Knowledge." Economica N.S. 4. 33-54. Reprinted in Hayek, 1948, 33-56.
Hayek, F. A. 1939. "Price Expectations, Monetary Disturbances, and Malinvestments." In Hayek, Profits, Interest, and Investment. London: Routledge and Kegan Paul. 135-156.
Hayek, F. A. 1941. The Pure Theory of Capital. Chicago: University of Chicago Press.
Hayek, F. A. 1944. The Road to Serfdom. Chicago: University of Chicago Press.
Hayek, F.A. [1945] 1949. "Individualism, True and False." Individualism and Economic Order. London: Routledge & Kegan Paul, 10-11.
Hayek, F. A. [1945] 1948. "The Use of Knowledge in Society." American Economic Review 35 (September): 519-530. 77-91.
Hayek, F. A. 1948. "The Meaning of Competition." In Hayek. 92-106.
Hayek, F. A. 1952. The Sensory Order. Chicago: University of Chicago Press.
Hayek, F. A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press.
Hayek, F. A. [1968a] 1978. "Competition as a Discovery Procedure." In Hayek 179-190.
Hayek, F. A. [1968b] 1978. "The Confusion of Language in Political Thought." In Hayek 71-97.
Hayek, F. A. 1973. Law, Legislation, and Liberty. Three volumes. Chicago: University of Chicago Press, 1973-1979.
Hayek, F. A. 1978. New Studies in Philosophy, Politics and Economics. Chicago: University of Chicago Press.
Hayek, F. A. 1989. The Fatal Conceit: The Errors of Socialism. Ed. by W. W. Bartley III. vol. 1 of The Collected Works of F. A. Hayek. London: Routledge and Chicago: University of Chicago Press.
Hayek, F. A. 1991. The Trend of Economic Thinking: Essays on Political Economists and Economic History. Ed. W. W. Bartley III and Stephen Kresge. Chicago: University of Chicago Press, and London: Routledge.
Hayek, F. A. 1992. The Fortunes of Liberalism, Edited by Peter G. Klein. Vol. 4 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press, and London: Routledge.
Hayek, F. A. 1995. Contra Keynes and Cambridge: Essays, Correspondence. Ed. Bruce Caldwell. Vol. 9 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press and London: Routledge.
Hayek, F. A. [1995] 1966. "Personal Recollections of Keynes and the 'Keynesian Revolution.'" In Hayek. 240-246.
Hayek, F. A. [1995] 1963. "The Economics of the 1930s as Seen from London." Hayek. 49-73.
References
ISBN links support NWE through referral fees
Birner, Jack, 2001. "The mind-body problem and social evolution." CEEL Working Paper 1-02. In Politics, economics and the history of ideas.
Caldwell, Bruce. J. 1998. "Hayek's Transformation" In History of Political Economy. 513-541.
__________. 1995. "Introduction" In Hayek, 1995, pp. 1-48
__________. 1997. "Hayek and Socialism." In Journal of Economic Literature no. 4. (1856-90).
__________. 2005. Hayek's Challenge: An Intellectual Biography of F. A. Hayek.
Dallago, B. & L. Mintone. 1996 Economic Institutions, Markets and Competition. Edward Elgar.
Edelman, G. 1987. Neural Darwinism, 25.
Epstein, R. Simple Rules for a Complex World. Cambridge, MA: Harvard Univ. Press.
Fuster, J. 1995. Memory in the Cerebral Cortex: An Empirical Approach to Neural Networks in the Human and Nonhuman Primate. Cambridge, MA: MIT Press, MS., 87
Hicks, Sir John. 1967 Critical Essays in Monetary Theory. Oxford, Clarendon Press.
Muller, Jerry Z. 2002. The Mind and the Market: Capitalism in Western Thought. Anchor Books.
Postrel, Virginia. 2004. “Friedrich the Great” The Boston Globe January 11, 2004. Retrieved February 9, 2007.
Wolin, R. 2004. The Seduction of Unreason: The Intellectual Romance with Fascism from Nietzsche to Postmodernism. Princeton University Press.
Yergin , D. & J. Stanislaw. 1998. The Commanding Heights: The Battle Between Government and the Marketplace that Is Remaking the Modern World. New York: Simon & Schuster, 14-15.
All links retrieved April 11, 2024.
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The Philosophy of Economics Foundational Text provides a systematic and well-structured overview over the field of philosophy of economics.
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https://www.exploring-economics.org/en/discover/philosophy-of-economics-foundational/
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Authors: Milena Dehn, Ella Needler and Jessica Palka
1. Introduction
Economics and philosophy have always been interconnected; however many economics students today may not be aware of how or why. This foundational text aims to address this gap through an introduction to the Philosophy of Economics. We will explore how economics has always been influenced by the study of philosophy, whether it appears obvious or not (for more on the relation between the separate fields of economics and philosophy, see Vromen (2021) and Claveau et al. (2021)).
A fundamental but often overlooked connection between economics and philosophy is in the work of Adam Smith. While Smith is most famous for The Wealth of Nations, he laid the philosophical groundwork for his economic text in The Theory of Moral Sentiments (Tribe, 1999). Smith not only focused on economics (then political economy) but also considered which moral ideas, such as justice and prudence, are necessary for society – and therefore the economy – to function. He understood that decisions about economic study and policy necessarily involve explicit or implicit value judgements about ethics, human behaviour and scientific inquiry, as we will come to discuss.
Stated generally, the Philosophy of Economics is the study of how or why we do economics the way we do it, and allows us to understand how the field of economics conducts itself today. While Smith was interested in the moral groundings of the economy, the Philosophy of Economics is more than just questions of ethics. Understanding the importance of philosophy in economics means acknowledging all the inputs that go into understanding economic theory: the history of ideas, core assumptions about human behaviour, ethical stances regarding economic outcomes, the role of value judgements in economic research, as well as the preferred methodologies and methods and what they tell us about how economists view the world. Since the work of Smith, and especially in the last four decades, new research areas have emerged in the Philosophy of Economics – far too many to cover here (see Kincaid and Ross, 2021; Hausman, 2021; Claveau et al., 2021). The goal of this foundational text is to provide a basic introduction to the vast number of topics in the Philosophy of Economics and provide stepping stones to learn more about each area that piques your interest.
First, we provide a glossary of key terms that may not be familiar to you as an economics student. We then provide a (very) brief overview of the History of Economic Thought and the central role it has played within the Philosophy of Economics in section 3. Next, we cover the field of ethics, a subfield of philosophy that influences normative economics. Section 5 considers how philosophical questions underpin the study of human behaviour and rational choice theory. In section 6 we discuss the Philosophy of Economic Science, also known as Economic Methodology, exploring the often obscured philosophical foundations of the way in which we conduct economic research. Section 7 provides an overview of the neoclassical and various heterodox subfields that have arisen within economics and how they differ regarding their philosophical underpinnings. Finally, we have collected a non-exhaustive list of further resources and materials for those who wish to continue their Philosophy of Economics learning.
Before we dive in, there are two characteristics of the study of the Philosophy of Economics that we must acknowledge. First, the research area in the Philosophy of Economics is not perfectly interdisciplinary. While there is some overlap, there are different strands of research topics and means of analysis between analytical philosophers (see Reiss and Heilman, 2021) and economists (see Ross and Kincaid, 2021). Nonetheless, since this foundational text aims to provide an overview of the Philosophy of Economics, the disciplinary differences between analytical philosophers and economists will not be elaborated on (see Claveau et al., 2021 for clarification).
Second, recent reflection has characterised the Philosophy of Economics’ research agenda as having a mainstream bias (Mireles-Flores and Nagatsu, 2022). This means that research topics pursued in the Philosophy of Economics tend towards topics under the umbrella of mainstream economics and away from what is typically understood in heterodox economics (Hands, 2015). This mainstream trend may be noticed throughout this foundational text. While recent research in the Philosophy of Economics tends towards the mainstream, the Philosophy of Economics is highly relevant for pluralist views of economics. Section 7 therefore discusses how core topics and debates in the Philosophy of Economics appear in different schools of thought.
2. Terminology
Epistemology: “What is knowledge?” A philosophical branch studying knowledge, its nature, scope, origin and necessary conditions as well as belief, truth and justification. Asks questions such as “What do we know?” How do we know that we know it?” How are beliefs justified?”
Ethics: the study of what is morally good and bad, what is right and wrong and how society ought to be structured
Methodology: a philosophical system of rules, principles and methods for organising and conducting scientific inquiries
Normative: what ought to be, based on values
Ontology: “What is reality?” A philosophical branch studying being, reality, existence, “what is”; belonging to the metaphysics branch of philosophy - questioning the fundamental nature of reality. Asks questions such as “What fundamentally exists? What do all entities (things that exist) have in common? How can we categorise entities?”
Philosophy of Science: “What is science?” Understanding the foundations, methods and implication of science. Asks questions such as “How is science distinguished from non-science? What is the purpose of science? What is a ‘good’ scientific explanation? How is scientific reasoning justified? What is the role of observation? What is the role of values?”
Positive: what is, based on facts
Scientific Instrumentalism: scientific theories are tools aiming at adequate predictions of what is observed (and given the purpose at hand), they should aim at answering questions and solving problems
Scientific Realism: Scientific theories are approximations of universal truths about reality, and should aim at the pursuit of truth
3. The History of Economic Thought
The history of economic thought is concerned with understanding the previous thinkers, ideas and institutions which have shaped economics. The history of economic thought has become associated with the Philosophy of Economics since it analyses ideas and knowledge over time. Nevertheless, the history of economic thought, or the understanding of the changes and evolutions in the field of economics, should not be confused with economic history, which is the understanding of historical economic events such as the Great Depression.
Understanding how we do economics today means understanding the historical progression of economic thought. As one example, economics today is characterised as having a mainstream view of thinking, however, this was not always the case as noted by Morgan and Rutherford (1998) who set out to understand the decline in pluralism in economics following the Second World War. The Philosophy of Economics is therefore also concerned with the movements and great thinkers which have shaped the field as it is these ideas and knowledge that forged the path of the field (see Heilbroner (2011)) for an overview of the great economic thinkers and Backhouse (2002) for a summary on the movement of ideas in the history of economics).
The history of economic thought can be summarised into a handful of key time periods, however it is worth recognising that ideas are fluid. While there are categorisations which can be used to understand the development of ideas in economics, it should be remembered that these classifications hold nuances. For example, while Carl Menger and Friedrich Hayek can both be classified as members of the Austrian school of thought, they have different approaches to economics (Hagemann, Nishizawa and Ikeda, 2010; Udehn, 2002). While this categorisation is not exhaustive, it is a good overview on the progression of modern economic thinking (Backhouse, 2002).
16th - 18th century:
Pre-Classical e.g. John Locke, David Hume, Bernard Mandeville;
The Physiocrats e.g. Francois Quesnay; and
Classical e.g. Adam Smith, Jean-Baptiste Say, David Ricardo.
19th century:
Marginalist e.g. William Stanley Jevons;
Neoclassical e.g. Carl Menger, Alfred Marshall, Mary Paley Marshall; and
Marxian e.g. Karl Marx, Friedrich Engels, Rosa Luxemburg.
Early 20th century:
e.g. John Maynard Keynes, Jan Tinbergen;
Institutional e.g. Thorstein Veblen; and
Austrian e.g. Joseph Schumpeter, Friedrich Hayek.
Post WWII and 20th century to present:
Neoclassical Synthesis e.g. Paul Samuelson, John Hicks, Robert Solow;
Post-Keynesian e.g. Hyman Minsky, Joan Robinson;
Monetarist e.g. Milton Friedman, Anna Schwartz; and
New Keynesian e.g. Robert Lucas.
Many of the significant changes in economic thought which impact economics today occurred during the Neoclassical, Early 20th century and Post-WWII time periods. One of the most substantial shifts occurred following the Second World War, with a significant shift from historical and philosophical towards mathematical and statistical emphases (Backhouse, 2002). While there were a number of factors that influenced this turn, a few notable reasons may include the rise of the econometric society, an increase in statistical tools and knowledge following the World Wars (Guglielmo, 2008), and the introduction of mathematics into economics in the Cambridge University exams (Weintraub, 1999). This is also when scarcity-based definitions of economics took over and the discipline became increasingly delineated based on the economic methodology, rather than substantive definitions based on material welfare (Backhouse and Medema, 2009).
While the post-war period of economics saw a rise in the use of mathematics, many emerging conceptual debates were and still are grounded in philosophy. This includes the place of normative versus positive economics stemming from Friedman’s 1953 essay “The Methodology of Positive Economics”, the debate on the concept of Methodological Individualism between Hayek and John Watkins in the 1950s, and the divide between Post-Keynesian and Neoclassical Synthesis economists in the mid to late 20th century due to concerns of critical realism (see chapter 1-2 of Minsky (1975)).
Moreover, the increasing prominence of mathematical approaches distinct from philosophical considerations has resulted in a chasm between economics and philosophy, which has only more recently and partially begun to coalesce (albeit disjointedly) within what is now known as heterodox economics. Critiques of this estrangement can be found for example in feminist economics (e.g. Nelson (1995)), and we will briefly explore some heterodox sub-fields with explicitly philosophical bases in section 7. While we will explore the content of these debates later in this foundational text, it is necessary to acknowledge the core role that philosophy plays in understanding the debate, negotiation and evolution of economic ideas over time.
4. Ethics and Normative Economics
Ethics generally refers to the study of what is morally good and bad, right and wrong and how a society ought to be structured (Dutt and Wilber, 2010). Normative economics is thus concerned with ethical questions in the practice of economics and the evaluation of economic states of affairs, processes, and institutions (Hausman, McPherson and Satz, 2016). While welfare and (pareto-)efficiency are the dominant assessment criteria for such evaluations in mainstream economics, there exists a more extensive debate concerning the principles of justice and especially distributive justice. The first part of this section thus outlines welfare and (pareto-)efficiency as the normative criteria that dominate mainstream normative economics. The second part will focus on principles of distributive justice, while the last part will point towards some additional debates in ethics and economics.
4.1 Welfare and Pareto-efficiency
In economics, the concept of welfare is not based on hedonism or any other substantive concept of welfare (i.e. a theory that specifies what is intrinsically good for people). Instead, welfare is defined formally in terms of satisfying preferences that are specified by the individuals themselves. The advantage of relying on a formal theory of welfare is said to be that no controversial or potentially paternalistic approach of wellbeing has to be endorsed by economists. However, the reliance on individuals' preferences can be problematic if individuals have false beliefs or insufficient knowledge and it is also questionable if extravagant or antisocial preferences should be taken into account.
Due to the difficulties of interpersonal comparisons of welfare, mainstream economists rely purely on pareto-efficiency when comparing economic outcomes. As a normative criterion, pareto-efficiency essentially means that an outcome is efficient with respect to satisfying individual preferences and a society does not miss any opportunities to better satisfy some preferences. However, distribution or different weights for different preferences are not taken into account. If circumstances are improved for some parties but worsened for others, pareto-efficiency cannot be used as a guiding criterion either.
Pareto-efficiency is also the base for the two influential welfare theorems:
perfectly competitive markets yield equilibria that are pareto efficient, and
any pareto-efficient allocation, involving any desired level of redistribution, can be achieved as competitive equilibrium given the right initial distribution of endowments.
These theorems are sometimes used to justify economists’ reliance on competitive markets, for example in efficiency-based arguments for taxes rather than regulations that restrict pollution. The second theorem can also be interpreted in the sense that policy goals besides efficiency can be ensured by relying on perfectly competitive markets if one adjusts the initial endowments accordingly. However, when invoking the welfare theorems as standards for applied scenarios, it must be remembered that they are based on perfectly competitive markets. The redistribution required for the ‘right initial distribution’ in the second theorem implies additional practical problems. Furthermore, even if one disregards the schism between realistic and highly idealised conditions, the prioritisation of efficiency over other moral standards is in itself a value judgement since there may be other societal goals that we could deem more desirable, such as fairness. It is therefore possible that a policy goal would be best served by deciding for an outcome that is not pareto-efficient, for example when we as a society hold certain moral beliefs that body parts should not be marketed.
A potential argument for the permissibility of economists' primary concern with efficiency is that we should separate the question of efficiency (the size of the pie) and distributive justice (how to slice the pie, our focus in the next section). However, since endowments influence possible allocations, a strict separation is hard to defend (Hausman, McPherson and Satz, 2016). Predominant understandings of welfare and efficiency within economics therefore have at their essense inherently philosophical questions about what society values, our goals, and how we seek to achieve them through economic policy.
4.2 Distributive Justice
Principles of distributive justice are those that provide moral guidance on how to structure the distribution of benefits and burdens across the global society. These principles differ in their potential metrics (welfare, resources, capabilities), scope (individuals, nations, generations), and patterns (equality, sufficiency, priority for the worst-off) (Lamont and Favor, 2017). In this section we cover egalitarianism, John Rawl’s difference principle, libertarianism, sufficientarism, and Amartya Sen’s capability approach, as accounts that differ along their patterns as well as their metrics. For an additional overview on the different theories of distributive justice, see Roemer (2009).
4.2.1 Egalitarianism
Egalitarianism normally refers to the equal distribution of resources, welfare or opportunities. A concern for equality can be defended as intrinsic, in the sense that equality is the fairest way to share scarcity, or that no one should be involuntarily disadvantaged based on morally irrelevant attributes (such as their birth-family). Additionally, there is a close connection between equality and other fundamental ethical principles, since equality seems to be important for ensuring the impartiality of social institutions or because inequality has deleterious effects on human welfare (Hausman, McPherson and Satz, 2016; Roemer, 2009).
Welfare egalitarianism thus contends that we should aim for equality of welfare, rather than the aggregate maximisation of welfare. While this seems to be a logical extension of economists’ concern with welfare, it revives the problem of interpersonal welfare comparisons. Strict egalitarianism is also criticised for not being pareto-efficient and for disallowing performance incentives that could make everyone better off (Hausman, McPherson and Satz, 2016).
Resource egalitarianism argues that people should be equipped with equivalent resources. The idea is to disallow inequality based on unmerited characteristics, but to leave room for different outcomes based on individual ambitions. Core problems include how to measure equality of goods (the index problem) and the timeframe within which the equality principles should apply (see e.g. debates about intergenerational justice: Meyer, 2021; Roemer, 2009). Additionally, the distinction between resources and personal merit is often hard to draw. As people have different needs, such as when they have a disability (see Dworkin (1981)), strict equality of resources might also not be the best way of safeguarding the moral equality of people (Lamont and Favor, 2017). Lastly, even egalitarian initial endowments can lead to stark inequalities if agents can freely engage in transactions as suggested by Nozick’s Wilt Chamberlain example.
4.2.2 John Rawls and the Difference Principle
One important resource-egalitarian approach is John Rawls’ Theory of Justice and his difference principle. Rawls argues that under a veil of ignorance, (i.e. where people do not know anything about their own position, race, gender etc.) they would decide that (1) all people have a set of equal basic rights and (2) inequalities are permissible only if (a) they are attached to positions open to all agents and (b) they benefit the members in society that are worst-off. The difference principle (2b) relies on the maximin criterion rather than maximisation or strict equality and acknowledges that some level of inequality and the related incentives might make everyone – especially the worst-off – better off. Rawls’ account has been criticised for referring only to the absolute and not the relative situation of the worst-off (not sufficiently egalitarian) and for restricting personal liberty too much (too egalitarian) (Rawls, 2001; Rawls, 1999; Lamont and Favor, 2017). In particular, Rawls' liberal egalitarian account of “justice as fairness” has been contrasted with Robert Nozick whose theories can be understood as “justice as entitlement”.
4.2.3 Robert Nozick and Libertarianism
The libertarian Robert Nozick argues that the commitment to an end result of equality inappropriately restricts agents’ liberties. He argues that any distribution of goods is just if it is brought about by free exchange among consenting adults from a just starting position (Nozick, 1974). Justice thus means respecting individual rights and Nozick’s theory must be understood as a theory of procedural (or historical) rather than patterned distributive justice. Based on the thesis of self ownership, Nozick argues that people have the right to use their powers for personal benefit and that they also have the right to claim any external resource that is not yet owned - as long as others are not rendered worse off than when the resource was unowned. While a strict interpretation of the self ownership principle implies counterintuitive consequences (e.g. the permissibility of voluntary slavery), the very vague criterion of justifiable property appropriation can be criticised as arbitrary (van der Vossen, 2019).
4.2.4 Sufficientarianism
It can also be argued that the problem of inequality is not inequalities per se, but the situation of the worst-off people. Sufficientarianism, as an alternative pattern of justice, thus contends that what is important is essentially not equality, but that all people have enough. Therefore, those people that have not reached a given threshold of resources and welfare must be given priority (Benbaji, 2006). This line of thought is based on a wave of doubts about egalitarianism, put forward for example by Frankfurt (1988), Parfit (1995), and Anderson (1999).
4.2.5 Amartya Sen
Lastly, while concerned with equality, Amartya Sen’s Capability Approach is based neither on evaluating purely material goods nor welfare. It instead refers to capabilities, or the set of “functionings” that an individual has the capacity to reach. A functioning is any doing or being, for example reading or being healthy. While the account emphasises freedom of choice over different functionings, it centres on the actual capacity to reach a functioning of wellbeing. Compared to resource approaches, Sen’s approach is able to consider the different life circumstances people face. For example, a pregnant mother might need more calories to realise the capability of being well-nourished than other people. Additionally, Sen explicitly endorses interpersonal utility comparisons and thus moves beyond some of the formerly mentioned limitations of welfare economics. Furthermore, contrary to welfare approaches, Sen stresses the capability (e.g. literacy) over any functioning (e.g. reading). Core problems of the account are the index problem, assigning weights to the capabilities, and the debate about prioritising capabilities or achieved functionings. Despite its stark deviation from mainstream economics, Sen’s (and Martha Nussbaum’s) account is well-known among economists and is highly influential as a substantive alternative to the welfare concept, having influenced the Human Development Index (Sen, 1985; Nussbaum, 2001; Robeyns and Fibieger Byskov, 2021).
4.3 Further Topics and Debates
We have given an introduction to ethics and economics that started with welfare and pareto-efficiency. As these criteria build the core of normative economics within the mainstream, the term normative economics itself is sometimes exclusively applied to welfare economics. Secondly, we introduced dominant approaches to distributive justice. Based on the majority of publications in the field of analytic Philosophy of Economics, this section has been shaped mostly by a liberal-egalitarian outlook (Claveau et al., 2021). We thus conclude this section with a non-exhaustive overview of additional topics in the field of ethics and economics including exploitation, the moral limits of the market, structural injustices, and climate change.
One such topic is the philosophical debate of exploitation, from for example a Marxian or feminist perspective. Exploitation refers to taking unfair advantage of another person through a specific transaction (e.g. in the context of sweatshop labour or surrogacy) or structurally through institutions (with Marx’ theory of exploitation being the most influential theory). While most philosophers agree that the exploiter gains some benefit from the exploitation, there exists a debate about purely harmful exploitation and cases of exploitation that benefit the exploited person to some extent. The moral case against exploitation can generally be approached from the different angles of justice outlined above, such as from an egalitarian or sufficientarist perspective. One important debate in the context of exploitation centres on whether Marx’s assessment of employment relationships under capitalism as exploitative can be defended without relying on the labour theory of value (Zwolinski, Ferguson, and Wertheimer, 2022; Roemer, 1982; Fleurbaey, 2022).
Philosophers have also examined the moral limits of markets using examples such as a market for kidneys or buying votes. Moral arguments for limiting markets can for example be based on the vulnerability of agents who have a limited choice space because of their position and on the weak agency of poorly informed individuals (Satz, 2010). This debate generally emphasises that organisational forms and allocation mechanisms have to accommodate different goods that are valued in different ways (Anderson, 1995; Herzog, 2021). It can also be argued that markets may efficiently satisfy the wants of people while also shifting them to preferences that can easily be satisfied within markets. Markets could thereby change our preferences, our relation to goods, and to other human beings (see for example Jaeggi (2014) on alienation).
Other strands of literature focus on structural injustice in relation to class, race and gender (Balibar and Wallerstein, 1991). Cicerchia (2021) for example asks how class can illuminate the broader field of domination, arguing that class domination harms a diverse group both in spite and because of differences among group members. Bright et al. (2022) analyse the connection between race and capitalism and more explicitly how features of race as social construct facilitate stable, inequitable distributions of resources. There are also theorists analysing the normative underpinnings and consequences of the institutional frameworks that shape our economy. Fraser and Jaeggi (2018) for example analyse capitalism as a social form and carve out the underlying institutional separations, for example between economy and polity or production and social reproduction. Anderson (2017) analyses the workplace and argues that employers can be conceptualised as ‘private governments’ with wide-reaching authoritarian power over the lives of workers.
Finally, it should be mentioned that there is an increasing focus on analysing climate change policies (Heath, 2021) and the wider field of climate justice (Caney, 2020) as a core ethical issue within economic research and policy design. Climate change entails questions about the responsibilities of current generations in relation to future generations, which actors have which responsibilities to address climate change (for example countries in the Global South and North), how the limited “greenhouse gas budget” should be distributed, and how we should make trade-offs between competing principles of climate justice, especially given high levels of non-compliance (Caney, 2020).
Fleurbaey (2022) provides an overview of other relevant topics in ethics and economics, such as cost-benefit analyses, social choice theory, fair allocation of resources, happiness studies, reciprocity and altruism and multidimensional poverty measurement.
5. Human Behaviour and Decision Making
The Philosophy of Economics is also concerned with understanding human behaviour and the choices individuals make. In the philosophical literature, decision theory is about understanding the reasoning behind one’s choices (Steele, 2020). Decision theory is intrinsically philosophical since normative assumptions must be made about an individual’s beliefs, desires, or other attitudes.
Decision theory has become a large area of research in the Philosophy of Economics over the past few decades (Claveau et al., 2021) which is why it holds its own section in this foundational text. However, as mentioned in the introduction, many of the core research areas in the Philosophy of Economics rest upon mainstream assumptions. Decision theory is a core example of this since it is primarily based on ideas of methodological individualism rather than methodological holism. Methodological individualism, which is widely accepted by the mainstream, is the idea that we should understand and model our economic world by starting with the individual actor (see the section 6.2.1 on Methodological Individualism for more).
Over the years, Decision Theory has evolved into core topics and fields, such as Rational Choice Theory and then behavioural economics, which challenges the preconceived notion that individuals are rational. In the last decade, additional topics including neuroeconomics and social preferences have risen to further challenge and understand our views of human behaviour. These areas of study necessarily incorporate philosophical considerations into economic research since beliefs about how humans behave and what motivates their behaviour underpin economic modelling at the micro- and macro-levels. This section will provide a brief overview of these fields and how they incorporate or reflect philosophical considerations.
5.1 Decision Theory and Rational Choice Theory
Rational choice theory is based on the assumption that individuals act in a rational manner when making decisions, with the Philosophy of Economics exploring the epistemological implications of this assumption. For example, the traditional homo economicus assumes humans believe and desire in a purely rational, self-interested manner with no irrational influences.
There are two main models of Rational Choice Theory that determine under which conditions a choice is considered as rational in economics: Ordinal Utility and Cardinal Utility. Ordinal Choice Theory is a model of decision making under certainty. Cardinal Choice Theory is a model of decision making under risk (Reiss, 2013). In addition, game theory is about understanding individuals' decision making in strategic situations with other players. The different assumptions we make about the context of decision making (e.g. certainty or strategy) is of philosophical concern because of the normative question at the core of how individuals ought to choose (for more see Sugden (1991)).
5.2 Behavioural Economics
Beginning in the 1970s, two psychologists were attempting to better understand human behaviour. Amos Traversky and Daniel Kahneman were challenging the widely-held belief that individuals always act in a rational, stable manner. Kahneman and Tversky’s work on topics including prospect theory (1979) and biases and heuristics (1974) showed that humans have non-rational tendencies, laying the groundwork for the emerging field of Behavioural Economics. The field aims to understand and model the non-rational tendencies of human beings and includes topics such as nudging, choice architecture, biases, and heuristics.
While this research movement is broadly considered as a leap towards understanding humans’ non-rational tendencies, Karen Hoff and Joseph Stiglitz suggest it is only a “quasi-rational” step and just the “first wave” of modelling non-rational behaviour (2016). Hoff and Stiglitz suggest we are now facing a second wave in behavioural economics that goes beyond the individual and looks to understand how social norms, cultures, situational contexts, and other social determinants of behaviour may impact decision making.
5.3 Social Preferences
In a rational world, one’s interactions with others would not impact their decision making because our behaviour would be purely self-interested. However, in reality, we know that feelings such as altruism, trust, reciprocity, spitefulness, and fairness impact our decision making. The study of social preferences aims to understand the non-rational human tendencies that lead us to prioritise group payoffs as well as or even above individual ones. This is where the philosophical concern enters; by changing the normative assumptions by which beliefs or attitudes, such as fairness or altruism, influence an individual’s behaviour. For example, Fehr and Schmidt (1999) was an original paper to discover that people’s attitudes towards fairness do not always align with the self-interest model. Rather, they determined people can act fairly and cooperatively during experiments such as an ultimatum game or public goods game because people have a preference towards equitable outcomes.
5.4 Neuroeconomics
In recent decades, a new tool for understanding human behaviour has become increasingly popular: neuroscience. The study of neuroeconomics is about using the tools and methods of neuroscience to measure brain activity to understand human decision making. Similarly to behavioural economics, neuroeconomics does not assume rational decision making but attempts to combine experimental economics, psychology and neuroscience to better understand and predict realistic and representative human behaviour. Gul and Pesendorfer (2008) argue for the “case of mindless economics”, believing the growth of neuroeconomics has the power to alter the methodology of economic research. To them, the field of neuroeconomcis rests on two pillars. First, that psychological and physiological evidence can be used to support (or refute) economic models and methodology and second, that economic welfare analyses prioritise “true utility” over “choice utility” since it can reflect what truly makes individuals happy rather than focusing on the utilities associated with choice.
6. Methodology and the Philosophy of Economic Science
Economic methodology, or philosophy of economic science, is a crucial subfield of philosophy of science that investigates the nature of economic phenomena (ontology), the possibilities of acquiring knowledge of them (epistemology) and which methodologies both the ontology and epistemology imply (how research should proceed to gather knowledge). Methodology is in this context also often used in the broader sense of encompassing both ontology and epistemology, with this broad meaning applied throughout the text here (Hausman, 2021).
This section will be split in two sections to discuss how philosophical questions are inherent to the methodology of economics. First, we introduce the distinction between positive and normative economics and what different stances on the role of value judgements imply for economic research. Second, we introduce some of the most relevant methodological debates and their ontological and epistemological underpinnings. This includes methodological individualism and related ontological and methodological considerations and what the different epistemologies of scientific instrumentalism and realism imply for economics. We then examine the challenge of ceteris paribus laws and highly idealised models as forms of analysis in economics. Lastly, we introduce the topic of causation and the philosophical issue of trying to infer causal links.
Before we dive into the details, it’s worth acknowledging that economic methodology is perhaps the area in which divergences between contemporary analytical philosophy and economics have most arisen. Some philosophers criticise that economic methodology is heavily influenced by outdated philosophical discourse and that the disciplines have become increasingly detached since the post-war period (as discussed above in section 3). One reason for this may be the essential differences between philosophers’ and economists’ goals, which result in a theory-praxis gap. A theorist may not always be aware of or interested in a practical problem, while practitioners may not know of or understand a theory well enough to use it:
Philosophers want to understand knowledge acquisition in economics mainly because of their general interest in the possibilities and limits of human knowledge and because of their general interest in human agency. Economists want to understand knowledge acquisition in economics, mainly because they want to streamline and to improve the process and to reveal the blunders of those who pigheadedly adhere to a different approach to economic theorizing. (Hausman, 1992a p. 231)
Economics therefore often focuses on critiquing and improving the tools and techniques of economic scholarship, while philosophers typically debate the epistemic value of economic theories and methods.
6.1 Normative versus Positive Economics
Since economics is a social science that is highly influential in guiding policies, an especially important question in the Philosophy of Economics is which role normative and moral judgements play in determining how research is conducted. It might be clear that ethics is important when applying economics to policy questions, but (how) are moral judgements reflected by the ways in which we conceptualise, gather and analyse economic information? Furthermore, how ought this best be done for both scientifically and morally sound results?
In the following section, we first outline arguments discussing whether one can strictly separate positive and normative economics. We then move on to the debate of whether positive economics can and should be free of any moral values.
6.1.1 Separating Normative and Positive Economics
John Neville Keynes, father to John Maynard Keynes, distinguished between the three core studies of positive, applied and normative economics. Positive economics investigates what is (how the economy works), applied economics concerns the implementation of otherwise abstract theories to concrete problems, while normative economics specialises on what ought to be (how the economy should work). JN Keynes proposed that the methodologies and methods appropriate for each category are fundamentally different since they require taking ethical, practical or purely scientific standpoints, respectively. Based on this, Colander (1992) suggests that the applied economics that most economists actually do does not belong in positive economics, since understanding the way that the economy works is a “pure science”, while applied economics concerns practical problems which cannot be considered in isolation from social, political, historical, institutional and ethical factors.
Friedman’s highly influential The Methodology of Positive Economics (1953) misrepresented JN Keynes by only distinguishing between normative and positive economics, and this binary thinking has (as expected by JN Keynes) essentially persevered in mainstream economics. Today many economists thus separate normative economics - as a small and readily distinguishable subfield focused on normative questions - from the main field of positive economics that is considered to be free of any moral values (Mongin, 2006) (for more on this distinction in contemporary economists see Atkinson (2009)). In the following section, we outline arguments discussing whether one can indeed separate positive and normative economics. We then move on to the debate of whether positive economics can and should be free of any moral values.
One way of thinking about the separation of positive economics and normative judgements is the ideal of ‘economists as engineers’ (Hausman, McPherson and Satz, 2016). Similar to engineers who advise policy makers on the technical specifications of constructing a dam, positive economists prioritise providing causal evaluations, acting as technical advisors on means-end relationships and not getting involved in evaluating policy goals. While this seems like a clear separation of positive inquiry and normative evaluations, the feasibility of the ideal is questioned by several philosophers.
Hausman (2016) for example argues that economists hardly ever get purely technical questions and that it will often be necessary to elaborate on unclear moral specifications because there will always be a normative element of what is the best answer. When advising on the imposition of tariff barriers, politicians might for example give a partial moral specification in the sense that they want to increase revenues but think that some goods have to be excluded from tariffs due to moral consideration. However, economists will have to understand in more detail what the government actually intends in order to translate this into an economic problem. Should they for example focus on evaluating the effects of tariffs in terms of the life of an average citizen, an average voter, subgroups affected specifically by a tariff on specific goods, or potentially the effect of the tariff on average people in other countries? Even if economists do not share the moral values of policy makers, they must therefore understand at which place moral values come into play and how to fill any gaps in line with the policy makers’ goals. It thus seems as if economists would need quite a sophisticated understanding of ethics even in their role as technical advisors (Hausman, McPherson and Satz, 2016).
Instead of the ideal of economists as engineers, DeMartino (2011) uses the analogy of a medical physician. A physician is regarded as an expert in their field but their expertise does not warrant an absolute disregard for the patient's autonomy or their right to understand, ask questions or give permission for any given option. In this context, DeMartino argues for an oath that economists swear by upon graduation, including to respect the autonomy and agency of any community with/for/on which an economist works as well as to anticipate the potentially harmful consequences of any interventions and to attempt to mitigate such effects.
Another form of defending the positive-normative split posits that there are some cases in which economists should make value statements themselves, but that these cases are few and easy to delineate (Mongin, 2006).
6.1.2 Value-free economics
There is also the question of whether the subfield of positive economics even can or should be objective and undistorted by moral values. Value-freedom is a broader debate in philosophy of science and goes beyond the scope of welfare economics and policy-advising. Economics prefers to present itself as a value-free science and has enjoyed comparing itself to physics, dentistry and, in recent years with the rise of Randomised Control Trials, medicine.
The Value-Free Ideal holds that positive economics is and should be free of contextual values, as these values distort judgments and endanger scientific objectivity (Hausman, McPherson and Satz, 2016). The value-free ideal normally implies that only non-epistemic values must be excluded (Douglas, 2013), while epistemic values like accuracy and simplicity are considered truth-conducive. Such values are therefore viewed as unrelated to political agendas in that they relate only to choosing empirically adequate theories (Longino, 1996; Kuhn, 1979).
Nonetheless, some philosophers question if it is possible or even desirable to exclude non-epistemic values from economics. Longino for example argues that epistemic values can be laden with socio-political values. The epistemic value of simplicity leads economists to choose a unitary theory of the family over a bargaining model (if both are consistent with the evidence) and is thus prone to conceal gendered inequalities and to import non-feminist values (Longino, 1996). Furthermore, Mongin (2006) examines if it is even possible to make a clear split between positive and normative statements. Thick concepts like ‘just’ or ‘rational’ always involve both descriptive and evaluative aspects and can hardly be disentangled. Additionally, he criticises that it is important to acknowledge the difference between evaluative judgments and normative prescriptions (Mongin, 2006).
Douglas (2009) argues that one must distinguish a direct role of values, if which they directly determine scientists’ choices, and an indirect role. If economists evaluate whether a type I error or a type II error would have worse consequences before deciding for an appropriate significance level for their hypothesis test, they use values indirectly. Douglas argues that the indirect role is justifiable and desirable in order to ensure good science (Douglas, 2009).
Given the difficulties of excluding all value judgements, some philosophers argue that objectivity is not necessarily achieved by excluding value-judgements but rather that any normative biases must be mentioned explicitly (Alexandrova, 2018). Some subfields of economics, especially more socio-historical or critical traditions, also embrace non-objectivity in claiming that biases are realistically unavoidable. Critical social sciences oppose the epistemological idea that scientific theories and methods can ever be neutral or independent from the social processes within which they are generated or performed. Furthermore, they espouse actively identifying ideologically impaired theories and practices in order to transform unjust social relations (Habermas, 1971). The argument is that only an explicit commitment to emancipatory values can reveal how dominant power structures and implicit values shape and limit knowledge creation. Explicit value acknowledgement and commitment is therefore crucial to see beyond predominant ideologies and power structures, to provide emancipatory knowledge and, eventually, to improve the living conditions of the worst-off (de Melo-Martín & Intemann, 2018; Ng, 2015).
Despite these debates within philosophy of science, the value-free ideal remains so influential in economics that Hausman, McPherson and Satz, (2016) frame it as the “standard view” of economics.
6.1.3 Performativity
Besides the discussed complications of excluding any normative values from economics, the ethical responsibility of economists is reinforced by the point that economics is inherently performative. Performativity is the idea that economic or financial models are not objective representations of a reality, but rather these models can influence the reality they are trying to represent. As economic agents are intentional beings, they can react to theories or theory-based policies, which can eventually have an effect on the economic processes that are being studied. As a social science, economics thus involves not only describing or explaining social realities, but often actively shaping them (Boldyrev and Svetlova, 2016).
A famous example is the Black-Scholes-Merton option-pricing theory. Traders used the formula to compare the market price of stock options to the hypothetical price of the model before making a purchasing decision. In the end, the purchasing behaviour led the market prices to converge to the model prices (MacKenzie, 2008). There are also studies suggesting that studying economics might make students more selfish, as economists constantly focus on self-interested rational choice theory rather than other models of behaviour (Frank, Gilovich and Regan, 1993). This is significant as economic research can — and materially does — impact the lives of millions of people across wide and sometimes unknowable geographies and timescales.
Additionally, performativity can disallow economic models from being predictively accurate over time. Lucas for example criticised large-scale macroeconometric forecasting models for capturing transitory correlations that would not remain stable in the face of policy changes (the Lucas Critique). He argues that policies based on macro-economic forecasts must fail because people will adapt to the new policy and not stick to their former behaviour – which will change the resulting macroeconomic outcomes and invalidate the model (Lucas, 1976). This calls into question whether economists can accurately predict and effectively model dynamic behaviour over time, and what this lack of certainty implies for their own performance as policy-designers and -makers.
6.2 Modes of Analysis and Fundamental Principles of Economic Research
6.2.1 Methodological Individualism
Methodological individualism is a concept in social science which states that social phenomena can be best understood as the sum of individual decisions and should be explained by showing how they result from individual actions. For example, in economics, strict methodological individualism (or microfoundations) entails that one should not merely study that an increase in supply leads to increasing prices, but that this conclusion should be understood through an underlying individual-level mechanism (Reiss, 2013). This is a generally accepted definition, but it should be recognised that there are varying understandings of methodological individualism concerning its relation between individuals, institutions, and social groups as well as on the ontological and methodological uses of the concept (Udehn, 2002; Hodgeson, 2007).
The idea of methodological individualism began with Carl Menger who argued that “reducing complicated phenomena to their elements” would allow conceptual gains (Menger, 1987, p. 93). Additionally, Max Weber put forward a different rationale for methodological individualism: only individuals possess intentional states, which is the only possible base for understanding the resulting macro-structures. The concept was first termed by Joseph Schumpeter in his 1909 essay, On the concept of social value. The idea was not popularised until debates arose in the 1950s between Friedrich von Hayek and John Watkins on the ontological and epistemic nature of methodological individualism. There was another surge in the topic in the 1980s, when Jon Elster critiqued that the functional explanations of Marxian theory overlook collective action problems, for example in a socialist revolution. He thus argued for methodological individualism from an analytical Marxist perspective (Heath, 2020).
Debates on methodological individualism can be based on methodological or ontological considerations (Hodgeson, 2007). Methodologically, the question is whether explanations that refer only to the macro level have some value or might even be more appropriate in some circumstances (Reiss, 2013). At the ontological level, it can be debated whether individuals and their behaviour are really the only entities that exist, or if there are macro entities (e.g. money, institutions, norms) that go beyond aggregated individuals and are causally effective because they for example influence the behaviour of individuals (Durkheim, 1982). In this context emergence means that macrophenomena can have properties that are qualitatively different from, and thus irreducible to, the properties of their constitutive micro phenomena; and emerge only through the interaction of the micro particles. Tornados can for example not be reduced to any specific underlying composition of micro-entities, even though they certainly contain micro particles (O’Connor, 2021). Neurosciences have also popularised the concept of supervenience: if mental states supervene on brain states it means that the same configuration of neurons will always lead to the same mental state, but the same mental state can occur for different configurations of brain states (McLaughlin and Bennett, 2021). This idea can be applied to economics as well if one argues that macroeconomic states supervene on microeconomic actors and their decisions, but are not reducible to microeconomics as the mapping is not one-to-one (Hoover, 2001). Methodological individualism is thus controversial from both a technical and a philosophical point of view, making it a key area of contention within the philosophy of economic science.
One alternative approach to methodological individualism is methodological holism which can be understood as taking into account social phenomena and the views or aims of the collective. Methodological holism has seen little favour amongst economists over the last century because of the ontological question on if it is even possible for the collective to have an aim and the methodological concern on how to measure that aim (see Zahle (2021)).
6.2.2 Instrumentalism and Realism
Despite being largely criticised by philosophers, Milton Friedman’s 1953 essay “The Methodology of Positive Economics” is one of the most well-known essays on economic methodology (Hausman, 1992b,c; Hands, 2001; Claveau et al 2002). Friedman considers the point that many economic assumptions are unrealistic. He argues that the goal of (positive) economics is to obtain theories that provide successful – that is, valid and meaningful – predictions about a relevant class of economic phenomena (instrumentalism). The theories should thus only be tested on the basis of their predictive success, while the question of assumptions being realistic is irrelevant for evaluating a theory. Instead, it only matters if assumptions are sufficiently close approximations for creating an effectively predictive model of the specific case at hand.
Hausman (1992c) criticises Friedman’s argument using the analogy of testing a used car. Even if one agrees that a car is good if it drives safely, economically, and comfortably, most people would reject that the only useful test of the car should be a road test. Instead, it seems useful to open the hood and to check separate components of the car; especially if one wants to use the car in new circumstances, wants to assess if it will likely work well in future, or if it has broken down before. Analogously, it seems like a very narrow test of a theory's qualities if one only considers the current predictive success and denies the relevance of assumptions and any predictions outside the initial scope, even if one agrees with the instrumentalist approach.
Additionally, instrumentalism is not the only way to legitimise unrealistic assumptions as explored for example by Usali Mäki (see section 6.2.4 on models).
Lawson (1997) also argues for a realist approach to economics, also understood as critical realism. Based on the work of Bhaskar (1975), Lawson criticised that mainstream economics focuses merely on identifying observable surface regularities. This places causality at the level of events rather than mechanisms and reduces what is considered as real (ontology) to what we can know (epistemology). Instead, science should acknowledge the underlying mechanisms that produce regularities even if they are revealed only partly in observable relations. Both Mäki’s and Lawson’s accounts therefore reject the purely instrumentalist approach of Friedman and agree that underlying causal mechanisms are relevant.
6.2.3 Inexact laws and ceteris paribus clauses
Due to the study of physics, the laws of nature – objectively true and universal statements – take centre stage in the philosophy of science. However, laws such as the law of prices are not universal and are not disproven by just any counterexample (Reiss, 2017). Economic laws are thus accompanied by ceteris paribus (‘other things being equal’) clauses, implying that they hold only if all the factors that one does not focus on, including unmentioned factors, do not vary (Reiss, 2017). The problem arising from ceteris paribus clauses is that they can be seen as empirically empty as they merely state: ‘Y always follows X, unless it does not’ (Earman & Roberts, 1999). This would disallow testing and especially falsifying ceteris paribus laws, which is highly problematic for a positivist approach to economics (Hausman 1992c).
This topic was already discussed in John Stuart Mill’s (1836) highly influential essay “On the Definition and Method of Political Economy”, in which he argues that the scientific method starts by breaking down complex phenomena and inductively determining the laws that govern individual causal factors. The combined consequences of various laws are then deduced. In this context, Mill justifies inexact predictions as laws can be disrupted by various interferences in the real world. While the law of prices may only be accurate under perfect conditions, this does not mean that one cannot make any predictions under imperfect conditions. Rather, the tendency of prices to react to changing supply will remain intact. Consequently, one can test the law in a non-ad-hoc way by testing it under different conditions that approximate the ceteris paribus conditions to different extents and falsify it by deciding between permissible and impermissible reasons for it not to hold (Kincaid and Harold, 1996; Reiss, 2017). Additionally, it can be argued that even physical laws are not actually universally valid and exceptionless (Cartwright, 1983). Instead, they are untrue in a strict empirical sense because they are highly idealised in order to be widely applicable. Strictly speaking, they would thus also require a ceteris paribus clause.
Nonetheless, these accounts do not necessarily solve the problem of inexactness but rather suggest a shift from laws to tendencies. Tendencies can however only be used and cumulated successfully if causal factors combine mechanically, and never react like chemical elements that form a new element when added together (Reutlinger, Schurz and Hüttemann, 2017; Kincaid and Harold, 1996; Mill, 1843). The debate about the use of laws in the social sciences and economics thus remains a philosophically relevant topic.
6.2.4 Models: Simplification and isolations
The debate regarding models and axioms has largely replaced that of laws or tendencies among economists in recent decades (Hausman, 2021). However, the goal remains to investigate how causal factors would operate in the absence of interference. As with ceteris paribus laws and unrealistic assumptions, models similarly entail philosophical questions about the legitimacy of using severe abstractions and idealisations to describe and ultimately shape the economy.
Uskali Mäki argues that unrealistic models can be useful for understanding and predicting real-world economic phenomena and that every science needs to apply isolation, which means that an entity is sealed off from the influence of other factors. Isolation comprises two factors: idealisation over certain factors (e.g. assuming perfect calculation skills) and omission over factors thought not to impact the economic phenomena under investigation. Isolative models are ‘unrealistic’ as they are necessarily incomplete and contain falsehoods. However, instead of justifying this through instrumentalism (like Friedman, see section 6.2.2), Mäki argues that isolation can be compatible with the pursuit of truth “if it correctly represents the isolated essence of the object” (Mäki, 1992:344). Important conditions are that the causal factors that the model refers to are real, that they are indeed causally relevant for the phenomena that one wants to explain, and that they are causally relevant based on the mechanism that is posited in the model. However, overall effects can only be derived from isolated causes if causes combine mechanically, while economic models which postulate factors that do not exist in reality cast doubt on Mäki’s account (Wimsatt, 2007).
Robert Sugden for example asserts that economic modellers do not start from real-world phenomena and proceed by isolating specific features. Rather, they construct models as credible counterfactual worlds that parallel real-world targets. This can be illustrated by Schelling’s checkerboard model, which claims that a preference to not be heavily outnumbered by neighbours of a different race can lead to completely segregated neighbourhoods. The basic elements of this model are not realistic and do not comply with Mäki’s conditions of isolation since people are modelled as coins in two colours living on a 8x8 checkerboard. Nonetheless, the model is applied to explain real effects through real causes. Sugden argues that the necessary inference between model and world must be grounded in the credibility of the model-world: only if the model and the real world are similar in some significant way (e.g. individuals holding mildly segregationist preferences), do we have reasons to believe that the causal relationship established in the model will also hold in the real world (Sugden, 2000). Nonetheless, credibility of a model is only necessary but not sufficient to justify inductive inferences from the model to the real world (Weisberg, 2006).
Nancy Cartwright (2009) criticises that there are serious obstacles to making inferences from credible world models to the real world, especially in economics. She argues that even analogous world models generally serve as isolating tools: we suppose that we can learn something about a more complex world with many operating factors by studying a sparse model with only one preference – such as a weakly segregationist preference - operating in isolation. This modelling approach is problematic because economics has few uncontroversial principles to base such models on. The consequence is that mere segregationist preferences together with the fundamental principle of maximisation under constraints will cause nothing unless we add structural assumptions for the neighbourhoods and some dynamics that imply action on the preferences. The result of weak segregationist preferences thus depends on exogenous structural assumptions – which leads Cartwright to argue that economic models are often overconstrained and conclusions will differ based on these constraints. Furthermore, given the issues of mechanistic addition, Cartwright concludes that even robustness tests might not be able to establish that our model results will hold across a variety of structural changes. Instead, robustness tests can help us to understand how circumstances shape the contributions that economic factors make, and this must be the base for extrapolation from model worlds.
Mary S. Morgan (2001) focuses on narrative techniques/stories as bridging the gap between real world and abstract models, in part built upon the account of economic metaphors by McCloskey (1990). Morgan argues that one must use and manipulate models, for example by answering ‘what happens if” questions. Using the example of the supply and demand curve model, Morgan illustrates that this process involves narrative methods. The model can for example be applied to see what happens if a consumer’s income increases, even though income is not a part of the model set-up. The ‘what if’ question is the starting point for a story that connects a change in consumer’s income to a change in the model, which is then used to deduce what will happen as a result. It is thus “only by asking questions and telling stories that we explore and demonstrate the full range of features and outcomes compatible with the [model]” (Morgan, 2001, p.370). Stories connect abstract models and their unrealistic assumptions to the real world by building an “intervening level between complete and exhaustive detail and complete generalisation” (Morgan, 2001, p. 379). Narratives must therefore be considered as an essential part of modelling - they sit between theory and reality and thereby help us to understand the world. For more, see The world in the model: How economists work and think (2012), in which Morgan discusses various case studies of historically significant economic models and analyses them from a philosophical perspective.
6.2.5 Causation
It is straightforward to observe correlation between two variables, but much trickier to determine a causal link. But what exactly is causality from the philosophical perspective? Causation is a philosophical issue since it entails ontological and epistemic questions on determining what must be present to make a causal inference true. Judea Pearl, a computer scientist and philosopher, is a pioneer on the philosophical understanding of causal inference with his work on the backdoor principle which is a visual approach for understanding omitted or confounding variables (see chapter 3 of Cunnningham (2021)).
Many econometric models aim to determine causal links. These include an independent variable (IV), difference-in-difference, regression discontinuity design (RDD), synthetic control method (SCM), and Randomised Control Trials (RCT). Each model is said to allow the economist to make a causal inference about the interaction between two variables. However, there are philosophical debates amongst these models. For example, with RCTs there are questions about determining the external or internal validity of a causal inference made. External validity can be understood as how well the results of a study can be generalized to another context and internal validity is understood as how accurate, primarily unbiased, the causal inference is within the context of a study. For example, if a randomised control trial is used to understand the effectiveness of a policy intervention in Kenya, external validity questions whether the causal inferences made on the policy intervention in Kenya will be applicable if the same policy is implemented in Bangladesh since the culture, institutions, and other factors may lead to different outcomes between Kenya and Bangladesh (White and Masset, 2007; Pelletier et.al., 2005). Whereas questions of internal validity would be how strong the causal inference is about the policy intervention in Kenya itself. For the case of RCTs, internal validity is usually strong because many elements of the study can be controlled. However, this is not always the case for other causal models.
In addition to the issue of external validity in making a causal inference, there are mathematical concerns such as the practices of data mining, data fitting, and extrapolating results. Edward Leamer in his 1983 paper “Let’s take the Con Out of Econometrics” voiced many of these concerns by calling out econometric practices for being biased and inaccurate, sparking a debate echoing the reasonableness of objectivity. Leamer’s paper led a handful of economists to pursue improving the research designs of empirical economics in order to make conclusions more reliable. These economists include Joshua Angrist, Steven Pischke, Alan Kreuger, David Card, Guido Imbens, and others who formed what came to be known as the credibility revolution. Anrgrist, Card and Imbens won the Nobel Prize in Economics in 2021 for their work on causal methods, suggesting that these efforts to improve the credibility and philosophical robustness of econometric methods is a relevant and impactful topic in the field of economics.
7. Philosophical Assumptions in Orthodox and Heterodox Economics
This section will contrast orthodox and heterodox economics approaches to Philosophy of Economics topics, especially regarding methodology. Research that is labelled as heterodox is that which typically critiques, challenges or entirely rejects the assumptions, theories, models, or conclusions of mainstream economics, therefore often incorporating or overlapping with topics of Philosophy of Economics. For example, while neoclassical economists are strong proponents of rational choice theory, Post-Keynesian economists critique its use and instead advocate for critical realism (Claveau et al., 2021). The Exploring Economics Orientation site is a great starting point for comparing the philosophical underpinnings of different schools of economics.
7.1 Neoclassical and Neoclassical Synthesis
It is well documented that the dominance of neoclassical economics has been accompanied by an increasing methodological dependence on formal, mathematically logical analyses (e.g. Mayer, 1993; Mirowski, 1989; McCloskey, 1994) that has been consistently reinforced through more refined and complex mathematical modelling techniques (Mehta, 2008). However;
"Less well charted is the coincidence of this development with a severing of ties with philosophy, ties that once bound economics to active negotiation of the set of assumptions and presuppositions about the world that underwrite its approach to phenomena." (Mehta, 2008, p. 75)
Mainstream economics, and primarily neoclassical thinking, adhere to theories of methodological individualism and rational choice when making assumptions about human decision making and behaviour. The assumption of pure rationality was challenged by the rise of behavioural economics which originally started outside the mainstream of thinking but within the last two decades has slowly grown to become accepted by many mainstream economists.
However, one of the most striking characteristics about mainstream economics is their avoidance of any explicitly philosophical investigation in an attempt to be viewed as an objective science (Atkinson, 2009). As discussed above, while mainstream economics has aimed to be viewed as an objective science with little to no value judgements or normative statements acknowledged, economists do - and most often implicitly - make assumptions about which values and normative views to uphold. This opens space for critique from alternative schools of thought which are often broadly grouped together as heterodox.
7.2 Marxian
Originally educated as a philosopher, Karl Marx is still one of the best known economists throughout the world for his critique of classical economics. In “Das Kapital'' (1867) he argues that the capitalist economy builds on the exploitation of labour by (the owners of) capital by appropriating the surplus value of production (labour theory of value). The Marxian economists that have critiqued and built upon his original work continue to explicitly combine economics and philosophy. Contemporary figures like John Roemer are thus renowned in both Marxian economics and Philosophy of Economics (more specifically in the field of analytical Marxism) and the work of Marxian economists like Richard Wolff and Stephen Resnik is also shaped by philosophical debates.
Marxian economists generally reject the idea of value-neutrality. Instead, a critical social science needs explicit value commitments to generate knowledge that can emancipate the oppressed (Ng, 2015). Despite methodological differences, Marxian economists share general value commitments in the sense that capitalism as an economic and social system is considered to be flawed and that a non-capitalist alternative would be preferred. Topics of exploitation and alienation relate back to those ethical issues discussed in section 4 (Leopold, 2022).
One important philosophical tenet of Marxian economics is that most theoreticians reject the suitability of methodological individualism. Marxian political economy generally focuses on class rather than the individual as the dominant unit of analysis and stresses the dialectic relationship between modes of production and social relations of production; essentially disallowing reductionism to the individual level. Additionally, Marxian economics relies on functional explanations, meaning that something that has an effect is explained in terms of its effect. In the subfield of analytical Marxism, functional explanations are defended for example by Joshua Cohen and criticised by Jon Elster (Leopold, 2022; Heath, 2020).
7.3 Post-Keynesian
Post-Keynesian economists are closely connected with ideas of critical realism and a critique of neoclassical economists (McKenna and Zannoni, 1993). Most famously, Joan Robinson (1978) called the neoclassical economists “bastard Keynesians” for forcing the verbal reasoning of John Maynard Keynes’ “The General Theory” (1936) into simplified mathematical models and minimising the role of fundamental uncertainty. Moreover, Hyman Minsky (1975) expanded on this by criticising their models, including the IS-LM model, for making unrealistic assumptions, most notably by ignoring uncertainty. These concerns and criticisms echo the concerns of critical realism, which form the basis for Post-Keynesian economics (Rotheim, 1999).
Additionally, many Post-Keynesians rely on holistic approaches rather than strict methodological individualism and reject that macro phenomena are reducible to individual actions. And even newer models that rely on microfoundations often reject microfoundations in terms of formal constrained-optimisation models.
7.4 Austrian
The Austrian school of economics distinguishes itself in the Philosophy of Economics by its attention to the topic of methodological individualism and its sceptical views towards formal economic methods (Linsbichler, 2021). Austrian economics believes social phenomena and the collective can be understood through the individual for methodological and ontological purposes. Contemporary Austrian economists do however adhere to a weaker view of methodological individualism than neoclassical economists by accepting more holist perspectives with the incorporation of also understanding individuals as social and cultural beings (Udehn, 2002). Contrary to neoclassical economists, Austrian economists also emphasise the interpretative element of methodological individualism and reject a mean-choice framework with given and stable means. Instead, individuals are creative problem-solvers, can commit errors in their reasoning, but can also refine and expand the possible choice room as entrepreneurs.
Moreover, Austrian economics tends to be sceptical of formal methods in economics including the use of mathematical modelling, statistics, and econometrics in its economic reasoning. Linsbichler (2021) suggests the main reason for this hesitation is that many Austrian economists believe human behavior is imprecise and so the means of representing that should be realistic and thus it is impractical to use formal modelling. Moreover, there are pragmatic reasons for Austrian economists to avoid formal modelling because many of their beliefs, assumptions and concepts would be difficult to formalise including radical uncertainty and the place of institutions. This approach to representing the world also explains why Austrian economists align with a weaker form of methodological individualism as they recognize the place of institutions and social relations. Austrian economists desire to create realist representations of the economy.
7.5 Institutional
Institutional economics (we focus here on original and not new institutionalist economics) aims to understand how institutions impact human behaviour (Mirowski, 2019). Thorstein Veblen, originally trained as a philosopher, was a sociologist who is regarded as the founding father of institutional economics for his critique of the economy as dynamic and socially embedded. The starting point is thus not the individual or any particular conception of human behaviour, but the social structures that will shape individuals and their decisions. While individuals also shape institutions, institutions are conceptualised as emergent macro phenomena that cannot be reduced to individual action (Elsner, 2007).
Institutionalists proceed inductively rather than deductively and prioritise research methods with a high degree of detail and contextualisation over the idea of universal and ahistorical laws. Knowledge creation is considered as situated, and the value-free ideal is thus rejected by most (Milonakis and Fine, 2009). This conception of research can also break down a strict separation of science and other forms of practice: institutionalists have for example relied on participatory research approaches that involve immersing oneself into the practices that are being studied and many are involved actively in politics (Elsner, 2006).
7.6 Feminist
Feminist Philosophy of Economics emphasizes that knowledge is situated and thus rejects the mainstream ideal of value-freedom. The three main branches of feminist epistemology (standpoint theory, feminist empiricism, postmodern epistemology) examine the question of situated knowledge from different angles. Feminist standpoint theory argues for example that researchers from oppressed backgrounds can have an epistemic advantage because as “outsiders within” (Hill Collins, 1986) they are in the best position to identify implicit assumptions if they commit to critical reflection (Intemann, 2010; Harding, 1991).
The situatedness of knowledge implies that the systematic exclusion of women from the field of economics (both as research subjects and practitioners) should be examined to understand how it has influenced the evolution of the discipline. Feminist economists have for example examined the discipline’s blind eye regarding social reproduction and unpaid care work or whether specific methods or epistemic values import non-feminist values, for example in theories of discrimination or models of the family (Longino, 1996). Additionally, the discipline’s concern for rigour, objectivity and detachment can be analysed from the perspective of gendered attributes and a gendered devaluation of attributes like connection and qualitative research (Nelson, 1995).
8. Additional Resources
We want to conclude this foundational text with a few additional resources including the links to other articles on Exploring Economics which relate to the Philosophy of Economics, as well as relevant journals and institutions who engage in this research or offer programs for bachelors and masters students. First, if you would like to understand some of these concepts more in depth from the philosophical perspective, the Stanford Encyclopedia of Philosophy (SEP) is a useful source for any topic that may have a philosophical nuance. Each entry in the database provides a comprehensive overview of the given topic and is typically written by a knowledgeable member of the field.
On Exploring Economics
The History of Economics
Dan Hausman, Philosophy of Economics
Kevin Hoover, The Philosophy and Methodology of Economics
Patricia Marino, Philosophy of Economics
N. Emrah Aydinonat and Michiro Nagatsu, Understanding Economic Models
Journals
Cambridge Journal of Economics
Economics & Philosophy
Erasmus Journal for Philosophy and Economics
The Journal of Philosophical Economics
Politics, Philosophy & Economics
Institutions
Bayreuth University
Centre for the History of Political Economy (HOPE) at Duke University
Erasmus Institute for Economics and Philosophy at Erasmus University
London School of Economics and Political Science
University of Edinburgh
University of Vienna
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It is easy to forget how often his advice was ignored during his lifetime | Culture
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The Economist
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https://www.economist.com/books-and-arts/2020/05/07/the-enduring-legacy-of-john-maynard-keynes
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It is easy to forget how often his advice was ignored during his lifetime
May 7th 2020
The Price of Peace. By Zachary Carter.Random House; 656 pages; $35 and £25.
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Austrian-British economist and philosopher (1899–1992)
Friedrich August von Hayek ( HY-ək, German: [ˈfʁiːdʁɪç ˈʔaʊɡʊst fɔn ˈhaɪɛk] ⓘ; 8 May 1899 – 23 March 1992), often referred to by his initials F. A. Hayek, was an Austrian-British academic, who contributed to economics, political philosophy, psychology, and intellectual history.[4][5][6][7] Hayek shared the 1974 Nobel Memorial Prize in Economic Sciences with Gunnar Myrdal for work on money and economic fluctuations, and the interdependence of economic, social and institutional phenomena.[8] His account of how prices communicate information is widely regarded as an important contribution to economics that led to him receiving the prize.[9][10][11]
During his teenage years, Hayek fought in World War I. He later said this experience, coupled with his desire to help avoid the mistakes that led to the war, drew him into economics.[12][13] He earned doctoral degrees in law in 1921 and political science in 1923 from the University of Vienna.[12][14] He subsequently lived and worked in Austria, Great Britain, the United States, and Germany. He became a British citizen in 1938.[15] His academic life was mostly spent at the London School of Economics, later at the University of Chicago, and the University of Freiburg. He is widely considered a major contributor to the Austrian School of Economics.[16][17]
Hayek had considerable influence on a variety of political movements of the 20th century, and his ideas continue to influence thinkers from a variety of political backgrounds today.[18][19][20] Although sometimes described as a conservative,[21] Hayek himself was uncomfortable with this label and preferred to be thought of as a classical liberal.[22][23] As the co-founder of the Mont Pelerin Society he contributed to the revival of classical liberalism in the post-war era.[24] His most popular work, The Road to Serfdom, has been republished many times over the eight decades since its original publication; General Motors created a popular cartoon version.[25][26]
Hayek was appointed a Member of the Order of the Companions of Honour in 1984 for his academic contributions to economics.[27] He was the first recipient of the Hanns Martin Schleyer Prize in 1984.[29] He also received the Presidential Medal of Freedom in 1991 from President George H. W. Bush.[30] In 2011, his article "The Use of Knowledge in Society" was selected as one of the top 20 articles published in the American Economic Review during its first 100 years.[31]
Life
[edit]
Early life
[edit]
Friedrich August von Hayek was born in Vienna to August von Hayek and Felicitas Hayek (née von Juraschek). Both of his parents had Czech family surnames and Czech ancestry.[32][33] The surname Hayek is the Germanized spelling of the Czech surname Hájek. Hayek traced his paternal Czech ancestry to an ancestor with the surname "Hagek" who came from Prague in the 1500s.
His father, born in 1871, also in Vienna, was a medical doctor employed by the municipal ministry of health. August was a part-time botany lecturer at the University of Vienna.[8] Friedrich was the oldest of three brothers, Heinrich (1900–1969) and Erich (1904–1986), who were one-and-a-half and five years younger than he was.
His father's career as a university professor influenced Hayek's goals later in life. Both of his grandfathers, who lived long enough for Hayek to know them, were scholars. Franz von Juraschek was a leading economist in Austria-Hungary and a close friend of Eugen von Böhm-Bawerk, one of the founders of the Austrian School of Economics.[39] Hayek's paternal grandfather, Gustav Edler von Hayek, taught natural sciences at the Imperial Realobergymnasium (secondary school) in Vienna. He wrote works in the field of biological systematics, some of which are relatively well known.
On his mother's side, Hayek was second cousin to the philosopher Ludwig Wittgenstein.[41] His mother often played with Wittgenstein's sisters and had known him well. As a result of their family relationship, Hayek became one of the first to read Wittgenstein's Tractatus Logico-Philosophicus when the book was published in its original German edition in 1921.[42] Although he met Wittgenstein on only a few occasions, Hayek said that Wittgenstein's philosophy and methods of analysis had a profound influence on his own life and thought. In his later years, Hayek recalled a discussion of philosophy with Wittgenstein when both were officers during World War I.[44] After Wittgenstein's death, Hayek had intended to write a biography of Wittgenstein and worked on collecting family materials and later assisted biographers of Wittgenstein.[45] He was related to Wittgenstein on the non-Jewish side of the Wittgenstein family. Since his youth, Hayek frequently socialized with Jewish intellectuals, and he mentions that people often speculated whether he was also of Jewish ancestry. That made him curious, so he spent some time researching his ancestors and found out that he had no Jewish ancestors within five generations.[46]
Hayek displayed an intellectual and academic bent from a very young age and read fluently and frequently before going to school.[15] However, he did quite poorly at school, due to the lack of interest and problems with teachers. He was at the bottom of his class in most subjects and once received three failing grades, in Latin, Greek, and mathematics. He was very interested in theater, even attempting to write some tragedies, and biology, regularly helping his father with his botanical work. At his father's suggestion, as a teenager he read the genetic and evolutionary works of Hugo de Vries and August Weismann and the philosophical works of Ludwig Feuerbach.[50] He noted Goethe as the greatest early intellectual influence. In school, Hayek was much taken by one instructor's lectures on Aristotle's ethics.[51] In his unpublished autobiographical notes, Hayek recalled a division between him and his younger brothers who were only a few years younger than him, but he believed that they were somehow of a different generation. He preferred to associate with adults.
In 1917, Hayek joined an artillery regiment in the Austro-Hungarian Army and fought on the Italian front.[52] Hayek suffered damage to his hearing in his left ear during the war[53] and was decorated for bravery.
Hayek then decided to pursue an academic career, determined to help avoid the mistakes that had led to the war. Hayek said of his experience: "The decisive influence was really World War I. It's bound to draw your attention to the problems of political organization". He vowed to work for a better world.[54]
Education
[edit]
At the University of Vienna, Hayek initially studied mostly philosophy, psychology and economics.[17] The university allowed students to choose their subjects freely and there was not much obligatory written work, or tests except main exams at the end of the study. By the end of his studies Hayek became more interested in economics, mostly for financial and career reasons; he planned to combine law and economics to start a career in diplomatic service. He earned doctorates in law and political science in 1921 and 1923 respectively.[17]
For a short time, when the University of Vienna closed he studied in Constantin von Monakow's Institute of Brain Anatomy, where Hayek spent much of his time staining brain cells.[57] Hayek's time in Monakow's lab and his deep interest in the work of Ernst Mach inspired his first intellectual project, eventually published as The Sensory Order (1952).[58][57] It located connective learning at the physical and neurological levels, rejecting the "sense data" associationism of the empiricists and logical positivists.[58] Hayek presented his work to the private seminar he had created with Herbert Furth called the Geistkreis.[59]
During Hayek's years at the University of Vienna, Carl Menger's work on the explanatory strategy of social science and Friedrich von Wieser's commanding presence in the classroom left a lasting influence on him.[50] Upon the completion of his examinations, Hayek was hired by Ludwig von Mises on the recommendation of Wieser as a specialist for the Austrian government working on the legal and economic details of the Treaty of Saint-Germain-en-Laye.[60] Between 1923 and 1924, Hayek worked as a research assistant to Professor Jeremiah Jenks of New York University, compiling macroeconomic data on the American economy and the operations of the Federal Reserve.[61] He was influenced by Wesley Clair Mitchell and started a doctoral program on problems of monetary stabilization but didn't finish it. His time in America wasn't especially happy. He had very limited social contacts, missed the cultural life of Vienna, and was troubled by his poverty. His family's financial situation deteriorated significantly after the War.[64]
Initially sympathetic to Wieser's democratic socialism, Hayek found Marxism rigid and unattractive, and his mild socialist phase lasted until he was about 23. Hayek's economic thinking shifted away from socialism and toward the classical liberalism of Carl Menger after reading von Mises' book Socialism.[60] It was sometime after reading Socialism that Hayek began attending von Mises' private seminars, joining several of his university friends, including Fritz Machlup, Alfred Schutz, Felix Kaufmann and Gottfried Haberler, who were also participating in Hayek's own more general and private seminar. It was during this time that he also encountered and befriended noted political philosopher Eric Voegelin, with whom he retained a long-standing relationship.[66]
London School of Economics
[edit]
With the help of Mises, in the late 1920s, he founded and served as director of the Austrian Institute for Business Cycle Research before joining the faculty of the London School of Economics (LSE) in 1931 at the behest of Lionel Robbins.[67] Upon his arrival in London, Hayek was quickly recognised as one of the leading economic theorists in the world and his development of the economics of processes in time and the co-ordination function of prices inspired the ground-breaking work of John Hicks, Abba P. Lerner and many others in the development of modern microeconomics.[68]
In 1932, Hayek suggested that private investment in the public markets was a better road to wealth and economic co-ordination in Britain than government spending programs as argued in an exchange of letters with John Maynard Keynes, co-signed with Lionel Robbins and others in The Times.[69][70] The nearly decade long deflationary depression in Britain dating from Winston Churchill's decision in 1925 to return Britain to the gold standard at the old pre-war and pre-inflationary par was the public policy backdrop for Hayek's dissenting engagement with Keynes over British monetary and fiscal policy.[71] Keynes called Hayek's book Prices and Production "one of the most frightful muddles I have ever read", famously adding: "It is an extraordinary example of how, starting with a mistake, a remorseless logician can end in Bedlam".[72]
Notable economists who studied with Hayek at the LSE in the 1930s and 1940s include Arthur Lewis, Ronald Coase, William Baumol, CH Douglas, John Kenneth Galbraith, Leonid Hurwicz, Abba Lerner, Nicholas Kaldor, George Shackle, Thomas Balogh, L. K. Jha, Arthur Seldon, Paul Rosenstein-Rodan and Oskar Lange.[73][74] Some were supportive and some were critical of his ideas. Hayek also taught or tutored many other LSE students, including David Rockefeller.[75]
Unwilling to return to Austria after the Anschluss brought it under the control of Nazi Germany in 1938, Hayek remained in Britain. Hayek and his children became British subjects in 1938.[76] He held this status for the remainder of his life, but he did not live in Great Britain after 1950. He lived in the United States from 1950 to 1962 and then mostly in Germany, but also briefly in Austria.[77]
In 1947, Hayek was elected a Fellow of the Econometric Society.[78]
The Road to Serfdom
[edit]
Main article: The Road to Serfdom
Hayek was concerned about the general view in Britain's academia that fascism was a capitalist reaction to socialism and The Road to Serfdom arose from those concerns.[79] The title was inspired by the French classical liberal thinker Alexis de Tocqueville's writings on the "road to servitude".[80] It was first published in Britain by Routledge in March 1944 and was quite popular, leading Hayek to call it "that unobtainable book" also due in part to wartime paper rationing.[81] When it was published in the United States by the University of Chicago in September of that year, it achieved greater popularity than in Britain.[82] At the instigation of editor Max Eastman, the American magazine Reader's Digest also published an abridged version in April 1945, enabling The Road to Serfdom to reach a far wider audience than academics. The book is widely popular among those advocating individualism and classical liberalism.[83]
Chicago
[edit]
In 1950, Hayek left the London School of Economics. After spending the 1949–1950 academic year as a visiting professor at the University of Arkansas, Hayek was conferred professorship by the University of Chicago, where he became a professor in the Committee on Social Thought.[84] Hayek's salary was funded not by the university, but by an outside foundation, the William Volker Fund.[85]
Hayek had made contact with many at the University of Chicago in the 1940s, with Hayek's The Road to Serfdom playing a seminal role in transforming how Milton Friedman and others understood how society works.[86] Hayek conducted a number of influential faculty seminars while at the University of Chicago and a number of academics worked on research projects sympathetic to some of Hayek's own, such as Aaron Director, who was active in the Chicago School in helping to fund and establish what became the "Law and Society" program in the University of Chicago Law School.[87] Hayek, Frank Knight, Friedman and George Stigler worked together in forming the Mont Pèlerin Society, an international forum for neoliberals.[88] Hayek and Friedman cooperated in support of the Intercollegiate Society of Individualists, later renamed the Intercollegiate Studies Institute, an American student organisation devoted to libertarian ideas.[77][89]
Although they shared most political beliefs, disagreeing primarily on the question of monetary policy, Hayek and Friedman worked in separate university departments with different research interests and never developed a close working relationship.[91] According to Alan O. Ebenstein, who wrote biographies of both of them, Hayek probably had a closer friendship with Keynes than with Friedman.
Hayek received a Guggenheim Fellowship in 1954.[93][94]
Another influential political philosopher and German-speaking exile at the University of Chicago at the time was Leo Strauss, but according to his student Joseph Cropsey who also knew Hayek, there was no contact between the two of them.
After editing a book on John Stuart Mill's letters he planned to publish two books on the liberal order, The Constitution of Liberty and "The Creative Powers of a Free Civilization" (eventually the title for the second chapter of The Constitution of Liberty).[96] He completed The Constitution of Liberty in May 1959, with publication in February 1960. Hayek was concerned that "with that condition of men in which coercion of some by others is reduced as much as is possible in society".[97] Hayek was disappointed that the book did not receive the same enthusiastic general reception as The Road to Serfdom had sixteen years before.[98]
He left Chicago mostly because of financial reasons, being concerned about his pension provisions.[99] His primary source of income was his salary, and he received some additional money from book royalties but avoided other lucrative sources of income for academics such as writing textbooks. He spent a lot on his frequent travels. He regularly spent summers in Austrian Alps, usually in the Tyrolean village Obergurgl where he enjoyed mountain climbing, and also visited Japan four times with additional trips to Tahiti, Fiji, Indonesia, Australia, New Caledonia and Ceylon. After his divorce, his financial situation worsened.
Freiburg and Salzburg
[edit]
From 1962 until his retirement in 1968, he was a professor at the University of Freiburg, West Germany, where he began work on his next book, Law, Legislation and Liberty. Hayek regarded his years at Freiburg as "very fruitful".[103] Following his retirement, Hayek spent a year as a visiting professor of philosophy at the University of California, Los Angeles, where he continued work on Law, Legislation and Liberty, teaching a graduate seminar by the same name and another on the philosophy of social science.[64] Preliminary drafts of the book were completed by 1970, but Hayek chose to rework his drafts and finally brought the book to publication in three volumes in 1973, 1976 and 1979.[104]
Hayek became a professor at the University of Salzburg from 1969 to 1977 and then returned to Freiburg.[15] When Hayek left Salzburg in 1977, he wrote: "I made a mistake in moving to Salzburg". The economics department was small, and the library facilities were inadequate.[105]
Although Hayek's health suffered, and he fell into a depressionary bout, he continued to work on his magnum opus, Law, Legislation and Liberty in periods when he was feeling better.
Nobel Memorial Prize
[edit]
On 9 October 1974, it was announced that Hayek would be awarded the Nobel Memorial Prize in Economics with Swedish economist Gunnar Myrdal, with the reasons for selection being listed in a press release.[107] He was surprised at being given the award and believed that he was given it with Myrdal to balance the award with someone from the opposite side of the political spectrum.[108] The Sveriges-Riksbank Nobel Prize in Economics was established in 1968, and Hayek was the first non-Keynesian economist to win it.
Among the reasons given, the committee stated, Hayek "was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929."[107] The following year, Hayek further confirmed his original prediction. An interviewer asked, "We understand that you were one of the only economists to forecast that America was headed for a depression, is that true?" Hayek responded, "Yes."[109] However, no textual evidence has emerged of "a prediction".[110][111] Indeed, Hayek wrote on 26 October 1929, three days before the crash, "at present there is no reason to expect a sudden crash of the New York stock exchange. ... The credit possibilities/conditions are, at any rate, currently very great, and therefore it appears assured that an outright crisis-like destruction of the present high [price] level should not be feared."[112][113]
During the Nobel ceremony in December 1974, Hayek met the Russian dissident Aleksandr Solzhenitsyn.[114] Hayek later sent him a Russian translation of The Road to Serfdom.[108] He spoke with apprehension at his award speech about the danger the authority of the prize would lend to an economist,[115] but the prize brought much greater public awareness to the then controversial ideas of Hayek and was described by his biographer as "the great rejuvenating event in his life".[116]
British politics
[edit]
In February 1975, Margaret Thatcher was elected leader of the British Conservative Party. The Institute of Economic Affairs arranged a meeting between Hayek and Thatcher in London soon after.[117] During Thatcher's only visit to the Conservative Research Department in the summer of 1975, a speaker had prepared a paper on why the "middle way" was the pragmatic path the Conservative Party should take, avoiding the extremes of left and right. Before he had finished, Thatcher "reached into her briefcase and took out a book. It was Hayek's The Constitution of Liberty. Interrupting our pragmatist, she held the book up for all of us to see. 'This', she said sternly, 'is what we believe', and banged Hayek down on the table".[118]
Despite the media depictions of him as Thatcher's guru and power behind the throne, the communication between him and the Prime Minister was not very regular, they were in contact only once or twice a year. Besides Thatcher, Hayek also made a significant influence on Enoch Powell, Keith Joseph, Nigel Lawson, Geoffrey Howe and John Biffen.
Hayek gained some controversy in 1978 by praising Thatcher's anti-immigration policy proposal in an article which ignited numerous accusations of anti-Semitism and racism because of his reflections on the inability of assimilation of Eastern European Jews in the Vienna of his youth. He defended himself by explaining that he made no racial judgements, only highlighted the problems of acculturation.
In 1977, Hayek was critical of the Lib–Lab pact in which the British Liberal Party agreed to keep the British Labour government in office. Writing to The Times, Hayek said: "May one who has devoted a large part of his life to the study of the history and the principles of liberalism point out that a party that keeps a socialist government in power has lost all title to the name 'Liberal'. Certainly no liberal can in future vote 'Liberal'".[122] Hayek was criticised by Liberal politicians Gladwyn Jebb and Andrew Phillips, who both claimed that the purpose of the pact was to discourage socialist legislation.
Lord Gladwyn pointed out that the German Free Democrats were in coalition with the German Social Democrats.[123] Hayek was defended by Professor Antony Flew, who stated that—unlike the British Labour Party—the German Social Democrats had since the late 1950s abandoned public ownership of the means of production, distribution and exchange and had instead embraced the social market economy.[124]
In 1978, Hayek came into conflict with Liberal Party leader David Steel, who claimed that liberty was possible only with "social justice and an equitable distribution of wealth and power, which in turn require a degree of active government intervention" and that the Conservative Party were more concerned with the connection between liberty and private enterprise than between liberty and democracy. Hayek claimed that a limited democracy might be better than other forms of limited government at protecting liberty, but that an unlimited democracy was worse than other forms of unlimited government because "its government loses the power even to do what it thinks right if any group on which its majority depends thinks otherwise".
Hayek stated that if the Conservative leader had said "that free choice is to be exercised more in the market place than in the ballot box, she has merely uttered the truism that the first is indispensable for individual freedom while the second is not: free choice can at least exist under a dictatorship that can limit itself but not under the government of an unlimited democracy which cannot".[125]
Hayek supported Britain in the Falklands War, writing that it would be justified to attack Argentinian territory instead of just defending the islands, which earned him a lot of criticism in Argentina, a country which he also visited several times. He was also displeased by the weak response of the United States to the Iran hostage crisis, claiming that an ultimatum should be issued and Iran bombed if they do not comply. He supported Ronald Reagan's decision to keep high defence spending, believing that a strong US military is a guarantee of world peace and necessary to keep the Soviet Union under control. President Reagan listed Hayek as among the two or three people who most influenced his philosophy and welcomed him to the White House as a special guest.[127] Senator Barry Goldwater listed Hayek as his favourite political philosopher and congressman Jack Kemp named him an inspiration for his political career.
Recognition
[edit]
In 1980, Hayek was one of twelve Nobel laureates to meet with Pope John Paul II "to dialogue, discuss views in their fields, communicate regarding the relationship between Catholicism and science, and 'bring to the Pontiff's attention the problems which the Nobel Prize Winners, in their respective fields of study, consider to be the most urgent for contemporary man'"
Hayek was appointed a Member of the Order of the Companions of Honour (CH) in the 1984 Birthday Honours by Elizabeth II on the advice of British Prime Minister Margaret Thatcher for his "services to the study of economics".[27] Hayek had hoped to receive a baronetcy and after being awarded the CH sent a letter to his friends requesting that he be called the English version of Friedrich (i.e. Frederick) from now on. After his twenty-minute audience with the Queen, he was "absolutely besotted" with her according to his daughter-in-law Esca Hayek. Hayek said a year later that he was "amazed by her. That ease and skill, as if she'd known me all my life". The audience with the Queen was followed by a dinner with family and friends at the Institute of Economic Affairs. When later that evening Hayek was dropped off at the Reform Club, he commented: "I've just had the happiest day of my life".
In 1991, President George H. W. Bush awarded Hayek the Presidential Medal of Freedom, one of the two highest civilian awards in the United States, for a "lifetime of looking beyond the horizon".[130]
Death
[edit]
Hayek died on 23 March 1992, aged 92, in Freiburg, Germany and was buried on 4 April in the Neustift am Walde cemetery in the northern outskirts of Vienna according to the Catholic rite. In 2011, his article "The Use of Knowledge in Society" was selected as one of the top 20 articles published in The American Economic Review during its first 100 years.[31]
The New York University Journal of Law and Liberty holds an annual lecture in his honor.[132]
Work and views
[edit]
Business cycle
[edit]
Main article: Austrian business cycle theory
Ludwig von Mises had earlier applied the concept of marginal utility to the value of money in his Theory of Money and Credit (1912) in which he also proposed an explanation for "industrial fluctuations" based on the ideas of the old British Currency School and of Swedish economist Knut Wicksell.[133] Hayek used this body of work as a starting point for his own interpretation of the business cycle, elaborating what later became known as the Austrian theory of the business cycle.[134] Hayek spelled out the Austrian approach in more detail in his book, published in 1929, an English translation of which appeared in 1933 as Monetary Theory and the Trade Cycle. There, Hayek argued for a monetary approach to the origins of the cycle. In his Prices and Production (1931), Hayek argued that the business cycle resulted from the central bank's inflationary credit expansion and its transmission over time, leading to a capital misallocation caused by the artificially low interest rates.[135] Hayek claimed that "the past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process".[136]
Hayek's analysis was based on Eugen Böhm von Bawerk's concept of the "average period of production" and on the effects that monetary policy could have upon it.[137] In accordance with the reasoning later outlined in his essay "The Use of Knowledge in Society" (1945), Hayek argued that a monopolistic governmental agency like a central bank can neither possess the relevant information which should govern supply of money, nor have the ability to use it correctly.[138]
In 1929, Lionel Robbins assumed the helm of the London School of Economics (LSE).[67] Eager to promote alternatives to what he regarded as the narrow approach of the school of economic thought that then dominated the English-speaking academic world (centered at the University of Cambridge and deriving largely from the work of Alfred Marshall), Robbins invited Hayek to join the faculty at LSE, which he did in 1931.[139] According to Nicholas Kaldor, Hayek's theory of the time-structure of capital and of the business cycle initially "fascinated the academic world" and appeared to offer a less "facile and superficial" understanding of macroeconomics than the Cambridge school's.[140]
Also in 1931, Hayek crititicized John Maynard Keynes's Treatise on Money (1930) in his "Reflections on the pure theory of Mr. J.M. Keynes"[141] and published his lectures at the LSE in book form as Prices and Production.[142] For Keynes, unemployment and idle resources are caused by a lack of effective demand, but for Hayek they stem from a previous unsustainable episode of easy money and artificially low interest rates.[136] Keynes asked his friend Piero Sraffa to respond. Sraffa elaborated on the effect of inflation-induced "forced savings" on the capital sector and about the definition of a "natural" interest rate in a growing economy (see Sraffa–Hayek debate).[143] Others who responded negatively to Hayek's work on the business cycle included John Hicks, Frank Knight and Gunnar Myrdal, who, later on, would share the Sveriges-Riksbank Prize in Economics with him.[144] Kaldor later wrote that Hayek's Prices and Production had produced "a remarkable crop of critics" and that the total number of pages in British and American journals dedicated to the resulting debate "could rarely have been equalled in the economic controversies of the past".[140]
Hayek's work, throughout the 1940s, was largely ignored, except for scathing critiques by Nicholas Kaldor.[140][145] Lionel Robbins himself, who had embraced the Austrian theory of the business cycle in The Great Depression (1934), later regretted having written the book and accepted many of the Keynesian counter-arguments.[146]
Hayek never produced the book-length treatment of "the dynamics of capital" that he had promised in the Pure Theory of Capital.[147] At the University of Chicago, Hayek was not part of the economics department and did not influence the rebirth of neoclassical theory that took place there (see Chicago school of economics).[84] When in 1974 he shared the Nobel Memorial Prize in Economics with Myrdal, the latter complained about being paired with an "ideologue". Milton Friedman declared himself "an enormous admirer of Hayek, but not for his economics".[148] Milton Friedman also commented on some of his writings, saying "I think Prices and Production is a very flawed book. I think his [Pure Theory of Capital] is unreadable. On the other hand, The Road to Serfdom is one of the great books of our time".[146]
Economic calculation problem
[edit]
Main article: Economic calculation problem
Building on the earlier work of Mises and others, Hayek also argued that while in centrally planned economies an individual or a select group of individuals must determine the distribution of resources, these planners will never have enough information to carry out this allocation reliably. This argument, first proposed by Max Weber and Ludwig von Mises, says that the efficient exchange and use of resources can be maintained only through the price mechanism in free markets (see economic calculation problem).[149]
In 1935, Hayek published Collectivist Economic Planning, a collection of essays from an earlier debate that had been initiated by Mises. Hayek included Mises's essay in which Mises argued that rational planning was impossible under socialism.[150]
Socialist Oskar Lange responded by invoking general equilibrium theory, which they argued disproved Mises's thesis. They noted that the difference between a planned and a free market system lay in who was responsible for solving the equations.[151] They argued that if some of the prices chosen by socialist managers were wrong, gluts or shortages would appear, signalling them to adjust the prices up or down, just as in a free market.[152] Through such a trial and error, a socialist economy could mimic the efficiency of a free market system while avoiding its many problems.[153]
Hayek challenged this vision in a series of contributions. In "Economics and Knowledge" (1937), he pointed out that the standard equilibrium theory assumed that all agents have full and correct information, and how, in his mind, in the real world different individuals have different bits of knowledge and furthermore some of what they believe is wrong.[154]
In "The Use of Knowledge in Society" (1945), Hayek argued that the price mechanism serves to share and synchronise local and personal knowledge, allowing society's members to achieve diverse and complicated ends through a principle of spontaneous self-organization. He contrasted the use of the price mechanism with central planning, arguing that the former allows for more rapid adaptation to changes in particular circumstances of time and place.[155] Thus, Hayek set the stage for Oliver Williamson's later contrast between markets and hierarchies as alternative co-ordination mechanisms for economic transactions.[156] He used the term catallaxy to describe a "self-organizing system of voluntary co-operation". Hayek's research into this argument was specifically cited by the Nobel Committee in its press release awarding Hayek the Nobel prize.[107]
Investment and choice
[edit]
Hayek made breakthroughs in the choice theory, and examined the inter-relations between non-permanent production goods and "latent" or potentially economic permanent resources, building on the choice theoretical insight that "processes that take more time will evidently not be adopted unless they yield a greater return than those that take less time".[157]
Philosophy of science
[edit]
See also: The Counter-Revolution of Science
During World War II, Hayek began the Abuse of Reason project. His goal was to show how a number of then-popular doctrines and beliefs had a common origin in some fundamental misconceptions about the social science.[158]
Ideas were developed in The Counter-Revolution of Science in 1952 and in some of Hayek's later essays in the philosophy of science such as "Degrees of Explanation" (1955) and "The Theory of Complex Phenomena" (1964).[159]
In Counter-Revolution, for example, Hayek observed that the hard sciences attempt to remove the "human factor" to obtain objective and strictly controlled results:
[T]he persistent effort of modern Science has been to get down to "objective facts," to cease studying what men thought about nature or regarding the given concepts as true images of the real world, and, above all, to discard all theories which pretended to explain phenomena by imputing to them a directing mind like our own. Instead, its main task became to revise and reconstruct the concepts formed from ordinary experience on the basis of a systematic testing of the phenomena, so as to be better able to recognize the particular as an instance of a general rule.
— Friedrich Hayek, The Counter-Revolution of Science (Chapter II, "The Problem and the Method of the Natural Sciences")
Meanwhile, the soft sciences are attempting to measure human action itself:
The social sciences in the narrower sense, i.e., those which used to be described as the moral sciences, are concerned with man's conscious or reflected action, actions where a person can be said to choose between various courses open to him, and here the situation is essentially different. The external stimulus which may be said to cause or occasion such actions can of course also be defined in purely physical terms. But if we tried to do so for the purposes of explaining human action, we would confine ourselves to less than we know about the situation.
— Friedrich Hayek, The Counter-Revolution of Science (Chapter III, "The Subjective Character of the Data of the Social Sciences")
He notes that these are mutually exclusive and that social sciences should not attempt to impose positivist methodology, nor to claim objective or definite results:[160]
Psychology
[edit]
Hayek's first academic essay was a psychological work titled 'Contributions to the Theory of the Development of Consciousness' (Beiträge zur Theorie der Entwicklung des Bewußtseins) In The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology (1952), Hayek independently developed a "Hebbian learning" model of learning and memory—an idea he first conceived in 1920 prior to his study of economics. Hayek's expansion of the "Hebbian synapse" construction into a global brain theory received attention in neuroscience, cognitive science, computer science, and evolutionary psychology by scientists such as Gerald Edelman, Vittorio Guidano and Joaquin Fuster.[161][162][163]
The Sensory Order can be viewed as a development of his attack on scientism. Hayek posited two orders, namely the sensory order that we experience and the natural order that natural science revealed. Hayek thought that the sensory order actually is a product of the brain. He described the brain as a very complex yet self-ordering hierarchical classification system, a huge network of connections. Because of the nature of the classifier system, richness of our sensory experience can exist. Hayek's description posed problems to behaviorism, whose proponents took the sensory order as fundamental.[158]
International Relations
[edit]
Hayek was a lifelong federalist. He joined several pan-European and pro-federalist movements throughout his career, and called for federal ties between the U.K. and Europe, and between Europe and the United States. After the 1950s, when the Cold War began in earnest, Hayek largely kept his federalist proposals out of the public sphere, although he did propose to federate Jerusalem as late as the 1970s.[164]
Hayek argued that closer economic ties without closer political ties would lead to more problems because interest groups in nation-states would best be able to counter the internationalization of markets that comes with closer economic ties by appealing to nationalism.[165] Much of his time in the pro-federalist and pan-European groups was spent arguing with pro-federal and pan-European democratic socialists over the proper extent of a world federal government. Hayek argued that such a world government should do little more than act as a negative check on national sovereignties and serve as a focal point for collective defense.[166]
As the Cold War heated up, Hayek grew more hawkish and he pushed his federal proposals onto the backburner in favor of more traditional public policy proposals that acknowledged and respected the sovereignty of nation-states.[167] Yet Hayek never disavowed his famous call for "the abrogation of national sovereignties"[168] and his lifetime of work in the area of international relations continues to attract attention from scholars searching for federalist answers to contemporary problems in international relations.[169][170][171][172]
Social and political philosophy
[edit]
Two traditions in the theory of liberty
[edit]
In the latter half of his career, Hayek made a number of contributions to social and political philosophy which he based on his views on the limits of human knowledge and the idea of spontaneous order in social institutions. He argues in favour of a society organised around a market order in which the apparatus of state is employed almost (though not entirely) exclusively to enforce the legal order (consisting of abstract rules and not particular commands) necessary for a market of free individuals to function. These ideas were informed by a moral philosophy derived from epistemological concerns regarding the inherent limits of human knowledge. Hayek argued that his ideal individualistic and free-market polity would be self-regulating to such a degree that it would be "a society which does not depend for its functioning on our finding good men for running it".[173]
He discusses the contrasting traditions of liberty—British and French—in the theory of freedom. The British tradition, influenced by thinkers like David Hume and Adam Smith, emphasizes the organic growth of institutions and the spontaneous evolution of society. It recognizes that political order arises from the cumulative experience and success of individuals, rather than from deliberate design. In contrast, the French tradition, rooted in Cartesian rationalism, seeks to construct a utopia based on a belief in the unlimited powers of human reason. The French tradition, that Hayek called constructivist rationalism, gained influence over time, partly due to its assumptions about human ambition and pride. However, according to Hayek, the British tradition, with its emphasis on the gradual development of civilization and the role of individual freedom, provides a more valid theory of liberty.[173][174][175]
Spontaneous order
[edit]
Main article: Spontaneous order
Hayek viewed the free price system not as a conscious invention (that which is intentionally designed by man), but as spontaneous order or what Scottish philosopher Adam Ferguson referred to as "the result of human action but not of human design".[176] For instance, Hayek put the price mechanism on the same level as language, which he developed in his price signal theory.[177]
Hayek attributed the birth of civilisation to private property in his book The Fatal Conceit (1988).[178] He explained that price signals are the only means of enabling each economic decision maker to communicate tacit knowledge or dispersed knowledge to each other to solve the economic calculation problem.[178] Alain de Benoist of the Nouvelle Droite (New Right) produced a highly critical essay on Hayek's work in an issue of Telos, citing the flawed assumptions behind Hayek's idea of "spontaneous order" and the authoritarian and totalising implications of his free-market ideology.[179]
Hayek's concept of the market as a spontaneous order has been applied to ecosystems to defend a broadly non-interventionist policy.[180] Like the market, ecosystems contain complex networks of information, involve an ongoing dynamic process, contain orders within orders and the entire system operates without being directed by a conscious mind.[181] On this analysis, species takes the place of price as a visible element of the system formed by a complex set of largely unknowable elements. Human ignorance about the countless interactions between the organisms of an ecosystem limits our ability to manipulate nature.[182]
Hayek's price signal concept is in relation to how consumers are often unaware of specific events that change market, yet change their decisions, simply because the price goes up. Thus pricing communicates information.[183]
Criticism of collectivism
[edit]
Hayek was one of the leading academic critics of collectivism in the 20th century.[15] In Hayek's view, the central role of the state should be to maintain the rule of law, with as little arbitrary intervention as possible.[97] In his popular book The Road to Serfdom (1944) and in subsequent academic works, Hayek argued that socialism required central economic planning and that such planning in turn leads towards totalitarianism.[184]
In The Road to Serfdom, Hayek wrote:
Although our modern socialists' promise of greater freedom is genuine and sincere, in recent years observer after observer has been impressed by the unforeseen consequences of socialism, the extraordinary similarity in many respects of the conditions under "communism" and "fascism".[185]
Hayek posited that a central planning authority would have to be endowed with powers that would impact and ultimately control social life because the knowledge required for centrally planning an economy is inherently decentralised, and would need to be brought under control.[150]
Though Hayek did argue that the state should provide law centrally, others have pointed out that this contradicts his arguments about the role of judges in "discovering" the law, suggesting that Hayek would have supported decentralized provision of legal services.[186]
Hayek also wrote that the state can play a role in the economy, specifically in creating a safety net, saying:
There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.[187]
"The Denationalization of Money" is one of his literary works, in which he advocated the establishment of competitions in issuing moneys.[188]
Social safety nets
[edit]
Main articles: Social insurance and Social safety net
With regard to a social safety net, Hayek advocated "some provision for those threatened by the extremes of indigence or starvation due to circumstances beyond their control" and argued that the "necessity of some such arrangement in an industrial society is unquestioned—be it only in the interest of those who require protection against acts of desperation on the part of the needy".[189] Summarizing Hayek's views on the topic, journalist Nicholas Wapshott has argued that "[Hayek] advocated mandatory universal health care and unemployment insurance, enforced, if not directly provided, by the state".[190] Critical theorist Bernard Harcourt has argued further that "Hayek was adamant about this".[191] In 1944, Hayek wrote in The Road to Serfdom:
There is no reason why in a society which has reached the general level of wealth which ours has attained [that security against severe physical privation, the certainty of a given minimum of sustenance for all; or more briefly, the security of a minimum income] should not be guaranteed to all without endangering general freedom. There are difficult questions about the precise standard which should thus be assured... but there can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. Indeed, for a considerable part of the population of England this sort of security has long been achieved.
Nor is there any reason why the state should not assist... 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. There are many points of detail where those wishing to preserve the competitive system and those wishing to supersede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less effective. But there is no incompatibility in principle between the state's providing greater security in this way and the preservation of individual freedom. 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.[192]
In 1973, Hayek reiterated in Law, Legislation and Liberty:
There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need to descend. To enter into such an insurance against extreme misfortune may well be in the interest of all; or it may be felt to be a clear moral duty of all to assist, within the organised community, those who cannot help themselves. So long as such a uniform minimum income is provided outside the market to all those who, for any reason, are unable to earn in the market an adequate maintenance, this need not lead to a restriction of freedom, or conflict with the Rule of law.[193]
Political theorist Adam James Tebble has argued that Hayek's concession of a social minimum provided by the state introduces a conceptual tension with his epistemically derived commitment to private property rights, free markets, and spontaneous order.[194]
Criticism of "social justice"
[edit]
Although Hayek believed in a society governed by laws, he disapproved of the notion of "social justice". He compared the market to a game in which "there is no point in calling the outcome just or unjust"[195] and argued that "social justice is an empty phrase with no determinable content".[196] Likewise, "the results of the individual's efforts are necessarily unpredictable, and the question as to whether the resulting distribution of incomes is just has no meaning".[197] He generally regarded government redistribution of income or capital as an unacceptable intrusion upon individual freedom, saying that "the principle of distributive justice, once introduced, would not be fulfilled until the whole of society was organized in accordance with it. This would produce a kind of society which in all essential respects would be the opposite of a free society".[196]
Liberalism and skepticism
[edit]
Arthur M. Diamond argues Hayek's problems arise when he goes beyond claims that can be evaluated within economic science. Diamond argued:
The human mind, Hayek says, is not just limited in its ability to synthesize a vast array of concrete facts, it is also limited in its ability to give a deductively sound ground to ethics. Here is where the tension develops, for he also wants to give a reasoned moral defense of the free market. He is an intellectual skeptic who wants to give political philosophy a secure intellectual foundation. It is thus not too surprising that what results is confused and contradictory.[198]
Chandran Kukathas argues that Hayek's defence of liberalism is unsuccessful because it rests on presuppositions that are incompatible. The unresolved dilemma of his political philosophy is how to mount a systematic defence of liberalism if one emphasizes the limited capacity of reason.[199] Norman P. Barry similarly notes that the "critical rationalism" in Hayek's writings appears incompatible with "a certain kind of fatalism, that we must wait for evolution to pronounce its verdict".[200] Milton Friedman and Anna Schwartz argue that the element of paradox exists in the views of Hayek. Noting Hayek's vigorous defense of "invisible hand" evolution that Hayek claimed created better economic institutions than could be created by rational design, Friedman pointed out the irony that Hayek was then proposing to replace the monetary system thus created with a deliberate construct of his own design.[201] John N. Gray summarized this view as "his scheme for an ultra-liberal constitution was a prototypical version of the philosophy he had attacked".[202] Bruce Caldwell wrote that "[i]f one is judging his work against the standard of whether he provided a finished political philosophy, Hayek clearly did not succeed", although he thinks that "economists may find Hayek's political writings useful".[203]
Dictatorship and totalitarianism
[edit]
Hayek sent António de Oliveira Salazar a copy of The Constitution of Liberty (1960) in 1962. Hayek hoped that his book—this "preliminary sketch of new constitutional principles"—"may assist" Salazar "in his endeavour to design a constitution which is proof against the abuses of democracy".[204]
Hayek visited Chile in the 1970s and 1980s during the Government Junta of general Augusto Pinochet and accepted being appointed Honorary Chairman of the Centro de Estudios Públicos, the think tank formed by the economists who transformed Chile into a free market economy.[204]
Asked about the military dictatorship of Chile by a Chilean interviewer, Hayek is translated from German to Spanish to English as having said the following:
As long term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. [...] Personally I prefer a liberal dictatorship to democratic government devoid of 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.[104]
In a letter to the London Times, he defended the Pinochet regime and said that he had "not been able to find a single person even in much maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende".[205][206] Hayek admitted that "it is not very likely that this will succeed, even if, at a particular point in time, it may be the only hope there is", but he explained that "[i]t is not certain hope, because it will always depend on the goodwill of an individual, and there are very few individuals one can trust. But if it is the sole opportunity which exists at a particular moment it may be the best solution despite this. And only if and when the dictatorial government is visibly directing its steps towards limited democracy".
For Hayek, the distinction between authoritarianism and totalitarianism has much importance and he was at pains to emphasise his opposition to totalitarianism, noting that the concept of transitional dictatorship which he defended was characterised by authoritarianism, not totalitarianism. For example, when Hayek visited Venezuela in May 1981, he was asked to comment on the prevalence of totalitarian regimes in Latin America. In reply, Hayek warned against confusing "totalitarianism with authoritarianism" and said that he was unaware of "any totalitarian governments in Latin America. The only one was Chile under Allende". For Hayek, the word "totalitarian" signifies something very specific, namely the intention to "organize the whole of society" to attain a "definite social goal" which is stark in contrast to "liberalism and individualism".[207] He claimed that democracy can also be repressive and totalitarian; in The Constitution of Liberty he often refers to Jacob Talmon's concept of totalitarian democracy.
Immigration, nationalism and race
[edit]
Hayek was skeptical about international immigration and supported Thatcher's anti-immigration policies. In Law, Legislation and Liberty he elaborated:
Freedom of migration is one of the widely accepted and wholly admirable principles of liberalism. But should this generally give the stranger a right to settle down in a community in which he is not welcome? Has he a claim to be given a job or be sold a house if no resident is willing to do so? He clearly should be entitled to accept a job or buy a house if offered to him. But have the individual inhabitants a duty to offer either to him? Or ought it to be an offence if they voluntarily agree not to do so? Swiss and Tyrolese villages have a way of keeping out strangers which neither infringe nor rely on any law. Is this anti-liberal or morally justified? For established old communities I have no certain answers to these questions.[208]
He was mainly preoccupied with practical problems concerning immigration:
There exist, of course, other reasons why such restrictions appear unavoidable so long as certain differences in national or ethnic traditions (especially differences in the rate of propagation) exist-which in turn are not likely to disappear so long as restrictions on migration continue. We must face the fact that we here encounter a limit to the universal application of those liberal principles of policy which the existing facts of the present world make unavoidable.[209]
He was not sympathetic to nationalist ideas and was afraid that mass immigration might revive nationalist sentiment among domestic population and ruin the postwar progress that was made among Western nations.[210] He additionally explained:
However far modern man accepts in principle the ideal that the same rules should apply to all men, in fact he does concede it only to those whom he regards as similar to himself, and only slowly learns to extend the range of those he does accept as his likes. There is little legislation can do to speed up this process and much it may do to reverse it by re-awakening sentiments that are already on the wane.[210]
Despite his opposition to nationalism, Hayek made numerous controversial and inflammatory comments about specific ethnic groups. Answering an interview question about people he cannot deal with he mentioned his dislike of Middle Eastern populations, claiming they were dishonest, and also expressed "profound dislike" of Indian students at London School of Economics, saying that were usually "detestable sons of Bengali moneylenders". He maintained that such attitudes were not based on any racial feeling. During World War II he discussed the possibility of sending his children to the United States but was concerned that they might be placed with a "coloured family". In a later interview, questioned about his attitude towards Black people, he said laconically that he "did not like dancing Negroes"[213] and on another occasion he ridiculed the decision to award the Nobel Peace Prize to Martin Luther King Jr.[214] He also made negative comments about awarding the Prize to Ralph Bunche, Albert Luthuli, and his LSE colleague W. Arthur Lewis who he described as an "unusually able West Indian negro".[214] In 1978 Hayek made a month-long visit to South Africa (his third) where he gave numerous lectures, interviews, and met prominent politicians and business leaders, unconcerned about possible propagandistic effect of his tour for Apartheid regime. He expressed his opposition to some of the government policies, believing that publicly funded institutions should treat all citizens equally, but also claimed that private institutions have the right to discriminate. Additionally, he condemned the "scandalous" hostility and interference of the international community in South African internal affairs. He further explained his attitude:
People in South Africa have to deal with their own problems, and the idea that you can use external pressure to change people, who after all have built up a civilization of a kind, seems to me morally a very doubtful belief.[216]
While Hayek gave somewhat ambiguous comments on the injustices of Apartheid and proper role of the state, some of his Mont Pelerin colleagues, such as John Davenport and Wilhelm Röpke, were more ardent supporters of South African government and criticized Hayek for being too soft on the subject.[217]
Inequality and class
[edit]
Hayek claimed that the idea that "all men are born equal" is untrue because evolution and genetic differences have created "boundless variety of human nature". He emphasized the importance of nature, complaining that it became too fashionable to ascribe all human differences to environment.[218] Hayek defended economic inequality, believing that the existence of wealthy class is important not only for economic reasons—accumulating capital and directing investments—but also for political, cultural, scientific and conservationist goals which are often financed and promoted by philanthropists. Since the market mechanism cannot provide for all societal needs, some of which are outside of economic calculation, existence of wealthy individuals guarantees the efficiency and pluralism in their development and realization, which could not be guaranteed in the case of state monopoly.[219] Individual wealth offers independence and can create intellectual, moral, political and artistic leaders which are not employed and influenced by the state.[220] According to Hayek the society benefits from having a hereditary wealthy class because individuals born in it don't have to devote their energy to earning a living and can devote themselves to other purposes such as experimenting with different ideas, hobbies and lifestyles which can later be adopted by broader society.[221] In The Constitution of Liberty he wrote:
Yet is it really so obvious that the tennis or golf professional is a more useful member of society than the wealthy amateurs who devoted their time to perfecting these games? Or that the paid curator of a public museum is more useful than a private collector? Before the reader answers these questions too hastily, I would ask him to consider whether there would ever have been golf or tennis professionals or museum curators if wealthy amateurs had not preceded them. Can we not hope that other new interests will still arise from the playful explorations of those who can indulge in them for the short span of a human life? It is only natural that the development of the art of living and of the non-materialistic values should have profited most from the activities of those who had no material worries.[222]
He contrasted individuals who inherited wealth, with upper class values and education, with the nouveau riche who often use their wealth in more vulgar ways.[221] He decried the disappearance of such leisured aristocratic class, claiming that contemporary Western elites are usually business groups that lack intellectual leadership and coherent "philosophy of life" and use their wealth mostly for economic purposes.[223]
Hayek was against high taxes on inheritance, believing that it is natural function of the family to transmit standards, traditions and material goods. Without transmission of property, parents might try to secure the future of their children by placing them in prestigious and high-paying positions, as was customary in socialist countries, which creates even worse injustices.[224] He was also strongly against progressive taxation, noting that in most countries additional taxes paid by the rich amount to insignificantly small amount of total tax revenue and that the only major result of the policy is "gratification of the envy of the less-well-off".[225] He also claimed that it is contrary to the idea of equality under the law and against democratic principle that the majority should not impose discriminatory rules against the minority.[226][227]
Criticism
[edit]
Hayek's views on social welfare policies have also been the subject of criticism. Critics contend that his opposition to government intervention in the economy fails to recognize the need for social safety nets and other forms of support for vulnerable populations. Furthermore, it has been argued that his views on welfare policy contradict his views on social justice.[228]
Hayek's argument in The Road to Serfdom has been criticized as a slippery slope argument and therefore fallacious.[229] However, others have argued that this is a fundamental misunderstanding of the book and Hayek's point is about what central planning directly entails, not what it is likely to lead to.[230]
Influence and recognition
[edit]
Hayek's influence on the development of economics is widely acknowledged. With regard to the popularity of his Nobel acceptance lecture, Hayek is the second-most frequently cited economist (after Kenneth Arrow) in the Nobel lectures of the prize winners in economics. Hayek wrote critically there of the field of orthodox economics and neo-classical modelisation.[231] A number of Nobel Laureates in economics, such as Vernon Smith and Herbert A. Simon, recognise Hayek as the greatest modern economist.[232] Another Nobel winner, Paul Samuelson, believed that Hayek was worthy of his award, but nevertheless claimed that "there were good historical reasons for fading memories of Hayek within the mainstream last half of the twentieth century economist fraternity. In 1931, Hayek's Prices and Production had enjoyed an ultra-short Byronic success. In retrospect hindsight tells us that its mumbo-jumbo about the period of production grossly misdiagnosed the macroeconomics of the 1927–1931 (and the 1931–2007) historical scene".[233] Despite this comment, Samuelson spent the last 50 years of his life obsessed with the problems of capital theory identified by Hayek and Böhm-Bawerk, and Samuelson flatly judged Hayek to have been right and his own teacher Joseph Schumpeter to have been wrong on the central economic question of the 20th century, the feasibility of socialist economic planning in a production goods dominated economy.[234]
Hayek is widely recognised for having introduced the time dimension to the equilibrium construction and for his key role in helping inspire the fields of growth theory, information economics and the theory of spontaneous order. The "informal" economics presented in Milton Friedman's massively influential popular work Free to Choose (1980) is explicitly Hayekian in its account of the price system as a system for transmitting and co-ordinating knowledge. This can be explained by the fact that Friedman taught Hayek's famous paper "The Use of Knowledge in Society" (1945) in his graduate seminars.
In 1944, he was elected as a Fellow of the British Academy[235] after he was nominated for membership by Keynes.[236]
Harvard economist and former Harvard University President Lawrence Summers explains Hayek's place in modern economics: "What's the single most important thing to learn from an economics course today? What I tried to leave my students with is the view that the invisible hand is more powerful than the [un]hidden hand. Things will happen in well-organized efforts without direction, controls, plans. That's the consensus among economists. That's the Hayek legacy".[237]
By 1947, Hayek was an organiser of the Mont Pelerin Society, a group of classical liberals who sought to oppose socialism. Hayek was also instrumental in the founding of the Institute of Economic Affairs, the right-wing libertarian and free-market think tank that inspired Thatcherism. He was in addition a member of the conservative and libertarian Philadelphia Society.[238]
Hayek had a long-standing and close friendship with philosopher of science Karl Popper, who was also from Vienna. In a letter to Hayek in 1944, Popper stated: "I think I have learnt more from you than from any other living thinker, except perhaps Alfred Tarski".[239] Popper dedicated his Conjectures and Refutations to Hayek. For his part, Hayek dedicated a collection of papers, Studies in Philosophy, Politics, and Economics, to Popper and in 1982 said that "ever since his Logik der Forschung first came out in 1934, I have been a complete adherent to his general theory of methodology".[240] Popper also participated in the inaugural meeting of the Mont Pelerin Society. Their friendship and mutual admiration do not change the fact that there are important differences between their ideas.[241]
Hayek also played a central role in Milton Friedman's intellectual development. Friedman wrote:
My interest in public policy and political philosophy was rather casual before I joined the faculty of the University of Chicago. Informal discussions with colleagues and friends stimulated a greater interest, which was reinforced by Friedrich Hayek's powerful book The Road to Serfdom, by my attendance at the first meeting of the Mont Pelerin Society in 1947, and by discussions with Hayek after he joined the university faculty in 1950. In addition, Hayek attracted an exceptionally able group of students who were dedicated to a libertarian ideology. They started a student publication, The New Individualist Review, which was the outstanding libertarian journal of opinion for some years. I served as an adviser to the journal and published a number of articles in it....[242]
While Friedman often mentioned Hayek as an important influence, Hayek rarely mentioned Friedman. He deeply disagreed with Chicago School methodology, quantitative and macroeconomic focus, and claimed that Friedman's Essays in Positive Economics was as dangerous a book as Keynes' General Theory. Friedman also claimed that despite some Popperian influence Hayek always retained basic Misesian praxeological view which he found "utterly nonsensical". He also noted that he admired Hayek only for his political works and disagreed with his technical economics; he called Prices and Production a "very flawed book" and The Pure Theory of Capital "unreadable". There were occasional tensions at the Mont Pelerin meetings between the Hayek's and Friedman's followers that sometimes threatened to split the Society. Although they worked at the same university and shared political beliefs, Hayek and Friedman rarely collaborated professionally and were not close friends.
Hayek's greatest intellectual debt was to Carl Menger, who pioneered an approach to social explanation similar to that developed in Britain by Bernard Mandeville and the Scottish moral philosophers in the Scottish Enlightenment. He had a wide-reaching influence on contemporary economics, politics, philosophy, sociology, psychology and anthropology. For example, Hayek's discussion in The Road to Serfdom (1944) about truth, falsehood and the use of language influenced some later opponents of postmodernism.[247]
Some radical libertarians had a negative view of Hayek and his milder form of liberalism. Ayn Rand disliked him, seeing him as a conservative and compromiser. In a letter to Rose Wilder Lane in 1946 she wrote:
Now to your question: 'Do those almost with us do more harm than 100% enemies?' I don't think this can be answered with a flat 'yes' or 'no,' because the 'almost' is such a wide term. There is one general rule to observe: those who are with us, but merely do not go far enough are the ones who may do us some good. Those who agree with us in some respects, yet preach contradictory ideas at the same time, are definitely more harmful than 100% enemies. As an example of the kind of 'almost' I would tolerate, I'd name Ludwig von Mises. As an example of our most pernicious enemy, I would name Hayek. That one is real poison.[249]
Hayek made no known written references to Rand.
Wikipedia co-founder Jimmy Wales was influenced by Hayek's ideas on spontaneous order and the Austrian School of economics, after being exposed to these ideas by Austrian economist and Mises Institute Senior Fellow Mark Thornton.[251]
In the 21st century, some libertarian political scientists argue that Hayek would be in favor of Bitcoin and cryptocurrencies due to its resistance to political pressure and due to Hayek's emphasis of sound money and competition in currencies.[252] They also argue that cryptocurrency and Bitcoin serve as a "Hayekian Escape," a method that the people can use to escape the government's currency monopoly.[253]
Relation to conservatism
[edit]
Hayek received new attention in the 1980s and 1990s with the rise of conservative governments in the United States, United Kingdom and Canada. After winning the 1979 United Kingdom general election, Margaret Thatcher appointed Keith Joseph, the director of the Hayekian Centre for Policy Studies, as her secretary of state for industry in an effort to redirect parliament's economic strategies. Likewise, David Stockman, Ronald Reagan's most influential financial official in 1981, was an acknowledged follower of Hayek.[254]
Although usually identified as a conservative liberal or a liberal conservative,[255] Hayek published an essay, "Why I Am Not a Conservative" (included as an appendix to The Constitution of Liberty), in which he criticized certain aspects of conservatism from a liberal perspective. Edmund Fawcett summarizes Hayek's critique as follows:
Conservatives, on Hayek’s account, suffered from the following weaknesses. They feared change unduly. They were unreasonably frightened of uncontrolled social forces. They were too fond of authority. They had no grasp of economics. They lacked the feel for “abstraction” needed for engaging with people of different outlooks. They were too cozy with elites and establishments. They gave in to jingoism and chauvinism. They tended to think mystically, much as socialists tended to overrationalize. They were, last, too suspicious of democracy.[256]
Hayek identified himself as a classical liberal, but noted that in the United States it had become almost impossible to use "liberal" in its original definition and the term "libertarian" was used instead.[257] He also found libertarianism as a term "singularly unattractive" and offered the term "Old Whig" (a phrase borrowed from Edmund Burke) instead. In his later life, he said: "I am becoming a Burkean Whig".[258] Whiggery as a political doctrine had little affinity for classical political economy, the tabernacle of the Manchester School and William Gladstone.[259]
In his 1956 preface to The Road to Serfdom, Hayek summarized all his disagreements with conservatism in this way:
Conservatism, though a necessary element in any stable society, is not a social program; in its paternalistic, nationalistic, and poweradoring tendencies it is often closer to socialism than true liberalism; and with its traditionalistic, anti-intellectual, and often mystical propensities it will never, except in short periods of disillusionment, appeal to the young and all those others who believe that some changes are desirable if this world is to become a better place. A conservative movement, by its very nature, is bound to be a defender of established privilege and to lean on the power of government for the protection of privilege. The essence of the liberal position, however, is the denial of all privilege, if privilege is understood in its proper and original meaning of the state granting and protecting rights to some which are not available on equal terms to others.
Samuel Brittan, concluded in 2010 that "Hayek's book [The Constitution of Liberty] is still probably the most comprehensive statement of the underlying ideas of the moderate free market philosophy espoused by neoliberals".[260] Brittan adds that although Raymond Plant (2009) comes out in the end against Hayek's doctrines, Plant gives The Constitution of Liberty a "more thorough and fair-minded analysis than it has received even from its professed adherents". As a neo-liberal, he helped found the Mont Pelerin Society, a prominent neo-liberal think tank where many other minds, such as Mises and Friedman gathered.[261][260]
Although Hayek is likely a student of the neo-liberal school of libertarianism,[262] he is nonetheless influential in the conservative movement, mainly for his critique of collectivism.[26]
Policy discussions
[edit]
Hayek's ideas on spontaneous order and the importance of prices in dealing with the knowledge problem inspired a debate on economic development and transition economies after the fall of the Berlin wall. For instance, economist Peter Boettke elaborated in detail on why reforming socialism failed and the Soviet Union broke down.[263] Economist Ronald McKinnon uses Hayekian ideas to describe the challenges of transition from a centralized state and planned economy to a market economy.[264] Former World Bank Chief Economist William Easterly emphasizes why foreign aid tends to have no effect at best in books such as The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good.[265]
Since the 2007–2008 financial crisis, there is a renewed interest in Hayek's core explanation of boom-and-bust cycles, which serves as an alternative explanation to that of the savings glut as launched by economist and former Federal Reserve Chair Ben Bernanke. Economists at the Bank for International Settlements, e.g. William R. White, emphasize the importance of Hayekian insights and the impact of monetary policies and credit growth as root causes of financial cycles.[266] Andreas Hoffmann and Gunther Schnabl provide an international perspective and explain recurring financial cycles in the world economy as consequence of gradual interest rate cuts led by the central banks in the large advanced economies since the 1980s.[267][268] Nicolas Cachanosky outlines the impact of American monetary policy on the production structure in Latin America.[269]
In line with Hayek, an increasing number of contemporary researchers sees expansionary monetary policies and too low interest rates as mal-incentives and main drivers of financial crises in general and the subprime market crisis in particular.[270][271] To prevent problems caused by monetary policy, Hayekian and Austrian economists discuss alternatives to current policies and organizations. For instance, Lawrence H. White argued in favor of free banking in the spirit of Hayek's "Denationalization of Money".[272] Along with market monetarist economist Scott Sumner,[273] White also noted that the monetary policy norm that Hayek prescribed, first in Prices and Production (1931) and as late as the 1970s,[274][275] was the stabilization of nominal income.[139]
Hayek's ideas find their way into the discussion of the post-Great Recession issues of secular stagnation. Monetary policy and mounting regulation are argued to have undermined the innovative forces of the market economies. Quantitative easing following the financial crises is argued to have not only conserved structural distortions in the economy, leading to a fall in trend-growth. It also created new distortions and contributes to distributional conflicts.[276]
Central European politics
[edit]
In the 1970s and 1980s, the writings of Hayek were a major influence on some of the future postsocialist economic and political elites in Central and Eastern Europe. Supporting examples include the following:
There is no figure who had more of an influence, no person had more of an influence on the intellectuals behind the Iron Curtain than Friedrich Hayek. His books were translated and published by the underground and black market editions, read widely, and undoubtedly influenced the climate of opinion that ultimately brought about the collapse of the Soviet Union.[277]
— Milton Friedman (Hoover Institution)
The most interesting among the courageous dissenters of the 1980s were the classical liberals, disciples of F.A. Hayek, from whom they had learned about the crucial importance of economic freedom and about the often-ignored conceptual difference between liberalism and democracy.[278]
— Andrzej Walicki (History, Notre Dame)
Estonian Prime Minister Mart Laar came to my office the other day to recount his country's remarkable transformation. He described a nation of people who are harder-working, more virtuous—yes, more virtuous, because the market punishes immorality—and more hopeful about the future than they've ever been in their history. I asked Mr. Laar where his government got the idea for these reforms. Do you know what he replied? He said, "We read Milton Friedman and F.A. Hayek."[279]
— United States Representative Dick Armey
I was 25 years old and pursuing my doctorate in economics when I was allowed to spend six months of post-graduate studies in Naples, Italy. I read the Western economic textbooks and also the more general work of people like Hayek. By the time I returned to Czechoslovakia, I had an understanding of the principles of the market. In 1968, I was glad at the political liberalism of the Dubcek Prague Spring, but was very critical of the Third Way they pursued in economics.[280]
— Václav Klaus (former President of the Czech Republic)
Personal life
[edit]
In August 1926, Hayek married Helen Berta Maria von Fritsch (1901–1960), a secretary at the civil service office where he worked. They had two children together.[281] Upon the close of World War II, Hayek restarted a relationship with an old girlfriend, who had married since they first met, but kept it secret until 1948. Hayek and Fritsch divorced in July 1950 and he married his cousin Helene Bitterlich (1900–1996)[283] just a few weeks later, after moving to Arkansas to take advantage of permissive divorce laws.[284] His wife and children were offered settlement and compensation for accepting a divorce. The divorce caused some scandal at LSE, where certain academics refused to have anything to do with Hayek.[284] In a 1978 interview to explain his actions, Hayek stated that he was unhappy in his first marriage and as his wife would not grant him a divorce he had taken steps to obtain one unilaterally.[285]
For a time after his divorce, Hayek rarely visited his children, but kept up more regular contact with them in his older years after moving to Europe. Hayek's son, Laurence Hayek (1934–2004) was a distinguished microbiologist.[287] His daughter Christine was an entomologist at the British Museum of Natural History,[2] and she cared for him during his last years, when he had declining health.
Hayek had a lifelong interest in biology and was also concerned with ecology and environmental protection. After being awarded his Nobel Prize, he offered his name to be used for endorsements by World Wildlife Fund, National Audubon Society, and the National Trust, a British conservationist organisation. Evolutionary biology was simply one of his interests in natural sciences. Hayek also had an interest in epistemology, which he often applied to his own thinking, as a social scientist. He held that methodological differences in the social sciences and in natural sciences were key to understanding why incompetent policies are often allowed.[289]
Hayek was brought up in a non-religious setting and decided from age 15 that he was an agnostic.
He died in 1992 in Freiburg, Germany, where he had lived since leaving Chicago in 1961. Despite his advanced age by the 1980s, he continued to write, even purportedly finishing a book, The Fatal Conceit, in 1988, although its actual authorship is unclear.[15][291]
Legacy and honours
[edit]
Hayek's intellectual presence has remained evident in the years following his death, especially in the universities where he had taught, namely the London School of Economics, the University of Chicago and the University of Freiburg. His influence and contributions have been noted by many. A number of tributes have resulted, many established posthumously:
The Hayek Society, a student-run group at the London School of Economics, was established in his honour.[292]
The Oxford Hayek Society, founded in 1983, is named after Hayek.[293]
The Cato Institute named its lower level auditorium after Hayek, who had been a Distinguished Senior Fellow at Cato during his later years.[294]
The auditorium of the school of economics in Universidad Francisco Marroquín in Guatemala is named after him.
The Hayek Fund for Scholars[295] of the Institute for Humane Studies provides financial awards for academic career activities of graduate students and untenured faculty members.
The Ludwig von Mises Institute holds a lecture named after Hayek every year at its Austrian Scholars Conference and invites notable academics to speak about subjects relating to Hayek's contributions to the Austrian School.
George Mason University has an economics essay award named in honour of Hayek.[296]
The Mercatus Center, a free-market think tank also at George Mason University, who has a philosophy, politics and economics program of study named for Hayek.
The Mont Pelerin Society has a quadrennial economics essay contest named in his honour.
Hayek was awarded honorary degrees from Rikkyo University, University of Vienna and University of Salzburg.[297]
Hayek has an investment portfolio named after him. The Hayek Fund[298] invests in corporations who financially support free market public policy organisations
1974: Austrian Decoration for Science and Art
1974: Nobel Memorial Prize in Economic Sciences (Sweden)[299]
1977: Pour le Mérite for Science and Art (Germany)[300]
1983: Honorary Ring of Vienna
1984: Honorary Dean of WHU – Otto Beisheim School of Management
1984: Hanns Martin Schleyer Prize
1984: Member of the Order of the Companions of Honour (United Kingdom)[301]
1990: Grand Gold Medal with Star for Services to the Republic of Austria[302]
1991: Presidential Medal of Freedom (United States)[130]
1994: The FA Hayek Scholarship in Economics or Political Science, University of Canterbury. The scholarship supports students toward study for an honours or master's degree in the Economics or Political Science at the university. It was established in 1994 by a gift from entrepreneur Alan Gibbs.[303]
Notable works
[edit]
Main article: Friedrich Hayek bibliography
The Road to Serfdom, 1944.
Individualism and Economic Order, 1948.
The Constitution of Liberty, 1960. The Definitive Edition, 2011. Description and preview.
Law, Legislation and Liberty (3 volumes)
Volume I. Rules and Order, 1973.[304]
Volume II. The Mirage of Social Justice, 1976.[305]
Volume III. The Political Order of a Free People, 1979.[306]
The Fatal Conceit: The Errors of Socialism, 1988. Note that the authorship of The Fatal Conceit is under scholarly dispute.[307] The book in its published form may actually have been written entirely by its editor W. W. Bartley III and not by Hayek.[308]
Ancestry
[edit]
Mother was from von Juraschek family.
See also
[edit]
Neoliberalism
Constructivist epistemology
Hayek Lecture
Fear the Boom and Bust, a series of music videos produced by the Mercatus Center in which Keynes and Hayek take part in a rap battle
Global financial system, which describes the financial system consisting of institutions and regulators that act on the international level
History of economic thought
Liberalism in Austria
John Maynard Keynes
References
[edit]
Bibliography
[edit]
Primary sources
[edit]
Hayek, Friedrich. The Collected Works of F.A. Hayek, ed. W.W. Bartley, III and others (University of Chicago Press, 1988–); "Plan of the Collected Works of F.A. Hayek" for 19 volumes; vol 2 excerpt and text search; vol 7 2012 excerpt.
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Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek
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A full-length assessment of the contributions to economics of Friedrich Hayek (Nobel Prize 1974). Hayek is unique for a number of reasons: because of his emphasis on the function of institutions in coordinating the various plans of individuals in the market; his attack on the expansionary policies of central banks which discoordinate the patterns of business investment and produce depressions; and his view about the possibility of rational economic calculation under socialism.
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https://oll.libertyfund.org/titles/driscoll-economics-as-a-coordination-problem-the-contributions-of-friedrich-a-hayek
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Gerald P. O’Driscoll (author)
Friedrich August von Hayek (foreword)
A full-length assessment of the contributions to economics of Friedrich Hayek (Nobel Prize 1974). Hayek is unique for a number of reasons: because of his emphasis on the function of institutions in coordinating the various plans of individuals in the market; his attack on the expansionary policies of central banks which discoordinate the patterns of business investment and produce depressions; and his view about the possibility of rational economic calculation under socialism.
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John Richard Hicks
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Sir John Richard Hicks (8 April 1904 – 20 May 1989) was a British economist. He contributed to the fields of consumer demand theory in microeconomics. In 1937, he developed the IS/LM model which summarizes a Keynesian view of macroeconomics. His book Value and Capital (1939) significantly extended general-equilibrium and value theory. The compensated demand function is named the Hicksian demand function in memory of him.
He was made a Knight Bachelor in 1964.[1]
In 1972 he received the Nobel Prize in Economic Sciences (jointly) for his pioneering contribution to general equilibrium theory and welfare theory. [2]
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Hayek and Intertemporal Equilibrium
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I am starting to write a paper on Hayek and intertemporal equilibrium, and as I write it over the next couple of weeks, I am going to post sections of it on this blog. Comments from readers will be even more welcome than usual, and I will do my utmost to reply to comments, a…
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Uneasy Money
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https://uneasymoney.com/2017/05/21/hayek-and-intertemporal-equilibrium/
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I am starting to write a paper on Hayek and intertemporal equilibrium, and as I write it over the next couple of weeks, I am going to post sections of it on this blog. Comments from readers will be even more welcome than usual, and I will do my utmost to reply to comments, a goal that, I am sorry to say, I have not been living up to in my recent posts.
The idea of equilibrium is an essential concept in economics. It is an essential concept in other sciences as well, its meaning in economics is not the same as in other disciplines. The concept having originally been borrowed from physics, the meaning originally attached to it by economists corresponded to the notion of a system at rest, and it took a long time for economists to see that viewing an economy as a system at rest was not the only, or even the most useful, way of applying the equilibrium concept to economic phenomena.
What would it mean for an economic system to be at rest? The obvious answer was to say that prices and quantities would not change. If supply equals demand in every market, and if there no exogenous change introduced into the system, e.g., in population, technology, tastes, etc., it would seem that would be no reason for the prices paid and quantities produced to change in that system. But that view of an economic system was a very restrictive one, because such a large share of economic activity – savings and investment — is predicated on the assumption and expectation of change.
The model of a stationary economy at rest in which all economic activity simply repeats what has already happened before did not seem very satisfying or informative, but that was the view of equilibrium that originally took hold in economics. The idea of a stationary timeless equilibrium can be traced back to the classical economists, especially Ricardo and Mill who wrote about the long-run tendency of an economic system toward a stationary state. But it was the introduction by Jevons, Menger, Walras and their followers of the idea of optimizing decisions by rational consumers and producers that provided the key insight for a more robust and fruitful version of the equilibrium concept.
If each economic agent (household or business firm) is viewed as making optimal choices based on some scale of preferences subject to limitations or constraints imposed by their capacities, endowments, technology and the legal system, then the equilibrium of an economy must describe a state in which each agent, given his own subjective ranking of the feasible alternatives, is making a optimal decision, and those optimal decisions are consistent with those of all other agents. The optimal decisions of each agent must simultaneously be optimal from the point of view of that agent while also being consistent, or compatible, with the optimal decisions of every other agent. In other words, the decisions of all buyers of how much to purchase must be consistent with the decisions of all sellers of how much to sell.
The idea of an equilibrium as a set of independently conceived, mutually consistent optimal plans was latent in the earlier notions of equilibrium, but it could not be articulated until a concept of optimality had been defined. That concept was utility maximization and it was further extended to include the ideas of cost minimization and profit maximization. Once the idea of an optimal plan was worked out, the necessary conditions for the mutual consistency of optimal plans could be articulated as the necessary conditions for a general economic equilibrium. Once equilibrium was defined as the consistency of optimal plans, the path was clear to define an intertemporal equilibrium as the consistency of optimal plans extending over time. Because current goods and services and otherwise identical goods and services in the future could be treated as economically distinct goods and services, defining the conditions for an intertemporal equilibrium was formally almost equivalent to defining the conditions for a static, stationary equilibrium. Just as the conditions for a static equilibrium could be stated in terms of equalities between marginal rates of substitution of goods in consumption and in production to their corresponding price ratios, an intertemporal equilibrium could be stated in terms of equalities between the marginal rates of intertemporal substitution in consumption and in production and their corresponding intertemporal price ratios.
The only formal adjustment required in the necessary conditions for static equilibrium to be extended to intertemporal equilibrium was to recognize that, inasmuch as future prices (typically) are unobservable, and hence unknown to economic agents, the intertemporal price ratios cannot be ratios between actual current prices and actual future prices, but, instead, ratios between current prices and expected future prices. From this it followed that for optimal plans to be mutually consistent, all economic agents must have the same expectations of the future prices in terms of which their plans were optimized.
The concept of an intertemporal equilibrium was first presented in English by F. A. Hayek in his 1937 article “Economics and Knowledge.” But it was through J. R. Hicks’s Value and Capital published two years later in 1939 that the concept became more widely known and understood. In explaining and applying the concept of intertemporal equilibrium and introducing the derivative concept of a temporary equilibrium in which current markets clear, but individual expectations of future prices are not the same, Hicks did not claim originality, but instead of crediting Hayek for the concept, or even mentioning Hayek’s 1937 paper, Hicks credited the Swedish economist Erik Lindahl, who had published articles in the early 1930s in which he had articulated the concept. But although Lindahl had published his important work on intertemporal equilibrium before Hayek’s 1937 article, Hayek had already explained the concept in a 1928 article “Das intertemporale Gleichgewichtasystem der Priese und die Bewegungen des ‘Geltwertes.'” (English translation: “Intertemporal price equilibrium and movements in the value of money.“)
Having been a junior colleague of Hayek’s in the early 1930s when Hayek arrived at the London School of Economics, and having come very much under Hayek’s influence for a few years before moving in a different theoretical direction in the mid-1930s, Hicks was certainly aware of Hayek’s work on intertemporal equilibrium, so it has long been a puzzle to me why Hicks did not credit Hayek along with Lindahl for having developed the concept of intertemporal equilibrium. It might be worth pursuing that question, but I mention it now only as an aside, in the hope that someone else might find it interesting and worthwhile to try to find a solution to that puzzle. As a further aside, I will mention that Murray Milgate in a 1979 article “On the Origin of the Notion of ‘Intertemporal Equilibrium’” has previously tried to redress the failure to credit Hayek’s role in introducing the concept of intertemporal equilibrium into economic theory.
What I am going to discuss in here and in future posts are three distinct ways in which the concept of intertemporal equilibrium has been developed since Hayek’s early work – his 1928 and 1937 articles but also his 1941 discussion of intertemporal equilibrium in The Pure Theory of Capital. Of course, the best known development of the concept of intertemporal equilibrium is the Arrow-Debreu-McKenzie (ADM) general-equilibrium model. But although it can be thought of as a model of intertemporal equilibrium, the ADM model is set up in such a way that all economic decisions are taken before the clock even starts ticking; the transactions that are executed once the clock does start simply follow a pre-determined script. In the ADM model, the passage of time is a triviality, merely a way of recording the sequential order of the predetermined production and consumption activities. This feat is accomplished by assuming that all agents are present at time zero with their property endowments in hand and capable of transacting – but conditional on the determination of an equilibrium price vector that allows all optimal plans to be simultaneously executed over the entire duration of the model — in a complete set of markets (including state-contingent markets covering the entire range of contingent events that will unfold in the course of time whose outcomes could affect the wealth or well-being of any agent with the probabilities associated with every contingent event known in advance).
Just as identical goods in different physical locations or different time periods can be distinguished as different commodities that cn be purchased at different prices for delivery at specific times and places, identical goods can be distinguished under different states of the world (ice cream on July 4, 2017 in Washington DC at 2pm only if the temperature is greater than 90 degrees). Given the complete set of state-contingent markets and the known probabilities of the contingent events, an equilibrium price vector for the complete set of markets would give rise to optimal trades reallocating the risks associated with future contingent events and to an optimal allocation of resources over time. Although the ADM model is an intertemporal model only in a limited sense, it does provide an ideal benchmark describing the characteristics of a set of mutually consistent optimal plans.
The seminal work of Roy Radner in relaxing some of the extreme assumptions of the ADM model puts Hayek’s contribution to the understanding of the necessary conditions for an intertemporal equilibrium into proper perspective. At an informal level, Hayek was addressing the same kinds of problems that Radner analyzed with far more powerful analytical tools than were available to Hayek. But the were both concerned with a common problem: under what conditions could an economy with an incomplete set of markets be said to be in a state of intertemporal equilibrium? In an economy lacking the full set of forward and state contingent markets describing the ADM model, intertemporal equilibrium cannot predetermined before trading even begins, but must, if such an equilibrium obtains, unfold through the passage of time. Outcomes might be expected, but they would not be predetermined in advance. Echoing Hayek, though to my knowledge he does not refer to Hayek in his work, Radner describes his intertemporal equilibrium under uncertainty as an equilibrium of plans, prices, and price expectations. Even if it exists, the Radner equilibrium is not the same as the ADM equilibrium, because without a full set of markets, agents can’t fully hedge against, or insure, all the risks to which they are exposed. The distinction between ex ante and ex post is not eliminated in the Radner equilibrium, though it is eliminated in the ADM equilibrium.
Additionally, because all trades in the ADM model have been executed before “time” begins, it seems impossible to rationalize holding any asset whose only use is to serve as a medium of exchange. In his early writings on business cycles, e.g., Monetary Theory and the Trade Cycle, Hayek questioned whether it would be possible to rationalize the holding of money in the context of a model of full equilibrium, suggesting that monetary exchange, by severing the link between aggregate supply and aggregate demand characteristic of a barter economy as described by Say’s Law, was the source of systematic deviations from the intertemporal equilibrium corresponding to the solution of a system of Walrasian equations. Hayek suggested that progress in analyzing economic fluctuations would be possible only if the Walrasian equilibrium method could be somehow be extended to accommodate the existence of money, uncertainty, and other characteristics of the real world while maintaining the analytical discipline imposed by the equilibrium method and the optimization principle. It proved to be a task requiring resources that were beyond those at Hayek’s, or probably anyone else’s, disposal at the time. But it would be wrong to fault Hayek for having had to insight to perceive and frame a problem that was beyond his capacity to solve. What he may be criticized for is mistakenly believing that he he had in fact grasped the general outlines of a solution when in fact he had only perceived some aspects of the solution and offering seriously inappropriate policy recommendations based on that seriously incomplete understanding.
In Value and Capital, Hicks also expressed doubts whether it would be possible to analyze the economic fluctuations characterizing the business cycle using a model of pure intertemporal equilibrium. He proposed an alternative approach for analyzing fluctuations which he called the method of temporary equilibrium. The essence of the temporary-equilibrium method is to analyze the behavior of an economy under the assumption that all markets for current delivery clear (in some not entirely clear sense of the term “clear”) while understanding that demand and supply in current markets depend not only on current prices but also upon expected future prices, and that the failure of current prices to equal what they had been expected to be is a potential cause for the plans that economic agents are trying to execute to be modified and possibly abandoned. In the Pure Theory of Capital, Hayek discussed Hicks’s temporary-equilibrium method a possible method of achieving the modification in the Walrasian method that he himself had proposed in Monetary Theory and the Trade Cycle. But after a brief critical discussion of the method, he dismissed it for reasons that remain obscure. Hayek’s rejection of the temporary-equilibrium method seems in retrospect to have been one of Hayek’s worst theoretical — or perhaps, meta-theoretical — blunders.
Decades later, C. J. Bliss developed the concept of temporary equilibrium to show that temporary equilibrium method can rationalize both holding an asset purely for its services as a medium of exchange and the existence of financial intermediaries (private banks) that supply financial assets held exclusively to serve as a medium of exchange. In such a temporary-equilibrium model with financial intermediaries, it seems possible to model not only the existence of private suppliers of a medium of exchange, but also the conditions – in a very general sense — under which the system of financial intermediaries breaks down. The key variable of course is vectors of expected prices subject to which the plans of individual households, business firms, and financial intermediaries are optimized. The critical point that emerges from Bliss’s analysis is that there are sets of expected prices, which if held by agents, are inconsistent with the existence of even a temporary equilibrium. Thus price flexibility in current market cannot, in principle, result in even a temporary equilibrium, because there is no price vector of current price in markets for present delivery that solves the temporary-equilibrium system. Even perfect price flexibility doesn’t lead to equilibrium if the equilibrium does not exist. And the equilibrium cannot exist if price expectations are in some sense “too far out of whack.”
Expected prices are thus, necessarily, equilibrating variables. But there is no economic mechanism that tends to cause the adjustment of expected prices so that they are consistent with the existence of even a temporary equilibrium, much less a full equilibrium.
Unfortunately, modern macroeconomics continues to neglect the temporary-equilibrium method; instead macroeconomists have for the most part insisted on the adoption of the rational-expectations hypothesis, a hypothesis that elevates question-begging to the status of a fundamental axiom of rationality. The crucial error in the rational-expectations hypothesis was to misunderstand the role of the comparative-statics method developed by Samuelson in The Foundations of Economic Analysis. The role of the comparative-statics method is to isolate the pure theoretical effect of a parameter change under a ceteris-paribus assumption. Such an effect could be derived only by comparing two equilibria under the assumption of a locally unique and stable equilibrium before and after the parameter change. But the method of comparative statics is completely inappropriate to most macroeconomic problems which are precisely concerned with the failure of the economy to achieve, or even to approximate, the unique and stable equilibrium state posited by the comparative-statics method.
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Related Links: Journal: Literature of Liberty: A Review of Contemporary Liberal Thought (1978-1982), 20 vols. ed. Leonard P. Liggio. Source: Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio. Chapter: BIBLIOGRAPHY OF FRIEDRICH A. HAYEK Copyright: This work is copyrighted by the Institute for Humane Studies, George Mason University, Fairfax, Virginia, and is put online with their permission. Fair Use: This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
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https://oll.libertyfund.org/pages/hayek-a-bibliography-of-his-writings
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Source: Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio. Chapter: BIBLIOGRAPHY OF FRIEDRICH A. HAYEK
Copyright: This work is copyrighted by the Institute for Humane Studies, George Mason University, Fairfax, Virginia, and is put online with their permission.
Fair Use: This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
BIBLIOGRAPHY OF FRIEDRICH A. HAYEK
The following bibliography of the writings by and about Friedrich A. Hayek was compiled near the end of 1982 by John Cody assisted by Nancy Ostrem. We gratefully acknowledge the helpful suggestions of Kurt R. Leube (Editor-in-chief of the International Carl Menger Library, Vienna), Prof. Albert H. Zlabinger of Jacksonville University (and co-editor with Kurt Leube of Philosophia Verlag), Prof. Paul Michelson of Huntington College, Paul Varnell of Chicago, and members of the Institute for Humane Studies staff, including Leonard P. Liggio, Walter Grinder, and John Blundell.
While aiming to be the most comprehensive, accurate, and up-to-date listing of Hayekian scholarship yet assembled, this bibliography–owing to the prolific and dispersed nature of the materials involved—must unavoidably contain errors, incomplete citations, and omissions. Among the omissions are a great many of Hayek's voluminous letters-to-editors, short notes or comments, interviews (including tape recordings, video-cassettes, and films), and book reviews. Such journals as the Schriften des Vereins für Sozialpolitik, Jährbucher für Nationalökonomie und Statistik, Zeitschrift für Volkswirtschaft und Sozialpolitik (after 1927 superseded by Zeitschrift für Nationalökonomie), and Economica contain many items not listed in this edition of the bibliography. Many additional bibliographical items by or about Hayek came to our attention only after our typesetting deadline precluded further citations. To remedy our omissions and to emend our in-accuracies for a possible subsequent publication of an enlarged Hayek bibliography we welcome our readers’ comments and assistance.
Earlier bibliographical orientations to Hayek's writings that proved helpful in creating the present Bibliography are:
Erich Streissler, Gottfried Haberler, Friedrich A. Lutz, and Fritz Machlup, eds. “Bibliography of the Writings of Friedrich A. von Hayek,” in Roads to Freedom: Essays in Honour of Friedrich A. von Hayek. London: Routledge & Kegan Paul, 1969, pp. 309–315.
Walter Eucken Institut. “Bibliographie der Schriften von F.A. von Hayek.” [“Bibliography of the Writings of F.A. von Hayek.”] in Freiburger Studien. Gesammelte Aufsätze von F.A. Hayek. Tübingen: J.C.B. Mohr/Paul Siebeck (Wirtschaftswissenschaftliche und wirtschaftsrechtliche Untersuchungen 5), 1969, pp. 279–284.
Fritz Machlup, “Friedrich von Hayek's Contribution to Economics.” The Swedish Journal of Economics 76 (December 1974): 498–531.
———. “Hayek's Contribution to Economics,” in Essays on Hayek. Edited by Fritz Machlup. Foreward by Milton Friedman. New York: New York University Press, 1976, pp. 13–39. [Machlup's 1974 and his updated 1976 bibliographical essays are indispensable guides to Hayek's writings through the mid-1970s. Adhering to the fourfold classification system of Hayek's writings laid out in the Streissler 1969 Roads to Freedom, Hayek “Bibliography,” Machlup devised an alphabetical and numerical identification code for easy reference to Hayek's books (B-), pamphlets (P-), edited or introduced books (E-), and articles in learned journals or collections of essays (A-).]
———. Würdigung der Werke von Friedrich August von Hayek. Translated by Kurt R. Leube. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 62), 1977, pp. 63–75. [This “Assessment of the Works of Friedrich August von Hayek is the German translation of the preceding Machlup Bibliography of Hayek.]
Leube, Kurt R. “Anhang: Bibliographie der Schriften von F.A. von Hayek,” [“Appendix: Bibliography of the Writings of F.A. von Hayek”] in: F.A. von Hayek. Geldtheorie und Konjunkturtheorie. Reprint of the first edition (Vienna, 1929; see B-1). Salzburg: Philosophia Verlag, 1976. pp. 148–160. This is identical to Leube's Hayek Bibliography in: Friedrich A. von Hayek. Individualismus und wirtschaftliche Ordnung. Reprint of the first German edition (Erlenbach-Zurich, 1952; see B-7). Salzburg: Philosophia Verlag, 1976, pp. 345–357.
———. “Ausgewählte Bibliographie der Arbeiten F.A. Hayeks zu verwandten Problemkreisen” [“Selected Bibliography of the Works of F.A. Hayek to Related Problem Areas”], in the German reprint of the first edition (Vienna, 1931; see B-2) of Preise und Produktion. Vienna: Philosophia Verlag, 1976, pp. 13–18.
Books
B-1 Geldtheorie und Konjunkturtheorie. (Beitrage zur Konjunkturforschung, heraus-gegeben vom Österreichisches Institut für Konjunkturforschung, No. 1). Vienna and Leipzig: Hölder-Pichler-Tempsky, 1929/2, xii, 147 pp. (England 1933, Japan 1935, Spain 1936.) Translated into English by N. Kaldor and H. M. Croome with an “Introduction to the Series, Library of Money and Banking History” by Lionel an “Introduction to the Series, Library of Money and Banking History” by Lionel Robbins as Monetary Theory and the Trade Cycle. London: Jonathan Cape, 1933, 244 pp. American edition, New York: Harcourt Brace & Co., 1933. Reprinted New York: Augustus M. Kelley, 1966. The German first edition of Geldtheorie is described as “Contributions to Trade Cycle Research, published by The Austrian Institute for Trade Cycle Research, No. 1.” This Institute was founded by Ludwig von Mises, and Hayek was its Director from 1927–1931.)
See also foreward and bibliography to the 2nd German edition by Kurt R. Leube, “Vorwort und Bibliographie zur Weiderauflage F. A. Hayek: Geldtheorie und Konjunkturtheorie.” Salzburg: (W. Neugebauer) Philosophia Verlag, 1976. [Hayek's Geldtheorie (1929) together with its English translation (1933) is an expanded version of the paper (A-7a) delivered at a meeting of the Verein für Sozialpolitik, held in Zurich, in September 1928 (See A-7a with annotations). Hayek cites earlier studies as the foundations for his Geldtheorie: A-2a, A-6, A-7a, A-9a, A-13. Hayek presents, from the Austrian School perspective, a critical assessment of rival theories on the cause of trade cycle. He argues that the cause of all significant trade cycle fluctuations are monetary interventions which distort relative price relationships.].
B-2 Prices and Production. (Studies in Economics and Political Science, edited by the director of the London School of Economics and Political Sciences. No. 107 in the series of Monographs by writers connected with the London School of Economics and Political Science.) London: Routledge & Sons, 1931/2, xv, 112 pp. 2nd revised and enlarged edition, London: Routledge & Kegan Paul, 1935/9, also 1967 edition, xiv, 162 pp. American edition, New York: Macmillan, 1932. German edition. Preise und Produktion. Vienna, 1931/2, also 1976 edition. (Japan 1934, China [Taipei] 1966, France 1975).
See also the selected bibliography to the 2nd German edition: Kurt R. Leube, “Ausgewählte Bibliographie zur Wiederauflage F. A. Hayek: Preise und Produktion.” Philosophia Verlag, 1976.
[The 1st edition of Prices (1931) literally reproduced Hayek's four lectures on industrial fluctuations presented at the University of London (LSE) during the session 1930–1931. The “Preface to the Second Edition” of Prices (1935) states how Hayek developed Austrian capital theory following the four lectures. These developments were contained in the 2nd edition and prepared for by A-11a, A-12, A-13, A-14, A-21, A-22, A-23, A-24a, as well as by the first German edition of Preise (1931), the English version (B-1), and A-9a. Economist Sudha R. Shenoy, in an unpublished manuscript, has done a detailed comparative analysis of the differences between the 1931 and 1935 editions of Prices.]
B-3 Monetary Nationalism and International Stability. Geneva, 1937; London: Longmans, Green (The Graduate Institute of International Studies, Geneva, Publication Number 18), 1937, xiv, 94 pp. Reprinted New York: Augustus M. Kelley, 1964, 1971, 1974.
[Revised version of five lectures delivered at the Institute Universitaire de Hautes Études Internationales at Geneva. Hayek surveys the consequence of alternative monetary arrangements, such as gold vs. paper currency and flexible vs. fixed exchange rates.]
B-4 Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939/3, viii, 266 pp., also 1969 edition. Reprinted New York: Augustus M. Kelley, 1969, 1970; Clifton, New Jersey: Augustus M. Kelley, 1975.
[Collection of essays, mostly reprints or revised versions of earlier essays, which are attempts “to improve and develop the outline of a Theory of Industrial Fluctuations contained in” B-1 and B-2. The first chapter, “Profits, Interest and Investment” is new; the other chapters are revisions of A-37a, A-27a, A-26, A-19, A-21, A-14, A-9a. Hayek's essays defend the Austrian School's theory of the trade cycle. He argues that monetary interventions cause far-ranging economic distortions that bring about malinvestment and unemployment.]
B-5 The Pure Theory of Capital. London: Routledge & Kegan Paul, 1941/2 (also 1950 edition); Chicago: University of Chicago Press, 1941 (also 1950, 1952 and 1975 editions); xxxi, 454 pp. (Spain 1946, Japan 1951 and 1952).
[Growing out of Hayek's concern for the causes of the trade cycle or industrial fluctuations, this work deals with capital, interest, and time components in the structure of production.]
B-6 The Road to Serfdom. London: George Routledge & Sons, 1944/1945/20 (also 1969 edition); Chicago: University of Chicago Press, 1944/1945/20 (also 1969 edition), 250 pp. (Sweden 1944; France 1945; German version 1945: Der Weg zur Knechtschaft. Zurich 1945/3 (also 1952 edition); the German translation by Eva Röpke is available in paperback from Deutscher Taschenbuch Verlag (Munich, 1976); Denmark, Portugal, and Spain 1946; Netherlands 1948; Italy 1948; Norway 1949; Japan 1954; China [Taipei] 1956/1965/1966; Iceland 1980). Reprinted in two different paperback versions with new Prefaces by F. A. H. Chicago: University of Chicago Press, Phoenix Books, 1956 (see B-13, chapt. 15) and also 1976 paperback edition by University of Chicago Press and Routledge and Kegan Paul.
[Hayek wrote The Road to Serfdom in his “spare time from 1940 to 1943” while he was engaged in pure economic theory. The central argument was first sketched in A-37b (1938) and expanded in P-2 (1939). Hayek's thesis is that social-political planning endangers both political and economic liberties of the individual.]
B-7 Individualism and Economic Order. London: George Routledge & Sons, 1948/5, also 1960, 1976; Chicago: University of Chicago Press, 1948/5, also 1969, 1976, vii, 272 pp. Paperback edition, Chicago: Henry Regnery Co., Gateway edition 1972 (out of print), but now available in a University of Chicago paperback edition; (German edition, Zurich, 1952, Norway [shortened version] 1953, Spain 1968, Netherlands no date.)
See also bibliographic postscript in the German reprint of the 1st edition, Erlenbach-Zurich: 1952: Kurt R. Leube, “Bibliographisches Nachwort zur Wiederauflage F. A. Hayek: Individualismus und wirtschaftliche Ordnung.” Salzburg: Philosophia Verlag, 1977.
[Individualism reprints P-5, A-34, A-49, A-50, E-5 (Chapt. 1: “The Nature of the Problem”), E-5 (Chapt. 5: “The (Present) State of the Debate”), A-41, A-48, A-45, A-38; and some previously unpublished lectures: Chapt. 5: “The Meaning of Competition” and Chapt. 6 “‘Free’ Enterprise and Competitive Order.” These articles and speeches sound the Hayekian warning against economic and social planning.]
B-8 John Stuart Mill and Harriet Taylor: Their Friendship and Subsequent Marriage. London: Routledge & Kegan Paul, 1951/1969; Chicago: University of Chicago Press, 1951/1969, 320 pp.
[During the 1920s the Mill-Taylor correspondence became available for scholarly assessment of how much ideological influence Harriet Taylor exerted on the political, economic, and social ideas of her intimate friend and eventual husband, John Stuart Mill. Hayek's volume presenting their correspondence allows the reader to judge the nature of their relationship.]
B-9 The Counter-Revolution of Science: Studies on the Abuse of Reason. Glencoe, Illinois: The Free Press, 1952, 255 pp; new edition New York, 1964; 2nd edition with 1959 Preface to German edition, Indianapolis, Indiana: Liberty Press, 1979, also available in Liberty Press paperback. (Germany 1959, Frankfurt am Main edition published under the title Missbrauch und Verfall der Vernunft or “The Abuse and Decline of Reason”; German reprint of Frankfurt edition, Salzburg: Philosophia Verlag, 1979; France excerpts, 1953; Italy 1967.)
[The two major sections of this volume first appeared as articles in Economica as A-46 (1942–1944) and A-42 (1941), respectively: the third study first appeared as A-70 (1951). Hayek analyzes the intellectual origins of social planning and engineering. Topics covered include: scientism and the methodology of studying society, collectivism, historicism, non-spontaneous or rationalistic social planning, as well as the role of Saint-Simon, Comte, and Hegel in legitimizing scientistic sociology.]
B-10 The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology. London: Routledge & Kegan Paul, 1952; Chicago: University of Chicago Press, 1952, xxii, 209 pp; new edition 1963/1976. Reprinted Chicago: University of Chicago Press, Phonenix Book paperback, 1963 (out of print). University of Chicago Press has reissued the paperback in a Midway Reprint, 1976, with the Heinrich Klüver Introduction.
[Though published in 1952, the “whole principle” of The Sensory Order was conceived 30 years earlier by Hayek in a draft of a student paper composed around 1919–1920, while he was still uncertain whether to become a psychologist or an economist. Three decades later his concern about the logical character of social theory led him to reexamine favorably his youthful conclusions on certain topics of epistemology and theoretical psychology: concepts of mind, classification, and the ordering of our mental and sensory world. In his 1952 Preface Hayek acknowledges his indebtedness “particularly” to Ernst Mach and his analysis of perceptual organization.]
B-11 The Political Ideal of the Rule of Law. Cairo: National Bank of Egypt, Fiftieth Anniversary Commemorative Lectures, 1955, 76 pp. [Publication of four lectures Hayek delivered at the invitation of the National Bank of Egypt. These essays form a historical survey of the evolution of freedom and the rule of law in Britain, France, Germany, and America.]
[Reprinted in a revised, edited, and abridged format as Chapters 11 and 13 - 16 of Hayek's B-12; Chapters 11 and 16 of the B-12 version were reprinted under the title, The Rule of Law. Menlo Park, California: Institute for Humane Studies (Studies in Law, No. 3), 1975.]
B-12 The Constitution of Liberty. London: Routledge and Kegan Paul, 1960; Chicago: University of Chicago Press, 1960/1963/5 (also 1969 edition); Toronto: The University of Toronto Press, 1960, x, 570 pp. Also available in paperback: Chicago: Henry Regnery Co. Gateway Edition, 1972.
German translation: Die Verfassung der Freiheit. Tübingen: Walter Eucken Institut (Wirtschaftswissenschaftliche und wirtschaftrechtliche Untersuchungen No. 7), [J. C. B. Mohr/P. Siebeck], 1971. (Spain 1961, Italy 1971, China [Taipei] 1975). [Hayek composed the Preface of The Constitution of Liberty on his 60th birthday (May 8, 1959). He intended this survey of the ideals of freedom in Western civilization to commemorate the centenary of John Stuart Mill's On Liberty (1859). In “Acknowledgments and Notes” he describes the various preliminary drafts and versions he incorporated into this volume; also see B-11. Hayek stresses the working of the liberal, spontaneous order of society, which is too complex to be subjected to social planning and engineering.]
B-13 Studies in Philosophy, Politics and Economics. London: Routledge & Kegan Paul, 1967/1969; Chicago: University of Chicago Press, 1967/1969; Toronto: University of Toronto Press, 1967/1969; x, 356 pp. Reprinted in paperback New York: Simon and Schuster Clarion Book, 1969.
[This volume of 25 essays contains reprints of articles and speeches by F. A. H. as well as previously unpublished writing and speeches over a 20-year period preceding 1967. Reprints (often revised) include: A-76, A-102, A-103b, A-112, A-108, A-115, A-65, A-68, A-99a, etc. Consult volume to determine other essays published for the first time. The scope of topics includes essays on epistemology, history of ideas, specialization, Hume, spontaneous order, the liberal social order, the transmission of liberal economic ideas, and a variety of other topics on philosophy, politics, and economics.]
B-14 Freiburger Studien. Gesammelte Aufsätze. Tübingen: Walter Eucken Institut (Wirtschaftswissenschaftliche und wirtschaftsrechliche Untersuchungen 5) J.C.B. Mohr/P. Siebeck, 1969, 284 pp.
[“Freiburg Studies. Collected Essays.” German anthology of Hayek's essays. Contains German versions of such items as P-9 and P-10.]
B-15 Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. I, Rules and Order. London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1973, xi, 184 pp.
A trilogy published in the following sequence:
Vol. I, Rules and Order, 1973
Vol. II, The Mirage of Social Justice, 1976
Vol. III, The Political Order of a Free People, 1979
These volumes are also available in paperback, Phoenix Books editions of the University of Chicago Press. A French translation, Droit, Législation et Liberté, is available from Presses Universitaires de France in the Collection Libre Échange, edited by Florian Aftalion and Georges Gallais-Hamonno.
[Vol. I distinguishes between liberal spontaneous order (‘cosmos’) and planned or engineered, rationalistic social orders (‘taxis’). Hayek also traces the changing concept of law, principles vs. expediency in politics, and the ‘law of legislation’.]
B-16 Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. II, The Mirage of Social Justice. London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1976, xiv, 195 pp.
[Vol. II outlines the meaning of justice in the free, liberal social order, critiques the notion of 'social’ or distributive justice, and contrasts it with the market order or ‘catallaxy’, the regime of the Open Society.]
B-17 New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul, 1978; Chicago: University of Chicago Press, 1978. [This volume of 20 essays supplements Hayek's earlier Studies (B-13) by reprinting in a more accessible form some of his earlier articles and unpublished lectures not reprinted in Studies. Reprints include P-11a, P-9, A-121, P-10, A-127, P-9, A-131a, A-136a, A-116, A-113. Consult New Studies for titles of essays not previously published. Ranging over themes from philosophy, politics, economics, and the history of ideas, Hayek analyzes such topics as constructivism, the ‘atavism of social justice’, liberalism, the dangers of economic planning, and the ideas of Mandeville, Smith, and Keynes. Chapter 2 reprints his 1974 Nobel Prize speech, “The Pretence of Knowledge.”]
B-18 Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. III, The Political Order of a Free People. London: Routledge & Kegan Paul; Chicago: University of Chicago Press, 1979, xv, 244 pp. [Vol. III concludes Hayek's trilogy. Hayek exposes the weakness inherent in most forms of democratic government and outlines his alternative constitutional, political, and legal arrangements to create a democratic order that would be consistent with the free society. The Epilogue, “The Three Sources of Human Values,” reprints Hayek's Hobhouse Lecture delivered at the London School of Economics, May 17, 1978.]
Pamphlets
P-1 Das Mieterschutzproblem, Nationalökonomische Betrachtungen. Vienna: Steyrermühl-Verlag, Bibliothek für Volkswirtschaft und Politik, No. 2, 1929. [“The Rent Control Problem, Political Economic Considerations.” Hayek's later article (A-9b) was adapted from P-1 (the more detailed study on the effects of rent control) and both were used to form the substance of Hayek's “The Repercussions of Rent Restrictions,” in F. A. Hayek, Milton Friedman, et al. Rent Control: A Popular Paradox. Evidence on The Effects of Rent Control. Vancouver: The Fraser Institute, 1975, pp. 67–83; this last volume grew out of an earlier version: Arthur Seldon, ed. Verdict on Rent Control. London: Institute of Economic Affairs, 1972.]
P-2 Freedom and the Economic System. University of Chicago Press (Public Policy Pamphlet No. 29. Harry D. Gideonse, editor), 1939, iv, 38 pp.
[Reprinted in an enlarged form from Contemporary Review (April 1938).]
P-3 The Case of the Tyrol. London: Committee on Justice for the South Tyrol, 1944. [F. A. H. advocates Tyrolean autonomy independent of Italian hegemony. Compare with Hayek's artice A-53 (1944).]
P-4 Report on the Changes in the Cost of Living in Gibraltar 1939–1944 and on Wages and Salaries. Gibraltar, no date (1945).
P-5 Individualism: True and False. (The Twelfth Finlay Lecture, delivered at University College, Dublin, on December 17, 1945.) Dublin: Hodges, Figgis & Co. Ltd. 1946; and Oxford: B. H. Blackwell Ltd. 1946, 38 pp.
[Reprinted in Individualism (B-7), chapter 1. German edition: “Wahrer und Falscher Individualismus.” Ordo 1, 1948. Spain, 1968. Also reprinted in the various translation of B-7.]
P-6 Two Essays on Free Enterprise. Bombay: Forum of Free Enterprise, 1962.
P-7 Wirtschaft, Wissenschaft und Politik. Freiburger Universitätsreden, N.F. Heft 34, Freiburg im Breisgau: H.F. Schulz, 1963, 24 pp.
[English version, “The Economy, Science and Politics,” chapter 18 of B-13. The original (in German) was Hayek's inaugural lecture on the assumption of the professorship of Political Economy Albert Ludwig University at Freiburg im Breisgau, June 18, 1962.]
P-8 Was der Goldwährung geschehen ist. Ein Bericht aus dem Jahre 1932 mit zwei Ergänzungen. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze, 12), 1965, 36 pp. (France 1966): Révue d'Economie Politique 76 (1966), for French version. [“What Has Happened to the Gold Standard. A Report Beginning with the Year 1932 with Two Supplements.”]
P-9 The Confusion of Language in Political Thought, With Some Suggestions for Remedying It. London: Institute of Economic Affairs (Occasional Paper 20), 1968/1976, 36 pp.
[Lecture originally delivered in 1967 in German to the Walter Eucken Institut at Freiburg im Breisgau. Reprinted in English as Chapter 6 of B-17, and in German as “Die Sprachverwirrung im politischen Denken” in B-14.]
P-10 Der Wettbewerb als Entdeckungsverfahren. Kiel: (Kieler Vorträge, N.S. 56), 1968, 20 pp.
[“Competition as a Discovery Procedure.” Originally delivered in English as a lecture to the Philadelphia Society at Chicago on March 29, 1968 and later on July 5, 1968, in German, to the Institut für Weltwirtschaft of the University of Kiel. The German version was published first, but it lacked the final section found in the English version published in Chapter 12 of New Studies (B-17). The German version also was reprinted in F. A. H.'s German collection of essays entitled Freiburger Studien (B-14), 1979.]
P-11a Die Irrtümer des Konstruktivismus und die Grundlagen legitimer kritik gesellschaftlicher Gebilde. Munich-Salzburg 1970/2 (also 1975 edition). Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 51), 1975. (Italy, 1971).
[Reprinted with some changes as “The Errors of Constructivism” (Chapt. 1) of B-17.]
P-11b A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40 Years’ Running Commentary on Keynesianism by F. A. Hayek. Compiled and introduced by Sudha R. Shenoy. London: Institute of Economic Affairs (Hobart Paperback #4), 1972; 2nd edition 1978, xii, 124 pp. Also reprinted, San Francisco: The Cato Institute (The Cato Papers, No. 6), 1979. See A-130.
P-11c Die Theorie Komplexer Phänomene. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 36), 1972.
[English version, “The Theory of Complex Phenomena” appears in Chapter 2 of B-13. This essay originally appeared in English in M. Bunge, ed. The Critical Approach and Philosophy. Essays in Honor of K. R. Popper. New York: The Free Press, 1964.]
P-12 Economic Freedom and Representative Government. Fourth Wincott Memorial Lecture delivered at the Royal Society of Arts, Oct. 21, 1973. London: The Institute of Economic Affairs (Occasional Paper 39), 1973, 22 pp.
[Appears as Chapter 8 of B-17.]
P-13 Full Employment at Any Price? London: Institute of Economic Affairs (Occasional Paper 45), 1975/1978, (Italy 1975), 52 pp.
[Three Lectures. Lecture 1: “Inflation, The Misdirection of Labour, and Unemployment; Lecture 2: “The Pretence of Knowledge” (Hayek's 1974 Nobel Prize Speech); Lecture 3: “No Escape: Unemployment Must Follow Inflation.” A Short Note on Austrian Capital Theory is added as an Appendix. Reprinted as Unemployment and Monetary Policy. San Francisco: Cato Institute (Cato Paper No. 3), 1979, 53 pp.]
P-14 Choice in Currency. A Way to Stop Inflation. London: Institute of Economic Affairs (Occasional Paper 48), February 1976/1977, 46 pp.
[Based on an Address entitled “International Money” delivered to the Geneva Gold and Monetary Conference on September 25, 1975 at Lausanne, Switzerland.]
P-15 Drei Vorlesungen über Demokratie, Gerechtigkeit und Sozialismus. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 63 [J.C.B. Mohr/P. Siebeck]), 1977. [“Three Lectures on Democracy, Justice, and Socialism.”]
P-16a Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: The Institute of Economic Affairs (Hobart Paper Special 70), October 1976, 107 pp.
P-16b See, along with P-16a, the revision: Denationalisation of Money—The Argument Refined. An Analysis of the Theory and Practice of Concurrent Currencies. Hobart Paper Special 70, Second (Extended) edition, 1978, 141 pp.
P-17 The Reactionary Character of the Socialist Conception, Remarks by F. A. Hayek. Hoover Institution, Stanford University, 1978.
P-18 Economic Progress in an Open Society. Seoul, Korea: Korea International Economic Institute (Seminar Series No. 16), 1978.
P-19 “The Three Sources of Human Values.” The Hobhouse Lecture given at the London School of Economics, May 17, 1978. Published in the Epilogue to Law, Legislation and Liberty, Vol. III. London: Routledge & Kegan Paul, 1979 (B-18).
[German translation: “Die drei Quellen der menschlichen Werte.” Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 70) [J. C. B. Mohr/P. Siebeck], 1979.]
P-20 Social Injustice, Socialism and Democracy. Sidney, Australia, 1979.
P-21 Wissenschaft und Sozialismus. Tübingen: Walter Eucken Institut, (Vorträge und Aufsätze 71) [J. C. B. Mohr/P. Siebeck], 1979.
[“Science and Socialism.”]
P-22 Liberalismus. Translated from English by Eva von Malchus. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 72) [J. C. B. Mohr/P. Siebeck 1979], 47 pp. [“Liberalism”] Reprint-translation into German of article in New Studies (B-17).
Books Edited or Introduced
E-1 Hermann Heinrich Gossen. Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln. Introduced by Friedrich A. Hayek. 3rd edition. Berlin: Prager, 1927, xxiii, 278 pp.
[“The Laws of Human Relationships and of the Rules to be Derived Therefrom for Human Action.” Cf.: A-15. Gossen's (1810–1858) fame rests on this one book, first published in 1854, in which he developed a comprehensive theory of the hedonistic calculus and postulated the principle of diminishing marginal utility. He thereby anticipated the marginal utility breakthrough in the theory of economic value in 1871 by Menger, Jevons, and Walras.]
E-2 Friedrich Freiherr von Wieser. Gesammelte Abhandlungen. Edited with an introduction by Friedrich A. von Hayek. Tübingen: Mohr, 1929, xxxiv, 404 pp. [This edition includes von Wieser's Collected Writings published between 1876 and 1923. Friedrich Freiherr von Wieser (1851–1926) was Hayek's mentor at the University of Vienna and represented the “older Austrian school” of Economics. See A-4 and A-125b.]
E-3 Richard Cantillon. Abhandlung über die Natur des Handels im Allgemeinen. Translated by Hella von Hayek. Introduction and annotations by F. A. von Hayek. Jena, 1931, xix, 207 pp.
[A French translation of Cantillon's “Essay on the Nature of Trade in General” appeared as Essai sur la Nature du Commerce en Général in Revue des Sciences Économiques (Liège, April-October, 1936). Italian translation by the Italian liberal editor of Il Politico, Luigi Einaudi appeared in Riforma sociale (July 1932).]
E-4 Beiträge zur Geldtheorie. Edited and prefaced by Friedrich A. Hayek. Contributions by Marco Fanno, Marius W. Holtrop, Johan G. Koopmans, Gunnar Myrdal, Knut Wicksell. Vienna, 1933, ix, 511 pp.
[“Contributions on Monetary Theory.”]
E-5 Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism. Edited with an Introduction and a Concluding Essay by F. A. Hayek. Contributions by N. G. Pierson, Ludwig von Mises, Georg Halm, and Enrico Barone. London: George Routledge & Sons, 1935, v, 293 pp. (France 1939, Italy 1946.)
[Reprinted New York: Augustus M. Kelley (1967), 1970 from the 1935 edition; reprinted Clifton, New Jersey: Augustus M. Kelley, 1975. Hayek's Introductory Chapter 1 deals with “The Nature and History of The Problem” of socialist calculation. Hayek's concluding chapter concerns “The Present State of the Debate.” Mises’ (1881–1973) article “Economic Calculation in the Socialist Commonwealth” (translated from the German by S. Adler), chapter 3, had set off the debate when it appeared originally under the title “Die Wirtschaftsrechnung im sozialstischen Gemeinwesen” in the Archiv für Socialwissenschaften 47 (1920). N.G. Pierson's (1839–1909) article, “The Problem of Value in the Socialist Community,” chapter 2, originally appeared in Dutch in De Economist 41 (s'Gravenhage, 1902): 423–456.]
E-6 Boris Brutzkus. Economic Planning in Soviet Russia. Edited and prefaced by Friedrich A. Hayek. London: George Routledge & Sons, 1935; xvii, 234 pp.
E-7 The Collected Works of Carl Menger. 4 volumes with an Introduction by F. A. von Hayek. London: The London School of Economics and Political Science (Series of Reprints of Scarce Tracts in Economic and Political Science No. 17–20), 1933–1936.
Volume 1: Grundsätze der Volkswirthschaftslehre (1871) 1934.
Volume 2: Untersuchungen über die Methode der Socialwissenschaften (1883) 1933.
Volume 3: Kleinere Shriften zur Methode und Geschichte der Volkswirthschaftlehre (1884–1915) 1935.
Volume 4: Schriften über Geldtheorie und Währungspolitik (1889–1893), 1936.
[Vol. 1 contains a biographical introduction to Menger by Hayek. Vol. 4 contains a complete list of Menger's known writings.]
Later 2nd German edition: Carl Menger, Gesammelte Werke. 4 vols. Tübingen, 1968–1970.
[“Collected Works”]
E-8 Henry Thornton. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). Edited and introduced by Friedrich A. Hayek. London: Allen and Unwin, 1939, 368 pp.
E-9 John Stuart Mill, The Spirit of the Age. Introduced by F.A. Hayek. Chicago: University of Chicago Press, 1942, xxxiii, 93 pp.
[Hayek's Introduction is entitled, “John Stuart Mill at the Age of Twenty-Four,” and surveys Mill's intellectual development at the time of Mill's famous essay, “The Spirit of the Age,” which represented important deviations from Benthamite Utilitarian liberalism.]
E-10 Capitalism and the Historians. Edited and introduced by F. A. Hayek. London: Routledge & Kegan Paul, and Chicago: University of Chicago Press, 1954, 188 pp. [The inspiration for the several papers presented was The Mont Pélèrin Society meetings held at Beauvallon in France in September 1951 on the distortions of historians and intellectuals in describing Capitalism and The Industrial Revolution. Hayek's Introduction (pp. 3–29) is entitled “History and Politics” and is reprinted in B-13 and (in German) as “Wirtschaftsgeschichte and Politik” [“Economic History and Politics”] in Ordo 7 (1955): 3–22. T. S. Ashton's first chapter is “The Treatment of Capitalism by Historians”; L. M. Hacker's second chapter is entitled “The Anticapitalist Bias of American Historians”; Bertrand de Jouvenel contributed chapter 3, “The Treatment of Capitalism by Continental Intellectuals”; T. S. Ashton's chapter 4, “The Standard of Life of the Workers in England, 1790–1830,” originally appeared in The Journal of Economic History, Supplement 9, 1949; the final article by W. H. Hutt, “The Factory System of The Early Nineteenth Century,” originally appeared in Economica (March 1926). Hayek's volume provoked many pro and con reviews. A sampling: Arthur Schlesinger, Jr., The Reporter (March 30, 1954): 38–40; Oscar Handlin, The New England Quarterly (March 1955): 99–107; Charles Wilson, Economic History Review (April 1956); Asa Briggs, The Journal of Economic History (Summer 1954); W. T. Eastbrook, The American Economic Review (September 1954); Max Eastman, The Freeman (February 22, 1954); Helmut Schoek, U.S.A. (July 14, 1954); Eric E. Lampard, The American Historical Review (October 1954); and John Chamberlain, Barron's (January 4, 1954.)]
E-11 Louis Rougier. The Genius of the West. Introduction by F.A. v. Hayek. Los Angeles: Nash Publishing (published for the Principles of Freedom Committee), 1971, pp. xv-xviii.
E-12 Gerald P. O'Driscoll, Jr. Economics as a Coordination Problem. The Contributions of Friedrich A. Hayek. Foreward by F.A. Hayek. Kansas City: Sheed Andrews and McMeel, Inc., 1977, pp. xi-xii.
E-13 Ludwig von Mises. Socialism: An Economic and Sociological Analysis. Translated by Jacques Kahane. 1981 Introduction by F.A. Hayek. Indianapolis: LibertyClassics, 1981, pp. xix-xxiv. Dated August 1978.
[Hayek's Foreward pays tribute to Mises for the anti-socialist impact that Mises’ Die Gemeinwirtschaft: Untersuchungen über den Sozialismus (Jena: Gustav Fischer, 1922) created on many intellectuals after the First World War.]
E-14 Ewald Schams. Gesammelte Aufsätze. Prefaced by F.A. Hayek. Ready in Spring 1983. Munich: Philosophia Verlag.
Articles in Journals, Newspapers, or Collections of Essays
A-1a “Das Stabilisierungsproblem in Goldwährungsländern.” Zeitschrift für Volkswirtschaft und Sozialpolitik, N.S. 4 (1924).
[“The Stabilization Problem for Countries on the Gold Standard.” See note A-2a for the biographical context of Hayek's first two article publications. The journal in which Hayek published some of his first articles was closely associated with the Austrian School of economics through its editorial direction. It underwent several name changes:
1892–1918: The journal was known as Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung. Organ der Gesellschaft österreichischer Volkswirt. [“Journal of Political Economy, Social Policy, and Administration. Publication of the Society of Austrian Political Economy”], and was published in Vienna by F. Tempsky.
1919–1920: Suspended publication.
1921–1927: It was known as Zeitschrift für Volkswirtschaft und Socialpolitik. [“Journal of Political Economy and Social Policy”] and was published in Vienna and Leipsig by F. Deuticke.
After 1927, the journal was superseded by Zeitschrift für Nationalökonomie. [“Journal of National Economy”]. See Bibliography A-22, etc.
The heavily Austrian School of economics-oriented editorial staff included:
1892–1918 Ernst von Plener (1841–1923)
1892–1914 Eugen von Böhm-Bawerk (1851–1914)
1892–1907 Karl Theodor von Inama-Sternegg (1843–1908)
1904–1916 Eugen von Philippovich (1858–1917)
1904–1918 Friedrich Freiherr von Wieser (1851–1926)
1911–1916 Robert Meyer (1855–1914)
1921–1927 R. Reisch (1866–?), Othmar Spann (1878–1950), and others.]
A-1b “Diskontopolitik und Warenpreise.” Der Österreichische Volkswirt 17 (1,2), (Vienna 1924).
[“Discount Policy and Commodity Prices.”]
A-2a “Die Währungspolitik der Vereinigten Staaten seit der Überwindung der Krise von 1920.” Zeitschrift für Volkswirtschaft und Sozialpolitik. N.S. 5 (1925).
[“The Monetary Policy in the United States Since Overcoming the Crisis of 1920.” Both this article and A-1a grew out of Hayek's post-graduate studies in America which he pursued from March 1923 to June 1924 at New York University. On the chronology of the Nobel Prize biography of Hayek: Official Announcement of the Royal Academy of Sciences, republished in the Swedish Journal of Economics 76 (December 1974): 469 ff. Also see Machlup, ed. (1976), pp. 16–17, as well as the annotation in the present Hayek Bibliography on item A-64. Hayek's American academic sojourn took place while he was on a leave of absence from his Austrian civil service position (1921–1926) as a legal consultant (along with Ludwig von Mises) for carrying out the provisions of the Treaty of St. Germain; see Bibliography A-145, p. 1 for Hayek's anecdote and background for his introduction to von Mises through von Wieser.]
A-2b “Das amerikanische Bankwesen seit der Reform von 1914.” Der Österreichische Volkswirt 17 (29–33), (Vienna 1925).
[“The American Banking System since the Reform of 1914.”]
A-3a “Bemerkungen zum Zurechnungsproblem.” Jahrbücher für Nationalökonomie und Statistik 124 (1926): 1–18.
[“Comments on the Problem of Imputation.” On the valuation of Producer goods. Compare Wilhelm Vleugel's Die Lösung des wirtschaftlichen Zurechnungsproblem bei Böhm-Bawerk und Wieser. Halle: Neimeyer (Königsberger Gelehrte Gesellschaft, Geisteswissenschaftliche Klasse, Shriften, Vol. 7, part 5), 1930.]
A-3b “Die Bedeutung der Konjunkturforschung für das Wirtschaftsleben.” Der Österreichische Volkswirt 19 (2), (Vienna 1926).
[“The Meaning of Business Cycle Research for Economic Life.”]
A-4 “Friedrich Freiherr von Wieser.” Jahrbücher für Nationalökonomie und Statistik 125 (1926): 513–530.
[Commemorative article on the occasion of the death of Hayek's Austrian School of economics mentor, von Wieser (1851–1926). Compare with Hayek's later article on von Wieser in The International Encyclopaedia of the Social Sciences (1968, 1972). Also see E-2 (1929) Hayek's German introduction and edition of von Wieser's Collected Writings. A-4 translated into English in an abridged form appears in The Development of Economic Thought: Great Economists in Perspective. Edited by Henry William Spiegel. New York & London: John Wiley & Sons, Inc. 1952, 1961, pp. 554–567.]
A-5a “Zur Problemstellung der Zinstheorie.” Archiv für Sozialwissenschaften und Sozialpolitik 58 (1927): 517–532.
[“On the Setting of the Problem of Rent Theory.”]
A-5b “Konjunkturforschung in Osterreich.” Die Industrie 32 (30), (Vienna 1927).
[“Business Cycle Research in Austria.”]
A-6 “Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des ‘Geldwertes.’” Weltwirtschaftliches Archiv 28 (1928): 33–76.
[“The Intertemporal Equilibrium System of Prices and the Movements of the ‘Value of Money.’”]
A-7a “Einige Bemerkungen über das Verhältnis der Geldtheorie zur Konjunkturtheorie.” Schriften des Vereins für Sozialpolitik 173/2 (1928): 247–295. Also see same journal, Volume 175, for a discussion.
[“Some Remarks on the Relationship between Monetary Theory and Business Cycle Theory.”]
[See B-1 with annotation. The journal in which Hayek published this article was the publication of the influential Verein für Sozialpolitik, founded in 1872 by (among others) Gustav Schmoller (1838–1917). This organization for social reform did not express a monolithic unity of doctrine, but was, nevertheless, excoriated by its opponents as a union of ‘Professorial Socialists’ (Katheder Sozialisten). See the interesting group photograph of a meeting of the Verein at the University of Zurich, September 11–13, 1928, showing the wonderfully variegated grouping that includes Hayek, von Mises, Machlup, A. Rüstow, Hunold, Morgenstern, Strigl, and Sombart: in Albert Hunold, “How Mises Changed My Mind.” The Mont Pélèrin Quarterly 3 (October 1961): 16–19. For background on the Verein, see Haney (1949), pp. 546, 820, 885. It was at the September 1928 meeting of the Verein that Hayek presented his paper, A-7a, which eventually grew into his Geldtheorie (1929).]
A-7b “Diskussionsbemerkungen über ‘Kredit und Konjunktur.’” Shriften des Vereins für Sozialpolitik 175, Verhandlungen 1928, (1928). [“Discussion Comments on ‘Credit and Business Cycle’”...(Transactions 1928).]
A-8 “Theorie der Preistaxen.” Közgazdasági Enciklopédia, Budapest, 1929.
[In Hungarian-German printing.]
A-9a “Gibt es einen ‘Widersinn des Sparens’? Eine Kritik der Krisentheorie von W.T. Foster und W. Catchings mit einigen Bemerkungen zur Lehre von de Beziehungen zwischen Geld und Kapital.” [“Is There a ‘Paradox of Saving’? A Critique of the Crises-Theory of W.T. Foster and W. Catchings with some Remarks on the Theory of the Relationship between Money and Capital.”] Zeitschrift für Nationalökonomie 1, no. 3 (1929): 125–169; revised and enlarged edition, Vienna: Springer, 1931. [English version: “The Paradox of Saving.” Economica 11, no. 32 (May 1931). Reprinted in B-4 (“Appendix”). The English translation was done by Nicholas Kaldor and Georg Tugendhat.]
A-9b “Wirkungen der Mietzinbeschränkungen.” Munich: Schriften des Vereins für Sozialpolitik 182 (1930)
[“The Repercussions of Rent Restrictions.” See P-1 for different treatments of the effects of rent control. A-9b formed the substance of Hayek's article in the Hayek-Friedman volume mentioned in P-1.]
A-9c “Bemerkungen zur vorstehenden Erwiderung Prof. Emil Lederers.” Zeitschrift für Nationalökonomie 1 (5), (1930).
[“Comments on the Preceding Reply of Prof. Emil Lederer.”]
A-10 “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 11, no. 33 (August 1931 - Part I): 270–295.
[See also A-11b.]
A-11a “The Pure Theory of Money: A Rejoinder to Mr. Keynes.” Economica 11, no. 34 (November 1931): 398–403.
[In the same issue of Economica, pp. 387–397, Keynes’ article appears: “A Reply to Dr. Hayek.”]
A-11b “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 12 (February 1932 - Part II): 22–44.
[See also A-10 and A-11a.]
A-11c “Das Schicksal der Goldwährung.” Der Deutsche Volkswirt 6 (20), (1932).
[“The Fate of the Gold Standard.” See P-8.]
A-11d “Foreign Exchange Restrictions.” The Economist 6 (1932).
A-12 “Money and Capital: A Reply to Mr. Sraffa.” Economic Journal 42 (June 1932): 237–249.
A-13 “Kapitalaufzehrung.” Weltwirtschaftliches Archiv 36 (July 1932/II): 86–108.
[“Capital Consumption.”]
A-14 “A Note on the Development of the Doctrine of ‘Forced Saving’.” Quarterly Journal of Economics 47 (November 1932): 123–133.
[Reprinted in B-4.]
A-15 “Gossen, Hermann Heinrich.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1932. Vol. 7, p. 3.
A-16 “Macleod, Henry D.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2, p. 30.
[Henry Dunning Macleod (1821–1902) was a Scottish economist who wrote The Theory and Practice of Banking, 2 vols, (1856) and The Theory of Credit, 2 vols, (1889–1891).]
A-17 “Norman, George W.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2.
A-18 “Philippovich, Eugen von.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 12, p. 116.
A-19 “Saving.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 13, pp. 548–552.
[Reprinted in revised form in B-4.]
A-20 “The Trend of Economic Thinking.” Economica 13 (May 1933): 121–137.
[Hayek's first inaugural lecture given at the University of London about a year after he assumed the Tooke professorship, in which speech he explained his general economic philosophy. See B-13, p. 254.]
A-21 Contribution to Gustav Clausing, ed. Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff. Munich: Duncker & Humblot, 1933.
[Translated into English in B-4 (Chapter 6) as “The Present State and Immediate Prospects of the Study of Industrial Fluctuations.” Arthur Spiethoff, (1873–1957), who is honored in this Festschrift, was born in 1873, studied under Schmoller, and devised a “non-monetary overinvestment theory” of the business cycle. See Haney (1949), p. 673.]
A-22 “Über Neutrales Geld.” Zeitschrift für Nationalökonomie 4 (October 1933).
[“Concerning Neutral Money.”]
A-23 “Capital and Industrial Fluctuations.” Econometrica 2 (April 1934): 152–167.
A-24a “On the Relationship between Investment and Output.” Economic Journal 44 (1934): 207–231.
A-24b “The Outlook for Interest Rates.” The Economist 7 (1934).
A-24c “Stable Prices or Neutral Money.” The Economist 7 (1934).
A-25 “Carl Menger.” Economica N.S. 1 (November 1934): 393–420.
[This is an English translation of Hayek's Introduction to Menger's Grundsätze in E-7. Reprinted in The Development of Economic Thought: Great Economists in Perspective. Edited by Henry William Spiegel. New York and London: John Wiley & Sons, Inc. 1952, 527–553. Also reprinted in Principles of Economics by Carl Menger. Translated by James Dingwall and Bert F. Hoselitz. With an Introduction by F. A. Hayek. New York & London: New York University Press, 1981, pp. 11–36. See A-131a.]
A-26 “Preiserwartungen, Monetäre Störungen und Fehlinvestitionen.” Nationalökonomisk Tidsskrift 73, no. 3 (1935).
[Reprinted in a revised form in B-4 as “Price Expectations, Monetary Disturbances and Malinvestments.” Originally delivered as a lecture on December 7, 1933 in the Sozialökonomisk Samfund in Copenhagen. First published in German and later in French in the Revue de Science Economique, Liège (October, 1935).]
A-27a “The Maintenance of Capital.” Economica N.S. 2 (1935): 241–276.
[Reprinted in B-4.]
A-27b “A Regulated Gold Standard.” The Economist (May 11, 1935).
A-28 “Spor miedzy szkola ‘Currency’ i szkola ‘Banking’.” Ekonomista 55 (Warsaw, 1935).
A-29 “Edwin Cannan” (Obituary). Zeitschrift für Nationalökonomie 6 (1935): 246–250.
[Cannan (1861–1935) is also celebrated by Hayek in A-72. Cannan associated himself at the London School of Economics with a group who developed liberal theory. This group included Lionel Robbins, Cannan's successor, and his colleague Sir Arnold Plant (see Plant, 1969), Sir Theodore Gregory (Athens), F.C. Benkam (Singapore), W.H. Hutt (South Africa), and F.W. Paish (Paris).
A-30 “Technischer Fortschritt und Überkapazität.” Österreichische Zeitschrift für Bankwesen 1 (1936).
[“Technical Progress and Overcapacity.”]
A-31 “The Mythology of Capital.” Quarterly Journal of Economics 50 (1936): 199–228.
[Reprinted in William Fellner and Bernard F. Haley, eds., Readings in the Theory of Income Distribution. Philadelphia: 1946.]
A-32 “Utility Analysis and Interest.” Economic Journal 46 (1936): 44–60.
A-33 “La situation monétaire internationale.” Bulletin Périodique de la Societé Belge d'Études et d'Expansion (Brussels), No. 103. (1936).
[“The International Monetary Situation.”]
A-34 “Economics and Knowledge.” Economica N.S. 4 (February 1937): 33–54.
[Reprinted in B-7. Also reprinted in J. M. Buchanan and G. F. Thirlby (eds.) L.S.E. Essays on Cost. New York and London: New York University Press, 1981 as chapter 3. Originally presented as a presidential address to the London Economic Club, 10 November 1936.]
A-35 “Einleitung zu einer Kapitaltheorie.” Zeitschrift für Nationalökonomie 8 (1937): 1–9.
[“Introduction to a Theory of Capital.”]
A-36 “Das Goldproblem.” Österreichische Zeitschrift für Bankwesen 2 (1937).
[“The Gold Problem.”]
A-37a “Investment that Raises the Demand for Capital.” Review of Economic Statistics 19 (November 1937).
[Reprinted in B-4.]
A-37b “Freedom and the Economic System.” Contemporary Review (April 1938).
[Reprinted in enlarged form in P-2.]
A-38 “Economic Conditions of Inter-State Federation.” New Commonwealth Quarterly 5 (London, 1939).
[Reprinted in B-7.]
A-39 “Pricing versus Rationing.” The Banker 51 (London, September 1939).
A-40 “The Economy of Capital.” The Banker 52 (London, October 1939).
A-41 “Socialist Calculation: The Competitive ‘Solution’.” Economica N.S. 7 (May 1940): 125–149.
[Reprinted in B-7.]
A-42 “The Counter-Revolution of Science.” Parts I-III. Economica N.S. 8 (February - August 1941): 281–320.
[Reprinted in B-9.]
A-43 “Maintaining Capital Intact: A Reply [to Professor Pigou.]” Economica N.S. 8 (1941): 276–280.
A-44 “Planning, Science and Freedom.” Nature 148 (November 15, 1941).
A-45 “The Ricardo Effect.” Economica N.S. 9 (1942).
[Reprinted in B-7. See also in B-17, Chapt. 11: “Three Elucidations of the Ricardo Effect,” and A-127.]
A-46 “Scientism and the Study of Society.” Part I: Economica N.S. 9 (1942). Part II: Economica 10 (1943). Part III: Economica 11 (1944).
[Reprinted in B-9.]
A-47 “A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’.” Economica N.S. 9 (November 1942): 383–385.
A-48 “A Commodity Reserve Currency.” Economic Journal 53 (1943).
[Reprinted in B-7 as chapter 10. Also reprinted in part as a pamphlet, “Material Relating to Proposals for an International Commodity Reserve Currency,” submitted to The International Monetary and Financial Conference at Bretton Woods, N.H. by the Committee for Economic Stability (1944). #380 of the F. A. Harper Archives at The Institute for Humane Studies.]
A-49 “The Facts of the Social Sciences.” Ethics 54 (October 1943).
[Reprinted in B-7.]
A-50 “The Geometrical Representation of Complementarity.” Review of Economic Studies 10 (1942–1943): 122–125.
A-51 “Gospodarka planowa a idea planowania prawa.” Economista Polski (London, 1943).
[Cf. Chapter 6 of B-6: “Planning and the Rule of Law.”]
A-52 Edited: “John Rae and John Stuart Mill: A Correspondence.” Economica N.S. 10 (1943): 253–255.
A-53 “The Economic Position of South Tyrol.” In: Justice for South Tyrol. London: 1943.
[Compare with P-3.]
A-54 “Richard von Strigl” (Obituary). Economic Journal 54 (1944): 284–286.
[Strigl who died in 1944 was a “Neo-Austrian” who developed the theory of saving and investment and analyzed monopolistic competition theory.]
A-55 “The Use of Knowledge in Society.” American Economic Review 35 (September 1945): 519–530.
[Reprinted in B-7 and in a revised, abridged version as a pamphlet; Menlo Park, CA: Institute for Humane Studies. (Reprint No. 5), no date (1971, 1975).]
A-56 “Time-Preference and Productivity: A Reconsideration.” Economica, N.S. no. 4, 12 (February 1945): 22–25.
A-57 Edited: “‘Notes on N.W. Senior's Political Economy’ by John Stuart Mill.” Economica N.S. 12 (1945): 134–139.
A-58 “Nationalities and States in Central Europe.” Central European Trade Review 3 (London, 1945): 134–139.
A-59 “Fuld Beskaeftigelse.” Nationalökonomisk Tidsskrift 84 (1946): 1–31.
A-60 “The London School of Economics 1895–1945.” Economica N.S. 13 (February 1946): 1–31.
A-61 “Probleme und Schwierigkeiten der englischen Wirtschaft.” Schweizer Monatshefte 27 (1947).
[“Problems and Difficulties of the English Economy.”]
A-62 “Le plein emploi.” Economie Appliquée 1, no. 2–3, (Paris, 1948): 197–210.
[“Full Employment.”]
A-63a “Der Mensch in der Planwirtschaft.” In Simon Moser (ed.) Weltbild und Menschenbild. Innsbruck and Vienna: 1948.
[“Man in the Planned Economy.”]
A-63b “Die politischen Folgen der Planwirtschaft.” Die Industrie. Zeitschrift der Vereinigung Österreichischer Industrieller. No. 3 (Vienna, January 1948).
[“The Political Effects of the Planned Economy.”]
A-64 “Wesley Clair Mitchell 1874–1948” (Obituary). Journal of the Royal Statistical Society 111 (1948).
[Compare with Arthur F. Burns’ commemoration of Mitchell in the Twenty-Ninth Report of The National Bureau of Economic Research. New York: 1969; adapted in The Development of Economic Thought. Edited by Henry William Spiegel. New York, 1952, 1961, pp. 414–442. Also note Hayek's personal association with Mitchell, as indicated in B-17, p. 3, note 3, during Hayek's stay in America during the early 1920s. Also note the correspondence between Wesley Mitchell and Hayek mentioned in Emil Kauder, A History of Marginal Utility Theory. Princeton University Press, 1965.]
A-65a “The Intellectuals and Socialism.” The University of Chicago Law Review 16, no. 3 (Spring 1949): 417–433. German translation in Schweizer Monatshefte 29 (1944–50); Norwegian translation (1951).
[Reprinted in B-13 and by the Institute for Humane Studies, 1971.]
A-65b “A Levy on Increasing Efficiency. The Economics of Development Charges.” The Financial Times (April 26–28, 1949).
A-66 “Economics.” Chambers’ Encyclopaedia 4 (Oxford 1950).
A-67 “Ricardo, David.” Chambers’ Encyclopaedia 11 (Oxford 1950).
A-68 “Full Employment, Planning and Inflation.” Institute of Public Affairs Review 4 (6) (Melbourne, Australia 1950).
[Reprinted as Chapter 19 in B-13. Also in German (1951) and Spanish (1960).]
A-69a “Capitalism and the Proletariat.” Farmand 7, no. 56 (Oslo: February 17, 1951).
A-69b “Gleichheit und Gerechtigkeit.” Jahresbericht der Züricher Volkswirt-schaftlichen Gesellschaft (1951).
[“Equality and Justice.”]
A-70 “Comte and Hegel.” Measure 2 (Chicago, July 1951).
[Reprinted in B-9.]
A-71 “Comments on ‘The Economics and Politics of the Modern Corporation’.” The University of Chicago Law School, Conference Series no. 8, (December 7, 1951).
A-72 “Die Überlieferung der Ideale der Wirtschaftsfreiheit.” Schweizer Monatshefte 31, No. 6 (1951).
[“The Transmission of the Ideals of Economic Freedom.” First in German (1951) and later in an English translation as “The Ideals of Economic Freedom: A Liberal Inheritance,” in The Owl (London 1951), pp. 7–12. A “corrected version” in English is reprinted as Chapter 13 of B-13. Published in The Freeman 2 (July 28, 1952): 729–731, as “A Rebirth of Liberalism.” A remarkably similar overview of the various liberal currents that flowed into modern economic liberalism is given by Carlo Mötteli (a financial editor for Neue Zücher Zeitung) in Swiss Review of World Affairs 1, no. 8 (November 1951) and entitled “The Regeneration of Liberalism,” reprinted in The Mont Pelerin Quarterly 3 (October 1961): 29–30.]
A-73a “Die Ungerechtigkeit der Steuerprogression.” Schweizer Monatshefte 32 (November 1952).
[“The Injustice of the Progressive Income Tax.” cf. A-79 and A-73b of which this is a translation.]
A-73b “The Case Against Progressive Income Taxes.” The Freeman 4 (December 28, 1953): 229–232.
A-74a “Leftist Foreign Correspondent.” The Freeman 3 (January 12, 1953): 275.
A-74b “The Actonian Revival.” Review of Lord Acton by Gertrude Himmelfarb and Acton's Political Philosophy by G. E. Fasnacht. The Freeman 3 (March 23, 1953): 461–462.
A-74c “Decline of the Rule of Law. Part I.” The Freeman 3 (April 20, 1953): 518–520; Part II The Freeman 3 (May 4, 1953): 561–563.
A-74d “Substitute for Foreign Aid.” The Freeman 3 (April 6, 1953): 482–484.
A-74e “Entstehung und Verfall des Rechtsstaatsideales.” In: Albert Hunold (ed.) Wirtschaft ohne Wunder. Volkswirtschaftliche Studien für das Schweizerische Institut für Auslandsforschung. Zurich, 1953.
[“The Rise and Fall of the Ideal of the Constitutional State.”]
A-75a “Marktwirtschaft und Wirtschaftspolitik.” Ordo 6 (February 1954): 3–18.
[“Market Economy and The Economic Policy.”]
A-75b “Wirtschaftsgeschichte und Politik.” Ordo 7 (March 1955).
[“Economic History and Politics.” See E-10.]
A-76 “Degrees of Explanation.” The British Journal for the Philosophy of Science 6, no. 23 (1955): 209–225.
[Received by journal Nov. 11, 1954. Hayek acknowledges indebtedness to Chester Barnand, Heinrich Klüver, Herbert Lamm, Michael Polanyi, Karl Popper, Warren Weaver and the members of a Faculty Seminar of the Committee of Social Thought in the University of Chicago “for reading and commenting on an earlier draft of this paper.” Reprinted in revised form in B-13, Chapter 1.]
A-77 “Towards a Theory of Economic Growth, Discussion of Simon Kuznets’ Paper.” In: National Policy for Economic Welfare at Home and Abroad. New York: Columbia University Bicentennial Conference, 1955.
A-78 “Comments.” In: Congress for Cultural Freedom (ed.) Science and Freedom. London: (Proceedings of the Hamburg Conference of the Congress for Cultural Freedom) 1955.
[Also printed in German.]
A-79 “Progressive Taxation Reconsidered.” In: Mary Sennholz (ed.) On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises. Princeton: D. von Nostrand Co., 1956. Presented on the Occasion of the Fiftieth Anniversary of his [von Mises'] Doctorate, February 26, 1956.
A-80 “The Dilemma of Specialization.” In Leonard D. White (ed.) The State of the Social Sciences. Chicago: University of Chicago Press, 1956.
[Reprinted in B-13, Chapter 8.]
A-81a “Uber den ‘Sinn’ sozialer Institutionen.” Schweizer Monatshefte 36 (October 1956).
[“On the ‘Meaning’ of Social Institutions.”]
A-81b “Freedom & The Rule of Law.” (The Third Programme, BBC Radio; 1st of 2 talks.) The Listener (Dec. 13, 1956).
A-82a “Was ist und was heisst ‘sozial’?” In Albert Hunold (ed.) Masse und Demokratie. Zürich: 1957.
[“What is ‘Social’—What Does It Mean?” Translated in an unauthorized English translation in Freedom and Serfdom (ed. A. Hunold), Dordrecht, 1961. The reprint in B-13, Chapter 17 is a revised version of the unauthorized English translation “which in parts gravely misrepresented the meaning of the original.”]
A-82b Review of Mill and His Early Critics by J.C. Rees. Leicester: University College of Leicester, 1956. In Journal of Modern History (June 1957): 54.
A-83 “Grundtatsachen des Fortschritts.” Ordo 9 (1957): 19–42.
[“The Fundamental Facts of Progress.”]
A-84 “Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147–152.
[Reprinted in B-13, Chapter 21.]
A-85a “La Libertad, La Economia Planificada y el Derecho.” Temas Contemporaneos (Buenos Aires) 3 (1958).
[“Liberty, the Planned Economy, and the Law.”]
A-85b “Das Individuum im Wandel der Wirtschaftsordnung.” Der Volkswirt No. 51–52 (Frankfurt am Main 1958).
[“The Individual and Change of Economic System.”]
A-86 “The Creative Powers of a Free Civilization.” In: Felix Morley (ed.) Essays in Individuality. Philadelphia: University of Pennsylvania Press, 1958.
A-87 “Freedom, Reason, and Tradition.” Ethics 68 (1958).
A-88a “Gleichheit, Wert und Verdienst.” Ordo 10 (1958): 5–29.
[“Equality, Value, and Profit.”]
A-88b “Attualitá di un insegnamento,” In: Angelo Dalle Molle, ed. Il Maestro dell’ Economia di Domani (Festschrift for Luigi Einaudi on his 85th Birthday). Verona, 1958, pp. 20–24.
[“The Reality of a Teaching,” In The Master of the Economics of the Future. Luigi Einaudi (1874–1961), who is honored in this Festschrift, was a classical liberal Italian economist and statesman. He was the first president of Italy (1948–1955). Following World War II he was governor of the Bank of Italy and devised programs for monetary stabilization. Einaudi is celebrated by Hayek, in an allusion, in A-72.]
A-89 “Liberalismus (1) Politischer Liberalismus.” Handwörterbuch der Sozialwissenschaften 6 (Stuttgart-Tübingen-Göttingen, 1959).
[“Liberalism (1) Political Liberalism.” See Chapter 9 of B-17.]
A-90 “Bernard Mandeville.” Handwörterbuch der Sozialwissenschaften 7 (Stuttgart-Tübingen-Göttingen, 1959).
A-91 “Unions, Inflation and Profits.” In: Philip D. Bradley (ed.) The Public Stake in Union Power. Charlottesville, University of Virginia Press: 1959.
[Reprinted in B-13.]
A-92 “Freiheit und Unabhängigkeit.” Schweizer Monatshefte 39 (1959).
[“Freedom and Independence.”]
A-93 “Verantwortlichkeit und Freiheit.” In: Albert Hunold (ed.) Erziehung zur Freiheit. Erlenbach-Zürich: E. Rentsch, 1959: 147–170.
[“Responsibility and Freedom.”]
A-94 “Marktwirtschaft und Strukturpolitik.” Die Aussprache 9 (1959).
[“Market Economy and Structural Policy.”]
A-95 “An Röpke.” In Wilhelm Röpke, Gegen die Brandung. Zürich: E. Rentsch, 1959.
[On Röpke.”]
A-96a “The Free Market Economy: The Most Efficient Way of Solving Economic Problems.” Human Events 16, no. 50 (Dec. 16, 1959).
[Reprinted in P-6.]
A-96b “The Economics of Abundance,” in Henry Hazlitt, ed. The Critics of Keynesian Economics. Princeton and London: Van Nostrand Co., 1960, pp. 126–130.
A-97a “The Social Environment.” In B. H. Bagdikian (ed.) Man's Contracting World in an Expanding Universe Providence, R.I.: 1960.
A-97b “Freedom, Reason and Tradition.” Proceedings of the 16th Annual Meeting: The Western Conference of Prepaid Medical Service Plans, (Winnipeg 1960).
A-97c “Progenitor of Scientism.” National Review (1960).
A-97d “Gobierno Democratico y Actividad Economica.” Espejo 1 (Mexico City 1960).
[“Democratic Government and Economic Activity.”]
A-98 “The Corporation in a Democratic Society: In Whose Interest Ought It and Will It Be Run?” In: M. Anshen and G. L. Bach (eds.) Management and Corporations 1985. New York: McGraw-Hill, 1960.
[Reprinted in B-13.]
A-99a “The ‘Non Sequitur’ of the ‘Dependence Effect’.” The Southern Economic Journal 27 (April 1961).
[Reprinted in B-13, Chapter 23.]
A-99b “Freedom and Coercion: Some Comments and Mr. Hamowy's Criticism.” New Individualist Review 1, no. 2 (Summer 1961): 28–32.
A-100a “Die Ursachen der ständigen Gefährdung der Freiheit.” Ordo 12 (1961): 103–112.
[“The Origins of the Constant Danger to Freedom.”]
A-100b “How Much Education at Public Expense?” Context 1 (Chicago 1961).
A-101 “The Moral Element in Free Enterprise.” In: National Association of Manufacturers (eds.) The Spiritual and Moral Significance of Free Enterprise. New York: 1962.
[Reprinted in B-13 as Chapter 16. Originally delivered as an address to the 66th Congress of American Industry organized by the N.A.M. New York, December 6, 1961.]
A-102 “Rules, Perception and Intelligibility.” Proceedings of the British Academy 48 (1962), London, 1963, pp. 321–344.
[Reprinted as Chapter 3 in B-13.]
A-103a “Wiener Schule.” Handwörterbuch der Sozialwissenschaften 12 (Stuttgart-Tübingen-Göttingen, 1962).
[“The Vienna School.”]
A-103b “The Uses of ‘Gresham's Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).
[Reprinted in B-13, Chapter 24.]
A-104 “Alte Wahrheiten und neue Irrtümer.” In: Internationales Institut der Sparkassen, ed. Das Sparwesen der Welt, Proceedings of the 7th International Conference of Savings Banks. Amsterdam: 1963.
[“Old Truths and New Errors.” Reprinted in B-14; Italian translation in Il Risparmio (Milan) 11 (1963).]
A-105 “Arten der Ordnung.” Ordo 14 (1963).
English version under the title “Kinds of Order in Society.” New Individualist Review (University of Chicago) 3, no. 2 (Winter 1964): 3–12. [Reprinted in B-14.] [The five volumes of New Individualist Review (1961–1968) in which “Kinds of Order” appears have been published in one volume as New Individualist Review. Indianapolis: Liberty Press, 1981. Reprinted as pamphlet: Menlo Park, California: The Institute for Humane Studies (Studies in Social Theory No. 5), 1975. Hayek used this essay as the basis of the second chapter of Vol. I of Law, Legislation and Liberty (B-15). Reprinted in German in B-14.]
A-106 “Recht, Gesetz und Wirtschaftsfreiheit.” In: Hundert Jahre Industrie und Handelskammer zu Dortmund 1863–1963. Dortmund, 1963.
[“Right, Law, and Economic Freedom.” Reprinted in B-14.]
A-107 Introduction to “The Earlier Letters of John Stuart Mill.” In F.E. Mineka, ed. John Stuart Mill, Vol. XII. Toronto: Toronto University Press and London: Routledge & Kegan Paul, 1963.
A-108 “The Legal and Political Philosophy of David Hume.” Il Politico 28, no. 4 (December 1963): 691–704.
[Lecture delivered for the Faculty of Law and Political Science of the University of Freiburg im Breisgau on July 18, 1963. Reprinted as chapter 7 of B-13. Also (in German) in B-14.]
A-109 “The Theory of Complex Phenomena.” In Mario A. Bunge (ed.) The Critical Approach to Science and Philosophy: Essays in Honor of Karl R. Popper. New York: The Free Press of Glencoe, Inc., 1964.
[Reprinted in B-13; see P-11c.]
A-110 Parts of “Commerce, History of.” Encyclopaedia Britannica, vol. VI. Chicago: 1964.
A-111 “Die Anschauungen der Mehrheit und die zeitgenössische Demokratie.” Ordo 15/16 (1965): 19–41.
[“The Perception of the Majority and Contemporary Democracy.” Reprinted in B-14.]
A-112 “Kinds of Rationalism.” The Economic Studies Quarterly 15, no. 3 (Tokyo, 1965).
[Reprinted in B-13, Chapter 5. Originally delivered as a lecture on April 27, 1964 at Rikkyo University, Tokyo. German translation in B-14.]
A-113 “Personal Recollections of Keynes and the ‘Keynesian Revolution’.” The Oriental Economist 34 (Tokyo, January 1966).
[German translation in B-14. Reprinted in B-17.]
A-114 “The Misconception of Human Rights as Positive Claims.” Farmand Anniversary Issue II/12 (Oslo, 1966): 32–35.
A-115 “The Principles of a Liberal Social Order.” Il Politico 31, no. 4 (December 1966): 601–618.
[Paper submitted to The Tokyo Meeting of the Mont Pélèrin Society, Sept. 5–10, 1966. German translation in Ordo 18 (1967); also reprinted in B-14. Reprinted as Chapter 11 of B-13 in a slightly altered version, deleting final poem linking spontaneous order to Lao-Tzu's Taoism of wu-wei. See Chiaki Nishiyama (1967) for a discussion of and reflection on Hayek's paper.]
A-116 “Dr. Bernard Mandeville.” Proceedings of the British Academy 52 (1966), London 1967.
[“Lecture on a Master Mind” delivered to the British Academy on March 23, 1966. Reprinted as Chapter 15 of B-17. German translation in B-14.]
A-117 “L'Etalon d'Or — Son Evolution.” Revue d'Economie Politique 76 (1966).
[“The Gold Standard—Its Evolution.”]
A-118 “Résultats de l'action des hommes mais non de leurs desseins.” In: Les Fondements Philosophiques des Systèmes Economiques. Textes de Jacques Rueff et essais rédiges en son honneur. (Paris 1967).
[Translated in English in B-13 as “The Results of Human Action but not of Human Design.” German translation in B-14.]
A-119 Remarks on “Ernst Mach und das sozialwissenschaftliche Denken in Wien.” In Ernst Mach Institut (ed.), Symposium aus Anlass des 50. Todestages von Ernst Mach. (Freiburg i. B., 1967.)
[See (B-10) for the influence of Mach (1838–1916) on Hayek. A-119 is part of a symposium commemorating the 50th anniversary of Mach's death: “Ernst Mach and Social Science Thought in Vienna.”]
A-120 “Rechtsordnung und Handelnsordnung.” In Eric Streissler (ed.), Zur Einheit der Rechts-und Staatswissenschaften, Vol. 27. Karlsruhe, 1967.
[“Legal Order and Commercial Order.” Reprinted in B-14.]
A-121 “The Constitution of A Liberal State.” Il Politico 32, no. 1 (Sept. 1967): 455–461.
[German translation in Ordo 19 (1968) and in B-14.]
A-122a “Bruno Leoni, the Scholar.” Il Politico 33, no. 1 (March 1968): 21–25. Also translated in the same journal as “Bruno Leoni lo studioso.” (pp. 26–30). In commemoration of Leoni's death (November 21, 1967).
A-122b “Ordinamento giuridico e ordine sociale.” Il Politico 33, no. 4 (December 1968): 693–724.
[“Juridical Regulation and Social Order.”]
A-123a “A Self-Generating Order for Society.” In John Nef (ed.), Towards World Community. The Hague, 1968.
A-123b Speech on the 70th Birthday of Leonard Reed. In: What's Past is Prologue. New York: Foundation for Economic Education, 1968.
A-124 “Economic Thought VI: The Austrian School.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & Free Press, 1968, 1972; Volume 4, pp. 458–462.
A-125a “Menger, Carl.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Company & Free Press, 1968, 1972; Volume 10, pp. 124–127.
A-125b “Wieser, Friedrich von.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & The Free Press, 1968, 1972; Volumes 15, 16, 17, pp. 549–550.
A-126 “Szientismus.” In W. Bernsdorf (ed.), Wörterbuch der Soziologie, Edited by W. Bernsdorf. 2nd ed. (Stuttgart, 1969).
[“Scientism.”]
A-127 “Three Elucidations of the ‘Ricardo Effect’.” Journal of Political Economy 77 (March-April 1969): 274–285.
[Reprinted in B-13 and (in German) in B-14.]
A-128a “The Primacy of the Abstract.” In Arthur Koestler and J. R. Smythies (eds.), Beyond Reductionism—The Alpbach Symposium. London, 1969.
[Reprinted in B-17.]
A-128b “Marktwirtschaft oder Syndikalismus?” In: Protokoll des Wirtschaftstages der CDU/DSU (Bonn 1969).
[“Market Economy or Syndicalism?”]
A-129a “Il sistema concorrenziale come strumento di conoscenza.” L'industria 1 (Turin, January-March 1970): 34–50.
[Translated with an English summary as “The Competitive System as a Tool of Knowledge.”]
A-129b “Principles or Expediency?” In Toward Liberty: Essays in Honor of Ludwig von Mises on the Occasion of his 90th Birthday, September 29, 1971. Sponsoring Committee F. A. von Hayek et.al; F. A. Harper, Secretary. Menlo Park, California: Institute for Humane Studies, 1971, vol I, pp. 29–45.
A-129c “Nature vs. Nurture Once Again.” A comment on C. D. Darlington, The Evolution of Man and Society, London, 1962 in Encounter (February 1971).
[Reprinted as Chapter 19 in B-17.]
A-130 “The Outlook for the 1970's: Open or Repressed Inflation.” In Sudha R. Shenoy (ed.) A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40-Years’ Running Commentary on Keynesianism. London: Institute of Economic Affairs (Hobart Paperback 4), 1972.
[This actually appeared in a pamphlet format (P-11b) to which Hayek adds a new article, “The Campaign Against Keynesian Inflation.” This article is also reprinted as Chapter 13 of B-17.]
A-131a “Die Stellung von Mengers ‘Grundsätzen’ in der Geschichte der Volkswirtschaftslehre.” Zeitschrift für Nationalökonomie 32, no. 1 (Vienna, 1972.)
English version: “The Place of Menger's Grundsätze in the History of Economic Thought.” In J. R. Hicks and W. Weber (eds.), Carl Menger and the Austrian School of Economics. Oxford, 1973, pp. 1–14. Reprinted as Chapter 17 in B-17. Compare with E-7.
[The 1934 earlier and distinct biographical study entitled “Carl Menger” found in E-7 was “written as an Introduction to the Reprint of Menger's Grundsätze der Volkwirtschaftslehre which constitutes the first of a series of four reprints embodying Menger's chief published contributions to Economic Science and which were published by the London School of Economics as Numbers 17 to 20 of its Series of Reprints of Scarce Works in Economics and Political Science.” An English translation of this earlier “Carl Menger” Introduction can be found in Carl Menger, Principles of Economics. A translation of Menger's Grundsätze by James Digwall and Bert F. Hoselitz, with an Introduction (“Carl Menger”) by F. A. Hayek. New York and London: New York University Press, 1981, pp. 11–36.
A-131b “In Memoriam Ludwig von Mises 1881–1973.” Zeitschrift für Nationalökonomie 33 (Vienna 1973)
A-131c “Tribute to von Mises, Vienna Years.” National Review (Autumn 1973).
A-131d “Talk at the Mont Pélèrin.” Newsletter of the Mont Pélèrin Society 3 (Luxembourg 1973).
A-132a “Inflation: The Path to Unemployment.” Addendum 2 to Lord Robbins et. al. Inflation: Causes, Consequences, Cures: Discourses on the Debate between the Monetary and the Trade Union Interpretations. London: The Institute for Economic Affairs (IEA Readings, No. 14), 1974, pp. 115–120.
[Reprinted from The Daily Telegraph of London (October 15 and 16, 1974).]
A-132b “Inflation and Unemployment.” New York Times (Nov. 15, 1974).
[Reprinted from The Daily Telegraph of London.]
A-132c Hayek, F.A. “Introduction” to Catallaxy: The Science of Exchange. Paper read at the first meeting of The Carl Menger Society, London, December 1974. [Hayek did not continue his intention to complete this book. The “Introduction” along with comment and discussion by Hayek, Lionel Robbins, and others is available in transcription at the Institute for Humane Studies.]
A-132d “The Pretence of Knowledge.” An Alfred Nobel Memorial Lecture, delivered December 11, 1974 at the Stockholm School of Economics. In Les Prix Nobel en 1974. Stockholm: Nobel Foundation, 1975.
[Reprinted in Full Employment at Any Price [P-13]. (Occasional Paper 45), Institute of Economic Affairs, London 1975. Also reprinted in Unemployment and Monetary Policy: Government as Generator of the Business Cycle with a foreward by Gerald O'Driscoll Jr. San Francisco: Cato Institute, 1979, pp. 23–36. This has also been reprinted as Chapter 2 of B-17.]
A-132e “Freedom and Equality in Contemporary Society.” PHP 4 (The PHP Institute, Tokyo), (Tokyo 1975).
A-132f “Economics, Politics & Freedom: An Interview with F. A. Hayek.” Interview conducted by Tibor Machan in Salzburg, Austria. Reason 6 (February 1975): 4–12.
A-133a “Die Erhaltung des liberalen Gedankengutes.” In Friedrich A. Lutz (ed.) Der Streit um die Gesellschaftsordnung (Zurich 1975).
[“The Preservation of the Liberal Ideal of Thought.”]
A-133b T.V. interview on “NBC Meet the Press.” Sunday, June 22, 1975. Meet the Press 19, no. 25 (June 22, 1975) Washington D.C.: Merkle Press, Inc. 1975, 9 pp.
A-133c “The Courage of His Convictions.” In Tribute to Mises 1881–1973. The Session of the Mont Pélèrin Society at Brussels 1974 devoted to the Memory of Ludwig von Mises. Chislehurst, 1975.
A-133d “The Formation of the Open Society.” Address given by Professor Friedrich A. von Hayek at the University of Dallas Commencement Exercises, May 18, 1975. [Unpublished typescript, available at the Institute for Humane Studies.]
A-134a “Types of Mind.” Encounter 45 (September 1975).
[This was revised and retitled “Two Types of Mind” in Chapter 4 of B-17.]
A-134b “Politicians Can't Be Trusted with Money.” [(Newspaper editor's title. Paper delivered in September at the Gold and Monetary Conference in Lausanne, Switzerland.) The Daily Telegraph of London, Part I (September 30, 1975); Part II “Financial Power to the People” (newspaper editor's title October 1, 1975).]
A-135a “A Discussion with Friedrich Hayek.” American Enterprise Institute. Domestic Affairs Studies 39 (Washington, D.C. 1975).
A-135b “World Inflationary Recession.” Paper presented to the International Conference on World Economic Stabilization, April 17–18, 1975, co-sponsored by the First National Bank of Chicago and the University of Chicago. First Chicago Report 5/1975.
A-136a “The New Confusion about Planning.” The Morgan Guaranty Survey (January 1976): 4–13.
[German translation in Die Industrie 10 (1976).]
A-136b “Institutions May Fail, but Democracy Survives.” U.S. News and World Report (March 8, 1976.)
A-136c “Adam Smith's Message in Today's Language.” Daily Telegraph, London (March 9, 1976.)
[Reprinted as Chapter 16 of B-17.]
[The gap in identification number (A-137 through A-141) will be supplied in subsequent revisions of this Hayek bibliography.]
A-142 “Il Problema della Moneta Oggi.” Academia Nationale dei Lincei. Atti de Convegni Rome (1976).
[“The Problem of Money Today.”]
A-143 “Remembering My Cousin Ludwig Wittgenstein.” Encounter (August 1977).
A-144a “Die Illusion der sozialen Gerechtigkeit.” In Schicksal? Grenzen der Machbarkeit. Eine Symposion. Munchen: Deutscher Taschenbuch Verlag, 1977.
[“The Illusion of Social Justice.” Cf. B-16, Vol. II of Law, Legislation and Liberty: The Mirage of Social Justice esp. Chapt. 9, also note Chapter 5 of B-17: “The Atavism of Social Justice.”]
A-144b “Toward Free Market Money.” Wall Street Journal (August 19, 1977).
A-144c “Persona Grata: Interview with Friedrich Hayek.” Interviewed by Albert Zlabinger, World Research INK 1, no. 12 (September, 1977): 7–9. Also available as a 30 minute 16mm color movie, entitled “Inside the Hayek Equation,” from World Research, Inc.; Campus Studies Division; 11722 Sorrento Valley Rd., San Diego, CA 92121.
A-144d “An Interview with Friedrich Hayek.” by Richard Ebeling. Libertarian Review (September 1977): 10–16.
A-144e “Is There a Case for Private Property.” Firing Line. Columbia S.C.: Southern Educational Communications Association, 1977.
A-145 “Coping with Ignorance.” Ludwig von Mises Memorial Lecture. Imprimis (Hillsdale College) 7 (July 1978) 6 pp.
[Reprinted in Cheryl A. Yurchis (ed.) Champions of Freedom. Hillsdale, Michigan: Hillsdale College Press, (The Ludwig von Mises Lecture Series Vol. 5) 1979.]
A-146a “The Miscarriage of the Democratic Ideal.” Encounter (March 1978). [A slightly revised version later appeared as Chapter 16 of B-18.]
A-146b “Will the Democratic Ideal Prevail?” In Arthur Seldon, ed. The Coming Confrontation: Will the Open Society Survive to 1989? London: The Institute for Economic Affairs (Hobart Paperback No. 12), 1978, pp. 61–73.
[Revised version of an article which appeared in Encounter (March 1978).]
A-147 “Die Entthronung der Politik.” In Uberforderte Demokratie? hrsg. von D. Frei, Sozialwissenschaftliche Studien de schweizerischen Instituts für Auslandsforschung, N.F. 7, Zurich 1978.
[“The Dethronement of Politics” in Has Democracy Overextended Itself? See also Chapter 18 of B-18: “The Containment of Power and the Dethronement of Politics.”]
A-148a “Can we still avoid inflation?” In Richard M. Ebeling (ed.) The Austrian Theory of the Trade Cycle and Other Essays. New York: Center for Libertarian Studies (Occasional Paper Series 8) 1978.
A-148b “Exploitation of Workers by Workers.” The last of three talks given by Professor F. A. Hayek under the title, “The Market Economy” (Radio 3, BBC). The Listener (August 17, 1978): 202–203.
A-149 “Notas sobre la Evolución de Sistemas de Reglas de Conducta.” Teorema 9, no. 1 (1979): 57–77.
[“Notes on the Evolution of Systems of Rules of Conduct.” Spanish version of Chapt. 4 of B-13.]
A-150 “Towards a Free Market Monetary System.” The Journal of Libertarian Studies 3, no. 1 (1979): 1–8.
[A lecture delivered at the Gold and Monetary Conference, New Orleans, Louisiana (November 10, 1977).]
A-151a “Freie Wahl de Währungen.” In Geldpolitik, ed. by J. Badura and O. Issing. Stuttgart and New York, 1980, pp. 136–146.
[“Free Choice of Currency Standards.”]
A-151b “An Interview with F. A. Hayek.” Conducted by Richard E. Johns. The American Economic Council Report (May 1980.)
[Reprinted in IRI Insights (publication of Investment Rarities, Inc.) 1 (November—December, 1980): 6–12, 14–15, 32.]
A-151c “Midju—Modid.” Frelsid (Journal of the Freedom Association of Iceland) 1 (1980): 6–15.
[“The Muddle of the Middle.”]
A-151d “Dankadresse.” In Erich Hoppmann, ed. Friedrich A. von Hayek. Baden—Baden: Nomos Verlagsgesellschaft, 1980. pp. 37–42.
[See Hoppmann (1980) in the Bibliography of Works Relating to Hayek.]
A-151e Review of Thomas Sowell's Knowledge and Decisions. (New York: Basic Books, 1980). In Reason 13 (December 1981): 47–49.
A-151f “L'Hygiène de la démocratie.” French translation of the English text of a speech delivered April 12, 1980 at the l'Assemblée Nationale in Paris by Friedrich A. Hayek. [“The Health of Democracy.” In Liberté économique et progrès social (périodique d'information et de liaison des libéraux) No. 40 (December—January 1981): 20–23.]
A-151g “The Ethics of Liberty and Property.” Chapter 4 of a forthcoming book, The Fatal Conceit. Published in the proceedings of the Mont Pélèrin Society 1982 General Meeting, 5–10 September, Berlin. Institut für Wirtschaftspolitik an der Universität zu Köln, 1982.
Works about or relevant to Friedrich A. Hayek
Aaron, Raymond. “La Definition Libérale le Libérté.” Archiv europäischer Sociologen II (1961).
[“The Liberal Definition of Liberty.”]
Agonito, Rosemary. “Hayek Revisited: Mind as a Process of Classification.” In: Behaviorism: A Forum for Critical Discussions 3, no. 2 (Spring 1975): 162–171.
Allen, Henry. “Hayek, the Answer Man.” The Washington Post (December 2, 1982), pp. C1, C17.
Arnold, G. L. “The Faith of a Whig.” Twentieth Century London (August 1960).
Arnold, Roger A. “The Efficiency Properties of Institutional Evolution: With Particular Reference to the Social—Philosophical Works of F. A. Hayek.” Virginia Polytechnic Institute and State University Ph.D. Dissertation, 1979. [Dissertation supervised by James M. Buchanan.]
———. “Hayek and Institutional Evolution.” The Journal of Libertarian Studies 4, no. 4 (Fall 1980): 341–352.
Barry, Norman P. “Austrian Economists on Money and Society.” National Westminster Bank Quarterly Review (May 1981): 20–31.
———. An Introduction to Modern Political Theory. London: MacMillan, 1981.
———. Hayek's Social and Economic Philosophy. London: Macmillan, 1979.
——— “The Tradition of Spontaneous Order.” Literature of Liberty 5 (Summer 1982): 7–58.
[A major section of this article deals with Hayek.]
Baumgarth, William P. “The Political Philosophy of F. A. von Hayek.” Harvard University Ph.D. Dissertation in Government, Cambridge, Mass., 1976
——— “Hayek and Political Order: The Rule of Law.” The Journal of Libertarian Studies 2, no. 1 (Winter 1978): 11–28
Bay, Christian. “Hayek's Liberalism: The Constitution of Perpetual Privilege.” Political Science Review 1 (Fall 1971): 93–124.
Bettelheim, Charles. “Freiheit und Planwirtschaft.” In: Die Umschau. Internationale Revue, Mainz, 1 (1946): 83–192. [“Freedom and the Planned Economy.”]
Bianca, G. Verso la Schiavitù. Replica a von Hayek. Naples, 1979.
[“(The Road) to Serfdom. Reply to von Hayek.”]
Birner, Jack. “Hayek's Research Program in Economics.” Ph.D. dissertation for Erasmus University in Rotterdam, no date (1982?).
[In Dutch with a 36-page summary in English. The English summary is available at the Institute for Humane Studies, Menlo Park, CA 94025.]
Black, R.D., Collison Coats, A. W., and Goodwin, Craufurd D.W. (eds.) The Marginal Revolution in Economics: Interpretation and Evaluation. Durham, North Carolina: Duke University Press, 1973.
Böhm, Stephan B. “Liberalism and Economics in the Hapsburg Monarchy,” 12 pp. Unpublished typescript. Paper presented to “The History of Economics Society Conference,” Kress Library, Harvard University Graduate School of Business Administration, June 16–19, 1980.
[Paper available at the Institute for Humane Studies]
Boland, L.A. “Time in Economics vs. Economics in Time. The ‘Hayek Problem.’” In The Canadian Journal of Economics (Canadian Economic Association) Toronto, 2, no. 2 (1978): 240–262.
Bostaph, Samuel. “The Methodological Debate between Carl Menger and the German Historical School.” Atlantic Economic Journal 6 (September 1978): 3–16.
Bradley, Jr., Robert. “Market Socialism: A Subjectivist Evaluation.” The Journal of Libertarian Studies 5, no. 1 (Winter 1981): 23–40.
Brell, K.H. “Zur Problematik der progressiven Einkommensbesteuerung. Eine Antikritik zu F.A. von Hayeks ‘Ungerechtigkeit der Steuerprogression’ und C. Fohls ‘Kritik der progressiven Einkommensbesteurung’.” Dissertation Karlsruhe (Berenz) 1957. [“On the Problematic of the Progressive Income Tax. A Counter—Critique to F.A. von Hayek's ‘The Injustice of the Progressive Income Tax’ and C. Fohl's ‘Critique of the Progressive Income Tax.’”]
Brittan, Samuel. “Hayek and the New Right.” Encounter 54 (January 1980): 30–46.
Broadbeck, M. “On the Philosophy of the Social Sciences.” Philosophy of Science 21, no. 2 (April 1959).
Brown, Pamela. “Constitution or Competition? Alternative Views on Monetary Reform.” Literature of Liberty 5 (Autumn 1982): 7–52.
[A major section of this article surveys Hayek's proposals for the ‘denationalization’ of money. See Hayek, P-14, P-16a, and P-16b.]
Brozen, Yale M. “The Antitrust Task Force Deconcentration Recommendation.” Journal of Law & Economics 13 (October 1970) 279–292.
Buchanan, James M. “Cultural Evolution and Institutional Reform.” Unpublished manuscript.
———. Cost and Choice. Chicago: Markham Publishing Co., 1969.
———. Freedom in Constitutional Contract. College Station, Texas: Texas A & M University Press, 1979.
Buchanan, James M. and Thirlby G.F. (eds.) L.S.E. Essays on Cost. London: Weidenfield Nicolsen, 1973.
[Classic essays on cost from the London School of Economics, including Hayek.]
Buckley, Jr., William F. “The Road to Serfdom: The Intellectuals and Socialism.” In Fritz Machlup, ed. Essays on Hayek. New York: New York University Press, 1976, pp. 95–106.
Business Week. “The Austrian School's Advice: ‘Hands Off!’” Business Week (August 3, 1974).
Campbell, William F. “Theory and History: The Methodology of Ludwig von Mises.” University of Minnesota M.A. thesis. Minneapolis, 1962.
Chambers, Raymond J. Accounting, Evaluation and Economic Behavior. Englewood Cliffs, New Jersey: Prentice—Hall, Inc., 1966.
[Also see Thomas Cullom Taylor, Jr. (1970).]
Congdon, Tim. “Is the Provision of a Sound Currency a Necessary Function of the State?” National Westminster Bank Quarterly Review. (London, August 1981): 2–21. [Deals with the assorted problems of Hayek's (P-16b). See Norman P. Barry (May, 1981).]
Corbin, Peter D. (Principal Investigator, Research Coordinator, American Geographic Society.) “Geoinflationary Variations in the U.S. Economy.”
[Examination of the Austrian theory of inflation which emphasizes the spatio—temporal aspects of the inflationary process. Available at the Institute for Humane Studies.]
Crespigny, Anthony de. “F.A. Hayek, Freedom for Progress.” in Anthony de Crespigny and Kenneth Minogue (eds.) Contemporary Political Philosophers. New York: Dodd, Mead and Co., 1975; London: Methuen, 1976, pp. 49–66.
Cunningham, Robert L. (ed.) Liberty and the Rule of Law. College Station, Texas: Texas A & M University Press, 1979.
[A collection of 13 papers delivered at a conference in honor of F.A. Hayek, Jan. 14–18, 1976 in San Francisco. Co—sponsored by Liberty Fund, Inc. and the University of San Francisco.]
Davenport, John. “An Unrepentant Old Whig.” Fortune (March 1960): 134–135, 192, 194, 197–198.
[Outline of Hayek's Social Philosophy on the occasion of the publication of B-12.]
Davis, Kenneth. Discretionary Justice: A Preliminary Inquiry. Baton Rouge, Louisiana: Louisiana State University Press, 1969.
Delettres, J.M. Les récentes théories der crises foundées sur les disparités des prix. Paris: Pendone, 1941, pp. 195–276.
[“Recent Theories of Economic Crises Based on Disparities in Prices.”]
Diamond, Arthur M. “F.A. Hayek on Constructivism and Ethics.” The Journal of Libertarian Studies 4, no. 4 (Fall 1980): 353–366.
Dietze, Gottfried. “Hayek on The Rule of Law.” In Fritz Machlup, ed. Essays on Hayek. New York: New York University Press, 1976, pp. 107–146.
———. “From the Constitution of Liberty to its Deconstruction by Liberalist Dissipation, Disintegration, Disassociation, Disorder.” In Fritz Meyer, ed., Zur Verfassung der Freiheit. Festgabe für Friedrich von Hayek. Stuttgart, New York: Gustav Fischer Verlag (Ordo, vol. 30), 1979, pp. 177–197.
Dolan, Edwin G., editor. The Foundations of Modern Austrian Economics. Kansas City: Sheed & Ward, Inc. 1976.
[Exposition by several authors of the history, principles and applications of the Austrian School of Economics. Among the topics of interest are Israel M. Kirzner's “On the Method of Austrian Economics” and “The Theory of Capital;” Murray N. Rothbard's “The Austrian Theory of Money,” and Gerald P. O'Driscoll, Jr.'s and Sudha R. Shenoy's “Inflation, Recession, and Stagflation.”]
Dorn, J.A. “Law and Liberty: A Comparison of Hayek and Bastiat.” Unpublished paper (October 1980), 50 pp.
[Available at the Institute for Humane Studies.]
Dreyhaupt, K.F. and Siepmann U. “Privater Wettbewerb im Geldwesen. Uberlegungen zu einem Vorschlag von F.A. von Hayek.” Ordo 29 (1978).
[“Private Competition in Monetary Affairs. Reflections on a Proposal by F.A. von Hayek.”]
Dyer, P.W. and Hickman, R.H. “American Conservatism and F.A. Hayek.” Modern Age 23, no. 4 (Fall 1979).
Eagley, Robert V. The Structure of Classical Economic Theory. New York: Oxford University Press, 1974.
Eastman, Max. Review of Hayek's Capitalism and the Historians. The Freeman 4 (February 22, 1954): 385–387.
Eaton, Howard O. The Austrian Philosophy of Value. Norman, Okla.: The University of Oklahoma Press, 1930.
Ebeling, Richard. “An Interview with Friedrich Hayek.” Libertarian Review (September 1977): 10–16.
———. “Reflections on John Hick's ‘The Hayek Story.’” Unpublished manuscript, no date; 23 pp.: Available from the Institute for Humane Studies, Menlo Park, California 94025.
———. “Hayek on Inflation.” Unpublished Paper presented to The Carl Menger Society Conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980.
Ellis, Howard S. German Monetary Theory, 1905–1933. Cambridge, Mass: Harvard University Press, 1934.
Fabrini, L. “La teoria del capitale e dell interesse di F.A. Hayek.” Revista internazionale de scienze sociali. Milano, Anno 58, Series 4, Volume 22 (1950): 250–286.
[“The Theory of Capital and Interest of F.A. Hayek.”]
Falconer, Robert T. “Capital Intensity and the Real Wage: A Critical Evaluation of Hayek's Ricardo Effect.” Texas A & M Ph.D. Dissertation. College Station, Texas, 1971.
Finer, H. Road to Reaction. London: Dobson, 1946.
[Reprinted Boston, 1945. Westport, Connecticut: Greenwood Press, 1973.]
Fingleton, Eamonn. “The Guru Who Came In From the Cold.” NOW! (January 30, 1981) 39–41.
Flanagan, T.E. “F.A. Hayek on Property and Justice.” Unpublished manuscript presented at the Theory of Property Summer Workshop at the University of Calgary, July 7–14, 1978.
Frankel, S. H. “Hayek on Money.” Unpublished paper presented to The Carl Menger Society Conference on Hayek at University College, London, October 28, 1978. [This conference was structured around Hayek's newly published New Studies in Philosophy, Politics, Economics and the History of Ideas. In addition to Frankel, it featured Thomas Torrance, Hillel Steiner and Jeremy Shearmur.]
Fridriksson, Fridrik. “Hayek á Íslandi 1940–1980.” Frelsid 3 (1981): 312–336. [“Hayek and Iceland, 1940–1980.”]
———. Friedrich A. Hayek. Forthcoming book developed from Fridriksson's Virginia Polytechnic Institute M.A. thesis in economics.
Garrigues, A. “El individualismo verdadero y falso, segun Hayek.” Moneda y credito, Revista de economie 34 (Madrid, 1950): 3–14.
[“Individualism: True and False, according to Hayek.”]
Garrison, Roger W. “The Austrian—Neoclassical Relation: A Study in Monetary Dynamics.” University of Virginia, Department of Economics, Ph.D. Dissertation, 1981.
Geddes, John M. “New Vogue for Critic of Keynes.” The New York Times (May 7, 1979).
Gerding, R. and Starbatty, J. “Zur ‘Entnationalisierung des Geldes.’ Eine Zwischenbilanz.” Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 78) (J.C.B. Mohr/Paul Siebeck), 1980.
[“On the ‘Denationalisation of Money.’ An Interim Statement.”]
Gilbert, J.C. “Professor Hayek's Contribution to Trade Cycle Theory.” Economic Essays in Commemoration of the Dundee School of Economics, 1931–1955. pp. 51–62.
Glasner, David. “Friedrich Hayek: An Appreciation.” Intercollegiate Review 7 (Summer 1971): 251–255.
Good, D.F. “The Great Depression and Austrian Growth after 1873.” The Economic History Review 31 (1978).
Gordon, Scott. “The Political Economy of F.A. Hayek.” Canadian Journal of Economics 14 (1981): 470–487.
Graf, Hans-Georg. “Muster-Voraussagen” und “Erklärungen des Prinzips” bei F.A. von Hayek. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze 65) (J.C.B. Mohr/P. Siebeck.), 1978.
[“‘Pattern-Prediction’ and'Clarification of Principle’ in F.A. von Hayek.”]
———. “Nicht-nomologische Theorie bei Komplexen Sachverhalten.” Ordo, Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft 26 (1975): 298–308.
[“Non-nomological Theory in Complex Phenomena.”]
Graham, F.D. “Keynes vs. Hayek on a Commodity Reserve Currency.” The Economic Journal 54 (1944): 422–429.
Grant, James. “Hayek: The Road to Stockholm.” The Alternative: An American Spectator 8, no. 8 (May 1975): 10–12.
Gray, John N. “F.A. Hayek on Liberty and Tradition.” The Journal of Libertarian Studies 4 (Spring 1980): 119–137.
———. “Hayek on Spontaneous Order.” Unpublished paper presented to The Carl Menger Society Conference on Hayek, London, Oct. 30, 1982.
Grinder, Walter E. Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation. In Libertarian Review (November 1974): 4–5.
———. Review of 4 books: F.A. Hayek's The Counter-Revolution of Science; Individualism and Economic Order; Studies in Philosophy, Politics and Economics; and Ludwig M. Lachmann's The Legacy of Max Weber. In Libertarian Review 4, no. 4 (April 1975): 4–5.
———. “In Pursuit of the Subjective Paradigm” and “Austrian Economics in the Present Crisis of Economic Thought.” In Capital, Expectations and the Market Process by Ludwig M. Lachmann. Edited by Walter E. Grinder. Kansas City: Sheed, Andrews & McMeel, Inc., 1977.
———. “The Austrian Theory of the Business Cycle: Reflections on Some Socio-Economic Effects.” Unpublished paper presented at The Symposium on Austrian Economics, University of Hartford, June 22–28, 1975.
[Available at the Institute for Humane Studies, Menlo Park, CA 94025.]
Gross, N.T. The Industrial Revolution in the Hapsburg Monarchy, 1750–1914. Fontana Economic History of Europe, vol. 4, Part 1. London, 1973.
Haberler, Gottfried. “Mises’ Private Seminar: Reminiscences.” The Mont Pélèrin Quarterly 3 (October 1961): 20–21.
[See also an expanded version in Wirtschafts Politische Blätter (Journal of Political Economy, Vienna) 28, 4 (1981). A Festschrift issue on the Centennary of Luwig von Mises’ birth (1881–1981).]
Hagel III, John. “From Laissez Faire to Zwangswirtschaft: The Dynamics of Interventionism.” Unpublished paper presented to The Symposium on Austrian Economics. University of Hartford, June 22–28, 1975, 37 pp.
[Available at the Institute for Humane Studies.]
Hamowy, Ronald. “Hayek's Conception of Freedom: A Critique.” New Individualist Review 1, no. 1 (April 1961): 28–31.
———. “Freedom and The Rule of Law in F.A. Hayek.” Il Politico 36, no. 2 (June 1971): 349–377.
———. “Law and the Liberal Society: F.A. Hayek's Constitution of Liberty.” Journal of Libertarian Studies 2, no. 4 (1978): 287–297.
Hampshire, Stuart. Thought and Action. London: Chatto and Windar, 1970.
———. “On Having a Reason.” In G.A. Vesey, ed., Human Values. Royal Institute of Philosophy Lectures, Vol II 1976–1979: Harvester Press, 1976. Chapter 5.
Haney, Lewis H. History of Economic Thought. New York: Macmillan, 1949, 4th edition. [See especially pp. 607–634 (“Fully Developed Subjectivism: The Austrian School.”) and pp. 811–831 (“Economic Thought in Germany and Austria, from 1870 to World War II.”]
Harris, R. “On Hayek.” Swinton Journal (1970).
Harrod, R. Money. London: St. Martin's Press, 1969.
———. “Professor Hayek on Individualism.” In R. Harrod, ed. Economic Essays, 2nd edition. London and New York: 1972. pp. 293–301.
Hart, H.L.A. The Concept of Law. Oxford: Clarendon Press, 1961.
Hartwell, Ronald Max. “Capitalism and the Historians.” In Fritz Machlup, ed. Essays on Hayek. New York: New York University Press, 1976, pp. 73–94.
Hawtrey, Ralph G. Capital and Employment. London, 1937, especially chapter 8: “Professor Hayek's Prices and Production.”
———. “The Trade Cycle and Capital Intensity.” Economica n.s. 7 (February 1940): 1–15. [Hawtrey was an economist connected with the British Treasury from 1919 to 1937. He “developed a purely monetary theory of the business cycle on a macro-economic concept of equilibrium.” See citation under Sennholz.]
———. “Professor Hayek's Pure Theory of Capital.” Economic Journal (Royal Economic Society) 51 (London 1941): 281–290.
———. “Prof. Hayek's ‘Prices and Production’.” In Capital and Employment, 2nd edition. London: Longmans, Green & Co., 1952, pp. 233–267.
Heimann, E. “Professor Hayek on German Socialism.” The American Economic Review. 35 (1945): 935–937.
[Compare with B. Hoselitz.]
Hicks, J.R. “Maintaining Capital Intact: A Further Suggestion.” Economica 9 (1942): 174–179.
———. “The Hayek Story.” In Critical Essays in Monetary Theory. Oxford University Press: 1967.
[See Richard M. Ebeling citation.]
Hicks, J.R. and Weber, W. Carl Menger and the Austrian School of Economics. Oxford: Oxford University Press, 1973.
Hoppmann, Erich (ed.) Friedrich A. von Hayek. Vorträge und Ansprächen auf der Festveranstaltung der Frieburger Wirtschaftswissenschaftlichen Fakultät zum 80. Geburtstag von Friedrich A. von Hayek. Baden-Baden: Nomos Verlagsgesellschaft, 1980.
[Festschrift with bibliography on F.A. Hayek's 80th birthday presented by the Faculty of Economics of the University of Freiburg. Contributors include: Erich Hoppmann, Berhard Stoeckle, Karl Brandt, Christian Watrin, Hans Otto Lenel, and Klaus Peter Krause. Hayek's “Dankadresse,” pp. 37–42, surveys highlights in Hayek's intellectual career and writings from the vantage point of his 80th year. The Hoppmann-edited Festschrift honoring Hayek also lists the contributors to the earlier 1979 Ordo Festschrift for Hayek, edited by Fritz Meyer, et.al (p. 53), and contains valuable updatings on bibliography by and about Hayek (pp. 55–60.)]
Hoselitz, B.F. “Professor Hayek on German Socialism.” The American Economic Review 35 (1945): 926–934.
[Compare with E. Heimann.]
Housinden, Daniel M. Capital, Profits, and Prices: An Essay in The Philosophy of Economics. New York: Columbia University Press, 1981.
Howey, Richard S. The Rise of the Marginal Utility School: 1870–1889. Lawrence, Kansas: The University of Kansas Press, 1960.
Hoy, Calvin M. “Hayek's Philosophy of Liberty.” Columbia University Ph.D. Dissertation. New York, 1982.
Hummel, Jeffrey Roger. “Problems with Austrian Business Cycle Theory.” Reason Papers No. 5 (Winter, 1979): 41–53.
Hunt, Lester. “Toward a Natural History of Morality.” Unpublished essay.
Hutchinson, T.W. The Politics and Philosophy of Economics: Marxians, Keynesians and Austrians. New York and London: New York University Press, 1981.
Janik, Allan and Toulmin, Stephen. Wittgenstein's Vienna. New York: Simon and Schuster, 1973.
[Important along with Carl Schorske's volume on Fin-de-siècle Vienna for the cultural-historical context in which Hayek and his cousin Wittgenstein lived. See A-143.]
Johnson, Frank. “The Facts of Hayek.” Sunday Telegraph Magazine (London, no date, [1975?]) 30–34.
[Profile and biographical sketch along with photographs of F.A. Hayek.]
Johnston, William. The Austrian Mind: An Intellectual and Social History, 1848–1938. Berkeley, Los Angeles, London: University of California Press, 1972.
Johr, W.A. “Note on Professor Hayek's ‘True Theory of Unemployment.’” Kyklos 30, no. 4 (1970): 713–723.
Jones, Harry W. “The Rule of Law and the Welfare State.” Columbia Law Review 58, no. 2 (February 1958).
Kaldor, N. “Prof. Hayek and the Concertina Effect.” In Economica N.S. 9 (1942): 148–176
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2003-03-15T17:20:25+00:00
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https://en.wikipedia.org/wiki/John_Hicks
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British economist (1904–1989)
For other people named John Hicks, see John Hicks (disambiguation).
Sir John Richard Hicks (8 April 1904 – 20 May 1989) was a British economist. He is considered one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS–LM model (1937), which summarised a Keynesian view of macroeconomics. His book Value and Capital (1939) significantly extended general-equilibrium and value theory. The compensated demand function is named the Hicksian demand function in memory of him.
In 1972 he received the Nobel Memorial Prize in Economic Sciences (jointly) for his pioneering contributions to general equilibrium theory and welfare theory.[1]
Early life
[edit]
Hicks was born in 1904 in Warwick, England, and was the son of Edward Hicks, editor and part proprietor of the Warwick and Leamington Spa Courier newspaper, and Dorothy Catherine, née Stephens, daughter of a non-conformist minister.[2][3]
He was educated at Clifton College (1917–1922)[4] and at Balliol College, Oxford (1922–1926), and was financed by mathematical scholarships. During his school days and in his first year at Oxford, he specialised in mathematics but also had interests in literature and history. In 1923, he moved to Philosophy, Politics and Economics, the "new school" that was just being started at Oxford. He graduated with second-class honours and, as he stated, "no adequate qualification in any of the subjects" that he had studied.[5]
Career
[edit]
From 1926 to 1935, Hicks lectured at the London School of Economics and Political Science.[6] He started as a labour economist and did descriptive work on industrial relations but gradually, he moved over to the analytical side, where his mathematics background returned to the fore. Hicks's influences included Lionel Robbins and such associates as Friedrich von Hayek, R.G.D. Allen, Nicholas Kaldor, Abba Lerner and Ursula Webb, the last of whom, in 1935, became his wife.
From 1935 to 1938, he lectured at Cambridge where he was also a fellow of Gonville & Caius College. He was occupied mainly in writing Value and Capital, which was based on his earlier work in London. From 1938 to 1946, he was Professor at the University of Manchester. There, he did his main work on welfare economics, with its application to social accounting.
In 1946, he returned to Oxford, first as a research fellow of Nuffield College (1946–1952) then as Drummond Professor of Political Economy (1952–1965) and finally as a research fellow of All Souls College (1965–1971), where he continued writing after his retirement.
Later life
[edit]
Hicks was knighted in 1964 and became an honorary fellow of Linacre College. He was co-recipient of the Nobel Prize in Economic Sciences (with Kenneth J. Arrow) in 1972. He donated the Nobel Prize to the London School of Economics and Political Science's Library Appeal in 1973.[6] He died on 20 May 1989 at his home in the Cotswold village of Blockley.[7]
Contributions to economic analysis
[edit]
Hicks's early work as a labour economist culminated in The Theory of Wages (1932, 2nd ed. 1963), still considered standard in the field. He collaborated with R.G.D. Allen in two seminal papers on value theory published in 1934.
His magnum opus is Value and Capital published in 1939. The book built on ordinal utility and mainstreamed the now-standard distinction between the substitution effect and the income effect for an individual in demand theory for the 2-good case. It generalised the analysis to the case of one good and a composite good, that is, all other goods. It aggregated individuals and businesses through demand and supply across the economy. It anticipated the aggregation problem, most acutely for the stock of capital goods. It introduced general equilibrium theory to an English-speaking audience, refined the theory for dynamic analysis, and for the first time attempted a rigorous statement of stability conditions for general equilibrium. In the course of analysis Hicks formalised comparative statics. In the same year, he also developed the famous "compensation" criterion called Kaldor–Hicks efficiency for welfare comparisons of alternative public policies or economic states.
Hicks's most familiar contribution in macroeconomics was the Hicks–Hansen IS–LM model,[8] published in his paper “Mr. Keynes and the "Classics"; a suggested interpretation”. This model formalised an interpretation of the theory of John Maynard Keynes (see Keynesian economics), and describes the economy as a balance between three commodities: money, consumption and investment. Hicks himself wavered in his acceptance of his IS–LM formulation; in a paper published in 1980 he dismissed it as a ‘classroom gadget’.[9]
Contributions to interpretation of income for accounting purposes
[edit]
Hicks's influential discourse on income sets the basis for its subjectivity but relevancy for accounting purposes. He aptly summarized it as follows. “The purpose of income calculations in practical affairs is to give people an indication of the amount they can consume without impoverishing themselves”.[10]
Formally, he defined income precisely in three measures:
Hicks's number 1 measure of income: “the maximum amount, which can be spent during a period if there is to be an expectation of maintaining intact the capital value of prospective receipts (in money terms)” (Hicks, 1946, p. 173)[11]
Hicks's number 2 measure of income (market price-neutral): "the maximum amount the individual can spend during a week, and still expect to be able to spend the same amount in each ensuing week” (Hicks, 1946, p. 174).[11]
Hicks's number 3 measure of income (takes into account market prices): “the maximum amount of money which an individual can spend this week, and still expect to be able to spend the same amount in real terms in each ensuing week” (Hicks, 1946, p. 174)[11]
See also
[edit]
Hicksian demand function
Hicks optimality
Hicks-neutral technical change
List of economists
Nobel Prize in Economics
Selected publications
[edit]
1932, 2nd ed., 1963. The Theory of Wages. London, Macmillan.
1934. "A Reconsideration of the Theory of Value," with R. G. D. Allen, Economica.
1937. "Mr. Keynes and the Classics: A Suggested Interpretation," Econometrica.
1939. "The Foundations of Welfare Economics", Economic Journal.
1939, 2nd ed. 1946. Value and Capital. Oxford: Clarendon Press.
1940. "The Valuation of Social Income," Economica, 7:105–24.
1941. "The Rehabilitation of Consumers' Surplus," Review of Economic Studies.
1942. The Social Framework: An Introduction to Economics.
1950. A Contribution to the Theory of the Trade Cycle. Oxford: Clarendon Press.
1956. A Revision of Demand Theory. Oxford: Clarendon Press.
1958. "The Measurement of Real Income," Oxford Economic Papers.
1959. Essays in World Economics. Oxford: Clarendon Press.
1961. "Measurement of Capital in Relation to the Measurement of Other Economic Aggregates", in Lutz and Hague, editors, Theory of Capital.
1965. Capital and Growth. Oxford: Clarendon Press.
1969. A Theory of Economic History. Oxford: Clarendon Press. Scroll to chapter-preview links.
1970. "Review of Friedman", Economic Journal.
1973. "The Mainspring of Economic Growth", Nobel Lectures, Economics 1969–1980, Editor Assar Lindbeck, World Scientific Publishing Co., Singapore, 1992.
1973. Autobiography for Nobel Prize
1973. Capital and Time: A Neo-Austrian Theory. Oxford, Clarendon Press.
1974. "Capital Controversies: Ancient and Modern", American Economic Review.
1974. The Crisis in Keynesian Economics. New York, Basic Books.
1975. "What Is Wrong with Monetarism", Lloyds Bank Review.
1977. Economic Perspectives. Oxford: Clarendon Press. LCCN 77-5770
1979. "The Formation of an Economist." Banca Nazionale del Lavoro Quarterly Review, no. 130 (September 1979): 195–204.
1979. Causality in Economics. Oxford: Basil Blackwell.
1980. "IS-LM: An Explanation," Journal of Post Keynesian Economics.
1981. Wealth and Welfare: Vol I. of Collected Essays in Economic Theory. Oxford: Basil Blackwell.
1982. Money, Interest and Wages: Vol. II of Collected Essays in Economic Theory. Oxford: Basil Blackwell.
1983. Classics and Moderns: Vol. III of Collected Essays in Economic Theory. Oxford: Basil Blackwell.
1989. A Market Theory of Money. Oxford University Press.
References
[edit]
Further reading
[edit]
Christopher Bliss, [1987] 2008. "Hicks, John Richard (1904–1989)", The New Palgrave: A Dictionary of Economics. Abstract.
Sen, Amartya; Zamagni, Stefano; Scazzieri, Roberto (2008). Markets, money and capital: Hicksian economics for the twenty-first century. Cambridge, UK New York: Cambridge University Press. ISBN 9780521873215.
John R. Hicks on Nobelprize.org
John Hicks page on the History of Economic Thought website.
Works by or about John Hicks at the Internet Archive
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https://lawliberty.org/features/who-was-hayek/
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Who Was Hayek? – Law & Liberty
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G. Patrick Lynch writes about his conversation with Bruce Caldwell about Friedrich Hayek, one of the most important economist.
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Law & Liberty
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https://lawliberty.org/features/who-was-hayek/
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There is a famous internet comparison of the world’s two most famous Hayek’s—Salma and Friedrich. Obviously, Salma is more well-known, but Friedrich may be gaining on her. He has appeared in numerous books and scholarly articles recently, but there is little agreement about who he was. Some portray him as an evil villain who has subjected the world to the horrors of “neoliberalism,” and its disruptive social effects. Others have argued that he is much closer to Rawls and Keynes and would have supported a generous welfare state to ameliorate the social problems his preferred policies generated. Still others view him as a heroic defender of libertarian views about the need to limit state intervention in society, and particularly in markets. Salma must be increasingly jealous, but probably confused about who exactly this nominal competitor was.
So who was Hayek? To answer that question I spoke with Bruce Caldwell, the editor of the Collected Works of FA Hayek for the University of Chicago Press and also the co-author with Hansjoerg Klausinger of the first volume of a new two-volume biography entitled Hayek: A Life, 1899-1950. We obviously addressed some material in the biography, but we also discussed who Hayek the person was to provide a better picture of the individual, the context he lived in, and what animated him intellectually. The picture that emerges is much more complex than either his supporters or critics fully realize.
A Liberal Boy from Vienna
Caldwell told me that the perspective taken in the biography was to “try to see the world the way Hayek saw it.” Hayek was raised in early-twentieth-century Vienna. He fought in the First World War, and lived through the Second World War in England during part of the Blitz. He observed the rise of fascism and the height of popularity for socialism and Soviet communism. He held academic positions in several countries and traveled the world. He also was surrounded by and interacted with what Caldwell calls “a wonderful cast of people.”
“Fritz” as they referred to him while he was young, was born into a lower ennobled family that was intellectual, took education seriously, and frequently pursued scientific interests outdoors. His father was a doctor, but his passion was botany. He was a sort of “plant geographer” and took the family on hikes collecting samples. Friedrich’s father read to him about exploring the North and South Poles, the advent of flight, and other new scientific discoveries. Hayek was raised in a world constrained by class and extended family. His tastes derived from “German-oriented culture” as Caldwell called it, particularly literary and theatrical material. Like his father, Fritz collected programs from plays and other performances he attended beginning at age 11.
His family and friends recognized he was very bright and intellectually advanced for his age, but Fritz chafed at the limits of the oppressive and formal Austrian education system. Hayek’s approach to education was to “drink things in, formulate them, intersperse them with his own ideas, and then come up with a particular view,” but he never took his formal education that seriously and was actually held back one year. What seem to be contradictions in the later Hayek may have originated in this very independent mind even at a young age. Hayek called himself a puzzler, as compared to someone who is a master of material, and as a student he approached learning similarly.
Hayek was athletic, excelling at tennis, rock climbing, and skiing. His upbringing and love of the outdoors extended into his adult life as he regularly vacationed in the Austrian Alps during the summers. Caldwell noted that those trips were “an essential part of his life” where “his batteries got charged, he planned the year ahead” outlining the intellectual projects he planned to pursue. While some came to fruition and others didn’t, he had a rhythm to his professional and personal life that revolved around being outdoors.
Hayek served in World War I on the Italian front, returning home unscathed despite several near-lethal incidents in observation balloons and airplanes. He then attended the University of Vienna. After three years of “classes” which were largely optional to attend, students took oral exams. Hayek, however, did things his own way. He was part of a small group (Caldwell estimates there were perhaps 30 members) of fellow students who actually did attend lectures and consulted with each other about which ones were interesting and worth attending, no matter the subject. For example, he sat in the lectures of the famed legal positivist Hans Kelsen, who was one of the authors of the Austrian Constitution, but also attended lectures in psychology, art history, economics, and other fields.
Political matters were very prominent in the aftermath of World War I. A new Austrian national political landscape emerged, in which all the major parties were either socialist, Marxist, or pan-German. Hayek rejected all of them because he was very much a defender of tolerance and discourse.
The large Austrian parties were “pretty awful in the views they embraced”—specifically anti-Semitism. For example the Pan German parties advocated Anschluss with Germany and “were emphasizing German culture. Hayek was fine with emphasizing German culture but many of these political parties had ‘Aryan Paragraphs’ which said if you’re Jewish you can’t be a member of it, and that was not something that he would have any part of.” The socialist party, influenced by Austro-Marxism, had no appeal for Hayek. Instead, he and one of his closest friends, Herbert Fürth, worked with a tiny party that was liberal, pro-democracy (including female suffrage), culturally tolerant, and secular. It performed so poorly it faded from history.
According to Caldwell the student population in Vienna at the time was “rife” with anti-Semitism, but this was common “in Anglo-Saxon areas as well. You go to Harvard, you go to Yale, you’re Jewish, it doesn’t work out so well for you.” Yet Hayek rejected this widely held prejudice out of hand.
Particularly important for the development of this progressive sensibility was an intellectual group founded by Hayek and Fürth, who was of Jewish descent.
Caldwell explains:
Fürth was really the person who was responsible for identifying people to join this group, and many of them were of Jewish descent or practicing Judaism, and it was through interacting with this group that Hayek came to realize that there was this whole additional culture, intellectual culture in Vienna that he had not experienced through his rather insular upbringing in the Hayek family. And he embraced it—he thought great! And wondered whether he had Jewish blood because he said “these are my people! They’re really smart; they know about literatures that I didn’t know.”
Through this group, Hayek was introduced to Italian, French, and other intellectual traditions outside of the largely Germanic views he’d previously learned.
During the next period of his life, Hayek interacted with many Jewish scholars, including Ludwig von Mises, Ludwig Lachmann, Fritz Machlup, and Karl Popper. As Caldwell put it, Hayek was “interested in ideas and he [was] a liberal. You’re going to judge people according to whether they’re good people…not according to things like race or whether they are Jewish.”
Mises and Starting a Career
Mises had an enormous impact on Hayek. The celebrated economist welcomed him into his seminar in Vienna, got him a job with an inflation-protected salary in the postwar era of hyperinflation, and helped set up his first trip to America. Mises had also written two books on the exact two topics—monetary policy and socialism—that would define Hayek’s early research.
Mises eventually tapped Hayek for a position at the Austrian business cycle institute he had founded. Caldwell describes this as an awkward fit for Hayek. While it served as the springboard for his professional career, he was deeply skeptical about the ability of economists to predict business cycles, which was very much in vogue among the American institutionalists, such as Wesley Clair Mitchell whose seminar Hayek attended at Columbia during his trip to America. Mitchell and others believed theory was derived from data, and this approach reminded Hayek and Mises of the German Historical School, the first nemesis of the Austrian economists. And the forecasting that the institute was required to do was another thing Hayek did not feel particularly comfortable doing as an Austrian. This, Caldwell says, was a difficult “needle to thread” for Hayek.
Eventually, Hayek landed at the London School of Economics, which was fortuitous because of the quality of his colleagues and his growing enthusiasm for British liberalism. Support for economic planning and socialism were common in the 1930s, even in Britain. “The world is really starting to fall apart between the Great Depression and the rise of these various fascisms and totalitarian systems,” Caldwell observed. “This is a fraught time that’s going to get worse and worse.” Remembering that context is important for understanding Hayek.
At the LSE, he bonded with fellow liberal economist Lionel Robbins, but Hayek maintained his civil and discursive approach toward all of his ideologically diverse colleagues and students. Those descriptions of Hayek are very consistent: “He’s very understated; he’s interested in pursuing the truth, and he does so dispassionately. He’s not someone who gets excited,” particularly when contrasted with the more exuberant and flamboyant Robbins. In video interviews, Hayek was always trying to explain his opinions, not “trying to ram them down your throat.” Of course, Caldwell reminded me that as someone with a German accent in England at that time, perhaps not being too assertive was the best way to go!
Along with Arnold Plant and Robbins, Hayek ran what was known as the “Grand Seminar” in which some of the foundational work in modern economic theory was being formulated. Among the students who attended it were Ronald Coase (The Coase Theorem), Nicholas Kaldor and John Hicks (Kaldor-Hicks efficiency), Aaron Director, John Kenneth Galbraith, Ludwig Lachmann, Tibor Scitovsky, and many others. Visitors attending the seminar included Frank Knight, Jacob Viner, Wilhelm Röpke, and Joseph Schumpeter.
Hayek the Scholar
One of Hayek’s first major research projects at the LSE was The Pure Theory of Capital, which received a chilly reception from the economics community. The second was a serious work extending the Austrian critique of socialism. During the war, he wrote his most famous economics article—“The Use of Knowledge in Society.” As Caldwell explains, that paper addresses “how a well-functioning market system is a mechanism for coordinating human action in a world of dispersed and subjectively held knowledge—where people have different bits of knowledge.” This raises serious questions about the possibility of effective central planning. To cite Bastiat, “Paris gets fed” because markets can process the decentralized and specialized knowledge of the real world better than central planners can. “The Use of Knowledge” is still widely cited in economics today.
Hayek’s work in this highly productive period wasn’t tethered merely to economics. His Abuse of Reason project began as an intellectual history of how what Hayek called “scientism,” the misuse of quasi-scientific principles in studying human institutions, spread from thinkers such as Saint-Simon and Comte through other channels and ultimately informed approaches to what in the twentieth century would become the social sciences. This project was never completed, but the discussion of the French period which became The Counter-Revolution of Science is widely cited and influential. Another piece from this period entitled Scientism and the Study of Society addresses other methodological issues.
As it became clearer that the Allies were going to win WWII, Hayek plainly saw the enthusiasm for economic and social planning by experts. Many popular pieces were being written by “men of science” (natural scientists who were public intellectuals) and others, such as Hayek’s LSE colleague Harold Laski, about the need for planning the economy, social order, and scientific research. While the war effort bolstered support for the need for planning it was clear that the Soviet Union was the model these men of science admired.
These individuals, Caldwell explains, believed they were “fighting for a new Jerusalem….fighting for a new world after World War II is over, and that world should be a socialist world.”
These ideas were effectively promoted to a mass audience. So Hayek began a popular project of his own. Pivoting from a more intellectual response (the second volume of the Abuse of Reason), Hayek turned instead to the more accessible and persuasive The Road to Serfdom. It was a major international success. Interestingly, Caldwell points out that the book is strangely silent on the dangers of Soviet communism, but since the Soviets were then our allies, Hayek had to remove a lot of material in the text bashing the USSR. Still the message of the book is clear: the risks of government power and planning, no matter the type of regime, are great.
Caldwell believes that The Road to Serfdom “gives Hayek his 15 minutes of fame, [and] that becomes quite important in terms of his ability to create the Mont Pèlerin Society.”
The Big Tent
Aside from his numerous intellectual contributions to economics, politics, and law, the Mont Pèlerin Society has proven to be one of Hayek’s most lasting achievements. Caldwell describes Hayek as “a very skilled institution creator,” using the recognition he attained from The Road to Serfdom (driven in part by a Reader’s Digest abridgment) to launch the MPS. He traveled internationally, giving talks and meeting like-minded individuals, including Harold Luhnow. Luhnow was president of Volker Fund, an early supporter of Hayek’s work and other pro-liberty/free market initiatives throughout academia. These trips helped Hayek identify many of the attendees of the first meeting, and Volker helped pay travel expenses.
“Between 1944 and 1946 he met people, often just a couple in each country, who shared his views that liberalism for the 20th century needed to be further developed, was certainly under attack, and maybe they could all get together to discuss its prospects.” But Hayek included a wide range of individuals at the first meeting. “There were vast differences of opinion among the various people who were there,” but this reflects how little intellectual support there was for liberalism in the late 1940s. For example, despite Hayek’s public debate with Keynes, Hayek always viewed Keynes as a liberal.
That first meeting has drawn a lot of attention from scholars opposed to “neoliberalism” today. As Caldwell said plainly, “This initial meeting of the Mont Pèlerin Society is taken by critics of neoliberalism in particular as the catalyst event in bringing together this cabal of corporate apologists and apologists for the plutocracy.” For a cabal, they certainly didn’t agree on much as can be seen in the transcripts of the meeting which Caldwell himself published in a separate book Mont Pèlerin 1947.
Hayek was trying to forge a network of sympathizers, but Caldwell believes Hayek the puzzler had another project at that first MPS meeting—to “figure out what the fundamental ideas of liberalism in the twentieth century might look like.” He “really wanted to avoid an organization that would be taking specific policy stances or putting out think tank papers.” Instead, he envisioned “a discussion group of like-minded people to try to iron out what our differences are and what the similarities are.” Caldwell believes that Hayek himself was defending this exact position—“it’s the ideas stupid”—in his 1949 article “The Intellectuals and Socialism.”
And this project can be seen from the opening session of the first MPS meeting. The topic was “Free Enterprise or the Competitive Order?” He’s drawing a contrast immediately between laissez faire and a more classical liberal order with constraints: hardly the raging neoliberal his opponents wish to paint him as today. Even more interestingly, the first three speakers were himself, Aaron Director from the University of Chicago, and Walter Eucken, an ordoliberal. All three are competitive order advocates, not defenders of laissez faire such as Mises and Henry Hazlitt, who were also at the first meeting. Hayek stacked the deck against laissez faire. “What is this liberal order if it’s not just laissez faire?” Caldwell asked me. In many ways this explains why Hayek occupies a unique position among defenders of liberty. He maintained close relationships with “liberals” and advocates for a very limited government.
Now Caldwell admits that “by the 1970s he’s (Hayek) really much closer to Mises, but in trying to construct this conversation among all these various people at this point he does have this broader view but he wants to figure out exactly what that broader view means.” Interestingly one of the first seminars Hayek ran at Chicago was titled “Liberalism from Locke to Mises” so his definition of the term was broad indeed.
Caldwell pointed to a very interesting difference between the Hayek of the first MPS and the Hayek of The Constitution of Liberty, which includes a chapter on the danger of unions, but nothing on the dangers of private sector or enterprise monopolies. In the 1940s, most economists assumed that markets could lead to monopoly. But by the 60s, that view had faded and Hayek’s writing reflected the change. This change alienated some of his older liberal allies. Walter Lippmann upon receiving his copy of The Constitution of Liberty sent a reply complaining about Hayek’s failure to deal with the monopoly question. It demonstrates once again the needle Hayek is trying to thread. “Among libertarians, the Constitution of Liberty might be viewed as allowing for too much intervention by the government.” Yet the liberal Lippmann was also uncomfortable with the work. “So it is this ongoing conversation he is engaged in and enjoys engaging in.”
While Hayek’s search for the meaning of liberalism certainly evolved, so did society’s re-embrace of socialism, and Caldwell sees this as an immense frustration for Hayek:
You think of the changes that are taking place in societies in the 60’s and the 70s, and he’s saying ‘You know we fought these battles about socialism back in the 30s and laid out some really good arguments and here people are bringing back this stuff? And ignoring any of the problems associated with it?’ So I think he became kind of fed up with the vacuity of the arguments of opponents.”
Hayek believed people were falling prey to “scientism”—and failing to look at the arguments or weigh the real-world evidence.
Caldwell shares a letter from a former student who characterized Hayek as someone who reached his conclusions about socialism logically:
he was someone who looked like he got the opinions that he held through a process of thinking it through, the dispassionate scholar, these are just the facts of the matter. This is a system that has really deep flaws. And you can put it into effect but it’s going to cause massive suffering.
Despite this frustration with the continuing popularity of socialism and his increasing doubts about the efficacy of government Hayek never was impressed with or supported anarcho-capitalism. Caldwell is still working on a second volume, which deals with the 60s and 70s but he called Hayek “unimpressed” with Rothbard. However, he acknowledges that the question of how much or how little government intervention Hayek would have allowed in his liberal order is tough to nail down.
A Failure to Communicate
I ended my discussion with Caldwell by reviewing Hayek’s relationship with his two families—his mother and siblings he had in Austria, and his wife and two children in England. Once the Anschluss occurred, Hayek, along with his wife and children, became a naturalized British citizen. The correspondence that survives between his family members who lived under the Nazi regime shows Hayek’s firm opposition to the Nazis and, regrettably, their initial support for the regime.
The situation with his wife and children is much more complicated and shows us that Hayek was less dispassionate in his personal life. Caldwell says as a father and husband Hayek was “the worst communicator, and all of the problems that arise from his family arise from this absence of communication.” Hayek had a long-standing affection for a cousin who had married someone else while Hayek was visiting America for the first time. Hayek then married his wife, Hella and had two children.
At some point in the 1930s, he and his cousin discussed divorcing their spouses and marrying one another, but the war intervened. After the war, Hayek was unable to split amicably with his wife, and a very ugly divorce drama unfolded. His friendship with Lionel Robbins, who took Hella’s side, was a casualty of the whole affair. In the end, Hayek’s move to the University of Chicago ended both the marriage and (at least for a while) the relationship with Robbins.
Who Was Hayek?
Too often, those who wish to paint him as a Machiavellian monster or a bleeding-heart quasi-socialist ignore the world Hayek lived in and the experiences that shaped him. When Hayek was presented with either fascism or communism, he chose neither. When the mainstream social norms were anti-Semitism, nationalism, and little flexibility in personal relationships, he pursued more liberal ends.
Not all of Hayek’s choices were defensible, which makes him human. But it’s easy to forget that he wasn’t reacting to a “socialism” like that of the Nordic countries, although I doubt he would have been a huge fan of the Norwegian model of society. He was a self-proclaimed liberal in speech, markets, and personal lives in the era of Hitler and Stalin. He was an avowed multiculturalist for his time and, as some of his fans on the left remind us, he was not opposed to some form of a welfare state. He was hardly a full-throated supporter of laissez faire, although he moved in that direction as his life went on.
He was less imperfect than many other twentieth-century intellectuals. There is something in Hayek for everyone and quite a bit to think about. He was quite possibly the most important economic liberal in the world in the later part of the twentieth century. He may never reach the heights of Salma, but there is much to admire in this unique individual who through puzzling, drinking it all in, building an independent life from an insular background, networking, living by principle and good fortune, went on to help shape the materially richer and freer world we currently live in.
Editor’s note: Corrections have been made to this essay related to certain biographical details.
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https://www.bbc.com/news/business-14366054
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Keynes v Hayek: Two economic giants go head to head
|
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2011-08-02T22:51:24+00:00
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Supporters of John Maynard Keynes and Friedrich August Hayek debate the merits of the economists' views.
|
en
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BBC News
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https://www.bbc.com/news/business-14366054
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John Maynard Keynes and Friedrich August Hayek were two prominent economists of the Great Depression era with sharply contrasting views. The arguments they had in the 1930s have been revived in the wake of the latest global financial crisis.
The contemporary relevance of their ideas has even been debated in a rap video, external. More than 1,000 people attended a BBC Radio 4 debate at the London School of Economics to hear supporters of the two economists argue their case.
Unlike Keynes, Hayek believed that genuine recovery from a post-boom crash called not just for adequate spending, but for a return to sustainable production - production purged of boom-era distortions caused by easy money.
Hayek was dismissed as someone who wanted to "liquidate labour, liquidate stocks, liquidate the farmers," and so on.
But an unsustainable boom is one after which some things really do need liquidating. The straightforward recipe for the revival of healthy investment following the 2008 crisis was to liquidate.
Liquidate Bear Stearns! Liquidate Fannie Mae and Freddie Mac!
Liquidate, in short, the whole sub-prime bubble-blowing apparatus that was nurtured by easy monetary policy.
That would have meant letting insolvent banks that lent or invested unwisely go bust.
But instead our governments chose to keep bad banks going and that is why quantitative easing has proven a failure.
Quantitative easing failed because almost all the new money the government created has gone to shore up the balance sheets of irresponsible bankers.
Now those banks sit on piles of idle cash while other businesses starve or cannot get started for want of credit.
The economy is like a drunk throwing up the morning after the night before.
It is disgorging itself - or trying to disgorge itself - of bad investments it was tempted to undertake largely because of easy money.
Giving it still more money will not prevent the inevitable suffering.
It might mask or delay it somewhat, but only at the cost of more suffering later.
This is not the sort of advice that governments welcome.
They want a painless, easy cure like the one Keynesians offer.
But, as Hayekians warned again and again, there is no painless recovery from an unsustainable boom.
The only way to have no pain is to avoid the boom itself.
The Great Depression, external bottomed out at the end of 1932, with British unemployment having reached 20%, American unemployment even higher.
Keynes wrote the General Theory in 1936 to explain why the recovery was so feeble.
His revolutionary proposition was that following a big shock - usually a collapse in investment - there were no automatic recovery forces in a market economy.
The economy would go on shrinking until it reached some sort of stability at a low level.
Keynes called this position "under-employment equilibrium".
The reason was that the level of activity - output and employment - depended on the level of aggregate demand or spending power.
If spending power shrank, output would shrink.
In this situation it was the government's job to increase its own spending to offset the decline in public spending - that is by running a deficit to whatever extent necessary.
To cut government spending was completely the wrong policy in a slump.
When an economy is booming, a hair shirt at the Treasury is the right policy, when it is stagnating it is the wrong policy.
Keynes's message was: you cannot cut your way out of a slump; you have to grow your way out.
Eighty years on we have still not fully learnt the lesson.
Three years after the collapse of 2008, our economy is flat: there are no signs of growth, nor can the Osborne policy of a thousand cuts produce any.
It was Friedrich Hayek, who represented the orthodox theories which Keynes attacked.
According to Hayek the main cause of slumps was excessive credit creation by the banks leading to overspending.
The boom was the illusion; the slump the reality.
The situation following an injection of money by the banking system would be similar to that of a people on an isolated island, if, after having partially constructed an enormous machine⦠they found they had exhausted all their savings before the new machine could turn out its products.
They would then have no choice but to abandon, temporarily, the work on the new process and to devote all their labour to producing their daily bread without any capital.
That is, go back to growing their own food - much as the Russians did when their economy collapsed in the early 1990s.
Keynes was scathing in his comment on Hayek's book, Prices and Production, which he called "one of the most frightful muddles I have ever read".
"It is an extraordinary example of how, starting with a mistake, a remorseless logician can end in Bedlam."
Hayek gave up serious economics, though not serious writing.
He and Keynes developed a wary respect, and even liking, for each other. "We get on very well in private life", Keynes wrote. "But what rubbish his theory is."
Keynes's magnetism made a deep impression on Hayek, but he never stopped believing that his influence on economics was "both miraculous and tragic".
The Keynes vs Hayek debate will be broadcast on BBC Radio 4 on Wednesday, 3 August at 20:00 BST and will repeated on Saturday, 6 August at 22:15 BST. You can listen again via the BBC iPlayer or by downloading the Analysis podcast.
Share your thoughts on the Keynes vs Hayek debate on Twitter using #lsehvk
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1
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https://www.academia.edu/90453938/Hayeks_Ricardo_Effect_A_Second_Look
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en
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Hayek's Ricardo Effect: A Second Look
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2022-11-10T00:00:00
|
Hayek's Ricardo Effect: A Second Look
|
https://www.academia.edu/90453938/Hayeks_Ricardo_Effect_A_Second_Look
|
It is a bit of a paradox that economists have neglected, and continue to neglect, the part of Hayek's work for which he was awarded the Nobel prize in economics and which is characterized by a high level of analytical rigour. The paper compares Hayek's economics with Keynes'. It is curious, to say the least, that after 80 years, current debates on how to extricate ourselves from the economic crisis hail directly from Keynes' and Hayek's different theories and visions on economics and economic policy. This comparison will lead to a discussion of the links between politicians and economists in general. Introduction A period in the history of economic thought that still determines much of contemporary thinking in economics is the 1930s. The fact that there were – and, after almost 90 years, still are – two profoundly different theoretical orientations may cast doubt on the progress economics has made.1 Another aspect that deserves attention is that these two different traditions are based on very different theories about what caused the economic crisis of 1929 and what are the remedies to overcome the recession that followed it. Today, we are still suffering from the consequences of a financial and economic crisis that is at least as serious as that of 1929. Ten years after it exploded, no one is sure whether we have succeeded in pulling the global economy out of this crisis and even less if we have taken the necessary precautions to prevent another one. Have not economists learned anything in the mean time? Have not policy makers learned anything in the mean time? These are some of the questions I intend to deal with in the conclusion.
If anything like a change in direction can be distinguished in the development of the work of Friedrich August von Hayek, it does not lie in his supposed abandoning of the idea of equilibrium (which is based on a mistaken interpretation of his work). It is rather the transition of a radically systematic approach to problems and the elaboration of their solution that is characterized by a high level of analytic sophistication to a more associative approach. Examples of the former are Hayek’s theory of mind and his monetary, business cycle and capital theories; his theory of evolution and social and political philosophy are examples of the latter. Hayek’s economics constitutes a research programme. One of the factors that influenced its further development was Sraffa’s criticism of Hayek’s Prices and Production. In reply to this, Hayek developed his highly sophisticated capital theory and his ideas on neutral money and the international monetary order. I intend to show that the development of Hayek’s economic research programme can only be understood if one takes into account his radically systematic and analytical approach. ADDED COMMENT The paper has “radical ECONOMIST” in the title because I wanted to point out to the audience of the Department of Economics of NYU that the almost generally accepted idea that Hayek’s theory of capital is fatally flawed is wrong. It is one of the (alas!) several red herrings that keep freely swimming in the sea of Hayek research. In the early 1930s Piero Sraffa critized Hayek’s Prices and Production. One of his criticisms was that Hayek had not taken account of the fact that every factor of production has its “own rate of interest.” Hayek took this criticism seriously and with the thoroughness that is characteristic of all his work in all of the various disciplines – at least up till the publication of The Sensory Order in 1952 - set out to solve the problem Sraffa had indicated. That led to a series of articles and eventually The Pure Theory of Capital, in which he had meticulously constructed a highly abstract theory takes into account each productive input's own rate of interest. Hayek showed how entrepreneurial decisions on investment process involve all these own rates. The paper shows that this type of radicalism characterizes the rest of Hayek’s work, too. This more than once became a case of the better being the enemy of the good: because Hayek did not succeed in solving the (often very difficult) problems he had put on his agenda at all, or not in time, he either decided not to publish his attempt to solve it (in the case of his reply to Popper’s criticism of The Sensory Order – see my paper on “How artificial is intelligence in AI?”) or it was too late for the scientific community to take notice (the case of Sraffa’s criticism).
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https://www.hoover.org/research/hayek-century
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en
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The Hayek Century
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Economist and Hoover honorary fellow Friedrich Hayek spent seven decades extolling the supremacy of capitalism over socialism. For most of those decades, Hayek was a voice in the wilderness. Yet as John Cassidy argues, by the end of his life Hayek was vindicated to such an extent that "it is hardly an exaggeration to refer to the twentieth century as the Hayek century."
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Hoover Institution
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https://www.hoover.org/research/hayek-century
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If there are two things most people can agree on these days, they are that free market capitalism is the only practical way to organize a modern society and that the key to economic growth is "knowledge." So prevalent are these beliefs that their origins are rarely examined, which is somewhat surprising, since both statements can be traced back, in large part, to one man, Friedrich August von Hayek, a reserved Austrian economist who died in 1992. In November 1989, when the Berlin Wall came down, Hayek was a frail but mentally alert 90-year-old living in Freiburg im Breisgau, Germany, a picturesque town in the Black Forest. Hayek didn’t issue any public statements, but he thoroughly enjoyed watching the television pictures from Berlin, Prague, and Bucharest. "He would beam benignly, and the comment was ‘I told you so,’" said Hayek’s son.
Illustration by Taylor Jones for the Hoover Digest.
Hayek did indeed tell us so and at a time when that message was deeply unfashionable. In 1937, in the wake of the Great Depression and with capitalism and democracy under siege from communism and fascism, he published an academic article entitled "Economics and Knowledge," which pointed out that free markets were not just a political construct, as many critics claimed, but remained the best way of coordinating scattered information. Seven years later, when most of the world’s major economies were under unprecedented central control, Hayek published The Road to Serfdom, a damning indictment of socialism and state planning that once more, this time in plain English, laid out the fundamental advantage of the free market: by allowing millions of decision makers to respond individually to freely determined prices, it allocates resources—labor, capital, and human ingenuity—in a manner that can’t be mimicked by a central plan, however brilliant the central planner.
This argument is now widely accepted, but when The Road to Serfdom was published, Hayek later recalled, "it went so far as to completely discredit me professionally." Many of his colleagues interpreted the book as a dangerous and antediluvian attack on the welfare states that were being built in wartime Britain, where Hayek lived, and in other European countries. The reviews didn’t get any better for a long time. During the 1950s and 1960s, the Soviet economy appeared to be doing pretty well, and the social democracies of Western Europe, with their large and growing state sectors, prospered mightily. In 1967, Eric Hobsbawm, the Marxist historian, dismissed Hayek as a "prophet in the wilderness"; in the same year, Anthony Quinton, a British philosopher, dubbed him a "magnificent dinosaur."
If economic history had stopped when the Beatles split up, Hayek would have remained a museum piece favored mainly by right-wing cranks. Even when I began studying economics, at Oxford, during the early 1980s, Hayek, with his seemingly outlandish proposals to emasculate the trade unions and privatize the money supply, was still considered well beyond the pale. True, he had received the Nobel Memorial Prize in 1974, but that was seen within the profession as a political sop, with Hayek’s name added to balance that of his cowinner, Gunnar Myrdal, a left-wing Swedish economist. (Myrdal later said that he wouldn’t have accepted the award if he had known he would have to share it with Hayek.) I made it all the way through undergraduate and graduate school without reading Hayek, and I wasn’t unusual. Even today, eight years after Hayek’s death, there is no scholarly biography available. Most economics textbooks still don’t mention him, and his intellectual legacy is often obscured, even by his admirers.
In a forthcoming essay in the Journal of Economic Perspectives, for example, János Kornai, the Hungarian economist who holds a chair at Harvard, reports that several decades of comparing capitalism and socialism have convinced him of two things: capitalism is a necessary condition for democracy, and technological development is faster under capitalism because the system encourages innovation. Kornai mentions Hayek’s work in passing, but he doesn’t say that Hayek made precisely the same points more than 50 years ago, in The Road to Serfdom, and amplified them in a series of books during the ensuing 45 years. Hayek got some things wrong (he was tardy about acknowledging the need for government action to reduce unemployment during the 1930s, for example) and neglected others (such as inequality and pollution); but on the biggest issue of all, the vitality of capitalism, he was vindicated to such an extent that it is hardly an exaggeration to refer to the twentieth century as the Hayek century.
Hayek versus Keynes
Hayek wasn’t the most brilliant economist of his era (that was probably John von Neumann, the Hungarian mathematical genius who invented game theory) or the most eloquent (John Maynard Keynes, Hayek’s sparring partner during the 1930s, nabbed that title), but he was arguably the most durable. Like Karl Popper, Hayek was a product of fin de siècle Vienna. Critics can claim, with some justification, that his sunny view of capitalism reflected his initial vantage point above the clouds.
He was born into an upper-class Austrian family on May 8, 1899. After serving as an artillery officer in the First World War, Hayek entered the University of Vienna. After considering psychology, he settled on law and economics, subjects that appeared to offer brighter career prospects. Many of Hayek’s fellow students would gather at the Kaffee Landmann to discuss Marxism and psychoanalysis, but Hayek found these fashionable disciplines "more unsatisfactory the more I studied them."
At this stage, Hayek was mildly socialist. His views changed as he studied under leading members of the pro–free market Austrian school of economics, especially Ludwig von Mises—who in 1922 published a critical book on socialism. Hayek became von Mises’s research assistant, and his mentor’s teachings—especially those that dealt with the central importance of entrepreneurship in what von Mises termed the capitalist discovery process—remained with him for life.
Hayek’s view of capitalism as a spontaneous information-processing machine was one of the great insights of the century.
After earning his economics doctorate in 1923 and spending just over a year in New York working as a research assistant at New York University, Hayek went to work for von Mises at the Abrechnungsamt in Vienna, a government office that dealt with official debts and other state financial issues. The two great issues of the day were inflation and what drives business cycles. On the former, Hayek deferred to von Mises, who, in protomonetarist fashion, argued that the only way to end the hyperinflation that plagued Germany and Austria was to stop the government from printing more money. Business cycles—the tendency for economies to oscillate between booms and recessions—were another matter; neither the Austrian economists, such as von Mises, nor the American neoclassicists, like Columbia’s John Bates Clark, could explain them properly, and this failure was recognized as a gaping hole in economic theory. Hayek set out to fill the gap. His theory, which was eventually expostulated in a 1931 book, Prices and Production, portrayed economic slumps as the inevitable product of prior booms, during which growth had become "unbalanced," with investment in the expansion of industrial capacity outstripping the supply of savings in the economy; recessions, in this view, were a way of restoring the balance between savings and investment.
Hayek’s ideas attracted attention in England, where one of the great economic debates of the century was unfolding. On one side, John Maynard Keynes and his young Cambridge acolytes were developing the theory that economic downturns were caused by a lack of overall demand in the economy and could be prevented by cutting taxes and increasing public sector spending. On the other side, figures such as Lionel Robbins, at the London School of Economics, were defending the traditional view that recessions were "nature’s cure" and that the only way to forestall them was through wage cuts and government retrenchment. Robbins spotted Hayek’s work and saw a potential ally against Keynes. He invited Hayek to the LSE, first as a guest lecturer and then, in 1932, as a full-time professor. Keynes dismissed Hayek’s theory as "one of the most frightful muddles I have ever read"; and for the ensuing five years the cannons pointing north from London and south from Cambridge were rarely silent, with virtually everybody in the British economics profession taking one side or the other. The two primary combatants, however, remained on surprisingly amicable personal terms. "Hayek has been here for the weekend," Keynes wrote to his wife in March 1933. "We get on very well in private life. But what rubbish his theory is."
In the end, Keynes won the battle over macroeconomic policy. The intellectual framework he set out in The General Theory of Employment, Interest, and Money, which was published in 1936, is still used by central banks and governments the world over to manage their economies. Hayek’s work on business cycles is rarely referred to these days—although his argument that periods of overinvestment tend to end in slumps has never been fully refuted. (Certainly, few inhabitants of Indonesia, South Korea, or Thailand would quibble with it after their experience in the past few years.) Whether Keynes, who died in 1946, won the larger war over the proper role of governments and markets is another question. A less intellectually self-assured man than Hayek might have changed or, at least, questioned his views. Hayek found his isolation increasingly discomforting, but it served only to convince him that the rest of the world was on the wrong track.
Refuting Central Planning
In 1937, Hayek published "Economics and Knowledge." The paper attracted little public attention at the time, but, in retrospect, it marked the origin of what became Hayek’s most lasting contribution to economics: the notion that free markets and free prices are a means of conveying and exploiting information. In any society, the central economic problem is how to best organize production and employ available resources in order to satisfy the needs and desires of millions of different people. Many of Hayek’s contemporaries believed that the best way forward was via central planning, which would allow resources to be directed to socially useful areas while avoiding the chronic instability of capitalism. Hayek begged to differ. Centralized systems may look attractive on paper, he argued, but they suffered from a basic and incurable ailment: the "division of knowledge" problem. In order to know where resources should be directed, the central planner needs to know both what goods people want to buy and how they can most cheaply be produced. But this knowledge is held in the minds of individual consumers and businesspeople, not in the filing cabinets (or, later, computers) of a government planning agency, and the only practical way for customers and firms to relay this knowledge to each other, Hayek argued, is through a system of market-determined prices.
"We must look at the price system as such a mechanism for communicating information if we want to understand its real function," he wrote in a 1945 paper, "The Use of Knowledge in Society." In a market system, people simply go out and buy the things they like, leaving unwanted goods on the shelves. If they want more of something—say, heating oil—it becomes scarce and its price rises, thereby prompting oil companies to increase production and consumers to economize. If people decide to use less oil, say, because natural gas has become cheaper, the price of oil will fall, and its production will be scaled back—all this taking place without any orders being issued by a government agency. "I am convinced that if it were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind," Hayek wrote.
This view of capitalism as a spontaneous information-processing machine—a "telecommunications system" was how Hayek referred to it—was one of the great insights of the century. It may have been implicit in the work of some previous economists, notably Adam Smith, but Hayek was the first to spell it out.
The collected papers of Friedrich Hayek are housed in the Hoover Institution Archives. The extensive collection includes many of the original manuscript drafts for The Road to Serfdom (shown here), as well as other of Hayek’s important writings. The collection also includes the decades-long correspondence between Hayek and Karl Popper, in which they discuss their various intellectual endeavors and critique each other’s work.
Hoover Institution Archives
Even left-wing economists, who regarded capitalism primarily as a system of social exploitation, were eventually forced to concede the acuity of Hayek’s analysis, and this resulted in elaborate efforts to construct a viable form of "market socialism," one that would combine common ownership of the means of production with freely determined prices. Hayek was always skeptical of these efforts. In a socialist system, prices could not play the same role that they do under capitalism, he argued, because under socialism there would be no competitive firms to react to the prices by innovating and redirecting resources. This point was confirmed in practice, as anybody who had the misfortune to drive an East German Trabant motorcar or to wear a Romanian suit, the prices of which were supposedly set in the market, would gladly testify.
Since the collapse of communism, of course, Hayek’s arguments have become commonplace. From Mexico to China, the first move of reformist governments has been to privatize state-owned businesses and liberalize prices, usually with positive results.
The Road to Serfdom
When the Second World War broke out, many British economists entered the wartime civil service, but Hayek, who had taken British citizenship in 1938 and supported the Allies wholeheartedly, was excluded because of his background. The snub gave Hayek time to write The Road to Serfdom.
Unlike Hayek’s earlier work, The Road to Serfdom was an explicitly populist tract, conceived in response to the growing support among British intellectuals for increased state intervention in the economy. Sir William Beveridge, a former colleague of Hayek’s at the LSE, had published two famous papers that laid the intellectual basis for the postwar welfare state. To Beveridge, capitalism needed saving from itself with a large dose of government control. Left untended, it had given the world, first, a Great Depression and, ultimately, fascism.
Hayek never accepted that fascism was a capitalist phenomenon. To him, Stalin and Hitler were two suits in the same closet, and the closet was marked "collectivism." Hayek dedicated his book "To the Socialists of All Parties." It was directed primarily against "classical Socialism," by which he meant "nationalization of the means of production," but what made it so controversial was the comparisons he drew between Nazi Germany and the way things were heading in the democracies. "Although few people, if anybody, in England would probably be ready to swallow totalitarianism whole, there are few single features which have not been advised by somebody or other," Hayek wrote. "Indeed, there is scarcely a leaf out of Hitler’s book which somebody or other in England or America has not recommended us to take and use for our own purposes."
In the United States, where opposition to the New Deal and to wartime industrial planning was strong, The Road to Serfdom caused a sensation. More than 600,000 copies were sold, and Hayek went on a wildly successful speaking tour, becoming something of a celebrity in the process.
In retrospect, it is clear that Hayek seriously exaggerated the threat to liberty presented by social democracy of the sort practiced in Western Europe. For example, his attacks on compulsory health insurance, state-financed education, and regional development programs—all of which were intended to help people fulfill their individual potential—were often overheated.
A less intellectually self-assured man than Hayek might have changed or, at least, questioned his views. Hayek found his isolation increasingly discomforting, but it served only to convince him that the rest of the world was on the wrong track.
All the same, the context in which Hayek was writing must be recalled. Many of his brightest pupils were Socialists or Communists; the true nature of Stalin’s regime was not yet commonly known; and capitalism had disgraced itself, for all to see. If the lure of central planning was to be repelled, lectures about the merits of Adam Smith and J. S. Mill would not suffice. The link between collectivism and tyranny would have to be spelled out in language that the man in the corner pub could understand. "Planning leads to dictatorship," Hayek wrote, "because dictatorship is the most effective instrument of coercion and the enforcement of ideals and, as such, essential if central planning on a large scale is to be possible." If these passages evoke memories of George Orwell, it is hardly surprising. Orwell reviewed Hayek’s book favorably, and in many ways The Road to Serfdom was the nonfiction precursor to Animal Farm, Orwell’s 1945 fable about the dangers of collectivism.
From Chicago to Stockholm
When he returned to London from America, Hayek was an internationally renowned (and, in many quarters, reviled) figure. In 1950 the University of Chicago offered him a position, although not one in economics.
Chicago’s economics department had refused to accept Hayek, despite his promarket views. "My understanding is that this was because, at that stage, he really wasn’t doing any economics," Milton Friedman, who joined the Chicago faculty in 1946, told me recently. Hayek joined the Committee on Social Thought, which John Nef, an economic historian, had recently set up, attracting over time a host of distinguished figures, including T. S. Eliot, Michael Polanyi, and Hannah Arendt. The new job suited Hayek well. He had little sympathy for the mathematical direction in which economics was going, considering it a futile application of the methods of classical physics to social phenomena that resisted Newtonian mechanics. (Hayek believed that the economy was an innately "complex" and unpredictable beast—a lesson taken up by some economists only in the last decade or so, as they have begun to apply evolutionary models and chaos theory to economics.)
His weekly seminar, "The Liberal Tradition"—Hayek always used the word "liberal" in its nineteenth-century sense—covered a panoply of thinkers, from Locke to von Mises. The seminar formed the basis for The Constitution of Liberty, published in 1960, which some consider to be Hayek’s finest book. (Its fans included Margaret Thatcher, who, during a visit to the Conservative Party’s research department in the mid 1970s, slammed a copy of it on the table and declared, "This is what we believe.") Capitalism had proved remarkably effective at raising living standards, Hayek argued, but its success wasn’t automatic; it depended on the existence of a generally accepted set of social norms (among them the sanctity of private property), a system of laws reflecting these norms, and a government that enforced the laws fairly, rather than discriminating arbitrarily among individuals. If any of these things were absent, economic development would be stymied.
Hayek was by no means antigovernment on principle. He simply believed that, unless there are strong and specific arguments to the contrary, the market is usually the most efficient method of providing goods and services.
The pertinence of Hayek’s analysis has been amply demonstrated since the collapse of communism. Many Western economists, including most of those who acted as advisers to postcommunist governments, believed that the collectivist economies could be transformed merely by freeing prices and privatizing state-owned firms. In Hungary, Poland, and Czechoslovakia—where capitalism predated communism, the rule of law was firmly established, and governments tended to respect private contracts—the optimists were proved, pretty much, right. In the former Soviet Union—where capitalism had never taken deep root, legal contracts were an alien tradition, and official corruption was rampant—the optimists got it horribly wrong. In Russia, for example, prices have been freed and firms have been privately owned for more than five years, but the economy is still only half the size it was before communism collapsed.
Never entirely comfortable with the informality of life in America, Hayek felt the lure of the old Europe from whence he came. In 1962, he accepted a post at the Albert-Ludwigs-Universität, in Freiburg, a reputable institution, though not one on the level of Chicago or the LSE. Hayek loved the Black Forest scenery, but the move wasn’t completely successful. During the late 1960s, he began to suffer from deep and paralyzing depressions and often seemed unable to work. This was the era when faith in the power of government was at its highest and support for free markets was at its lowest. "He was depressed, I think, mostly because he saw the condition of the world as depressing, and he felt he wasn’t receiving the kind of recognition he hoped for," Milton Friedman told me.
Given the intellectual climate of the time, the 1974 Nobel Prize came as a complete surprise to Hayek, and it had a remarkably rejuvenative effect. Suddenly, he found the energy and inspiration to think, write, and travel again. In 1988, at the age of 89, he published The Fatal Conceit, an astonishingly erudite book that stressed the evolutionary nature of capitalism. By gradually learning to follow a few rules—honesty, how to exchange goods for money, respect for private property—he maintained, man had "stumbled upon" an extremely effective, though unplanned, method of coordinating human activity. Socialism, Hayek explained, was a futile attempt to overturn the evolutionary process. A year later, as if on cue, communism collapsed.
A Legacy for a New Century
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Is Lm Model On Economics Of The Twentieth Century?
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Free Essay: IS-LM Model Mr. Keynes and the “Classics”; A Suggested Interpretation is a classic journal written by John R. Hicks, who has left huge impact on...
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IS-LM Model Mr. Keynes and the “Classics”; A Suggested Interpretation is a classic journal written by John R. Hicks, who has left huge impact on Economics of the twentieth century. John Hicks introduced the beginning of “IS-LM economic model”, which set up basic system of Macroeconomics to the world through this journal. This journal could be considered as an attempt to interpret and reassess Mr. Keynes’ General Theory of Empoyment within the typical “classic” theory framework and compare Keynes’ view and classical economists’ view. Mr. Hicks starts with setting the typical classical theory in a form that is similar to that where Mr. Keynes does his. He makes the same assumptions for the theory as Mr. Keynes does, which is first, the quantity of factors of production is all fixed and second, only homogeneous labor is counted and the last, depreciation can be neglected. Consequently, Mr. Hicks comes up with three equations. 1. M = kI, where M is the given quantity of money and I is the total income. This suggests that the quantity of money and the total income depend on the other. 2. Iχ = C(i), where Iχ is the amount of investment and i is the rate of interest. This explains investment is determined by the interest rate. 3. Iχ = S(i, I). The last equation is driven as saving equals investment, which is, again, determined by the interest rate. John Hicks then presents the three equations from Mr. Keynes’s General Theory of Employment that are a bit different from the ones
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Calculation Debate
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"When the definitive history of economic analysis during the 1930s comes to be written, a leading character in the drama (it was quite a drama) will be Professor Hayek. . . . It is hardly remembered that there was a time when the new theories of Hayek were the principal rival of the new theories of Keynes" (Sir John Hicks, 1967).
F. A. Hayek: Hayek was born into a family of intellectuals in Vienna. He earned doctorates from the University of Vienna (1921 and 1923). Influenced by Menger's Principles of Economics (1871), his ideas were also gradually refined by Eugen Boehm-Bawerk, Friedrich Wieser, and Ludwig von Mises.
Ludwig von Mises (1881-1973)
Note on Mises: Although this debate is famous in terms of Hayek and Keynes, Mises was central to understanding the concept of economic calculation and why, under a planned economy, it would be impossible to know where resources should be allocated without the knowledge generated from market prices. See Ludwig von Misess seminal essay, Economic Calculation in the Socialist Commonwealth, originally published in 1920 under the title Die Wirtschaftsrechnung im sozialistischen Gemeinwesen in the Archiv für Sozialwissenschaften, vol. 47 (1920). I agree with economist Joseph Salerno that
Economic Calculation in the Socialist Commonwealth surely ranks among the most important economic articles written this [20th] century."
J. M. Keynes: Born in Cambridge, England - son of an economics lecturer at Cambridge University (father) and successful author and social reformist (mother). Studies under Marshall and he is believed to have prompted Keynes's shift in interest from mathematics and classics to economics.
"The Hayek-Keynes debate was perhaps the most fundamental debate in monetary economics in the 20th century. Beginning with his essay, 'The End of Laissez Faire' (1926), Keynes presented his interventionist pleas in the language of pragmatic classical liberalism. As a result, Keynes was heralded as the 'savior of capitalism,' rather than being recognized as the advocate of inflation and government intervention that he was." (P. Boettke). Remember, "classical liberalism" is not the "liberalism" of today.
The First Debate
Point: Hayek - the fundamental problem with Keynes's economics was his failure to understand the role that interest rates and capital structure play in a market economy. Because of Keynes's use of aggregate (collective) concepts, he failed to address these issues adequately in A Treatise on Money (1930). Hayek pointed out that Keynes's aggregation tended to redirect the analytical focus of the economist away from examining how the industrial structure of the economy emerged from the economic choices of individuals.
Counter Point: Keynes did not take kindly to Hayek's criticism. He responded at first by attacking Hayek's book Prices and Production (1931). Then Keynes claimed that he no longer believed what he had written in A Treatise on Money, and turned his attention to writing another book, The General Theory of Employment, Interest, and Money (1936), which in time became the most influential book on economic policy in the 20th century.
No Counter Point from Hayek: Rather than attempting to criticize directly what Keynes presented in his General Theory, Hayek turned his talents to refining capital theory. Hayek said that part of the reason he didn't respond to Keyne's General Theory was because Keynes was always changing his mind -- so why take the time to write a response when Keynes will probably change his mind later anyway.
Some historians of thought think that if Hayek had responded to the General Theory -- history would have been very different?
By the end of the 1930s, Keynes's brand of economics was on the rise. In the eyes of the public Keynes had defeated Hayek. Hayek lost standing in the profession and with students.
During this time, Hayek was also involved in another grand debate in economic policy-the socialist calculation debate, triggered by a 1920 article by Mises which stated that socialism was technically impossible because it would lack market prices (cited above).
The Economic Calculation Debate - Main Question: To what extent can the economy be successfully planned and manipulated by government planners?
Hayek: In a way, this was a continuation of Hayek's arguments against Keynes for his "aggregates" -- but also against his call for economic planning.
Again, the economics profession and the intellectual community in general did not appreciate Hayek's criticism.
"What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic." F. A. Hayek - The Use of Knowledge in Society.
Focus is on coordination - how do coordination and economic order emerge from the unintended consequences of millions of economic actors?
Emphasis on knowledge - Dispersed economic agents have knowledge of time and circumstances which cannot be fully aggregated or understood by central planners. Government planners have a knowledge problem.
". . . the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation." (The Use of Knowledge in Society)
Two Kinds of Knowledge in Society:
Scientific:
Individual knowledge of time and circumstances (dispersed throughout society):
Can planners possess the knowledge necessary to move resources to where they are useful to people? Even move resources such that the basic necessities of life are met? Is economic calculation possible without market prices, profits and losses?
Emphasis on prices: Informational role of prices - prices serve as a learning mechanism which allows economic agents to economize on the quantity of information they must process in making choices.
Emphasis on change: "If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them." (The Use of Knowledge in Society)
Incentive Issues: Hayek pointed out that political agents will often face perverse incentives -- in the absence of private ownership, political agents will lack the incentive to allocate resources in an economically efficient manner (where people can use them). This is true even if they had the knowledge to do so - which they do not.
Keynes: Main work was The General Theory of Employment, Interest and Money (1936) - Response to the Great Depression and the "failure" of Classical economics.
Emphasis on demand - and the psychological reasons to consume or to invest:
"When employment increases, D1 [consumption] will increase, but not by so much as D [change in income]; since when our income increases our consumption increases also, but not by so much. The key to our practical problem is to be found in this psychological law." (The General Theory)
Emphasis on aggregates:
Looking at aggregate demand - and how this demand can be manipulated by government.
Was emphasis on uncertainty: But the uncertainty was one of the decision makers. Should they invest or not? Depends upon the expected rate of profit -- which is uncertain, for example. There was not an emphasis on the uncertainty of economic planners!
Really an entirely different way of looking at the economy and what was important to our understanding of it.
Summing Up: Keynes vs. Hayek
The original question: To what extent can the economy be successfully planned and manipulated by government planners?
Keynes: Government planners can effectively manipulate the economy as desired in order to overcome the "failures of the market" due to inadequate demand - "psychological law". Planners should be able to use discretionary policy (at their discretion).
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John R. Hicks
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John Richard Hicks (1904–1989) was born in Warwick, UK, a town in the English midlands not far from Birmingham to the northwest, and a stone’s throw from and
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Hicks’s Early Life and Education
John Richard Hicks (1904–1989) was born in Warwick, UK, a town in the English midlands not far from Birmingham to the northwest, and a stone’s throw from and Coventry to the northeast and from Stratford-upon-Avon to the southwest.
Hicks’s father was a reporter for a local Warwick newspaper.
Thanks to a scholarship based on the mathematical ability Hicks demonstrated from an early age, he was able to receive his secondary education at Clifton College, a private boarding school in Bristol.
While still on a mathematics scholarship, Hicks matriculated at Oxford University’s Balliol College in 1922.
At Oxford, in addition to studying math, Hicks initially studied literature and history. Then, during his second year, he signed up for Oxford’s newly established program in “Philosophy, Politics and Economics.”
Hicks received his bachelor’s degree from Oxford in 1926.
Hicks’s Career
After graduating, Hicks obtained a position as lecturer at the London School of Economics (LSE), where he taught until 1935.
During his years at the LSE, Hicks became a close associate of Lionel Robbins. He also made the acquaintance of many other well-known economists, including Friedrich A. Hayek, Abba P. Lerner, Nicholas Kaldor, and Ursula Webb.
In 1935, Hicks and Ursula Webb were married, after which Webb was known professionally as Ursula Hicks.
In 1935, Hicks was also elected a fellow of Gonville and Caius [pronounced “Keys”] College at Cambridge University. Hicks taught at Cambridge for three years, until 1938.
Hicks spent his years at Cambridge writing Value and Capital (see “Selected Works by Hicks” below)—often considered to be his magnum opus—which was published in 1939.
In this book, Hicks widened his early focus on labor economics to a broader concern with welfare economics (the impact of the economy on the welfare of society as a whole). In particular, in Value and Capital he showed how welfare economics can be applied to social accounting.
In 1938, Hicks was hired as a full professor at the University of Manchester, where he taught until 1946.
In 1946, Hicks returned to his alma mater, Oxford University. Initially, he was a research fellow at Nuffield College. Then, in 1952, he was appointed the Drummond Professor of Political Economy.
Finally, in 1965, Hicks became a research fellow of All Souls College, a post he held until his retirement in 1971.
In 1972, Hicks shared the Nobel Memorial Prize in Economic Sciences with Kenneth J. Arrow.
Hicks’s Ideas
Hicks began life as a labor economist focused primarily on industrial relations. Over time, he gradually moved into the broader field of welfare economics.
In his later work, Hicks was able to apply his background in mathematics to the formal analysis of the causal effects of economic factors on the welfare of society as a whole.
Specifically, in Value and Capital, Hicks built on the earlier concept of ordinal utility, focusing on the now-standard distinction in demand theory between the substitution effect and the income effect in the case of two goods.
The book then generalized the previously established analysis to the case of one good and a “composite good”—that is, all other goods—aggregating individuals and businesses throughout the economy by means of supply and demand.
Hicks anticipated the aggregation problem, especially for the stock of capital goods.
In addition to these analyses, Value and Capital advanced the state of play of economics at the time in three main ways: (1) it introduced formal general equilibrium theory to an English-speaking audience; (2) it refined the earlier form of the theory in order to make it suitable for dynamic analysis; and (3) it attempted for the first time to construct a rigorous model of the stability conditions for general equilibrium.
In the same year that he published Value and Capital, 1939, Hicks also developed the “compensation criterion”—which later became known as the “Kaldor–Hicks efficiency”—which provided a model making welfare comparisons between the expected consequences of alternative public policies (or states of the economy).
Even before Value and Capital was published, Hicks had already made what is perhaps his single best-known contribution to macroeconomics, namely, the so-called “Hicks–Hansen,” or “IS–LM,” model, published in his 1937 paper “Mr. Keynes and the “Classics” (see below).
IS–LM is a model of general equilibrium in which equilibrium is defined as the point of intersection of the “investment–saving” (IS) curve and the “liquidity preference–money supply” (LM) curve.
In the 1937 paper, Hicks used the IS–LM model to provide a formal interpretation of the General Theory of Employment, Interest, and Money, which John Maynard Keynes had published the previous year.
At the most abstract level, in his 1937 paper and the 1929 book, Hicks maintained that the economy may be understood as a balance among three factors: money, consumption, and investment.
In his later years, Hicks came to doubt the validity of his own IS–LM model, dismissing it in a 1980 paper as a “classroom gadget.”
Finally, Hicks is also famous for his mathematical formalization of income for accounting purposes.
Selected Works by Hicks
The Theory of Wages (1932; second edition, 1963).
“A Reconsideration of the Theory of Value, Part I,” Economica, n.s., 1: 52–76 (1934).
“Mr. Keynes and the Classics: A Suggested Interpretation,” Econometrica, 5: 147–159 (1937).
“The Foundations of Welfare Economics,” Economic Journal, 49: 696–712 (1939).
Value and Capital: An Inquiry into Some Fundamental Principles of Economic Theory (1939; second edition, 1946).
“The Valuation of Social Income,” Economica, n.s., 7: 105–124 (1940).
“The Rehabilitation of Consumers’ Surplus,” Review of Economic Studies, 8: 108–116 (1941).
The Social Framework: An Introduction to Economics (1942).
A Contribution to the Theory of the Trade Cycle (1950).
A Revision of Demand Theory (1956).
“The Measurement of Real Income,” Oxford Economic Papers, n.s., 10: 125–162 (1958).
Essays in World Economics(1959).
“Measurement of Capital in Relation to the Measurement of Other Economic Aggregates,” in D.C. Hague, ed., The Theory of Capital: Proceedings of a Conference held by the International Economic Association. London: Palgrave Macmillan (1961).
Capital and Growth (1965).
Critical Essays in Monetary Theory (1967).
A Theory of Economic History (1969).
“The Mainspring of Economic Growth,” Nobel lecture (1973).
Capital and Time: A Neo-Austrian Theory (1973).
“Capital Controversies: Ancient and Modern,” American Economic Review, 64: 307–316 (1974).
The Crisis in Keynesian Economics (1974).
Economic Perspectives: Further Essays on Money and Growth (1976).
Causality in Economics (1979).
“IS-LM: An Explanation,” Journal of Post Keynesian Economics, 3: 139–154 (1980).
Collected Essays in Economic Theory, Volume I: Wealth and Welfare (1981).
Collected Essays in Economic Theory, Volume II: Money, Interest and Wages (1982).
Collected Essays in Economic Theory, Volume III: Classics and Moderns (1983).
A Market Theory of Money (1989).
Selected Works About Hicks
Hagemann, Harald and Omar Hamouda, eds., The Legacy of Sir John Hicks: His Contributions to Economic Analysis (1994).
Hagemann, Harald and Roberto Scazzieri, eds., Capital, Time and Transitional Dynamics (2009).
Hamouda, O.F., John R. Hicks: The Economist’s Economist (1993).
Helm, Dieter, The Economics of John Hicks (1984).
Procházka, David, “The Hicks’ Concept of Income and Its Relevancy for Accounting Purposes,” European Financial and Accounting Journal, 4: 37–60 (2009).
Puttaswamaiah, K., ed., John Hicks: His Contributions to Economic Theory and Application (2018).
Scazzieri, Roberto, Amartya Sen, and Stefano Zamagni, eds., Markets, Money and Capital: Hicksian Economics for the Twenty First Century (2009).
Wolfe, J.N., ed., Value, Capital, and Growth: Papers in Honour of Sir John Hicks (1968).
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https://www.newstatesman.com/ideas/2023/04/super-spreader-friedrich-hayek-neoliberalism
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en
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Friedrich Hayek: super
|
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2023-04-04T13:41:40+01:00
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How the Austrian philosopher influenced political elites and became the godfather of neoliberalism.
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en
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New Statesman
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https://www.newstatesman.com/ideas/2023/04/super-spreader-friedrich-hayek-neoliberalism
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The spectacular implosion of Liz Truss’s zombie Thatcherism last autumn gives every reason to reconsider its intellectual sources. The Iron Lady once confronted wet Tory grandees who were pontificating on economics by opening her handbag and pulling out Friedrich Hayek’s chef-d’oeuvre, Constitution of Liberty (1960), thundering “This is what we believe!” Hayek was no unknown quantity: he had attained fame in the mid-1940s with The Road to Serfdom (1944), a polemic predicting that economic planning would lead to totalitarianism. His arguments had played a role in the 1945 UK general election, with Labour politicians accusing Conservatives of recycling dubious claims from a “German professor”.
Hayek was Austrian. Anybody curious about his background is well served by the exhaustive account written by two historians of economic thought, the American Bruce Caldwell and Hansjörg Klausinger, who teaches in Vienna. The book, published in November, aims to be “the definitive full biography” and not only recounts the major debates on economics in which Hayek participated; it is also aimed at those who would like “to learn more about Hayek’s personal life”. One learns a lot, more than anyone could ever have wanted to know. Much of it is not pretty. By contrast, we don’t learn much that’s new when it comes to Hayek’s thinking, but quite a bit about how this master institution-builder spread his thinking to political elites.
As the authors confess, they don’t exactly keep a critical distance from the subject they affectionately call “Fritz”. They reconstruct the complicated history of his family, part of Austria’s lowest rank of the lower nobility. Hayek’s parents exhibited plenty of anti-Semitism, but the man himself, Caldwell and Klausinger are at pains to show, did not – a plausible claim not least because Hayek disliked nationalism, which, he held, made it more probable that people would accept the creation of a welfare state based on national fellow feeling.
[See also: John Gray: The Friedrich Hayek I knew, and what he got right – and wrong]
Born in Vienna in 1899, Hayek was a distinctly political economist. He had little interest in mathematics (which the Austrian school he attended had sidelined in favor of Latin and Greek), and plenty of academic colleagues, especially in the US, subsequently looked down on him as a result. Hayek certainly had the ambition to propound general theories, both in economics and social philosophy, but, as this biography makes clear, he regularly abandoned grand projects like a “big book on money” or an extended intellectual history explaining the supposed rise of a dangerous social engineering mentality since the 19th century. Using Hayek’s own distinction between “masters” and “puzzlers”, Caldwell and Klausinger demonstrate that Hayek was nothing if not a puzzler, someone who kept going back to problems as opposed to offering a definitive synthesis.
“Fritz” (a name Hayek apparently disliked because it reminded him of Frederick the Great of Prussia) was born into the Vienna we now remember as the intellectual crucible from which emerged psychoanalysis, positivism, atonal music – and fascism (in fact, Wittgenstein was one of his distant cousins). Hayek had started his intellectual trajectory sympathetic to economic planning and what he called in retrospect “a sort of Fabian socialism” (he never took much interest in Marx himself, considering the German theorist merely one in a long line of thinkers who overestimated the power of science to predict and control society). Soon enough, though, Hayek came under the spell of Ludwig von Mises, a libertarian much more than a typical 19th-century continental liberal. Between 1924 and 1931, he attended Mises’s private seminar, which was held in Mises’s large office in the Austrian Chamber of Commerce (followed by dinner and then night caps in Café Künstler); it left him convinced that planners would be lost without prices signalling relative scarcities and that socialism was bound to fail.
Mises was also instrumental in getting Hayek a job in Vienna and then, as a research assistant, in New York City, from March 1923 to May 1924. Hayek’s impressions of the US make one read his dedication of Constitution of Liberty to the “unknown civilisation that is growing in America” in a new light. The Viennese visitor felt that his belief in “the vast intellectual superiority of the Europeans” had been confirmed; he complained to Mises about the “tastelessness and banality” of American life and, in a heroic act of old-world resistance, grew a moustache to “protest against American civilisation” (or lack thereof, considering the real meaning of the dedication). Hayek concluded that “America is a country to earn one’s money but not to live” (a comment that proved oddly prescient about Hayek’s later decision to maximise his salary at the University of Chicago to financially support the family he had abandoned in Europe).
Probably to the annoyance of aficionados of notions like the “Anglosphere”, Hayek also contrasted the cultural wasteland of the US with an England which he had come to idealise even before he visited (for the Austrian, Britain was always only England; he had little attention when writing about Adam Smith, for instance, to anything particularly Scottish in the Scottish enlightenment). His dream of English life came true with an appointment at the London School of Economics in 1931; ever after, he would insist that he had remained “much more English than the English”, the last defender of what he considered “Gladstonian liberalism”.
[See also: How Friedrich Hayek became fascinated with the romance of Harriet Taylor and J S Mill]
LSE in the Thirties was a place of extraordinary intellectual ferment and clashing political perspectives: from six in the evening, one could hear Hayek lecture on why a collectivist economy would not work, and at the same time one might listen to the distinguished economist (and Labour politician) Evan Durbin explain how to run a collectivist economy. One of Hayek’s prominent arguments at the time was that increasing public or private spending constituted the wrong response to the economic downturn; instead, what mattered was restoring “the right structure of production” and ending the “consumption of capital” (due, it seemed, to excessive demands by a newly enfranchised working class). This position – articulated such that people couldn’t decide whether it was English with a strong German accent or German with a strong English accent – made him what his colleague and friend Lionel Robbins called a “sadistic deflationist”. It also made him less popular among students. As one of them put it, in the early Thirties everyone had been a Hayekian; by the end of the decade the only Hayekians left were Hayek himself and the student lamenting that fact.
Of course, the biggest theoretical battle was with Keynes, who felt that Hayek had some mysterious taste for picking on him, but who, during the war years, graciously invited Hayek to take up rooms in Cambridge (which Hayek considered the most English part of England). Keynes, in Hayek’s view, was more an artist than a social scientist, and, in economics, a fellow puzzler, even though Keynes’s most famous contribution was branded a “general theory”. Both men, though, understood that theory really mattered, in contrast with empiricists such as the Webbs and Beveridge, who were unable to think beyond immediate policy questions.
Hayek – in contrast to so many economists today – thought that theory and history were not opposed to each other; economic history mattered, even if it could not by itself yield economic theories, but the history of economics – especially of how economic thought had gone wrong – also remained crucial. Hayek was deeply interested in the past of his own discipline; in particular, he sought to understand just how the social engineering mindset had come to dominate the 20th century. He was aghast at those scientists who proclaimed that capitalism’s primary fault was not even inequality, but “irrationality” on account of its sheer wastefulness, as well as its supposed tendency to “frustrate science”. Hayek charged that the “men of science” misunderstood the scientific method; they failed to see that reason was not a thing, but an ongoing process which could not yield failsafe prescriptions for society-wide planning.
Hayek’s own academic plans often failed to materialise; he set aside his history of the rise of “scientism” in favor of a short, polemical volume, The Road to Serfdom. There he argued that planning must lead to totalitarianism; central planners would have to impose their own values, instead of allowing people to develop and act on their own preferences (which were never just material but bound up with values). He also deployed what would become the most influential argument still associated with his name: knowledge – including tacit knowledge – is distributed throughout society; central planners could never gain access to that knowledge, but it could be expressed in individual market transactions and hence in prices (he did not anticipate that, already in the early 1970s, cybernetics experts had created a computer network that was supposed to generate instant feedback to planners under Salvador Allende’s ill-fated socialist experiment in Chile). To be fair, the issue was not just information, but the feature of markets as allowing for co-ordination without agreement – never mind that market power can also mean that people are forced to agree; there’s hardly much anyone can do if they happen to disagree with their mobile phone company’s terms and conditions.
[See also: John Gray: The Friedrich Hayek I knew, and what he got right – and wrong]
Hayek’s critics – including Keynes, who in general registered “deeply moved agreement” with The Road to Serfdom – claimed that one could stop on what Hayek had presented as a slippery slope to totalitarianism; meanwhile his libertarian readers would never quite forgive that Hayek had cautiously endorsed an “extensive system of social services”. His most enthusiastic followers probably never read the finer points; especially American businessmen delighted in the short Reader’s Digest version that brought Hayek fame and fortune in the US, as he was sent on lecture tours and was offered a privately financed position at the University of Chicago.
Hayek’s professorship was not in economics, but in the Committee on Social Thought, a much more philosophical, humanistic, and, broadly speaking, conservative unit within an uncompromisingly intellectual university, whose president had famously abolished the football team. Hayek’s placement made sense: from around the mid-1940s he had effectively abandoned economics for social philosophy. At the same time, closer in spirit to what would later come to be known as the “Chicago Boys”, he was determined to influence policy. To do so, he concluded, it was crucial to change the climate of ideas.
Hayek’s instrument to bring about intellectual climate change was the Mont Pèlerin Society, named after the Swiss mountain village where it was founded in 1947. More interesting designations had been mooted, but contenders like the Tocqueville Society or Acton Society proved vulnerable to the charge that mid-20th century crusaders for freedom should not invoke Catholic aristocrats. Hayek worked assiduously to make the society a success. He had already proven his talents for academic politics during his university years in Vienna; now he embarked on decades of a kind of intellectual diplomacy: he brought together ideologically diverse figures in the initial meetings, to the dismay of his conservative US donors who dispatched delegates to find out whether some of the attendees were really “sound”. Hayek proved able to get along with famously difficult characters like Mises and Karl Popper; and, like many a successful leader, he kept people on board by keeping them guessing about what he himself really thought about some of the heated society debates (Mises, always pushing free market orthodoxy pur et dur left no one guessing and stormed out of one MPS meeting shouting “you are all a bunch of Communists!”).
[See also: Why inflation and the cost-of-living crisis won’t take us back to the 1970s]
Caldwell and Klausinger’s first volume stops in 1950, so how exactly the society gained influence – especially on what Hayek called “second-hand dealers in ideas”, ranging from journalists to cartoonists and doctors – is not told here. What comes through clearly enough, though, is the talent and energy Hayek had for building institutions and for what can only be called propaganda. He once offered his services to the British Ministry of Information as an “ex-Austrian” who could formulate propaganda aimed at Germany to set the facts of German history straight. He worked out extensive plans for a Central European College, aimed at creating a distinctly liberal intelligentsia, as well as a post-war “Danube federation”.
The one plan – or, one is tempted to say, the one instance of personal engineering – that came to pass perfectly was Hayek’s transition to a new wife, a new job, and the New World. Caldwell and Klausinger, drawing on interviews and archival material apparently never used before, recount in excruciating detail how Hayek traded his first wife, Hella, for his first love (and cousin) Helene. Hella had done everything the traditional role of wife of a very important professor demanded; Hayek himself joked that he had never seen the inside of his own kitchen. Hella, left with two children, did not want the marriage to end, so Hayek devised a devious scheme to move to Arkansas (also deceiving his future employers at Chicago about his real intentions), residing there just long enough to be granted a “bootleg divorce”. His cruelty cost him the friendship with Lionel Robbins, with the latter declaring that “the man I knew is dead and I should find it almost unbearably painful to meet his successor”.
Caldwell and Klausinger spend many, many of their roughly 800 pages on what they call Hayek’s “ambivalent love life”. Was it necessary for the rest of us to know all the details? Maybe it’s because these historians believe in detail tout court; nothing is too minute (was there hot and cold toast or only cold toast on the boat to New York? Was a bag Hayek forgot at a train station – which had no connection to anything else in Hayek’s life story – recovered or not? Curious minds will find out). But perhaps, in their own way, they wanted to convey a side of their “Fritz” not unconnected to policies for which his name was to be invoked ever since the 1970s: something cold, cruel and inhumanly consistent in the name of “freedom”, no matter the costs.
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https://contemporarythinkers.org/friedrich-hayek/tag/money/
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Friedrich Hayek
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Friedrich Hayek
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https://contemporarythinkers.org/friedrich-hayek/tag/money/
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Books
The Stabilization Problem for Countries on the Gold Standard
– “Das Stabilisierungsproblem in Goldwährungsländern.” Zeitschrift für Volkswirtschaft und Sozialpolitik, N.S. 4 (1924).
Discount Policy and Commodity Prices
– “Diskontopolitik und Warenpreise.” Der Österreichische Volkswirt 17 (1,2), (Vienna 1924).
The American Banking System since the Reform of 1914
– “Das amerikanische Bankwesen seit der Reform von 1914.” Der Österreichische Volkswirt 17 (29–33), (Vienna 1925).
The Monetary Policy in the United States Since Overcoming the Crisis of 1920
– “Die Währungspolitik der Vereinigten Staaten seit der Überwindung der Krise von 1920.” Zeitschrift für Volkswirtschaft und Sozialpolitik. N.S. 5 (1925).
The Meaning of Business Cycle Research for Economic Life
– “Die Bedeutung der Konjunkturforschung für das Wirtschaftsleben.” Der Österreichische Volkswirt 19 (2), (Vienna 1926).
Business Cycle Research in Austria
– “Konjunkturforschung in Osterreich.” Die Industrie 32 (30), (Vienna 1927).
The Intertemporal Equilibrium System of Prices and the Movements of the ‘Value of Money.’
– “Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des ‘Geldwertes.’” Weltwirtschaftliches Archiv 28 (1928): 33–76.
Some Remarks on the Relationship between Monetary Theory and Business Cycle Theory
– “Einige Bemerkungen über das Verhältnis der Geldtheorie zur Konjunkturtheorie.” Schriften des Vereins für Sozialpolitik 173/2 (1928): 247–295.
Discussion Comments on ‘Credit and Business Cycle’
– “Diskussionsbemerkungen über ‘Kredit und Konjunktur.’” Shriften des Vereins für Sozialpolitik 175, Verhandlungen 1928, (1928).
Monetary Theory and the Trade Cycle
– Geldtheorie und Konjunkturtheorie. (Beitrage zur Konjunkturforschung, heraus-gegeben vom Österreichisches Institut für Konjunkturforschung, No. 1). Vienna and Leipzig: Hölder-Pichler-Tempsky, 1929/2, xii, 147 pp. (England 1933, Japan 1935, Spain 1936.) Translated into English by Lionel Robbins as Monetary Theory and the Trade Cycle. London: Jonathan Cape, 1933, 244 pp. American edition, New York: Harcourt Brace & Co., 1933. Reprinted New York: Augustus M. Kelley, 1966.
The German essay, of which the following is a translation, represents an expanded version of a paper prepared for the meeting of the Verein für Sozialpolitik, held in Zurich in September… More
Prices and Production
– Studies in Economics and Political Science, edited by the director of the London School of Economics and Political Sciences. No. 107 in the series of Monographs by writers connected with the London School of Economics and Political Science.) London: Routledge & Sons, 1931/2, xv, 112 pp. 2nd revised and enlarged edition, London: Routledge & Kegan Paul, 1935/9, also 1967 edition, xiv, 162 pp. American edition, New York: Macmillan, 1932.
These seven works taken together represent the first integration and systematic elaboration of the Austrian theories of money, capital, business cycles, and comparative monetary… More
The Pure Theory of Money: A Rejoinder to Mr. Keynes
– “The Pure Theory of Money: A Rejoinder to Mr. Keynes.” Economica 11, no. 34 (November 1931): 398–403.
A Reply to Dr. Hayek
– Keynes, J.M. “A Reply to Dr. Hayek.” Economica 12 (November 1931): 387–397.
Excerpt: “In an article recently published, Dr. Hayek has invited me to clear up some ambiguities of terminology which he finds in my Treatise of Money, and also other matters. As he… More
Money and Capital: A Reply to Mr. Sraffa
– "Money and Capital: A Reply to Mr. Sraffa.” Economic Journal 42 (June 1932): 237–249
Excerpt: “With an article devoted to a critical discussion of my Prices and Production, Mr. Sraffa has recently entered the arena of monetary controversy. There is no denying the fact… More
A Note on the Development of the Doctrine of ‘Forced Saving’
– “A Note on the Development of the Doctrine of ‘Forced Saving’.” Quarterly Journal of Economics 47 (November 1932): 123–133.
Excerpt: “The enhanced interest in the problem of “forced saving,” due to recent developments in the theory of industrial fluctuations, has led to the discovery of so many more or… More
Reflections on the Pure Theory of Money of Mr. J. M. Keynes
– “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 12 (February 1932 - Part II): 22–44.
The Fate of the Gold Standard
– “Das Schicksal der Goldwährung.” Der Deutsche Volkswirt 6 (20), (1932).
Capital Consumption
– “Kapitalaufzehrung.” Weltwirtschaftliches Archiv 36 (July 1932/II): 86–108.
Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion
– Marget, Arthur W. “Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion.” Journal of Political Economy 40 (April 1932): 261–266.
Concerning Neutral Money
– “Über Neutrales Geld.” Zeitschrift für Nationalökonomie 4 (October 1933).
The Present State and Immediate Prospects of the Study of Industrial Fluctuations
– Contribution to Gustav Clausing, ed. Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff. Munich: Duncker & Humblot, 1933.
Contributions on Monetary Theory
– Beiträge zur Geldtheorie. Edited and prefaced by Friedrich A. Hayek. Contributions by Marco Fanno, Marius W. Holtrop, Johan G. Koopmans, Gunnar Myrdal, Knut Wicksell. Vienna, 1933.
Capital and Industrial Fluctuations
– “Capital and Industrial Fluctuations.” Econometrica 2 (April 1934): 152–167.
Excerpt: A sympathetic criticism of the kind to which the views of the present author have been subjected by Messrs Hansen and Tout in a recent issue of ECONOMETRICA, offers a welcome… More
On the Relationship between Investment and Output
– “On the Relationship between Investment and Output.” Economic Journal 44 (1934): 207–231.
Saving
– “Saving.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 13, pp. 548–552.
The Outlook for Interest Rates
– “The Outlook for Interest Rates.” The Economist 7 (1934).
Stable Prices or Neutral Money
– “Stable Prices or Neutral Money.” The Economist 7 (1934).
Theories of the Trade Cycle
– Macfie, A.L. Theories of the Trade Cycle. London: Macmillan, 1934.
A Regulated Gold Standard
– “A Regulated Gold Standard.” The Economist (May 11, 1935).
Excerpt: “It is still impossible to predict when conditions will make a solution of international currency problems appear practicable. This does not mean that it is too early to ask… More
Spor miedzy szkola ‘Currency’ i szkola ‘Banking’
– “Spor miedzy szkola ‘Currency’ i szkola ‘Banking’.” Ekonomista 55 (Warsaw, 1935).
Utility Analysis and Interest
– “Utility Analysis and Interest.” Economic Journal 46 (1936): 44–60.
The International Monetary Situation
– “La situation monétaire internationale.” Bulletin Périodique de la Societé Belge d'Études et d'Expansion (Brussels), No. 103. (1936).
Monetary Nationalism and International Stability
– Geneva, 1937; London: Longmans, Green (The Graduate Institute of International Studies, Geneva, Publication Number 18), 1937, xiv, 94 pp. Reprinted New York: Augustus M. Kelley, 1964, 1971, 1974.
From Preface: “The five lectures which are here reproduced are necessarily confined to certain aspects of the wide subject indicated by the title. They are printed essentially as they… More
Investment that Raises the Demand for Capital
– “Investment that Raises the Demand for Capital.” Review of Economic Statistics 19 (November 1937).
Excerpt: “The purpose of this article is to state a proposition which underlies the modern “monetary over-investment theories” of the trade cycle in a form in which, as… More
Introduction to a Theory of Capital
– “Einleitung zu einer Kapitaltheorie.” Zeitschrift für Nationalökonomie 8 (1937): 1–9.
Profits, Investment, and Other Essays
– London: Routledge & Kegan Paul, 1939/3, viii, 266 pp., also 1969 edition. Reprinted New York: Augustus M. Kelley, 1969, 1970; Clifton, New Jersey: Augustus M. Kelley, 1975.
From Preface: “The essays collected in this volume are a selection from the various attempts made in the course of the past ten years to improve and develop the outline of a theory of… More
The Paradox of Saving
– "The Paradox of Saving," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The assertion that saving renders the purchasing power of the consumer insufficient to take up the volume of current production, although made more often by members of the… More
Price Expectations, Monetary Disturbances and Malinvestments
– “Price Expectations, Monetary Disturbances and Malinvestments," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The most characteristic feature of the work of our generation of economists is probably the general endeavor to apply the methods and results of the pure theory of… More
The Maintenance of Capital
– “The Maintenance of Capital,” Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The significance of the problem. It is not likely that in the whole field of economics there are many more concepts which are at the same time so generally used and so… More
An Enquiry into the Nature and Effects of the Paper Credit of Great Britain
– Henry Thornton. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). Edited and introduced by Friedrich A. Hayek. London: Allen and Unwin, 1939.
Excerpt: “To most of the contemporaries of Henry Thornton his authorship of the book which is now reprinted after one hundred and thirty-six years would by no means have been regarded… More
Hayek och ‘Ricardo-effekten’
– Welinder, C. “Hayek och ‘Ricardo-effekten’” In Ekonomisk Tidsskrift (Uppsala och Stockholm) 42 (1940): 33–39.
The Pure Theory of Capital
– London: Routledge & Kegan Paul, 1941/2 (also 1950 edition); Chicago: University of Chicago Press, 1941 (also 1950, 1952 and 1975 editions); xxxi, 454 pp. (Spain 1946, Japan 1951 and 1952).
The Pure Theory of Capital, F. A. Hayek’s long-overlooked, little-understood volume, was his most detailed work in economic theory. Originally published in 1941 when fashionable economic… More
Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital
– Pigou, A.C. “Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital.” Economica 8 (1941): 271–275.
A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’
– “A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’.” Economica N.S. 9 (November 1942): 383–385.
Professor Hayek’s Theory of Interest
– Lutz, Friedrich A. “Professor Hayek's Theory of Interest.” Economica 10 (1943): 302–310
Excerpt: “In the following discussion attention will be concentrated on that parts of Prof. Hayek’s Pure Theory of Capital which contains his theory of interest in “real”… More
Keynes vs. Hayek on a Commodity Reserve Currency
– Graham, F.D. “Keynes vs. Hayek on a Commodity Reserve Currency.” The Economic Journal 54 (1944): 422–429.
Excerpt: “The issues raised in Lord Keynes’ reply to Prof. Hayek’s article on a commodity reserve currency, in a recent issue of this journal, seem worthy of more extended… More
Full Employment, Planning and Inflation
– “Full Employment, Planning and Inflation.” Institute of Public Affairs Review 4 (6) (Melbourne, Australia 1950).
Excerpt: “In the five years that have elapsed since the war, central planning, “full employment,” and inflationary pressure have been the three features which have dominated… More
The Rate of Interest in the Trade Cycle Theories of Prof. Hayek
– Palmer, G.G.D. “The Rate of Interest in the Trade Cycle Theories of Prof. Hayek.” The South African Journal of Economics 23 (1955): 1–18.
Excerpt: “For many years the trade cycle theories of Prof. Hayek have been the centre of interest and controversy. His approach stands in contrast on the one hand to that of the… More
Professor Hayek’s Contribution to Trade Cycle Theory
– Gilbert, J.C. “Professor Hayek's Contribution to Trade Cycle Theory.” Economic Essays in Commemoration of the Dundee School of Economics, 1931–1955. pp. 51–62
Inflation Resulting from the Downward Inflexibility of Wages
– “Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147–152.
Excerpt: “Contrary to what is widely believed, the crucial results of the “Keynesian revolution” is the general acceptance of a factual assumption and, what is more, of an… More
Unions, Inflation and Profits
– “Unions, Inflation and Profits.” In: Philip D. Bradley (ed.) The Public Stake in Union Power. Charlottesville, University of Virginia Press: 1959.
Excerpt: “Tendencies are observable in the field of labor economics which most seriously threaten our future prosperity. The developments which are bringing this about are not of… More
The Economics of Abundance
– “The Economics of Abundance,” in Henry Hazlitt, ed. The Critics of Keynesian Economics. Princeton and London: Van Nostrand Co., 1960, pp. 126–130.
Excerpt: “Now in such a situation, in which abundant unused reserves of all kinds of resources, including all intermediate products, exist, may occasionally prevail in the depths of… More
Prof. Hayek and the Concertina Effect
– Kaldor, N. “Prof. Hayek and the Concertina Effect.” In Economica N.S. 9 (1942): 148–176; reprinted in: Kaldor, Essays on Economic Stability and Growth. London: Duckworth, 1960
Excerpt: “It was more than ten years ago that Prof. Hayek first fascinated the academic world of economists by a new theory of industrial fluctuations which in theoretical conception,… More
The Uses of ‘Gresham’s Law’ as an Illustration of ‘Historical Theory’
– “The Uses of ‘Gresham's Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).
Excerpt: “Mr. A. L. Burns’ use of Gresham’s Law as an illustration provides a good example for showing how useful it would be for the historian if he examined what… More
The Gold Standard—Its Evolution
– “L'Etalon d'Or — Son Evolution.” Revue d'Economie Politique 76 (1966).
The Hayek Story
– Heimann, E. “The Hayek Story.” In Critical Essays in Monetary Theory. Oxford University Press: 1967.
Three Elucidations of the ‘Ricardo Effect’
– “Three Elucidations of the ‘Ricardo Effect’.” Journal of Political Economy 77 (March-April 1969): 274–285.
Excerpt: “The immediate aim of this paper is to clear up a point on which Sir John Hicks in his recent review of my earlier discussions of the relation between the demand for consumer… More
Note on Professor Hayek’s ‘True Theory of Unemployment’
– Johr, W.A. “Note on Professor Hayek's ‘True Theory of Unemployment.’” Kyklos 30, no. 4 (1970): 713–723
Excerpt: “Prof. Hayek is an economist whose prestige, acquired by his writings on problems of economics and social philosophy, stands high. Consequently, every work he publishes… More
Hayek on the Great Depression
– Interview with Hayek, Common Sense Capitalism.
Capital Intensity and the Real Wage: A Critical Evaluation of Hayek’s Ricardo Effect
– Falconer, Robert T. “Capital Intensity and the Real Wage: A Critical Evaluation of Hayek's Ricardo Effect.” Texas A & M Ph.D. Dissertation. College Station, Texas, 1971.
A Tiger by the Tail: The Keynesian Legacy of Inflation
– A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40 Years’ Running Commentary on Keynesianism by F. A. Hayek. Compiled and introduced by Sudha R. Shenoy. London: Institute of Economic Affairs (Hobart Paperback #4), 1972
Excerpt from Introduction: “The small book you are holding in your hands is unique. It is perhaps the finest introduction to the thought of a major thinker ever published in the… More
Inflation: The Path to Unemployment
– “Inflation: The Path to Unemployment.” Addendum 2 to Lord Robbins et. al. Inflation: Causes, Consequences, Cures: Discourses on the Debate between the Monetary and the Trade Union Interpretations. London: The Institute for Economic Affairs (IEA Readings, No. 14), 1974, pp. 115–120.
Inflation and Unemployment
– “Inflation and Unemployment.” New York Times (Nov. 15, 1974).
Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation
– Grinder, Walter E. Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation. In Libertarian Review (November 1974): 4–5
Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften
– Leube, Kurt R. “Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften.” (University of Salzburg Research Papers, 1974).
Full Employment at Any Price?
– Full Employment at Any Price? London: Institute of Economic Affairs (Occasional Paper 45), 1975/1978, (Italy 1975), 52 pp.
Politicians Can’t Be Trusted with Money
– “Politicians Can't Be Trusted with Money.” [(Newspaper editor's title. Paper delivered in September at the Gold and Monetary Conference in Lausanne, Switzerland.) The Daily Telegraph of London, Part I (September 30, 1975).
World Inflationary Recession
– “World Inflationary Recession.” Paper presented to the International Conference on World Economic Stabilization, April 17–18, 1975, co-sponsored by the First National Bank of Chicago and the University of Chicago. First Chicago Report 5/1975.
Ausgewählte Bibliographie zur Wiederauflage
– Leube, Kurt R. “Ausgewählte Bibliographie zur Wiederauflage F.A. Hayek: Preise und Produktion.” Vienna, 1975.
Hayek and Keynes: A Retrospective Assessment
– O'Driscoll, Jr. Gerald P. “Hayek and Keynes: A Retrospective Assessment.” Iowa State University Department of Economics Staff Paper No. 20. Ames, Iowa: Xerox 1975. [Paper prepared for the Symposium on Austrian Economics, University of Hartford, June 22–28, 1975.]
Inflation, Unemployment and Hayek
– Spencer, Roger W. “Inflation, Unemployment and Hayek.” Review (Federal Reserve Bank of St. Louis.) 57 (1975): 6–10.
Excerpt: “In these times of high unemployment and rising price levels, one looks to the leaders of the economics profession for analysis and solutions. One possible candidate, who has… More
Choice in Currency: A Way to Stop Inflation
– Choice in Currency. A Way to Stop Inflation. London: Institute of Economic Affairs (Occasional Paper 48), February 1976/1977, 46 pp.
Excerpt: The chief root of our present monetary troubles is, of course, the sanction of scientific authority which Lord Keynes and his disciples have given to the age-old superstition that… More
Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies
– Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: The Institute of Economic Affairs (Hobart Paper Special 70), October 1976, 107 pp.
Excerpt: “In my despair about the hopelessness of finding a politically feasible solution to what is technically the simplest possible problem, namely to stop inflation, I threw out… More
The Problem of Money Today
– “Il Problema della Moneta Oggi.” Academia Nationale dei Lincei. Atti de Convegni Rome (1976).
Rereading von Hayek
– Leduc, G. “En rélisant von Hayek.” Revue d'Economie Politique 86 (1976): 491–494.
Inflationstheorie bei Hayek und Keynes
– Leube, Kurt R. “Inflationstheorie bei Hayek und Keynes.” (Paper prepared for a Seminar at the University of Salzburg, 1975).
Friedrich A. Hayek: Nobel Prizewinner
– Shearmur, Jeremy. “Friedrich A. Hayek: Nobel Prizewinner.” In Fritz Machlup, ed., Essays on Hayek. New York: New York University Press, 1976, pp. 171–176.
Toward Free Market Money
– “Toward Free Market Money.” Wall Street Journal (August 19, 1977).
Economics as a Coordination Problem
– Foreword by F. A. Hayek. In Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, ed. by Gerald P. O'Driscoll, Jr. Kansas City: Sheed Andrews and McMeel, Inc., 1977.
Foreword by Hayek: “To give a coherent account of the whole of the theoretical work of an economist who has not attempted to do so himself is sometimes a useful task. But the proof of… More
Economics as a Coordination Problem by Gerald O’Driscoll Jr.
– O'Driscoll, Jr. Gerald P. Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, with a foreword by F.A. Hayek. Kansas City: Sheed Andrews & McMeel, 1977.
Unemployment and the Free Market
– Interview of Hayek, Firing Line, YouTube video.
Nobel Laureate F A Hayek is interviewed by Firing Line’s William F. Buckley Jr regarding unemployment, inflation, and John Maynard Keynes.
Can we still avoid inflation?
– “Can we still avoid inflation?” In Richard M. Ebeling (ed.) The Austrian Theory of the Trade Cycle and Other Essays. New York: Center for Libertarian Studies (Occasional Paper Series 8) 1978.
Excerpt: “In one sense the question asked in the title of this lecture is purely rhetorical. I hope none of you has suspected me of doubting even for a moment that technically there… More
Hayek, the Inter-War Years and the Gold Standard
– Miller, Robert. “Hayek, the Inter-War Years and the Gold Standard.” Unpublished paper presented to The Carl Menger Society, June 10, 1978.
Axel Leijonhufvud interviews Friedrich A. Hayek
– The Hayek Interviews, Universidad Francisco Marroquín, Date unspecified.
Dr. Hayek speaks with Dr. Axel Leijonhufvud primarily about his academic career and intellectual pursuits. First Dr. Hayek tells of his eclectic course of study at university, including law… More
Towards a Free Market Monetary System
– “Towards a Free Market Monetary System.” The Journal of Libertarian Studies 3, no. 1 (1979): 1–8.
When a little over two years ago, at the second Lausanne Conference of this group, I threw out, almost as a sort of bitter joke, that there was no hope of ever again having decent money,… More
Introduction: The Debate, 1931–71
– Shenoy, Sudha R. “Introduction: The Debate, 1931–71.” in F.A. Hayek, A Tiger by the Tail: The Keynesian Legacy of Inflation, Cato 1979.
Excerpt: “The roots of current economic ideas and of those guiding the wages policy lie in the 1930s, in discussion inspired by the publication of the General Theory. Though… More
Free Choice of Currency Standards
– “Freie Wahl de Währungen.” In Geldpolitik, ed. by J. Badura and O. Issing. Stuttgart and New York, 1980, pp. 136–146.
Hayek on Inflation
– Ebeling, Richard. “Hayek on Inflation.” Unpublished Paper presented to The Carl Menger Society Conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980
Hayek, the Answer Man
– “Hayek, the Answer Man.” The Washington Post (December 2, 1982), pp. C1, C17.
He is everything you want an 83-year-old Viennese conservative economist to be. Tall and rumpled. A pearl stickpin in his tie. A watch chain across his vest, even though he wears a digital… More
Constitution or Competition? Alternative Views on Monetary Reform
– Brown, Pamela. “Constitution or Competition? Alternative Views on Monetary Reform.” Literature of Liberty 5 (Autumn 1982): 7–52
Excerpt: Money, for practically as long as it has existed, has been employed to realize two fundamentally different sorts of goals: production or plunder. In a market economy, private… More
Interview with F.A. Hayek
– Policy Report. February 1983.
Excerpt: In December the Cato Institute launched its Distinguished Lecturer Series with an address by F. A. Hayek, 1974 Nobel laureate in economics and author of numerous books,… More
Exclusive Interview with F.A. Hayek
– Blanchard, James U. Policy Report. May-June 1984.
Excerpt: F.A. Hayek is one of the world’s leading free-market economists and social philosophers. Besides the important 1944 bestseller, The Road to Serfdom, he has written books on… More
Hayek vs. Keynes
– Bruce Caldwell, INET Conference, King’s College, Cambridge University, April 8-11, 2010.
Excerpt: Tonight I will talk briefly about the Keynes-Hayek relationship, then will focus on some of Hayek’s insights that may be of relevance today. In the process I hope to clear up… More
Fight of the Century: Keynes vs. Hayek, Round Two
– EconStories, YouTube, April 27, 2011.
Produced by Emergent Order. Visit us at http://emergentorder.com. “Fight of the Century” is the new economics hip-hop music video by John Papola and Russ Roberts… More
Masters Of Money – Part 2 – Friedrich Hayek
– Episode 2, BBC series, September 2012.
According to conventional wisdom, today’s global financial crisis happened because markets were not regulated enough. But what if the opposite is true? That it was excessive… More
Hayek and the Modern World: Economic Organization and Activity
– Conference, Jepson School of Leadership Studies, University of Richmond, April 12, 2013.
The Jepson School of Leadership Studies brought together invited scholars to explore economist Friedrich A. Hayek’s contributions to political economy in theory and practice and his… More
Jack High interviews Friedrich A. Hayek
– The Hayek Interviews, Universidad Francisco Marroquín, 1978.
Known as an economist to the world, Dr. Hayek talks with Jack High about the past and present in the realm of economics. Discussing the role of various economists had on his thinking,… More
Essays
The Stabilization Problem for Countries on the Gold Standard
– “Das Stabilisierungsproblem in Goldwährungsländern.” Zeitschrift für Volkswirtschaft und Sozialpolitik, N.S. 4 (1924).
Discount Policy and Commodity Prices
– “Diskontopolitik und Warenpreise.” Der Österreichische Volkswirt 17 (1,2), (Vienna 1924).
The American Banking System since the Reform of 1914
– “Das amerikanische Bankwesen seit der Reform von 1914.” Der Österreichische Volkswirt 17 (29–33), (Vienna 1925).
The Monetary Policy in the United States Since Overcoming the Crisis of 1920
– “Die Währungspolitik der Vereinigten Staaten seit der Überwindung der Krise von 1920.” Zeitschrift für Volkswirtschaft und Sozialpolitik. N.S. 5 (1925).
The Meaning of Business Cycle Research for Economic Life
– “Die Bedeutung der Konjunkturforschung für das Wirtschaftsleben.” Der Österreichische Volkswirt 19 (2), (Vienna 1926).
Business Cycle Research in Austria
– “Konjunkturforschung in Osterreich.” Die Industrie 32 (30), (Vienna 1927).
The Intertemporal Equilibrium System of Prices and the Movements of the ‘Value of Money.’
– “Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des ‘Geldwertes.’” Weltwirtschaftliches Archiv 28 (1928): 33–76.
Some Remarks on the Relationship between Monetary Theory and Business Cycle Theory
– “Einige Bemerkungen über das Verhältnis der Geldtheorie zur Konjunkturtheorie.” Schriften des Vereins für Sozialpolitik 173/2 (1928): 247–295.
Discussion Comments on ‘Credit and Business Cycle’
– “Diskussionsbemerkungen über ‘Kredit und Konjunktur.’” Shriften des Vereins für Sozialpolitik 175, Verhandlungen 1928, (1928).
Monetary Theory and the Trade Cycle
– Geldtheorie und Konjunkturtheorie. (Beitrage zur Konjunkturforschung, heraus-gegeben vom Österreichisches Institut für Konjunkturforschung, No. 1). Vienna and Leipzig: Hölder-Pichler-Tempsky, 1929/2, xii, 147 pp. (England 1933, Japan 1935, Spain 1936.) Translated into English by Lionel Robbins as Monetary Theory and the Trade Cycle. London: Jonathan Cape, 1933, 244 pp. American edition, New York: Harcourt Brace & Co., 1933. Reprinted New York: Augustus M. Kelley, 1966.
The German essay, of which the following is a translation, represents an expanded version of a paper prepared for the meeting of the Verein für Sozialpolitik, held in Zurich in September… More
Prices and Production
– Studies in Economics and Political Science, edited by the director of the London School of Economics and Political Sciences. No. 107 in the series of Monographs by writers connected with the London School of Economics and Political Science.) London: Routledge & Sons, 1931/2, xv, 112 pp. 2nd revised and enlarged edition, London: Routledge & Kegan Paul, 1935/9, also 1967 edition, xiv, 162 pp. American edition, New York: Macmillan, 1932.
These seven works taken together represent the first integration and systematic elaboration of the Austrian theories of money, capital, business cycles, and comparative monetary… More
The Pure Theory of Money: A Rejoinder to Mr. Keynes
– “The Pure Theory of Money: A Rejoinder to Mr. Keynes.” Economica 11, no. 34 (November 1931): 398–403.
A Reply to Dr. Hayek
– Keynes, J.M. “A Reply to Dr. Hayek.” Economica 12 (November 1931): 387–397.
Excerpt: “In an article recently published, Dr. Hayek has invited me to clear up some ambiguities of terminology which he finds in my Treatise of Money, and also other matters. As he… More
Money and Capital: A Reply to Mr. Sraffa
– "Money and Capital: A Reply to Mr. Sraffa.” Economic Journal 42 (June 1932): 237–249
Excerpt: “With an article devoted to a critical discussion of my Prices and Production, Mr. Sraffa has recently entered the arena of monetary controversy. There is no denying the fact… More
A Note on the Development of the Doctrine of ‘Forced Saving’
– “A Note on the Development of the Doctrine of ‘Forced Saving’.” Quarterly Journal of Economics 47 (November 1932): 123–133.
Excerpt: “The enhanced interest in the problem of “forced saving,” due to recent developments in the theory of industrial fluctuations, has led to the discovery of so many more or… More
Reflections on the Pure Theory of Money of Mr. J. M. Keynes
– “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 12 (February 1932 - Part II): 22–44.
The Fate of the Gold Standard
– “Das Schicksal der Goldwährung.” Der Deutsche Volkswirt 6 (20), (1932).
Capital Consumption
– “Kapitalaufzehrung.” Weltwirtschaftliches Archiv 36 (July 1932/II): 86–108.
Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion
– Marget, Arthur W. “Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion.” Journal of Political Economy 40 (April 1932): 261–266.
Concerning Neutral Money
– “Über Neutrales Geld.” Zeitschrift für Nationalökonomie 4 (October 1933).
The Present State and Immediate Prospects of the Study of Industrial Fluctuations
– Contribution to Gustav Clausing, ed. Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff. Munich: Duncker & Humblot, 1933.
Contributions on Monetary Theory
– Beiträge zur Geldtheorie. Edited and prefaced by Friedrich A. Hayek. Contributions by Marco Fanno, Marius W. Holtrop, Johan G. Koopmans, Gunnar Myrdal, Knut Wicksell. Vienna, 1933.
Capital and Industrial Fluctuations
– “Capital and Industrial Fluctuations.” Econometrica 2 (April 1934): 152–167.
Excerpt: A sympathetic criticism of the kind to which the views of the present author have been subjected by Messrs Hansen and Tout in a recent issue of ECONOMETRICA, offers a welcome… More
On the Relationship between Investment and Output
– “On the Relationship between Investment and Output.” Economic Journal 44 (1934): 207–231.
Saving
– “Saving.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 13, pp. 548–552.
The Outlook for Interest Rates
– “The Outlook for Interest Rates.” The Economist 7 (1934).
Stable Prices or Neutral Money
– “Stable Prices or Neutral Money.” The Economist 7 (1934).
Theories of the Trade Cycle
– Macfie, A.L. Theories of the Trade Cycle. London: Macmillan, 1934.
A Regulated Gold Standard
– “A Regulated Gold Standard.” The Economist (May 11, 1935).
Excerpt: “It is still impossible to predict when conditions will make a solution of international currency problems appear practicable. This does not mean that it is too early to ask… More
Spor miedzy szkola ‘Currency’ i szkola ‘Banking’
– “Spor miedzy szkola ‘Currency’ i szkola ‘Banking’.” Ekonomista 55 (Warsaw, 1935).
Utility Analysis and Interest
– “Utility Analysis and Interest.” Economic Journal 46 (1936): 44–60.
The International Monetary Situation
– “La situation monétaire internationale.” Bulletin Périodique de la Societé Belge d'Études et d'Expansion (Brussels), No. 103. (1936).
Monetary Nationalism and International Stability
– Geneva, 1937; London: Longmans, Green (The Graduate Institute of International Studies, Geneva, Publication Number 18), 1937, xiv, 94 pp. Reprinted New York: Augustus M. Kelley, 1964, 1971, 1974.
From Preface: “The five lectures which are here reproduced are necessarily confined to certain aspects of the wide subject indicated by the title. They are printed essentially as they… More
Investment that Raises the Demand for Capital
– “Investment that Raises the Demand for Capital.” Review of Economic Statistics 19 (November 1937).
Excerpt: “The purpose of this article is to state a proposition which underlies the modern “monetary over-investment theories” of the trade cycle in a form in which, as… More
Introduction to a Theory of Capital
– “Einleitung zu einer Kapitaltheorie.” Zeitschrift für Nationalökonomie 8 (1937): 1–9.
Profits, Investment, and Other Essays
– London: Routledge & Kegan Paul, 1939/3, viii, 266 pp., also 1969 edition. Reprinted New York: Augustus M. Kelley, 1969, 1970; Clifton, New Jersey: Augustus M. Kelley, 1975.
From Preface: “The essays collected in this volume are a selection from the various attempts made in the course of the past ten years to improve and develop the outline of a theory of… More
The Paradox of Saving
– "The Paradox of Saving," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The assertion that saving renders the purchasing power of the consumer insufficient to take up the volume of current production, although made more often by members of the… More
Price Expectations, Monetary Disturbances and Malinvestments
– “Price Expectations, Monetary Disturbances and Malinvestments," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The most characteristic feature of the work of our generation of economists is probably the general endeavor to apply the methods and results of the pure theory of… More
The Maintenance of Capital
– “The Maintenance of Capital,” Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The significance of the problem. It is not likely that in the whole field of economics there are many more concepts which are at the same time so generally used and so… More
An Enquiry into the Nature and Effects of the Paper Credit of Great Britain
– Henry Thornton. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). Edited and introduced by Friedrich A. Hayek. London: Allen and Unwin, 1939.
Excerpt: “To most of the contemporaries of Henry Thornton his authorship of the book which is now reprinted after one hundred and thirty-six years would by no means have been regarded… More
Hayek och ‘Ricardo-effekten’
– Welinder, C. “Hayek och ‘Ricardo-effekten’” In Ekonomisk Tidsskrift (Uppsala och Stockholm) 42 (1940): 33–39.
The Pure Theory of Capital
– London: Routledge & Kegan Paul, 1941/2 (also 1950 edition); Chicago: University of Chicago Press, 1941 (also 1950, 1952 and 1975 editions); xxxi, 454 pp. (Spain 1946, Japan 1951 and 1952).
The Pure Theory of Capital, F. A. Hayek’s long-overlooked, little-understood volume, was his most detailed work in economic theory. Originally published in 1941 when fashionable economic… More
Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital
– Pigou, A.C. “Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital.” Economica 8 (1941): 271–275.
A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’
– “A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’.” Economica N.S. 9 (November 1942): 383–385.
Professor Hayek’s Theory of Interest
– Lutz, Friedrich A. “Professor Hayek's Theory of Interest.” Economica 10 (1943): 302–310
Excerpt: “In the following discussion attention will be concentrated on that parts of Prof. Hayek’s Pure Theory of Capital which contains his theory of interest in “real”… More
Keynes vs. Hayek on a Commodity Reserve Currency
– Graham, F.D. “Keynes vs. Hayek on a Commodity Reserve Currency.” The Economic Journal 54 (1944): 422–429.
Excerpt: “The issues raised in Lord Keynes’ reply to Prof. Hayek’s article on a commodity reserve currency, in a recent issue of this journal, seem worthy of more extended… More
Full Employment, Planning and Inflation
– “Full Employment, Planning and Inflation.” Institute of Public Affairs Review 4 (6) (Melbourne, Australia 1950).
Excerpt: “In the five years that have elapsed since the war, central planning, “full employment,” and inflationary pressure have been the three features which have dominated… More
The Rate of Interest in the Trade Cycle Theories of Prof. Hayek
– Palmer, G.G.D. “The Rate of Interest in the Trade Cycle Theories of Prof. Hayek.” The South African Journal of Economics 23 (1955): 1–18.
Excerpt: “For many years the trade cycle theories of Prof. Hayek have been the centre of interest and controversy. His approach stands in contrast on the one hand to that of the… More
Professor Hayek’s Contribution to Trade Cycle Theory
– Gilbert, J.C. “Professor Hayek's Contribution to Trade Cycle Theory.” Economic Essays in Commemoration of the Dundee School of Economics, 1931–1955. pp. 51–62
Inflation Resulting from the Downward Inflexibility of Wages
– “Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147–152.
Excerpt: “Contrary to what is widely believed, the crucial results of the “Keynesian revolution” is the general acceptance of a factual assumption and, what is more, of an… More
Unions, Inflation and Profits
– “Unions, Inflation and Profits.” In: Philip D. Bradley (ed.) The Public Stake in Union Power. Charlottesville, University of Virginia Press: 1959.
Excerpt: “Tendencies are observable in the field of labor economics which most seriously threaten our future prosperity. The developments which are bringing this about are not of… More
The Economics of Abundance
– “The Economics of Abundance,” in Henry Hazlitt, ed. The Critics of Keynesian Economics. Princeton and London: Van Nostrand Co., 1960, pp. 126–130.
Excerpt: “Now in such a situation, in which abundant unused reserves of all kinds of resources, including all intermediate products, exist, may occasionally prevail in the depths of… More
Prof. Hayek and the Concertina Effect
– Kaldor, N. “Prof. Hayek and the Concertina Effect.” In Economica N.S. 9 (1942): 148–176; reprinted in: Kaldor, Essays on Economic Stability and Growth. London: Duckworth, 1960
Excerpt: “It was more than ten years ago that Prof. Hayek first fascinated the academic world of economists by a new theory of industrial fluctuations which in theoretical conception,… More
The Uses of ‘Gresham’s Law’ as an Illustration of ‘Historical Theory’
– “The Uses of ‘Gresham's Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).
Excerpt: “Mr. A. L. Burns’ use of Gresham’s Law as an illustration provides a good example for showing how useful it would be for the historian if he examined what… More
The Gold Standard—Its Evolution
– “L'Etalon d'Or — Son Evolution.” Revue d'Economie Politique 76 (1966).
The Hayek Story
– Heimann, E. “The Hayek Story.” In Critical Essays in Monetary Theory. Oxford University Press: 1967.
Three Elucidations of the ‘Ricardo Effect’
– “Three Elucidations of the ‘Ricardo Effect’.” Journal of Political Economy 77 (March-April 1969): 274–285.
Excerpt: “The immediate aim of this paper is to clear up a point on which Sir John Hicks in his recent review of my earlier discussions of the relation between the demand for consumer… More
Note on Professor Hayek’s ‘True Theory of Unemployment’
– Johr, W.A. “Note on Professor Hayek's ‘True Theory of Unemployment.’” Kyklos 30, no. 4 (1970): 713–723
Excerpt: “Prof. Hayek is an economist whose prestige, acquired by his writings on problems of economics and social philosophy, stands high. Consequently, every work he publishes… More
Hayek on the Great Depression
– Interview with Hayek, Common Sense Capitalism.
Capital Intensity and the Real Wage: A Critical Evaluation of Hayek’s Ricardo Effect
– Falconer, Robert T. “Capital Intensity and the Real Wage: A Critical Evaluation of Hayek's Ricardo Effect.” Texas A & M Ph.D. Dissertation. College Station, Texas, 1971.
A Tiger by the Tail: The Keynesian Legacy of Inflation
– A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40 Years’ Running Commentary on Keynesianism by F. A. Hayek. Compiled and introduced by Sudha R. Shenoy. London: Institute of Economic Affairs (Hobart Paperback #4), 1972
Excerpt from Introduction: “The small book you are holding in your hands is unique. It is perhaps the finest introduction to the thought of a major thinker ever published in the… More
Inflation: The Path to Unemployment
– “Inflation: The Path to Unemployment.” Addendum 2 to Lord Robbins et. al. Inflation: Causes, Consequences, Cures: Discourses on the Debate between the Monetary and the Trade Union Interpretations. London: The Institute for Economic Affairs (IEA Readings, No. 14), 1974, pp. 115–120.
Inflation and Unemployment
– “Inflation and Unemployment.” New York Times (Nov. 15, 1974).
Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation
– Grinder, Walter E. Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation. In Libertarian Review (November 1974): 4–5
Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften
– Leube, Kurt R. “Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften.” (University of Salzburg Research Papers, 1974).
Full Employment at Any Price?
– Full Employment at Any Price? London: Institute of Economic Affairs (Occasional Paper 45), 1975/1978, (Italy 1975), 52 pp.
Politicians Can’t Be Trusted with Money
– “Politicians Can't Be Trusted with Money.” [(Newspaper editor's title. Paper delivered in September at the Gold and Monetary Conference in Lausanne, Switzerland.) The Daily Telegraph of London, Part I (September 30, 1975).
World Inflationary Recession
– “World Inflationary Recession.” Paper presented to the International Conference on World Economic Stabilization, April 17–18, 1975, co-sponsored by the First National Bank of Chicago and the University of Chicago. First Chicago Report 5/1975.
Ausgewählte Bibliographie zur Wiederauflage
– Leube, Kurt R. “Ausgewählte Bibliographie zur Wiederauflage F.A. Hayek: Preise und Produktion.” Vienna, 1975.
Hayek and Keynes: A Retrospective Assessment
– O'Driscoll, Jr. Gerald P. “Hayek and Keynes: A Retrospective Assessment.” Iowa State University Department of Economics Staff Paper No. 20. Ames, Iowa: Xerox 1975. [Paper prepared for the Symposium on Austrian Economics, University of Hartford, June 22–28, 1975.]
Inflation, Unemployment and Hayek
– Spencer, Roger W. “Inflation, Unemployment and Hayek.” Review (Federal Reserve Bank of St. Louis.) 57 (1975): 6–10.
Excerpt: “In these times of high unemployment and rising price levels, one looks to the leaders of the economics profession for analysis and solutions. One possible candidate, who has… More
Choice in Currency: A Way to Stop Inflation
– Choice in Currency. A Way to Stop Inflation. London: Institute of Economic Affairs (Occasional Paper 48), February 1976/1977, 46 pp.
Excerpt: The chief root of our present monetary troubles is, of course, the sanction of scientific authority which Lord Keynes and his disciples have given to the age-old superstition that… More
Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies
– Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: The Institute of Economic Affairs (Hobart Paper Special 70), October 1976, 107 pp.
Excerpt: “In my despair about the hopelessness of finding a politically feasible solution to what is technically the simplest possible problem, namely to stop inflation, I threw out… More
The Problem of Money Today
– “Il Problema della Moneta Oggi.” Academia Nationale dei Lincei. Atti de Convegni Rome (1976).
Rereading von Hayek
– Leduc, G. “En rélisant von Hayek.” Revue d'Economie Politique 86 (1976): 491–494.
Inflationstheorie bei Hayek und Keynes
– Leube, Kurt R. “Inflationstheorie bei Hayek und Keynes.” (Paper prepared for a Seminar at the University of Salzburg, 1975).
Friedrich A. Hayek: Nobel Prizewinner
– Shearmur, Jeremy. “Friedrich A. Hayek: Nobel Prizewinner.” In Fritz Machlup, ed., Essays on Hayek. New York: New York University Press, 1976, pp. 171–176.
Toward Free Market Money
– “Toward Free Market Money.” Wall Street Journal (August 19, 1977).
Economics as a Coordination Problem
– Foreword by F. A. Hayek. In Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, ed. by Gerald P. O'Driscoll, Jr. Kansas City: Sheed Andrews and McMeel, Inc., 1977.
Foreword by Hayek: “To give a coherent account of the whole of the theoretical work of an economist who has not attempted to do so himself is sometimes a useful task. But the proof of… More
Economics as a Coordination Problem by Gerald O’Driscoll Jr.
– O'Driscoll, Jr. Gerald P. Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, with a foreword by F.A. Hayek. Kansas City: Sheed Andrews & McMeel, 1977.
Unemployment and the Free Market
– Interview of Hayek, Firing Line, YouTube video.
Nobel Laureate F A Hayek is interviewed by Firing Line’s William F. Buckley Jr regarding unemployment, inflation, and John Maynard Keynes.
Can we still avoid inflation?
– “Can we still avoid inflation?” In Richard M. Ebeling (ed.) The Austrian Theory of the Trade Cycle and Other Essays. New York: Center for Libertarian Studies (Occasional Paper Series 8) 1978.
Excerpt: “In one sense the question asked in the title of this lecture is purely rhetorical. I hope none of you has suspected me of doubting even for a moment that technically there… More
Hayek, the Inter-War Years and the Gold Standard
– Miller, Robert. “Hayek, the Inter-War Years and the Gold Standard.” Unpublished paper presented to The Carl Menger Society, June 10, 1978.
Axel Leijonhufvud interviews Friedrich A. Hayek
– The Hayek Interviews, Universidad Francisco Marroquín, Date unspecified.
Dr. Hayek speaks with Dr. Axel Leijonhufvud primarily about his academic career and intellectual pursuits. First Dr. Hayek tells of his eclectic course of study at university, including law… More
Towards a Free Market Monetary System
– “Towards a Free Market Monetary System.” The Journal of Libertarian Studies 3, no. 1 (1979): 1–8.
When a little over two years ago, at the second Lausanne Conference of this group, I threw out, almost as a sort of bitter joke, that there was no hope of ever again having decent money,… More
Introduction: The Debate, 1931–71
– Shenoy, Sudha R. “Introduction: The Debate, 1931–71.” in F.A. Hayek, A Tiger by the Tail: The Keynesian Legacy of Inflation, Cato 1979.
Excerpt: “The roots of current economic ideas and of those guiding the wages policy lie in the 1930s, in discussion inspired by the publication of the General Theory. Though… More
Free Choice of Currency Standards
– “Freie Wahl de Währungen.” In Geldpolitik, ed. by J. Badura and O. Issing. Stuttgart and New York, 1980, pp. 136–146.
Hayek on Inflation
– Ebeling, Richard. “Hayek on Inflation.” Unpublished Paper presented to The Carl Menger Society Conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980
Hayek, the Answer Man
– “Hayek, the Answer Man.” The Washington Post (December 2, 1982), pp. C1, C17.
He is everything you want an 83-year-old Viennese conservative economist to be. Tall and rumpled. A pearl stickpin in his tie. A watch chain across his vest, even though he wears a digital… More
Constitution or Competition? Alternative Views on Monetary Reform
– Brown, Pamela. “Constitution or Competition? Alternative Views on Monetary Reform.” Literature of Liberty 5 (Autumn 1982): 7–52
Excerpt: Money, for practically as long as it has existed, has been employed to realize two fundamentally different sorts of goals: production or plunder. In a market economy, private… More
Interview with F.A. Hayek
– Policy Report. February 1983.
Excerpt: In December the Cato Institute launched its Distinguished Lecturer Series with an address by F. A. Hayek, 1974 Nobel laureate in economics and author of numerous books,… More
Exclusive Interview with F.A. Hayek
– Blanchard, James U. Policy Report. May-June 1984.
Excerpt: F.A. Hayek is one of the world’s leading free-market economists and social philosophers. Besides the important 1944 bestseller, The Road to Serfdom, he has written books on… More
Hayek vs. Keynes
– Bruce Caldwell, INET Conference, King’s College, Cambridge University, April 8-11, 2010.
Excerpt: Tonight I will talk briefly about the Keynes-Hayek relationship, then will focus on some of Hayek’s insights that may be of relevance today. In the process I hope to clear up… More
Fight of the Century: Keynes vs. Hayek, Round Two
– EconStories, YouTube, April 27, 2011.
Produced by Emergent Order. Visit us at http://emergentorder.com. “Fight of the Century” is the new economics hip-hop music video by John Papola and Russ Roberts… More
Masters Of Money – Part 2 – Friedrich Hayek
– Episode 2, BBC series, September 2012.
According to conventional wisdom, today’s global financial crisis happened because markets were not regulated enough. But what if the opposite is true? That it was excessive… More
Hayek and the Modern World: Economic Organization and Activity
– Conference, Jepson School of Leadership Studies, University of Richmond, April 12, 2013.
The Jepson School of Leadership Studies brought together invited scholars to explore economist Friedrich A. Hayek’s contributions to political economy in theory and practice and his… More
Jack High interviews Friedrich A. Hayek
– The Hayek Interviews, Universidad Francisco Marroquín, 1978.
Known as an economist to the world, Dr. Hayek talks with Jack High about the past and present in the realm of economics. Discussing the role of various economists had on his thinking,… More
Commentary
The Stabilization Problem for Countries on the Gold Standard
– “Das Stabilisierungsproblem in Goldwährungsländern.” Zeitschrift für Volkswirtschaft und Sozialpolitik, N.S. 4 (1924).
Discount Policy and Commodity Prices
– “Diskontopolitik und Warenpreise.” Der Österreichische Volkswirt 17 (1,2), (Vienna 1924).
The American Banking System since the Reform of 1914
– “Das amerikanische Bankwesen seit der Reform von 1914.” Der Österreichische Volkswirt 17 (29–33), (Vienna 1925).
The Monetary Policy in the United States Since Overcoming the Crisis of 1920
– “Die Währungspolitik der Vereinigten Staaten seit der Überwindung der Krise von 1920.” Zeitschrift für Volkswirtschaft und Sozialpolitik. N.S. 5 (1925).
The Meaning of Business Cycle Research for Economic Life
– “Die Bedeutung der Konjunkturforschung für das Wirtschaftsleben.” Der Österreichische Volkswirt 19 (2), (Vienna 1926).
Business Cycle Research in Austria
– “Konjunkturforschung in Osterreich.” Die Industrie 32 (30), (Vienna 1927).
The Intertemporal Equilibrium System of Prices and the Movements of the ‘Value of Money.’
– “Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des ‘Geldwertes.’” Weltwirtschaftliches Archiv 28 (1928): 33–76.
Some Remarks on the Relationship between Monetary Theory and Business Cycle Theory
– “Einige Bemerkungen über das Verhältnis der Geldtheorie zur Konjunkturtheorie.” Schriften des Vereins für Sozialpolitik 173/2 (1928): 247–295.
Discussion Comments on ‘Credit and Business Cycle’
– “Diskussionsbemerkungen über ‘Kredit und Konjunktur.’” Shriften des Vereins für Sozialpolitik 175, Verhandlungen 1928, (1928).
Monetary Theory and the Trade Cycle
– Geldtheorie und Konjunkturtheorie. (Beitrage zur Konjunkturforschung, heraus-gegeben vom Österreichisches Institut für Konjunkturforschung, No. 1). Vienna and Leipzig: Hölder-Pichler-Tempsky, 1929/2, xii, 147 pp. (England 1933, Japan 1935, Spain 1936.) Translated into English by Lionel Robbins as Monetary Theory and the Trade Cycle. London: Jonathan Cape, 1933, 244 pp. American edition, New York: Harcourt Brace & Co., 1933. Reprinted New York: Augustus M. Kelley, 1966.
The German essay, of which the following is a translation, represents an expanded version of a paper prepared for the meeting of the Verein für Sozialpolitik, held in Zurich in September… More
Prices and Production
– Studies in Economics and Political Science, edited by the director of the London School of Economics and Political Sciences. No. 107 in the series of Monographs by writers connected with the London School of Economics and Political Science.) London: Routledge & Sons, 1931/2, xv, 112 pp. 2nd revised and enlarged edition, London: Routledge & Kegan Paul, 1935/9, also 1967 edition, xiv, 162 pp. American edition, New York: Macmillan, 1932.
These seven works taken together represent the first integration and systematic elaboration of the Austrian theories of money, capital, business cycles, and comparative monetary… More
The Pure Theory of Money: A Rejoinder to Mr. Keynes
– “The Pure Theory of Money: A Rejoinder to Mr. Keynes.” Economica 11, no. 34 (November 1931): 398–403.
A Reply to Dr. Hayek
– Keynes, J.M. “A Reply to Dr. Hayek.” Economica 12 (November 1931): 387–397.
Excerpt: “In an article recently published, Dr. Hayek has invited me to clear up some ambiguities of terminology which he finds in my Treatise of Money, and also other matters. As he… More
Money and Capital: A Reply to Mr. Sraffa
– "Money and Capital: A Reply to Mr. Sraffa.” Economic Journal 42 (June 1932): 237–249
Excerpt: “With an article devoted to a critical discussion of my Prices and Production, Mr. Sraffa has recently entered the arena of monetary controversy. There is no denying the fact… More
A Note on the Development of the Doctrine of ‘Forced Saving’
– “A Note on the Development of the Doctrine of ‘Forced Saving’.” Quarterly Journal of Economics 47 (November 1932): 123–133.
Excerpt: “The enhanced interest in the problem of “forced saving,” due to recent developments in the theory of industrial fluctuations, has led to the discovery of so many more or… More
Reflections on the Pure Theory of Money of Mr. J. M. Keynes
– “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 12 (February 1932 - Part II): 22–44.
The Fate of the Gold Standard
– “Das Schicksal der Goldwährung.” Der Deutsche Volkswirt 6 (20), (1932).
Capital Consumption
– “Kapitalaufzehrung.” Weltwirtschaftliches Archiv 36 (July 1932/II): 86–108.
Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion
– Marget, Arthur W. “Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion.” Journal of Political Economy 40 (April 1932): 261–266.
Concerning Neutral Money
– “Über Neutrales Geld.” Zeitschrift für Nationalökonomie 4 (October 1933).
The Present State and Immediate Prospects of the Study of Industrial Fluctuations
– Contribution to Gustav Clausing, ed. Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff. Munich: Duncker & Humblot, 1933.
Contributions on Monetary Theory
– Beiträge zur Geldtheorie. Edited and prefaced by Friedrich A. Hayek. Contributions by Marco Fanno, Marius W. Holtrop, Johan G. Koopmans, Gunnar Myrdal, Knut Wicksell. Vienna, 1933.
Capital and Industrial Fluctuations
– “Capital and Industrial Fluctuations.” Econometrica 2 (April 1934): 152–167.
Excerpt: A sympathetic criticism of the kind to which the views of the present author have been subjected by Messrs Hansen and Tout in a recent issue of ECONOMETRICA, offers a welcome… More
On the Relationship between Investment and Output
– “On the Relationship between Investment and Output.” Economic Journal 44 (1934): 207–231.
Saving
– “Saving.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 13, pp. 548–552.
The Outlook for Interest Rates
– “The Outlook for Interest Rates.” The Economist 7 (1934).
Stable Prices or Neutral Money
– “Stable Prices or Neutral Money.” The Economist 7 (1934).
Theories of the Trade Cycle
– Macfie, A.L. Theories of the Trade Cycle. London: Macmillan, 1934.
A Regulated Gold Standard
– “A Regulated Gold Standard.” The Economist (May 11, 1935).
Excerpt: “It is still impossible to predict when conditions will make a solution of international currency problems appear practicable. This does not mean that it is too early to ask… More
Spor miedzy szkola ‘Currency’ i szkola ‘Banking’
– “Spor miedzy szkola ‘Currency’ i szkola ‘Banking’.” Ekonomista 55 (Warsaw, 1935).
Utility Analysis and Interest
– “Utility Analysis and Interest.” Economic Journal 46 (1936): 44–60.
The International Monetary Situation
– “La situation monétaire internationale.” Bulletin Périodique de la Societé Belge d'Études et d'Expansion (Brussels), No. 103. (1936).
Monetary Nationalism and International Stability
– Geneva, 1937; London: Longmans, Green (The Graduate Institute of International Studies, Geneva, Publication Number 18), 1937, xiv, 94 pp. Reprinted New York: Augustus M. Kelley, 1964, 1971, 1974.
From Preface: “The five lectures which are here reproduced are necessarily confined to certain aspects of the wide subject indicated by the title. They are printed essentially as they… More
Investment that Raises the Demand for Capital
– “Investment that Raises the Demand for Capital.” Review of Economic Statistics 19 (November 1937).
Excerpt: “The purpose of this article is to state a proposition which underlies the modern “monetary over-investment theories” of the trade cycle in a form in which, as… More
Introduction to a Theory of Capital
– “Einleitung zu einer Kapitaltheorie.” Zeitschrift für Nationalökonomie 8 (1937): 1–9.
Profits, Investment, and Other Essays
– London: Routledge & Kegan Paul, 1939/3, viii, 266 pp., also 1969 edition. Reprinted New York: Augustus M. Kelley, 1969, 1970; Clifton, New Jersey: Augustus M. Kelley, 1975.
From Preface: “The essays collected in this volume are a selection from the various attempts made in the course of the past ten years to improve and develop the outline of a theory of… More
The Paradox of Saving
– "The Paradox of Saving," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The assertion that saving renders the purchasing power of the consumer insufficient to take up the volume of current production, although made more often by members of the… More
Price Expectations, Monetary Disturbances and Malinvestments
– “Price Expectations, Monetary Disturbances and Malinvestments," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The most characteristic feature of the work of our generation of economists is probably the general endeavor to apply the methods and results of the pure theory of… More
The Maintenance of Capital
– “The Maintenance of Capital,” Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The significance of the problem. It is not likely that in the whole field of economics there are many more concepts which are at the same time so generally used and so… More
An Enquiry into the Nature and Effects of the Paper Credit of Great Britain
– Henry Thornton. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). Edited and introduced by Friedrich A. Hayek. London: Allen and Unwin, 1939.
Excerpt: “To most of the contemporaries of Henry Thornton his authorship of the book which is now reprinted after one hundred and thirty-six years would by no means have been regarded… More
Hayek och ‘Ricardo-effekten’
– Welinder, C. “Hayek och ‘Ricardo-effekten’” In Ekonomisk Tidsskrift (Uppsala och Stockholm) 42 (1940): 33–39.
The Pure Theory of Capital
– London: Routledge & Kegan Paul, 1941/2 (also 1950 edition); Chicago: University of Chicago Press, 1941 (also 1950, 1952 and 1975 editions); xxxi, 454 pp. (Spain 1946, Japan 1951 and 1952).
The Pure Theory of Capital, F. A. Hayek’s long-overlooked, little-understood volume, was his most detailed work in economic theory. Originally published in 1941 when fashionable economic… More
Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital
– Pigou, A.C. “Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital.” Economica 8 (1941): 271–275.
A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’
– “A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’.” Economica N.S. 9 (November 1942): 383–385.
Professor Hayek’s Theory of Interest
– Lutz, Friedrich A. “Professor Hayek's Theory of Interest.” Economica 10 (1943): 302–310
Excerpt: “In the following discussion attention will be concentrated on that parts of Prof. Hayek’s Pure Theory of Capital which contains his theory of interest in “real”… More
Keynes vs. Hayek on a Commodity Reserve Currency
– Graham, F.D. “Keynes vs. Hayek on a Commodity Reserve Currency.” The Economic Journal 54 (1944): 422–429.
Excerpt: “The issues raised in Lord Keynes’ reply to Prof. Hayek’s article on a commodity reserve currency, in a recent issue of this journal, seem worthy of more extended… More
Full Employment, Planning and Inflation
– “Full Employment, Planning and Inflation.” Institute of Public Affairs Review 4 (6) (Melbourne, Australia 1950).
Excerpt: “In the five years that have elapsed since the war, central planning, “full employment,” and inflationary pressure have been the three features which have dominated… More
The Rate of Interest in the Trade Cycle Theories of Prof. Hayek
– Palmer, G.G.D. “The Rate of Interest in the Trade Cycle Theories of Prof. Hayek.” The South African Journal of Economics 23 (1955): 1–18.
Excerpt: “For many years the trade cycle theories of Prof. Hayek have been the centre of interest and controversy. His approach stands in contrast on the one hand to that of the… More
Professor Hayek’s Contribution to Trade Cycle Theory
– Gilbert, J.C. “Professor Hayek's Contribution to Trade Cycle Theory.” Economic Essays in Commemoration of the Dundee School of Economics, 1931–1955. pp. 51–62
Inflation Resulting from the Downward Inflexibility of Wages
– “Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147–152.
Excerpt: “Contrary to what is widely believed, the crucial results of the “Keynesian revolution” is the general acceptance of a factual assumption and, what is more, of an… More
Unions, Inflation and Profits
– “Unions, Inflation and Profits.” In: Philip D. Bradley (ed.) The Public Stake in Union Power. Charlottesville, University of Virginia Press: 1959.
Excerpt: “Tendencies are observable in the field of labor economics which most seriously threaten our future prosperity. The developments which are bringing this about are not of… More
The Economics of Abundance
– “The Economics of Abundance,” in Henry Hazlitt, ed. The Critics of Keynesian Economics. Princeton and London: Van Nostrand Co., 1960, pp. 126–130.
Excerpt: “Now in such a situation, in which abundant unused reserves of all kinds of resources, including all intermediate products, exist, may occasionally prevail in the depths of… More
Prof. Hayek and the Concertina Effect
– Kaldor, N. “Prof. Hayek and the Concertina Effect.” In Economica N.S. 9 (1942): 148–176; reprinted in: Kaldor, Essays on Economic Stability and Growth. London: Duckworth, 1960
Excerpt: “It was more than ten years ago that Prof. Hayek first fascinated the academic world of economists by a new theory of industrial fluctuations which in theoretical conception,… More
The Uses of ‘Gresham’s Law’ as an Illustration of ‘Historical Theory’
– “The Uses of ‘Gresham's Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).
Excerpt: “Mr. A. L. Burns’ use of Gresham’s Law as an illustration provides a good example for showing how useful it would be for the historian if he examined what… More
The Gold Standard—Its Evolution
– “L'Etalon d'Or — Son Evolution.” Revue d'Economie Politique 76 (1966).
The Hayek Story
– Heimann, E. “The Hayek Story.” In Critical Essays in Monetary Theory. Oxford University Press: 1967.
Three Elucidations of the ‘Ricardo Effect’
– “Three Elucidations of the ‘Ricardo Effect’.” Journal of Political Economy 77 (March-April 1969): 274–285.
Excerpt: “The immediate aim of this paper is to clear up a point on which Sir John Hicks in his recent review of my earlier discussions of the relation between the demand for consumer… More
Note on Professor Hayek’s ‘True Theory of Unemployment’
– Johr, W.A. “Note on Professor Hayek's ‘True Theory of Unemployment.’” Kyklos 30, no. 4 (1970): 713–723
Excerpt: “Prof. Hayek is an economist whose prestige, acquired by his writings on problems of economics and social philosophy, stands high. Consequently, every work he publishes… More
Hayek on the Great Depression
– Interview with Hayek, Common Sense Capitalism.
Capital Intensity and the Real Wage: A Critical Evaluation of Hayek’s Ricardo Effect
– Falconer, Robert T. “Capital Intensity and the Real Wage: A Critical Evaluation of Hayek's Ricardo Effect.” Texas A & M Ph.D. Dissertation. College Station, Texas, 1971.
A Tiger by the Tail: The Keynesian Legacy of Inflation
– A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40 Years’ Running Commentary on Keynesianism by F. A. Hayek. Compiled and introduced by Sudha R. Shenoy. London: Institute of Economic Affairs (Hobart Paperback #4), 1972
Excerpt from Introduction: “The small book you are holding in your hands is unique. It is perhaps the finest introduction to the thought of a major thinker ever published in the… More
Inflation: The Path to Unemployment
– “Inflation: The Path to Unemployment.” Addendum 2 to Lord Robbins et. al. Inflation: Causes, Consequences, Cures: Discourses on the Debate between the Monetary and the Trade Union Interpretations. London: The Institute for Economic Affairs (IEA Readings, No. 14), 1974, pp. 115–120.
Inflation and Unemployment
– “Inflation and Unemployment.” New York Times (Nov. 15, 1974).
Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation
– Grinder, Walter E. Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation. In Libertarian Review (November 1974): 4–5
Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften
– Leube, Kurt R. “Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften.” (University of Salzburg Research Papers, 1974).
Full Employment at Any Price?
– Full Employment at Any Price? London: Institute of Economic Affairs (Occasional Paper 45), 1975/1978, (Italy 1975), 52 pp.
Politicians Can’t Be Trusted with Money
– “Politicians Can't Be Trusted with Money.” [(Newspaper editor's title. Paper delivered in September at the Gold and Monetary Conference in Lausanne, Switzerland.) The Daily Telegraph of London, Part I (September 30, 1975).
World Inflationary Recession
– “World Inflationary Recession.” Paper presented to the International Conference on World Economic Stabilization, April 17–18, 1975, co-sponsored by the First National Bank of Chicago and the University of Chicago. First Chicago Report 5/1975.
Ausgewählte Bibliographie zur Wiederauflage
– Leube, Kurt R. “Ausgewählte Bibliographie zur Wiederauflage F.A. Hayek: Preise und Produktion.” Vienna, 1975.
Hayek and Keynes: A Retrospective Assessment
– O'Driscoll, Jr. Gerald P. “Hayek and Keynes: A Retrospective Assessment.” Iowa State University Department of Economics Staff Paper No. 20. Ames, Iowa: Xerox 1975. [Paper prepared for the Symposium on Austrian Economics, University of Hartford, June 22–28, 1975.]
Inflation, Unemployment and Hayek
– Spencer, Roger W. “Inflation, Unemployment and Hayek.” Review (Federal Reserve Bank of St. Louis.) 57 (1975): 6–10.
Excerpt: “In these times of high unemployment and rising price levels, one looks to the leaders of the economics profession for analysis and solutions. One possible candidate, who has… More
Choice in Currency: A Way to Stop Inflation
– Choice in Currency. A Way to Stop Inflation. London: Institute of Economic Affairs (Occasional Paper 48), February 1976/1977, 46 pp.
Excerpt: The chief root of our present monetary troubles is, of course, the sanction of scientific authority which Lord Keynes and his disciples have given to the age-old superstition that… More
Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies
– Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: The Institute of Economic Affairs (Hobart Paper Special 70), October 1976, 107 pp.
Excerpt: “In my despair about the hopelessness of finding a politically feasible solution to what is technically the simplest possible problem, namely to stop inflation, I threw out… More
The Problem of Money Today
– “Il Problema della Moneta Oggi.” Academia Nationale dei Lincei. Atti de Convegni Rome (1976).
Rereading von Hayek
– Leduc, G. “En rélisant von Hayek.” Revue d'Economie Politique 86 (1976): 491–494.
Inflationstheorie bei Hayek und Keynes
– Leube, Kurt R. “Inflationstheorie bei Hayek und Keynes.” (Paper prepared for a Seminar at the University of Salzburg, 1975).
Friedrich A. Hayek: Nobel Prizewinner
– Shearmur, Jeremy. “Friedrich A. Hayek: Nobel Prizewinner.” In Fritz Machlup, ed., Essays on Hayek. New York: New York University Press, 1976, pp. 171–176.
Toward Free Market Money
– “Toward Free Market Money.” Wall Street Journal (August 19, 1977).
Economics as a Coordination Problem
– Foreword by F. A. Hayek. In Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, ed. by Gerald P. O'Driscoll, Jr. Kansas City: Sheed Andrews and McMeel, Inc., 1977.
Foreword by Hayek: “To give a coherent account of the whole of the theoretical work of an economist who has not attempted to do so himself is sometimes a useful task. But the proof of… More
Economics as a Coordination Problem by Gerald O’Driscoll Jr.
– O'Driscoll, Jr. Gerald P. Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, with a foreword by F.A. Hayek. Kansas City: Sheed Andrews & McMeel, 1977.
Unemployment and the Free Market
– Interview of Hayek, Firing Line, YouTube video.
Nobel Laureate F A Hayek is interviewed by Firing Line’s William F. Buckley Jr regarding unemployment, inflation, and John Maynard Keynes.
Can we still avoid inflation?
– “Can we still avoid inflation?” In Richard M. Ebeling (ed.) The Austrian Theory of the Trade Cycle and Other Essays. New York: Center for Libertarian Studies (Occasional Paper Series 8) 1978.
Excerpt: “In one sense the question asked in the title of this lecture is purely rhetorical. I hope none of you has suspected me of doubting even for a moment that technically there… More
Hayek, the Inter-War Years and the Gold Standard
– Miller, Robert. “Hayek, the Inter-War Years and the Gold Standard.” Unpublished paper presented to The Carl Menger Society, June 10, 1978.
Axel Leijonhufvud interviews Friedrich A. Hayek
– The Hayek Interviews, Universidad Francisco Marroquín, Date unspecified.
Dr. Hayek speaks with Dr. Axel Leijonhufvud primarily about his academic career and intellectual pursuits. First Dr. Hayek tells of his eclectic course of study at university, including law… More
Towards a Free Market Monetary System
– “Towards a Free Market Monetary System.” The Journal of Libertarian Studies 3, no. 1 (1979): 1–8.
When a little over two years ago, at the second Lausanne Conference of this group, I threw out, almost as a sort of bitter joke, that there was no hope of ever again having decent money,… More
Introduction: The Debate, 1931–71
– Shenoy, Sudha R. “Introduction: The Debate, 1931–71.” in F.A. Hayek, A Tiger by the Tail: The Keynesian Legacy of Inflation, Cato 1979.
Excerpt: “The roots of current economic ideas and of those guiding the wages policy lie in the 1930s, in discussion inspired by the publication of the General Theory. Though… More
Free Choice of Currency Standards
– “Freie Wahl de Währungen.” In Geldpolitik, ed. by J. Badura and O. Issing. Stuttgart and New York, 1980, pp. 136–146.
Hayek on Inflation
– Ebeling, Richard. “Hayek on Inflation.” Unpublished Paper presented to The Carl Menger Society Conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980
Hayek, the Answer Man
– “Hayek, the Answer Man.” The Washington Post (December 2, 1982), pp. C1, C17.
He is everything you want an 83-year-old Viennese conservative economist to be. Tall and rumpled. A pearl stickpin in his tie. A watch chain across his vest, even though he wears a digital… More
Constitution or Competition? Alternative Views on Monetary Reform
– Brown, Pamela. “Constitution or Competition? Alternative Views on Monetary Reform.” Literature of Liberty 5 (Autumn 1982): 7–52
Excerpt: Money, for practically as long as it has existed, has been employed to realize two fundamentally different sorts of goals: production or plunder. In a market economy, private… More
Interview with F.A. Hayek
– Policy Report. February 1983.
Excerpt: In December the Cato Institute launched its Distinguished Lecturer Series with an address by F. A. Hayek, 1974 Nobel laureate in economics and author of numerous books,… More
Exclusive Interview with F.A. Hayek
– Blanchard, James U. Policy Report. May-June 1984.
Excerpt: F.A. Hayek is one of the world’s leading free-market economists and social philosophers. Besides the important 1944 bestseller, The Road to Serfdom, he has written books on… More
Hayek vs. Keynes
– Bruce Caldwell, INET Conference, King’s College, Cambridge University, April 8-11, 2010.
Excerpt: Tonight I will talk briefly about the Keynes-Hayek relationship, then will focus on some of Hayek’s insights that may be of relevance today. In the process I hope to clear up… More
Fight of the Century: Keynes vs. Hayek, Round Two
– EconStories, YouTube, April 27, 2011.
Produced by Emergent Order. Visit us at http://emergentorder.com. “Fight of the Century” is the new economics hip-hop music video by John Papola and Russ Roberts… More
Masters Of Money – Part 2 – Friedrich Hayek
– Episode 2, BBC series, September 2012.
According to conventional wisdom, today’s global financial crisis happened because markets were not regulated enough. But what if the opposite is true? That it was excessive… More
Hayek and the Modern World: Economic Organization and Activity
– Conference, Jepson School of Leadership Studies, University of Richmond, April 12, 2013.
The Jepson School of Leadership Studies brought together invited scholars to explore economist Friedrich A. Hayek’s contributions to political economy in theory and practice and his… More
Jack High interviews Friedrich A. Hayek
– The Hayek Interviews, Universidad Francisco Marroquín, 1978.
Known as an economist to the world, Dr. Hayek talks with Jack High about the past and present in the realm of economics. Discussing the role of various economists had on his thinking,… More
Multimedia
The Stabilization Problem for Countries on the Gold Standard
– “Das Stabilisierungsproblem in Goldwährungsländern.” Zeitschrift für Volkswirtschaft und Sozialpolitik, N.S. 4 (1924).
Discount Policy and Commodity Prices
– “Diskontopolitik und Warenpreise.” Der Österreichische Volkswirt 17 (1,2), (Vienna 1924).
The American Banking System since the Reform of 1914
– “Das amerikanische Bankwesen seit der Reform von 1914.” Der Österreichische Volkswirt 17 (29–33), (Vienna 1925).
The Monetary Policy in the United States Since Overcoming the Crisis of 1920
– “Die Währungspolitik der Vereinigten Staaten seit der Überwindung der Krise von 1920.” Zeitschrift für Volkswirtschaft und Sozialpolitik. N.S. 5 (1925).
The Meaning of Business Cycle Research for Economic Life
– “Die Bedeutung der Konjunkturforschung für das Wirtschaftsleben.” Der Österreichische Volkswirt 19 (2), (Vienna 1926).
Business Cycle Research in Austria
– “Konjunkturforschung in Osterreich.” Die Industrie 32 (30), (Vienna 1927).
The Intertemporal Equilibrium System of Prices and the Movements of the ‘Value of Money.’
– “Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des ‘Geldwertes.’” Weltwirtschaftliches Archiv 28 (1928): 33–76.
Some Remarks on the Relationship between Monetary Theory and Business Cycle Theory
– “Einige Bemerkungen über das Verhältnis der Geldtheorie zur Konjunkturtheorie.” Schriften des Vereins für Sozialpolitik 173/2 (1928): 247–295.
Discussion Comments on ‘Credit and Business Cycle’
– “Diskussionsbemerkungen über ‘Kredit und Konjunktur.’” Shriften des Vereins für Sozialpolitik 175, Verhandlungen 1928, (1928).
Monetary Theory and the Trade Cycle
– Geldtheorie und Konjunkturtheorie. (Beitrage zur Konjunkturforschung, heraus-gegeben vom Österreichisches Institut für Konjunkturforschung, No. 1). Vienna and Leipzig: Hölder-Pichler-Tempsky, 1929/2, xii, 147 pp. (England 1933, Japan 1935, Spain 1936.) Translated into English by Lionel Robbins as Monetary Theory and the Trade Cycle. London: Jonathan Cape, 1933, 244 pp. American edition, New York: Harcourt Brace & Co., 1933. Reprinted New York: Augustus M. Kelley, 1966.
The German essay, of which the following is a translation, represents an expanded version of a paper prepared for the meeting of the Verein für Sozialpolitik, held in Zurich in September… More
Prices and Production
– Studies in Economics and Political Science, edited by the director of the London School of Economics and Political Sciences. No. 107 in the series of Monographs by writers connected with the London School of Economics and Political Science.) London: Routledge & Sons, 1931/2, xv, 112 pp. 2nd revised and enlarged edition, London: Routledge & Kegan Paul, 1935/9, also 1967 edition, xiv, 162 pp. American edition, New York: Macmillan, 1932.
These seven works taken together represent the first integration and systematic elaboration of the Austrian theories of money, capital, business cycles, and comparative monetary… More
The Pure Theory of Money: A Rejoinder to Mr. Keynes
– “The Pure Theory of Money: A Rejoinder to Mr. Keynes.” Economica 11, no. 34 (November 1931): 398–403.
A Reply to Dr. Hayek
– Keynes, J.M. “A Reply to Dr. Hayek.” Economica 12 (November 1931): 387–397.
Excerpt: “In an article recently published, Dr. Hayek has invited me to clear up some ambiguities of terminology which he finds in my Treatise of Money, and also other matters. As he… More
Money and Capital: A Reply to Mr. Sraffa
– "Money and Capital: A Reply to Mr. Sraffa.” Economic Journal 42 (June 1932): 237–249
Excerpt: “With an article devoted to a critical discussion of my Prices and Production, Mr. Sraffa has recently entered the arena of monetary controversy. There is no denying the fact… More
A Note on the Development of the Doctrine of ‘Forced Saving’
– “A Note on the Development of the Doctrine of ‘Forced Saving’.” Quarterly Journal of Economics 47 (November 1932): 123–133.
Excerpt: “The enhanced interest in the problem of “forced saving,” due to recent developments in the theory of industrial fluctuations, has led to the discovery of so many more or… More
Reflections on the Pure Theory of Money of Mr. J. M. Keynes
– “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 12 (February 1932 - Part II): 22–44.
The Fate of the Gold Standard
– “Das Schicksal der Goldwährung.” Der Deutsche Volkswirt 6 (20), (1932).
Capital Consumption
– “Kapitalaufzehrung.” Weltwirtschaftliches Archiv 36 (July 1932/II): 86–108.
Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion
– Marget, Arthur W. “Review of Friedrich A. Hayek, Prices and Production and Preise und Produktion.” Journal of Political Economy 40 (April 1932): 261–266.
Concerning Neutral Money
– “Über Neutrales Geld.” Zeitschrift für Nationalökonomie 4 (October 1933).
The Present State and Immediate Prospects of the Study of Industrial Fluctuations
– Contribution to Gustav Clausing, ed. Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff. Munich: Duncker & Humblot, 1933.
Contributions on Monetary Theory
– Beiträge zur Geldtheorie. Edited and prefaced by Friedrich A. Hayek. Contributions by Marco Fanno, Marius W. Holtrop, Johan G. Koopmans, Gunnar Myrdal, Knut Wicksell. Vienna, 1933.
Capital and Industrial Fluctuations
– “Capital and Industrial Fluctuations.” Econometrica 2 (April 1934): 152–167.
Excerpt: A sympathetic criticism of the kind to which the views of the present author have been subjected by Messrs Hansen and Tout in a recent issue of ECONOMETRICA, offers a welcome… More
On the Relationship between Investment and Output
– “On the Relationship between Investment and Output.” Economic Journal 44 (1934): 207–231.
Saving
– “Saving.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 13, pp. 548–552.
The Outlook for Interest Rates
– “The Outlook for Interest Rates.” The Economist 7 (1934).
Stable Prices or Neutral Money
– “Stable Prices or Neutral Money.” The Economist 7 (1934).
Theories of the Trade Cycle
– Macfie, A.L. Theories of the Trade Cycle. London: Macmillan, 1934.
A Regulated Gold Standard
– “A Regulated Gold Standard.” The Economist (May 11, 1935).
Excerpt: “It is still impossible to predict when conditions will make a solution of international currency problems appear practicable. This does not mean that it is too early to ask… More
Spor miedzy szkola ‘Currency’ i szkola ‘Banking’
– “Spor miedzy szkola ‘Currency’ i szkola ‘Banking’.” Ekonomista 55 (Warsaw, 1935).
Utility Analysis and Interest
– “Utility Analysis and Interest.” Economic Journal 46 (1936): 44–60.
The International Monetary Situation
– “La situation monétaire internationale.” Bulletin Périodique de la Societé Belge d'Études et d'Expansion (Brussels), No. 103. (1936).
Monetary Nationalism and International Stability
– Geneva, 1937; London: Longmans, Green (The Graduate Institute of International Studies, Geneva, Publication Number 18), 1937, xiv, 94 pp. Reprinted New York: Augustus M. Kelley, 1964, 1971, 1974.
From Preface: “The five lectures which are here reproduced are necessarily confined to certain aspects of the wide subject indicated by the title. They are printed essentially as they… More
Investment that Raises the Demand for Capital
– “Investment that Raises the Demand for Capital.” Review of Economic Statistics 19 (November 1937).
Excerpt: “The purpose of this article is to state a proposition which underlies the modern “monetary over-investment theories” of the trade cycle in a form in which, as… More
Introduction to a Theory of Capital
– “Einleitung zu einer Kapitaltheorie.” Zeitschrift für Nationalökonomie 8 (1937): 1–9.
Profits, Investment, and Other Essays
– London: Routledge & Kegan Paul, 1939/3, viii, 266 pp., also 1969 edition. Reprinted New York: Augustus M. Kelley, 1969, 1970; Clifton, New Jersey: Augustus M. Kelley, 1975.
From Preface: “The essays collected in this volume are a selection from the various attempts made in the course of the past ten years to improve and develop the outline of a theory of… More
The Paradox of Saving
– "The Paradox of Saving," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The assertion that saving renders the purchasing power of the consumer insufficient to take up the volume of current production, although made more often by members of the… More
Price Expectations, Monetary Disturbances and Malinvestments
– “Price Expectations, Monetary Disturbances and Malinvestments," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The most characteristic feature of the work of our generation of economists is probably the general endeavor to apply the methods and results of the pure theory of… More
The Maintenance of Capital
– “The Maintenance of Capital,” Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The significance of the problem. It is not likely that in the whole field of economics there are many more concepts which are at the same time so generally used and so… More
An Enquiry into the Nature and Effects of the Paper Credit of Great Britain
– Henry Thornton. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). Edited and introduced by Friedrich A. Hayek. London: Allen and Unwin, 1939.
Excerpt: “To most of the contemporaries of Henry Thornton his authorship of the book which is now reprinted after one hundred and thirty-six years would by no means have been regarded… More
Hayek och ‘Ricardo-effekten’
– Welinder, C. “Hayek och ‘Ricardo-effekten’” In Ekonomisk Tidsskrift (Uppsala och Stockholm) 42 (1940): 33–39.
The Pure Theory of Capital
– London: Routledge & Kegan Paul, 1941/2 (also 1950 edition); Chicago: University of Chicago Press, 1941 (also 1950, 1952 and 1975 editions); xxxi, 454 pp. (Spain 1946, Japan 1951 and 1952).
The Pure Theory of Capital, F. A. Hayek’s long-overlooked, little-understood volume, was his most detailed work in economic theory. Originally published in 1941 when fashionable economic… More
Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital
– Pigou, A.C. “Maintaining Capital Intact, on F.A. von Hayek: The Pure Theory of Capital.” Economica 8 (1941): 271–275.
A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’
– “A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’.” Economica N.S. 9 (November 1942): 383–385.
Professor Hayek’s Theory of Interest
– Lutz, Friedrich A. “Professor Hayek's Theory of Interest.” Economica 10 (1943): 302–310
Excerpt: “In the following discussion attention will be concentrated on that parts of Prof. Hayek’s Pure Theory of Capital which contains his theory of interest in “real”… More
Keynes vs. Hayek on a Commodity Reserve Currency
– Graham, F.D. “Keynes vs. Hayek on a Commodity Reserve Currency.” The Economic Journal 54 (1944): 422–429.
Excerpt: “The issues raised in Lord Keynes’ reply to Prof. Hayek’s article on a commodity reserve currency, in a recent issue of this journal, seem worthy of more extended… More
Full Employment, Planning and Inflation
– “Full Employment, Planning and Inflation.” Institute of Public Affairs Review 4 (6) (Melbourne, Australia 1950).
Excerpt: “In the five years that have elapsed since the war, central planning, “full employment,” and inflationary pressure have been the three features which have dominated… More
The Rate of Interest in the Trade Cycle Theories of Prof. Hayek
– Palmer, G.G.D. “The Rate of Interest in the Trade Cycle Theories of Prof. Hayek.” The South African Journal of Economics 23 (1955): 1–18.
Excerpt: “For many years the trade cycle theories of Prof. Hayek have been the centre of interest and controversy. His approach stands in contrast on the one hand to that of the… More
Professor Hayek’s Contribution to Trade Cycle Theory
– Gilbert, J.C. “Professor Hayek's Contribution to Trade Cycle Theory.” Economic Essays in Commemoration of the Dundee School of Economics, 1931–1955. pp. 51–62
Inflation Resulting from the Downward Inflexibility of Wages
– “Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147–152.
Excerpt: “Contrary to what is widely believed, the crucial results of the “Keynesian revolution” is the general acceptance of a factual assumption and, what is more, of an… More
Unions, Inflation and Profits
– “Unions, Inflation and Profits.” In: Philip D. Bradley (ed.) The Public Stake in Union Power. Charlottesville, University of Virginia Press: 1959.
Excerpt: “Tendencies are observable in the field of labor economics which most seriously threaten our future prosperity. The developments which are bringing this about are not of… More
The Economics of Abundance
– “The Economics of Abundance,” in Henry Hazlitt, ed. The Critics of Keynesian Economics. Princeton and London: Van Nostrand Co., 1960, pp. 126–130.
Excerpt: “Now in such a situation, in which abundant unused reserves of all kinds of resources, including all intermediate products, exist, may occasionally prevail in the depths of… More
Prof. Hayek and the Concertina Effect
– Kaldor, N. “Prof. Hayek and the Concertina Effect.” In Economica N.S. 9 (1942): 148–176; reprinted in: Kaldor, Essays on Economic Stability and Growth. London: Duckworth, 1960
Excerpt: “It was more than ten years ago that Prof. Hayek first fascinated the academic world of economists by a new theory of industrial fluctuations which in theoretical conception,… More
The Uses of ‘Gresham’s Law’ as an Illustration of ‘Historical Theory’
– “The Uses of ‘Gresham's Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).
Excerpt: “Mr. A. L. Burns’ use of Gresham’s Law as an illustration provides a good example for showing how useful it would be for the historian if he examined what… More
The Gold Standard—Its Evolution
– “L'Etalon d'Or — Son Evolution.” Revue d'Economie Politique 76 (1966).
The Hayek Story
– Heimann, E. “The Hayek Story.” In Critical Essays in Monetary Theory. Oxford University Press: 1967.
Three Elucidations of the ‘Ricardo Effect’
– “Three Elucidations of the ‘Ricardo Effect’.” Journal of Political Economy 77 (March-April 1969): 274–285.
Excerpt: “The immediate aim of this paper is to clear up a point on which Sir John Hicks in his recent review of my earlier discussions of the relation between the demand for consumer… More
Note on Professor Hayek’s ‘True Theory of Unemployment’
– Johr, W.A. “Note on Professor Hayek's ‘True Theory of Unemployment.’” Kyklos 30, no. 4 (1970): 713–723
Excerpt: “Prof. Hayek is an economist whose prestige, acquired by his writings on problems of economics and social philosophy, stands high. Consequently, every work he publishes… More
Hayek on the Great Depression
– Interview with Hayek, Common Sense Capitalism.
Capital Intensity and the Real Wage: A Critical Evaluation of Hayek’s Ricardo Effect
– Falconer, Robert T. “Capital Intensity and the Real Wage: A Critical Evaluation of Hayek's Ricardo Effect.” Texas A & M Ph.D. Dissertation. College Station, Texas, 1971.
A Tiger by the Tail: The Keynesian Legacy of Inflation
– A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40 Years’ Running Commentary on Keynesianism by F. A. Hayek. Compiled and introduced by Sudha R. Shenoy. London: Institute of Economic Affairs (Hobart Paperback #4), 1972
Excerpt from Introduction: “The small book you are holding in your hands is unique. It is perhaps the finest introduction to the thought of a major thinker ever published in the… More
Inflation: The Path to Unemployment
– “Inflation: The Path to Unemployment.” Addendum 2 to Lord Robbins et. al. Inflation: Causes, Consequences, Cures: Discourses on the Debate between the Monetary and the Trade Union Interpretations. London: The Institute for Economic Affairs (IEA Readings, No. 14), 1974, pp. 115–120.
Inflation and Unemployment
– “Inflation and Unemployment.” New York Times (Nov. 15, 1974).
Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation
– Grinder, Walter E. Review of two books: Macro-economic Thinking & The Market Economy by Ludwig M. Lachmann; and A Tiger by the Tail: The Keynesian Legacy of Inflation. In Libertarian Review (November 1974): 4–5
Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften
– Leube, Kurt R. “Friedrich A. von Hayek—Nobelpreis für Wirtschaftswissenschaften.” (University of Salzburg Research Papers, 1974).
Full Employment at Any Price?
– Full Employment at Any Price? London: Institute of Economic Affairs (Occasional Paper 45), 1975/1978, (Italy 1975), 52 pp.
Politicians Can’t Be Trusted with Money
– “Politicians Can't Be Trusted with Money.” [(Newspaper editor's title. Paper delivered in September at the Gold and Monetary Conference in Lausanne, Switzerland.) The Daily Telegraph of London, Part I (September 30, 1975).
World Inflationary Recession
– “World Inflationary Recession.” Paper presented to the International Conference on World Economic Stabilization, April 17–18, 1975, co-sponsored by the First National Bank of Chicago and the University of Chicago. First Chicago Report 5/1975.
Ausgewählte Bibliographie zur Wiederauflage
– Leube, Kurt R. “Ausgewählte Bibliographie zur Wiederauflage F.A. Hayek: Preise und Produktion.” Vienna, 1975.
Hayek and Keynes: A Retrospective Assessment
– O'Driscoll, Jr. Gerald P. “Hayek and Keynes: A Retrospective Assessment.” Iowa State University Department of Economics Staff Paper No. 20. Ames, Iowa: Xerox 1975. [Paper prepared for the Symposium on Austrian Economics, University of Hartford, June 22–28, 1975.]
Inflation, Unemployment and Hayek
– Spencer, Roger W. “Inflation, Unemployment and Hayek.” Review (Federal Reserve Bank of St. Louis.) 57 (1975): 6–10.
Excerpt: “In these times of high unemployment and rising price levels, one looks to the leaders of the economics profession for analysis and solutions. One possible candidate, who has… More
Choice in Currency: A Way to Stop Inflation
– Choice in Currency. A Way to Stop Inflation. London: Institute of Economic Affairs (Occasional Paper 48), February 1976/1977, 46 pp.
Excerpt: The chief root of our present monetary troubles is, of course, the sanction of scientific authority which Lord Keynes and his disciples have given to the age-old superstition that… More
Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies
– Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: The Institute of Economic Affairs (Hobart Paper Special 70), October 1976, 107 pp.
Excerpt: “In my despair about the hopelessness of finding a politically feasible solution to what is technically the simplest possible problem, namely to stop inflation, I threw out… More
The Problem of Money Today
– “Il Problema della Moneta Oggi.” Academia Nationale dei Lincei. Atti de Convegni Rome (1976).
Rereading von Hayek
– Leduc, G. “En rélisant von Hayek.” Revue d'Economie Politique 86 (1976): 491–494.
Inflationstheorie bei Hayek und Keynes
– Leube, Kurt R. “Inflationstheorie bei Hayek und Keynes.” (Paper prepared for a Seminar at the University of Salzburg, 1975).
Friedrich A. Hayek: Nobel Prizewinner
– Shearmur, Jeremy. “Friedrich A. Hayek: Nobel Prizewinner.” In Fritz Machlup, ed., Essays on Hayek. New York: New York University Press, 1976, pp. 171–176.
Toward Free Market Money
– “Toward Free Market Money.” Wall Street Journal (August 19, 1977).
Economics as a Coordination Problem
– Foreword by F. A. Hayek. In Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, ed. by Gerald P. O'Driscoll, Jr. Kansas City: Sheed Andrews and McMeel, Inc., 1977.
Foreword by Hayek: “To give a coherent account of the whole of the theoretical work of an economist who has not attempted to do so himself is sometimes a useful task. But the proof of… More
Economics as a Coordination Problem by Gerald O’Driscoll Jr.
– O'Driscoll, Jr. Gerald P. Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, with a foreword by F.A. Hayek. Kansas City: Sheed Andrews & McMeel, 1977.
Unemployment and the Free Market
– Interview of Hayek, Firing Line, YouTube video.
Nobel Laureate F A Hayek is interviewed by Firing Line’s William F. Buckley Jr regarding unemployment, inflation, and John Maynard Keynes.
Can we still avoid inflation?
– “Can we still avoid inflation?” In Richard M. Ebeling (ed.) The Austrian Theory of the Trade Cycle and Other Essays. New York: Center for Libertarian Studies (Occasional Paper Series 8) 1978.
Excerpt: “In one sense the question asked in the title of this lecture is purely rhetorical. I hope none of you has suspected me of doubting even for a moment that technically there… More
Hayek, the Inter-War Years and the Gold Standard
– Miller, Robert. “Hayek, the Inter-War Years and the Gold Standard.” Unpublished paper presented to The Carl Menger Society, June 10, 1978.
Axel Leijonhufvud interviews Friedrich A. Hayek
– The Hayek Interviews, Universidad Francisco Marroquín, Date unspecified.
Dr. Hayek speaks with Dr. Axel Leijonhufvud primarily about his academic career and intellectual pursuits. First Dr. Hayek tells of his eclectic course of study at university, including law… More
Towards a Free Market Monetary System
– “Towards a Free Market Monetary System.” The Journal of Libertarian Studies 3, no. 1 (1979): 1–8.
When a little over two years ago, at the second Lausanne Conference of this group, I threw out, almost as a sort of bitter joke, that there was no hope of ever again having decent money,… More
Introduction: The Debate, 1931–71
– Shenoy, Sudha R. “Introduction: The Debate, 1931–71.” in F.A. Hayek, A Tiger by the Tail: The Keynesian Legacy of Inflation, Cato 1979.
Excerpt: “The roots of current economic ideas and of those guiding the wages policy lie in the 1930s, in discussion inspired by the publication of the General Theory. Though… More
Free Choice of Currency Standards
– “Freie Wahl de Währungen.” In Geldpolitik, ed. by J. Badura and O. Issing. Stuttgart and New York, 1980, pp. 136–146.
Hayek on Inflation
– Ebeling, Richard. “Hayek on Inflation.” Unpublished Paper presented to The Carl Menger Society Conference entitled “Hayek—An Introductory Course,” London, Dec. 6, 1980
Hayek, the Answer Man
– “Hayek, the Answer Man.” The Washington Post (December 2, 1982), pp. C1, C17.
He is everything you want an 83-year-old Viennese conservative economist to be. Tall and rumpled. A pearl stickpin in his tie
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2019-04-01T10:38:00+00:00
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The Fortunes of Liberalism1 collects a wide-ranging number of Friedrich. A. Hayek’s articles, reviews, addresses, and even obituaries—35 in total—spanning all seven decades of his scholarly career from the 1920s to the 1980s. To call this collection eclectic is an understatement, but the unifying theme is Hayek’s perspective on thinkers who have some connection to […]
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The editors of this volume of Hayek’s collected works, operating under the unfortunate circumstance of founding Editor William Bartley’s death, organized it into two main parts: one on Austrian economics and one on the titular fortunes of liberalism. Within each part, Hayek’s thoughts are divided into chapters by thinker or theme rather than including a separate chapter for each original piece. So, for instance, the chapter on Carl Menger includes both a biography of Menger and an essay on Menger’s Principles of Economics. Sometimes pieces are folded into chapters as “addenda” that are thematically related. Each section begins with a “prologue,” a particular essay that is meant to set the tone for that part. And the chapter on Wittgenstein is presented as a “Coda” to Part I. While it makes perfect sense that the editors sought to provide some thematic structure to the book, this organization is ultimately bewildering.
Fortunately, the volume includes an appendix that lists the contents by date, making clear what elements constitute each chapter and when they were written. This is how I would recommend interested readers approach the text. Interested readers could either simply read the entries most relevant to their own interests or proceed chronologically. I took the latter approach, and found the contents a fascinating window into Hayek’s intellectual evolution.
It is certainly possible to read these essays in order to learn about their respective subjects. Hayek was himself interested in the history of ideas, and paints fascinating pictures of the state of the economics profession in the 1920’s, Carl Menger’s life and work, and the intellectual climate of interwar Vienna. But it is difficult to separate Hayek’s reconstructions of others’ ideas from his own thoughts. The essays here say as much or more about Hayek as they do about their subjects. Since the collected pieces span the entirety of Hayek’s career, Fortunes serves as a valuable companion piece to intellectual biographies and overviews of Hayek’s thought such as Hayek’s Challenge by Bruce Caldwell or Peter Boettke’s recent F.A. Hayek: Economics, Political Economy, and Social Philosophy.
Fortunes touches on an incredible breadth of topics, and it is impossible to comment on all of them. Here I focus on one theme in particular that recurs throughout this collection: Hayek’s views on the methodology of the social sciences. How can economists and other social scientists generate knowledge about economic and other social phenomena?
The primary figure Hayek engages with in this particular volume is Ludwig von Mises. While he engages with many other thinkers throughout the text, his agreements and disagreements with Mises are spelled out in far more detail. When it comes to other thinkers, Hayek frequently glosses over disagreements—”in a short review… it would not be appropriate to say more about any minor faults” (on Schumpeter, page 162)—or treats them in a sort of totemic fashion, dubbing thinkers like Lord Acton and Alexis de Tocqueville “patron saint[s]” (page 247) of the movement he wishes to build. This is even true of Hayek’s own teacher, Friedrich Wieser. While Hayek’s obituary of Wieser is packed to the brim with admiration, he is (appropriately) coy about points of agreement or disagreement with his former mentor. He engages Mises on a much more substantive level.
The relationship between Mises and Hayek has been hotly debated among economists interested in their ideas. Editor Peter Klein’s introduction surveys some of these debates (pages 9-13). Hayek himself penned “Economics and Knowledge” partly as a critique of what he understood as Mises’s extreme belief that economics was strictly a priori and deductive rather than empirical. In “Economics and Knowledge” Hayek qualifies this view by claiming that part of economics—that part dealing with how knowledge is generated and transmitted by the economic systems—is necessarily empirical. But as Hayek notes, after reading this article, Mises never expressed any disagreement with it (pages 55-56). How did Hayek’s views evolve after 1937?
Hayek’s 1941 review of Nationalökonomiei, the German language predecessor to Human Action, coincides with a crossroads in Hayek’s thought, around the time that he began work on his “Abuse of Reason” project (c.f. Caldwell 2004, Ch. 11). His views on this book are mixed. He expresses dismay that, while Mises’s thought has evolved over the decades, it does not engage seriously enough with contemporary economic theory (page 150). He praises the book on two specific grounds. First, he claims that the central part of the text is not Mises’s ruminations on methodology, but his analysis of an exchange society in terms of what is later called comparative advantage. Second, he admires Mises’s foray outside of economics proper into broader social philosophy (page 151). This would become a theme in all of Hayek’s work from the 1940’s onward. Because Nationalökonomiei is “more like [the work] of an eighteenth-century philosopher than that of a modern specialist… one feels throughout much nearer to reality” (page 152). In line with his own thinking at the time, he sees engagement with law, politics, and philosophy as a virtue rather than a vice. Hayek sums up his feelings thus:
Although the reviewer would put many things differently, he must confess, at the risk of being condemned with Professor Mises as holding views conflicting with the whole trend of modern scientific development, that on the main point Professor Mises’s lone voice seems to him considerably nearer the truth than the commonly accepted views. (page 152)
A 1956 tribute to Mises that Hayek delivered at the Foundation for Economic Education reiterates this appreciation for a broader approach to economics, in line with older thinkers like Adam Smith and Montesquieu (page 133). In a tribute to Wilhelm Röpke published a few years later, Hayek makes his esteem for ‘political economy’ of this sort even more explicit:
One is often more realistic and in closer touch with reality in the social sciences when one does not limit oneself to those facts that are measurable and quantifiable. There is also an intermediate realm between ‘pure’ theory and questions of practical politics where systematic treatment is at least as useful as in pure theory. (page 197)
In March 1964, Hayek reviews an English translation of Mises’s Epistemological Problems of Economics. He defends the contemporary relevance of the book, claiming that “the sort of uncritical empiricism against which this book is mainly directed is today probably found more frequently and in a more naïve form among American social scientists than anywhere else” (page 147). Hayek then goes on to claim that Mises’s view only gives the appearance of being extreme, and that, “on examination, the difference between the views which Professor Mises has long held and the modern ‘hypothetico-deductive’ interpretation of theoretical science (e.g., as stated by Karl Popper in 1935) is comparatively small” (page 148). This claim will surprise those who are familiar with the common reading of Mises as an ‘extreme’ apriorist. But Hayek shares this reading of Mises with Fritz Machlup (1955), a reading that has recently been articulated and defended by Gabriel Zanotti and Nicolas Cachanosky (2015). Hayek in fact sees this view as common to Austrian economics generally, arguing that Menger’s approach to understanding social institutions also has empirical, falsifiable content rather than being merely theoretical (pages 102-103).
Hayek also mentions approvingly Mises’s argument that social science can also lean on our understanding (German Verstehen) of human intentionality (page 148). We understand human values and goals because we ourselves are human. This point is quite similar to Hayek’s own argument that the “facts of the social sciences” consist partly in what people think and believe. A dollar bill, for example, counts as money because we believe that it does.
But Hayek’s thoughts on the role of qualitative understanding, as opposed to a more mathematical approach to human behavior, are muddied by two later entries in Fortunes. In his 1978 chapter on the historical significance of Menger’s Principles of Economics, Hayek expresses sympathy for Menger’s reliance on Verstehen, but wonders whether later mathematical techniques—particularly indifference curve analysis—render this approach unnecessary for economic theory (pages 102-103). In an unfinished essay for the New Palgrave dictionary of economics from the early 1980s, Hayek states that indifference curve analysis as developed by John R. Hicks in the 1930s “may well be regarded as the ultimate statement of more than half a century’s discussion in the tradition of the Austrian school.” (page 54)
I raise these complications not because I think they are particularly important, but as a note of caution. It is tempting to read either too much coherence or too much incoherence into Hayek’s thought, especially when pulling from articles, book reviews, obituaries, and fragments that span seven decades. It is not always clear when Hayek is expressing ecumenical professional judgments independent of his agreement or disagreement, when he is understating his own views, or when he is simply being kind to those he discusses. It is especially unwise to develop a strong impression of Hayek’s views from only considering this volume. So the interpretation I offer here should be taken as leaning on a limited and inconsistent set of observations.
In 1978, Hayek pens the foreword to the Liberty Fund edition of what is his favorite book by Mises, Socialism. He credits this book with a fundamental change in his views. With the benefit of hindsight, Hayek recognizes that Mises’s theory of the market process differed substantially from that of other economists (pages 140-141). This meant that his argument that a socialist planner could not engage in economic calculation fell at least partly on deaf ears. The pushback against Mises in the broader economics profession is, I suspect, what ultimately led both Mises and Hayek to write so much on economic methodology in the ensuing decades. They did not understand why everyone else did not see the point as clearly as they did.
This foreword also includes the most direct critique of Mises in Fortunes. Hayek takes issue with Mises’s claim that liberalism comes from a rational recognition of the benefits of social cooperation (page 142). Rather, says Hayek, human beings stumbled into a liberal, market order largely by accident. We may have come to prefer living in this sort of society ex post, but we did not rationally design it. This claim of course echoes Hayek’s famous view that important social institutions often evolve spontaneously rather than intentionally, one that he associates in this volume primarily with Menger (page 103) and Smith (page 56). Hayek goes on to claim that Mises later “largely emancipated himself from that rationalist-constructivist starting point” (page 142), but does not cite any work in particular. Perhaps he has in mind Human Action, since it post-dates socialism. Without speculating on particular passages Hayek might be thinking of, this book has a number of statements such as “the evolution of reason, language, and cooperation is the outcome of the same process; they were inseparably and necessarily linked together” (1949, page 43). This view is similar to Hayek’s argument in Law, Legislation, and Liberty that reason is a product of social evolution (1973, Ch. 1).
The difference between Mises and Hayek is often portrayed as the difference between an arch-rationalist and a skeptical empiricist. The essays in Fortunes, while not speaking decisively to this view—and obviously not considering Mises’s own words—complicate this simplistic view. It is no accident that both Mises and Hayek wrote so widely on so many topics. For both, understanding the process of social cooperation requires attention to the institutional framework of economic activity. Economists need to interact with diverse disciplines such as law, history, politics, moral philosophy, and psychology. And economics is but one part of a broader social philosophy, a philosophy that both of them identify with liberalism.
In his later work, Hayek does not object to Mises’s methodology so much as his early social rationalism. Time and again Hayek casts Mises in a more nuanced light than either his critics or some of his more enthusiastic followers. Maybe he is wrong. But Hayek takes the work of his revered mentor not as settled doctrine but as a launching pad to develop new and better ways of understanding the world. This is the best any academic mentor can hope for. As Peter Klein quotes in his introduction, Margit von Mises [Mises’s wife] said that “Lu[dwig] met every new student hopeful that one of them might develop into a second Hayek” (page 9).
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A RETROSPECTIVE LOOK AT “THE HAYEK STORY”: ROUNDABOUTNESS, STICKY CONSUMPTION, AND SEQUESTERED CAPITAL
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Review of John Hicks' Article 'a Suggested Interpretation...
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Free Essay: A Review of Mr. Keynes and the “Classics”; A Suggested Interpretation By J. R. Hicks Word count: 2,932, (excluding mathematical equations) We aim...
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A Review of
Mr. Keynes and the “Classics”; A Suggested Interpretation
By J. R. Hicks
Word count: 2,932, (excluding mathematical equations)
We aim to examine the British economist Sir John Hick’s article ‘Mr Keynes and the “classics”; A suggested interpretation (April 1937)’ in which Hicks seeks to devise a simpler more cruder ‘classical’ model of the imperial, however complicated work of Professor Pigou’s ‘The theory of unemployment’ that will rightfully disagree with Mr Keynes’s mystifying but accepted proposal in his ‘General theory of unemployment.’ We seek to explore the proposed model by Hicks with the support of mathematics, economic behaviour and theory from his own independent views as well established economists.
I …show more content…
The assumption to neglect depreciation is ‘dangerous’ as described by Sir Hicks himself. The danger occurs as most investment goods may experience depreciation of assets and capital, which will in turn affect the cost of production resulting in firms having less profit. This could be a big factor in the number of people a firm can employ, consequently affecting the unemployment rate. This shows the danger can be off vast effect. However, the assumption of such danger is of necessity to devise a simple model. Taking into account appreciation of assets and goods is of too much complication and will be almost impossible to calculate and formulate with consistency and reliability. A model characteristic Hicks seeks to avoid.
The rational and fair views of Hicks’ new approach can be further fortified where he refers to “Classical economics” and “Keynesian” in the same sentence, ‘thus I assume that I am dealing with a short period in which the quantity of physical equipment of all kinds available can be taken as fixed. Hicks generates ‘three fundamental equations’ denoting: w = Rate of money wages/person
There are only 2 industries; Investment goods and consumption goods x = Output of investment goods (PQx) y = Output of consumption goods (PQy)
There are 2 Factors of production in short run (Labour and Capital) as Land and Enterprise are fixed, so our output function including labour and capital is shown by: x=fx(Nx,C) y=fy(Ny,C)
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Friedrich August von Hayek (May 8, 1899 in Vienna – March 23, 1992 in Freiburg) was an Austrian economist and political philosopher, noted for his defense of liberal democracy and free-market capitalism against socialist and collectivist thought in the mid-twentieth century. Widely regarded as one of the most influential members of the Austrian School of economics, he also made significant contributions in the fields of jurisprudence and cognitive science. His analysis of socialist economics was proven prescient by the breakup of communist Eastern Europe. He shared the 1974 Nobel Memorial Prize in Economics with ideological rival Gunnar Myrdal, and in 1991 he received the Presidential Medal of Freedom.
Biography
Friedrich August von Hayek was born on May 8, 1899 in Vienna, Austria to a Catholic family of prominent intellectuals. He was a distant cousin of the philosopher Ludwig Wittgenstein. At the University of Vienna he earned doctorates in law and political science in 1921 and 1923 respectively, and also studied psychology and economics with keen interest. He was a student of Friedrich von Wieser. Initially sympathetic to socialism, Hayek's economic thinking was transformed during his student years in Vienna through attending Ludwig von Mises' private seminars along with Fritz Machlup, Oskar Morgenstern, Gottfried Haberler, and other young students.
Hayek worked as a research assistant to Jeremiah Jenks of New York University from 1923 to 1924. He then served as director of the newly formed Austrian Institute for Business Cycle Research before joining the faculty of the London School of Economics (LSE) at the behest of Lionel Robbins in 1931. Unwilling to return to Austria after its annexation to Nazi Germany, Hayek became a British citizen in 1938, a status he held for the remainder of his life.
In the 1930s Hayek enjoyed a considerable reputation as a leading economic theorist. However, he was challenged by followers of John Maynard Keynes, who argued for more active government intervention in economic affairs. The debate between the two schools of thought has continued, with Hayek's position gaining currency since the late 1970s.
By 1947, Hayek was an organizer of the Mont Pelerin Society, a group of classical liberals who sought to oppose what they saw as "socialism" in various areas. In 1950, Hayek left the LSE for the University of Chicago, becoming a professor in the Committee on Social Thought. (NOTE: Hayek was barred from entering the Economics department because of his Austrian economic views by one member, whom he would not name but many have speculated was Frank Hyneman Knight). He found himself at Chicago amongst other prominent economists, such as Milton Friedman, but by this time, Hayek had turned his interests towards political philosophy and psychology.
From 1962 until his retirement in 1968, he was a professor at the University of Freiburg. In 1974, Hayek shared the Nobel Memorial Prize in Economics, causing a revival of interest in the Austrian school of economics. In his speech at the 1974 Nobel Prize banquet, Hayek, whose work emphasized the fallibility of individual knowledge about economic and social arrangements, expressed his misgivings about promoting the perception of economics as a strict science on par with physics, chemistry, or medicine (the scientific disciplines recognized by the original Nobel Prizes).
Margaret Thatcher, the Conservative British prime minister from 1979 to 1990, was an outspoken devotée of Hayek's writings. Shortly after Thatcher became Leader of the party, she "reached into her briefcase and took out a book. It was Friedrich von Hayek's The Constitution of Liberty. Interrupting [the speaker], she held the book up for all to see. "This" she said sternly, "is what we believe" and banged Hayek down on the table.
In 1984 he was appointed as a member of the Order of the Companions of Honour by Queen Elizabeth II on the advice of British Prime Minister Margaret Thatcher for his "services to the study of economics." Later he served as a visiting professor at the University of Salzburg.
Friedrich Hayek died in 1992 in Freiburg, Germany.
Contributions to science
Specialists in business cycle theory recognize Hayek's early work on industrial fluctuations, and modern information theorists often acknowledge his work on prices as signals. Hayek's work is also known in political philosophy (Hayek 1960), legal theory (Hayek 1973-1979), and psychology (Hayek 1952).
The philosopher of science Karl Popper wrote in letter to Hayek in 1944: "I think I have learnt more from you than from any other living thinker, except perhaps Alfred Tarski."
Others have lauded also his achievements in the scientific arena:
The first proponent of cortical memory networks on a major scale was neither a neuroscientist nor a computer scientist but… a Viennese economist: Friedrich von Hayek. A man of exceptionally broad knowledge and profound insight into the operation of complex systems, Hayek applied such insight with remarkable success to economics (Nobel Prize, 1974), sociology, political science, jurisprudence, evolutionary theory, psychology, and brain science. (Fuster 1995, 87)
Hayek made a quite fruitful suggestion, made contemporaneously by the psychologist Donald Hebb, that whatever kind of encounter the sensory system has with the world, a corresponding event between a particular cell in the brain and some other cell carrying the information from the outside word must result in reinforcement of the connection between those cells. These days, this is known as a Hebbian synapse, but von Hayek quite independently came upon the idea. I think the essence of his analysis still remains with us. (Edelman 1987, 25).
"Hayek posited spontaneous order in the brain arising out of distributed networks of simple units (neurons) exchanging local signals" says Harvard psychologist Steven Pinker: "Hayek was way ahead of his time in pushing this idea. It became popular in cognitive science, beginning in the mid-1980s, under the names 'connectionism' and parallel distributed processing." (Postrel 2004).
The economic thinker
Hayek’s argument was always that to fully control the economy meant to control all aspects of life. Economic decisions are not separate from individual values or purposes. They reflect those purposes:
We want money for many different things, and those things are not always, or even rarely, just to have money for its own sake. … We want money for our spouses or our children or to do something in terms of the transformation of ourselves; for everything from plastic surgery to reading intellectual history or building a church. These are all non-economic goals that we express through the common means of money. (Muller 2002).
Consequently, Hayek put the price mechanism on the same level as, for example, language. Such thinking led him to speculate on how the human brain could accommodate this evolved behavior. In The Sensory Order (1952), he proposed the hypothesis that forms the basis of the technology of neural networks and of much of modern neurophysiology.
The business cycle
In Prices and Production (1931) and Monetary Theory and the Trade Cycle (1933) Hayek showed how monetary injections, by lowering the rate of interest below what Ludwig von Mises called its "natural rate," distort the economy's inter-temporal structure of production. Most theories of the effects of money on prices and output (then and since) consider only the effects of the total money supply on the price level and aggregate output or investment. Hayek, instead, focused on the way money enters the economy ("injection effects") and how this affects relative prices and investment in particular sectors.
In Hayek's framework, investments in some stages of production are "malinvestments" if they do not help to align the structure of production to consumers' inter-temporal preferences. The reduction in interest rates caused by credit expansion directs resources toward capital-intensive processes and early stages of production (whose investment demands are more interest-rate elastic), thus "lengthening" the period of production. If interest rates had fallen because consumers had changed their preferences to favor future over present consumption, then the longer time structure of production would have been an appropriate, coordinating response.
A fall in interest rates caused by credit expansion, however, would have been a "false signal," causing changes in the structure of production that do not accord with consumers' inter temporal preferences. The boom generated by the increase in investment is artificial. Eventually, market participants come to realize that there are not enough savings to complete all the new projects; the boom becomes a bust as these malinvestments are discovered and liquidated.
Every artificial boom induced by credit expansion, then, is self-reversing. Recovery consists of liquidating the malinvestments induced by the lowering of interest rates below their natural levels, thus restoring the time structure of production so that it accords with consumers' inter-temporal preferences.
Spontaneous order
In Economics and Knowledge (1937) and The Use of Knowledge in Society (1945) Hayek argued that the central economic problem facing society is not, as is commonly expressed in textbooks, the allocation of given resources among competing ends:
It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only those individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge not given to anyone in its totality. (Hayek 1945, 78).
The efficient exchange and use of resources, Hayek claimed, can be maintained only through the price mechanism in free markets. He argued that the price mechanism serves to share and synchronize local and personal knowledge, allowing society's members to achieve diverse, complicated ends through a principle of spontaneous self-organization. He coined the term "catallaxy" to describe a "self-organizing system of voluntary co-operation." (Hayek 1945)
Much of the knowledge necessary for running the economic system, Hayek contended, is in the form not of
"scientific" or technical knowledge—the conscious awareness of the rules governing natural and social phenomena—but of … knowledge, the idiosyncratic, dispersed bits of understanding of "circumstances of time and place" (Hayek 1968).
This tacit knowledge is often not consciously known even to those who possess it and can never be communicated to a central authority. The market tends to use this tacit knowledge through a type of discovery procedure (Hayek 1968), by which this information is unknowingly transmitted throughout the economy as an unintended consequence of individuals' pursuing their own ends.
Indeed, Hayek's (1948) distinction between the neoclassical notion of "competition," identified as a set of equilibrium conditions (number of market participants, characteristics of the product, and so on), and the older notion of competition as a rivalrous process, has been widely influential in Austrian economics.
On the other side, the key to a functioning economy—or society—is decentralized competition. In a market economy, prices act as a "system of telecommunications," coordinating information far beyond the scope of a single mind. They permit ever-evolving order to emerge from dispersed knowledge. In any complex operation, there is too much relevant information for a single person or small group to absorb and act on.
For Hayek, market competition generates a particular kind of order—an order that is the product "of human action but not human design" (a phrase Hayek borrowed from Adam Smith's mentor Adam Ferguson). This "spontaneous order" is a system that comes about through the independent actions of many individuals, and produces overall benefits unintended and mostly unforeseen by those whose actions bring it about. To distinguish between this kind of order and that of a deliberate, planned system, Hayek (1968b, 72-76) used the Greek terms cosmos for a spontaneous order and taxis for a consciously planned one.
Examples of a "cosmos" include the market system as a whole, money, the common law, and even language. A "taxis," by contrast, is a designed or constructed organization, like a corporation or bureau; these are the "islands of conscious power in [the] ocean of unconscious cooperation like 'lumps of butter coagulating in a pail of buttermilk'.”
Most importantly, however, Hayek always stressed that his moral philosophy has to be backed by “a complex system of moral codes, rules of fairness, as well as an articulated system of punishment for the violators … a system under which a bad man can do the least harm.” (Hayek 1945).
Hayek noted that the market does not always work perfectly. People's plans are not always successfully coordinated, resulting in high unemployment, for example. For Hayek, it was government intervention that served as cause not solution to many market problems. Thus, he argued that increases in the money supply by the central bank led to artificially reduced interest rates which gave false signals to investors, resulting in malinvestments (Hayek 1931). Such an artificial boom necessarily leads to artificial bust as the market spontaneously finds its natural order again. Hayek argued that the way to avoid the busts was therefore to avoid the artificial booms.
Hayek versus Keynes
As one of Keynes' leading professional adversaries, Hayek was well situated to provide a full refutation of Keynes' General Theory. But he never did. Part of the explanation for this no doubt lies with Keynes's personal charm and legendary rhetorical skill, along with Hayek's general reluctance to engage in direct confrontation with his colleagues. Hayek also considered Keynes an ally in the fight against wartime inflation and did not want to detract from that issue (Hayek, 1994, 91).
Caldwell (1988) suggests another reason: it was during this time that Hayek was losing faith in equilibrium theory and moving toward a "market process" view of economic activity, making it difficult for him to engage Keynes on the same terms in which they had debated earlier. Furthermore, as Hayek later explained, Keynes was constantly changing his theoretical framework, and Hayek saw no point in working out a detailed critique of the General Theory, if Keynes might change his mind again (Hayek, 1963, 60; Hayek, 1966, 240-241). Hayek thought a better course would be to produce a fuller elaboration of Eugen von Böhm-Bawerk's capital theory, and he began to devote his energies to this project.
The following quote puts Hayek’s “side” into a proper perspective.
Underlying all this has been a fundamental shift in ideas … The dramatic redefinition of state and marketplace over the last two decades demonstrates anew the truth of Keynes' axiom about the overwhelming power of ideas. For concepts and notions that were decidedly outside the mainstream have now moved, with some rapidity, to center stage and are reshaping economies in every corner of the world. Even Keynes himself has been done in by his own dictum. During the bombing of London in World War II, he arranged for a transplanted Austrian economist, Friedrich von Hayek, to be temporarily housed in a college at Cambridge University. It was a generous gesture; after all, Keynes was the leading economist of his time, and Hayek, his rather obscure critic. In the postwar years, Keynes' theories of government management of the economy appeared unassailable. But a half century later, it is Keynes who has been toppled and Hayek, the fierce advocate of free markets, who is preeminent. (Yergin & Stanislaw 1998 14-15)
Contribution to social and political philosophy
Hayek's most significant contribution,
was to make clear how our present complex social structure is not the result of the intended actions of individuals but of the unintended consequences of individual interactions over a long period of time, the product of social evolution, not of deliberate planning. (Postrel 2004).
Hayek's major insight, which he referred to as his "one discovery" in the social sciences, was to define the central economic and social problem as one of organizing dispersed knowledge. Different people have different purposes. They know different things about the world. Much important information is local and transitory, known only to the man on the spot.
"Some of that knowledge is objective and quantifiable, but much is tacit and unarticulated. Often we only discover what we truly want as we actually make trade-offs between competing goods … The economic problem of society," Hayek wrote in his 1945 article, "is thus not merely a problem of how to allocate `given' resources … if `given' is taken to mean given to a single mind which deliberately solves the problem set by these data. … It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know … Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in totality." (Hayek 1945).
Applying this insight to socialist thought, revealed that central economic planning was doomed to failure.
The economic calculation problem
Hayek was one of the leading academic critics of collectivism in the twentieth century. He believed that all forms of collectivism (even those theoretically based on voluntary cooperation) could only be maintained by a central authority of some kind. In his popular book, The Road to Serfdom (1944) and in subsequent works, Hayek claimed that socialism required central economic planning and that such planning in turn had a risk of leading towards totalitarianism, because the central authority would have to be endowed with powers that would impact social life as well.
Building on the earlier work of Ludwig von Mises and others, Hayek also argued that in centrally-planned economies an individual or a select group of individuals must determine the distribution of resources, but that these planners will never have enough information to carry out this allocation reliably. Hayek maintained that the data required for economic planning do not and cannot exist in a central planner, but rather each individual has information regarding resources and opportunities:
Central to Mises’ thesis was that socialist economy is possible in theory but difficult (if not impossible) in practice because knowledge is decentralized and incentives are weak … and thus it cannot achieve an efficient utilization of resources. (Hayek 1992, 127)
In Hayek's view, the central role of the state should be to maintain the rule of law, with as little arbitrary intervention as possible. It was shocking enough for Britain, where his views were respectfully, though critically, received. But in the United States, where Reader's Digest published a condensed version, The Road to Serfdom was a bestseller and a political lightning rod. It rallied supporters of traditional free enterprise and enraged the intelligentsia to whom it was addressed. How dare this mustachioed Austrian suggest that the ambitions of the New Deal might have anything in common with Hitler or Stalin! (Postrel 2004).
Hayek went eventually as far as to attribute the birth of civilization to private property in his book The Fatal Conceit (1988). According to him, price signals are the only possible way to let each economic decision maker communicate tacit knowledge or dispersed knowledge to each other, in order to solve the economic calculation problem.
Theorem on transitional and developing countries
When we combine Hayek’s key theorems, it emerges that economic development requires (a) the “learning process” of how to play the social roles of which market relations is based on and keeping within the implicit rules and (b) the moral codes of co-operative society (which punishes violators), to form a system marginalizing the opportunities and other elements harmful to the society while forming the ultimate criterion of success.
Such a “learning process” - in which the moral codes are spontaneously achieved - is, however, a function of time usually measured in terms of generations (Dallago 1996, 82, 116-117).
The time-element of this “learning process” is obviously non-existent (at least not spanning generations) in developing and transitional societies. Instead, we see quick "privatizations" (often by the old oligarchy who had the money to buy the bulk of industrial infrastructure) and “quasi-market” relations without sufficient moral scruples, codes of conduct, or functioning legal system.
Attempts to substitute the generations-long “learning process”—of how to achieve at least minimum functioning legal, moral, and co-operative notion in the society—in these new “free market” societies have been based on exogenous inputs. Whether involving the transfer of a whole constitution (or major substantive and civil laws) or just amendments to the existing dysfunctional system, the results have unfortunately, in many cases been unsuccessful, as Hayek's insights predicted.
Thus, Hayek’s theorem of generations-long learning process on the road to full-fledged democracy proved to be one of his most prophetic.
Influence, recognition, and legacy
Hayek's intellectual foundation was based on the ideas of David Hume, Adam Smith, and other Scottish thinkers of the 1700s. Like these great thinkers, Hayek was influential in many fields, not the least of which being economics:
When the definitive history of economic analysis during the 1930s comes to be written … a leading character in the drama (it was quite a drama) will be Professor Hayek. … It is hardly remembered that there was a time when the new theories of Hayek were the principal rival of the new theories of Keynes. (Hicks 1967, 203).
He had a wide-reaching influence on contemporary economics, politics, philosophy, sociology, psychology, and anthropology. For example, Hayek's discussion in The Road to Serfdom (1944) about truth and falsehood in totalitarian systems influenced later opponents of postmodernism (Wolin 2004).
Having heavily influenced Margaret Thatcher's economic approach, and some of Ronald Reagan's economic advisors, in the 1990s Hayek became one of the most-respected economists in Europe. There is a general consensus that his analyses of socialist as well as non-socialist societies were proven prescient by the breakup of communist Eastern Europe.
Hayek shared the 1974 Nobel Memorial Prize in Economics with ideological rival Gunnar Myrdal and in 1991 he received the Presidential Medal of Freedom, one of the two highest civilian awards in the United States, “for a lifetime of looking beyond the horizon.”
After his death, Hayek's intellectual presence continued to be noticeable, especially in the universities where he had taught: the London School of Economics, the University of Chicago, and the University of Freiburg. A student-run group at the LSE Hayek Society, was established in his honor. At Oxford University, there is also a Hayek Society. The Cato Institute, one of Washington, DC's leading think tanks, named its lower level auditorium after Hayek, who had been a Distinguished Senior Fellow at Cato during his later years. Also, the auditorium of the school of economics in Universidad Francisco Marroquín in Guatemala is named after him.
Publications
Hayek, F. A. [1931] 1935. Prices and Production. London: Routledge & Sons, Second revised edition: London: Routledge & Kegan Paul.
Hayek, F. A. 1933. Monetary Theory and the Trade Cycle. London: Jonathan Cape,
Hayek, F. A. [1933] 1991. "The Trend of Economic Thinking." Economica (13), 121-137. Reprinted in Hayek, 1948, 17-34.
Hayek, F. A. 1937. "Economics and Knowledge." Economica N.S. 4. 33-54. Reprinted in Hayek, 1948, 33-56.
Hayek, F. A. 1939. "Price Expectations, Monetary Disturbances, and Malinvestments." In Hayek, Profits, Interest, and Investment. London: Routledge and Kegan Paul. 135-156.
Hayek, F. A. 1941. The Pure Theory of Capital. Chicago: University of Chicago Press.
Hayek, F. A. 1944. The Road to Serfdom. Chicago: University of Chicago Press.
Hayek, F.A. [1945] 1949. "Individualism, True and False." Individualism and Economic Order. London: Routledge & Kegan Paul, 10-11.
Hayek, F. A. [1945] 1948. "The Use of Knowledge in Society." American Economic Review 35 (September): 519-530. 77-91.
Hayek, F. A. 1948. "The Meaning of Competition." In Hayek. 92-106.
Hayek, F. A. 1952. The Sensory Order. Chicago: University of Chicago Press.
Hayek, F. A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press.
Hayek, F. A. [1968a] 1978. "Competition as a Discovery Procedure." In Hayek 179-190.
Hayek, F. A. [1968b] 1978. "The Confusion of Language in Political Thought." In Hayek 71-97.
Hayek, F. A. 1973. Law, Legislation, and Liberty. Three volumes. Chicago: University of Chicago Press, 1973-1979.
Hayek, F. A. 1978. New Studies in Philosophy, Politics and Economics. Chicago: University of Chicago Press.
Hayek, F. A. 1989. The Fatal Conceit: The Errors of Socialism. Ed. by W. W. Bartley III. vol. 1 of The Collected Works of F. A. Hayek. London: Routledge and Chicago: University of Chicago Press.
Hayek, F. A. 1991. The Trend of Economic Thinking: Essays on Political Economists and Economic History. Ed. W. W. Bartley III and Stephen Kresge. Chicago: University of Chicago Press, and London: Routledge.
Hayek, F. A. 1992. The Fortunes of Liberalism, Edited by Peter G. Klein. Vol. 4 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press, and London: Routledge.
Hayek, F. A. 1995. Contra Keynes and Cambridge: Essays, Correspondence. Ed. Bruce Caldwell. Vol. 9 of The Collected Works of F. A. Hayek. Chicago: University of Chicago Press and London: Routledge.
Hayek, F. A. [1995] 1966. "Personal Recollections of Keynes and the 'Keynesian Revolution.'" In Hayek. 240-246.
Hayek, F. A. [1995] 1963. "The Economics of the 1930s as Seen from London." Hayek. 49-73.
References
ISBN links support NWE through referral fees
Birner, Jack, 2001. "The mind-body problem and social evolution." CEEL Working Paper 1-02. In Politics, economics and the history of ideas.
Caldwell, Bruce. J. 1998. "Hayek's Transformation" In History of Political Economy. 513-541.
__________. 1995. "Introduction" In Hayek, 1995, pp. 1-48
__________. 1997. "Hayek and Socialism." In Journal of Economic Literature no. 4. (1856-90).
__________. 2005. Hayek's Challenge: An Intellectual Biography of F. A. Hayek.
Dallago, B. & L. Mintone. 1996 Economic Institutions, Markets and Competition. Edward Elgar.
Edelman, G. 1987. Neural Darwinism, 25.
Epstein, R. Simple Rules for a Complex World. Cambridge, MA: Harvard Univ. Press.
Fuster, J. 1995. Memory in the Cerebral Cortex: An Empirical Approach to Neural Networks in the Human and Nonhuman Primate. Cambridge, MA: MIT Press, MS., 87
Hicks, Sir John. 1967 Critical Essays in Monetary Theory. Oxford, Clarendon Press.
Muller, Jerry Z. 2002. The Mind and the Market: Capitalism in Western Thought. Anchor Books.
Postrel, Virginia. 2004. “Friedrich the Great” The Boston Globe January 11, 2004. Retrieved February 9, 2007.
Wolin, R. 2004. The Seduction of Unreason: The Intellectual Romance with Fascism from Nietzsche to Postmodernism. Princeton University Press.
Yergin , D. & J. Stanislaw. 1998. The Commanding Heights: The Battle Between Government and the Marketplace that Is Remaking the Modern World. New York: Simon & Schuster, 14-15.
All links retrieved April 11, 2024.
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The enduring legacy of John Maynard Keynes
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It is easy to forget how often his advice was ignored during his lifetime | Culture
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/favicon.ico
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The Economist
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https://www.economist.com/books-and-arts/2020/05/07/the-enduring-legacy-of-john-maynard-keynes
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It is easy to forget how often his advice was ignored during his lifetime
May 7th 2020
The Price of Peace. By Zachary Carter.Random House; 656 pages; $35 and £25.
This article appeared in the Culture section of the print edition under the headline “Alive in the long run”
From the May 9th 2020 edition
Discover stories from this section and more in the list of contents
Explore the edition
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Will there be more?
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The creation, and collapse, of a progressive evangelical church
For the members of Circle of Hope, good intentions were soon eclipsed by internal divisions
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Famous Economists
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UCL Department of Economics
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https://www.ucl.ac.uk/economics/about-department/famous-economists/famous-economists
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London has been associated with many pioneers in economics and statistics. Many of these have associations with University College, either as students or teachers there. Below we summarise the place of London in the history of economics, statistics and related sciences until the mid twentieth century.
List of London's Famous Economists
Members of the economics department have put together a series of Economists' walks around London
One of the earliest contributors was the London merchant and mercantilist, Thomas Mun (1571-1641) whose emphasis on the importance of the balance of trade in economic prosperity deeply influenced subsequent economic thought. William Petty (1623-1687) was an advocate of data collection and quantitative enquiry in economics and other issues of state whose own exercises in political arithmetic’ included an attempt to estimate national income and can be seen as early examples of applied econometrics. John Locke (1632-1704), best known for his contributions to epistemology and political philosophy, wrote also on economics and provided, for example, an early statement of the Quantity Theory of Money.
In 1776 probably the most influential book in the history of economics, The Wealth of Nations, was published in London. Its author, the Scotsman Adam Smith (1723-1790) spent most of the previous three years in London debating the book’s chapters with friends and refining it for publication. At times also in London was Smith’s greatest friend, fellow Scottish philosopher David Hume (1711-1776) who also wrote on economics, arguing, for example, against mercantilism and introducing specie-flow arguments into analysis of international trade.
The late eighteenth century saw London at the centre of intellectual advance in economics. Jeremy Bentham (1748-1832) introduced the notion of utility’ and developed the utilitarian framework still underpinning much applied policy evaluation, besides writing occasionally on explicitly economic issues. Living most of his life in London, his ideas influenced the founders of UCL and, according to the terms of his will, his dressed skeleton can still be seen in a glass cabinet in the college’s cloisters. Reverend Thomas Robert Malthus (1766-1834) is believed to have worked on his controversial but influential ideas on population and economy while living in London. Among his ideas was that of diminishing returns in production, an idea discovered at the same time by two other London-born thinkers, Edward West (1782-1828) and David Ricardo.
Arguably the greatest economist of his time, David Ricardo (1772-1823) corresponded with both Malthus and Bentham. Born into a Jewish family in east London, he made his fortune in the City’s emerging financial quarters before working out his theories of political economy, developing, for instance, ideas of gains from trade and a theory of distribution of factor returns that remain influential. In his thorough application of comparative static ways of thinking to the analysis of economic equilibria he has been said to have literally invented the technique of economics.
The Ricardian system dominated economic thought in the country for the next half century. The Chair of Political Economy founded in his name at UCL was occupied first by his follower John Ramsay McCulloch (1789-1864). Also working in London was his adherent Thomas de Quincey (1785-1859), now better known for literary memoirs recounting his time as an opium eater. Most influential among his followers however were the London father and son, James Mill (1773-1836) and John Stuart Mill (1806-1873) whose works expounded and developed both utilitarian ethics and classical economic theory. Living in London as a political exile, Karl Marx (1818-1883) was heavily though not uncritically influenced by Ricardo’s theories as he developed his own economic theory working in the Reading Room of the nearby British Museum. Nassau William Senior (1790-1864) was an influential critic of Malthus’ and Ricardo’s assumptions and made important contributions to the theory of international trade. Now better known for his place in the history of computing, Charles Babbage (1791-1871), a lifelong Londoner, also contributed around this time to the economic theory of production.
The most eminent figure to hold a professorship of economics at UCL was William Stanley Jevons (1835-1882), also earlier a student of the college. Often seen as the main British contributor to the marginalist revolution in economic thought of the 1870s, he challenged Ricardian ideas, seeking for instance to replace theories of value based on labour input with theories based on utility. In his support for the use of mathematical analysis in economics and in his practical use of economic statistics, he can be seen as one of the first exponents of recognisably modern econometric methods. His ideas were influential on later London economists, including Philip Wicksteed (1844-1927), Edwin Cannan (1861-1935) and Lionel Robbins (1898-1984). Among Jevons’ friends was Francis Ysidro Edgeworth (1845-1926), then a professor at King’s College London, whose own contributions included the idea of the indifference curve and important insights into economic equilibrium, whilst he also made contributions to the earliest developments in mathematical statistics.
In subsequent years economics in Britain was dominated by Alfred Marshall (1842-1924), who, though he later worked outside the city, was born and educated in London. His approach sought to reconcile classical and modern thought. Among his followers was Arthur Cecil Pigou (1877-1959) who began his career as a lecturer at Kings College London and who made important contributions to analysis of taxation.
At the turn of the century, the London School of Economics and Political Science was founded and played a major role in economic thought in the following years through figures such as Cannan and Robbins, already mentioned above, and others such as Arthur Bowley (1869-1957), John Hicks (1904-1989), Abba Lerner (1903-1982), Roy Allen (1906-1983), Friedrich Hayek (1889-1992) and Bill Phillips (1914-1975) – of the Phillips-curve - who made various hydraulic models of the economy, one being on display in the Science Museum.
Perhaps the most influential and well known British economist of the twentieth century was John Maynard Keynes (1883-1946). Although academically attached to Cambridge, he associated with a group of aesthetes and scholars known as the Bloomsbury Group named after the Bloomsbury area of London (particularly, Gordon Square) where they met and where the World Congress takes place.
Several of the above figures, such as Petty, Edgeworth and Bowley, also contributed to the history of statistics. Here also London, and especially UCL, has played an outstanding role.
John Graunt (1620-1674), a friend and collaborator of Petty, studied London mortality statistics, projected population and created the first known life tables. Abraham de Moivre (1667-1754), tutoring in London as a Huguenot emigré, made several fundamental contributions to the theory of probability including definitions of concepts such as independence and the first use of the normal distribution (which he linked to the binomial distribution in a precursor of the central limit theorem), besides working on problems of annuities. Not known for his contributions to economic theory, though one of the greatest scientists ever, was the Warden/Master of the Mint (from 1696 until his death) Isaac Newton (1642-1727). Needless to say, that his invention of differentiation was not just a milestone for physics, but proved to be indispensable for the development of (mathematical) economics too. It yielded numerous further tools, for instance Taylor’s theorem, a creation of Brook Taylor (1685-1731).
Reverend Thomas Bayes (1702-1761), best known for the theorem bearing his name, ministered and is buried in London. His work was published after his death by Richard Price (1723-1791), another dissenting cleric who made contributions of his own to the theory of probability and to many other areas, including actuarial science, social insurance and government finance. Thomas Simpson (1710-1761), mathematician, also made important contributions to probability and annuities.
Through the nineteenth century, enquiry into public health led to developments in statistical practice. William Farr (1807-1883), an associate of McCulloch, modeled spread of epidemics. His collaboration with John Snow (1813-1858), a London medic, identifying the source of the 1854 cholera outbreak in Broad St to an infected water supply was a landmark in epidemiology. Farr worked closely with Florence Nightingale (1820-1910), nurse and national heroine, who made important advances in collection of medical statistics. William Guy (1810-1885), professor at Kings College London, also contributed to the development of medical statistics. In the late nineteenth century Charles Booth (1840-1916) initiated and oversaw an innovative fifteen year social survey of poverty in London.
In the same era the two early pioneers of matrix algebra were the friends Arthur Cayley (1821-1895) and James Joseph Sylvester (1814-1897). Ineligible, because Jewish, for university employment elsewhere in Britain, the latter was professor of Natural Philosophy at UCL from 1838 until 1840. Returning after a time in the US and now practising law, he met Cayley, who was trained as a mathematician too. Later both returned to chairs in mathematics.
The notions of correlation and regression were introduced in the work of the eugenicist, Francis Galton (1822-1911). The Chair in Eugenics founded at UCL by Galton was first held by Karl Pearson (1857-1936) who founded the college’s Department of Applied Statistics. He continued to explore the ideas of regression and correlation with, for example, George Udny Yule (1871-1951) also then at UCL. Among Pearson’s other contributions were both the introduction of the chi-squared test and the method of moments. Also briefly in the department at this time was William Gosset (1876-1937), discoverer of the t test for a sample mean. Pearson’s son, Egon Pearson (1895-1980) followed him into a post at UCL where he met Jerzy Neyman (1894-1981) with whom he developed the theory of hypothesis testing. Pearson’s successor at UCL was Ronald Aylmer Fisher (1890-1962) whose many contributions include the application of t and F tests to regression coefficients and proposing the method of maximum likelihood estimation. Meanwhile factor analysis was being developed by Charles Spearman (1863-1945) a professor of psychology at UCL. Other UCL statisticians of the early twentieth century included John Wishart (1898-1956), later of Imperial College, and Maurice Kendall (1907-1983), later at LSE and Maurice Bartlett (1910-2002), who succeeded Egon Pearson, but held other positions afterwards.
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From Austrian theory of capital to dissent: Nicholas Kaldor, Friedrich A. Hayek and the way to disequilibrium
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From Austrian theory of capital to dissent: Nicholas Kaldor, Friedrich A. Hayek and the way to disequilibrium - Author: Keanu Telles
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https://www.emerald.com/insight/content/doi/10.1108/ECON-10-2022-0139/full/html
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Introduction
It is not easy to imagine two more distinct and antagonist economists in the twentieth century than the Hungarian Nicholas Kaldor (1908–1986) and the Austrian Friedrich A. von Hayek (1899–1992). Indeed, Kaldor is widely known as a joint architect and a leading figure – with Richard Kahn, Joan Robinson, Luigi Pasinetti, and others – of the Cambridge school of post-Keynesian economics. In the 1950s and 1960s, this group extended the principles of John Maynard Keynes’ The General Theory of Employment, Interest, and Money (1936) to the long-run analysis of economic growth and income distribution.
Nevertheless, Kaldor started his intellectual career as very sympathetic to the Austrian school as exposed by Lionel Robbins, Hayek, and others. In the 1930s, both Hayek and Kaldor were followers of the so-called Austrian theory of capital, derived from the works of John Stuart Mill, William S. Jevons, Carl Menger, Eugen von Böhm-Bawerk, and Knut Wicksell. It states that the quantity of capital corresponds to the length of time in which primary original factors of production (labor in Böhm-Bawerk’s model and labor and land in Wicksell’s case) are utilized to produce secondary durable and nondurable (i.e. working) capital goods.
This time length is measured by the average production period (the degree of roundaboutness or capital intensity) which is an increasing monotonic function of the total quantity of capital. The quantity of capital is understood as the length of production stages, the length of time contained in the whole production process, a notion introduced by Menger’s Grundsätze der Volkswirtschaftslehre (1871). This allowed the extension of marginal productivity theory to the realms of capital. In equilibrium, the marginal productivity of waiting (i.e. the marginal productivity of the average period of production) will be equal to the interest rate.
In this essay, we reconstruct the similar and intertwined paths of Kaldor and Hayek to disequilibrium economics through the theoretical deficiencies exposed by the Austrian theory of capital and its consequences on equilibrium analysis . The critical reaction to the Austrian business cycle theory presented by Hayek in the 1930s revealed the limitations of its theory of capital. More importantly, however, the Austrian integration of capital theory into a business cycle theory and its shortcomings called attention to the limitation of the theoretical apparatus of equilibrium analysis in dynamic contexts. These limitations exposed in the epitome of the equilibrium theoretical edifice, the neoclassical synthesis of the Austrian theory of capital, contributed to Hayek and Kaldor abandoning the neoclassical equilibrium theory en route toward dissent.
The critiques made by Piero Sraffa and Gunnar Myrdal (in a sense both later incorporated by Keynes in 1936) to Hayek’s business cycle theory emphasized the indeterminateness of equilibrium in a dynamic, monetary, and expectational economy. In particular, Myrdal’s 1933 critique of Wicksell’s three conditions to monetary equilibrium led to a reaction against the notion of perfect foresight (i.e. perfect knowledge) intrinsic in the traditional (dynamic or intertemporal) equilibrium analysis, proper to the capital accumulation and trade cycle phenomena. This is visible in Hayek’s reaction in his Copenhagen lecture in December 1933 and Kaldor’s theoretical emancipation in 1934. The conjunction of the intellectual wars on capital and business cycle theories merged with the economic calculation debate under socialism revealed to Hayek the way to the reformulation of equilibrium analysis in terms of social knowledge coordination in his December 1936 presidential address to the London Economic Club, “Economics and Knowledge” (1937).
In 1937, nevertheless, Kaldor entered into the controversy between Hayek and Frank H. Knight on the theory of capital in a middle-ground position, criticizing the use of production periods and roundaboutness in a trade cycle theory but defending in its own right the Austrian theory of capital. Kaldor (1937b) writes to Knight saying that “I think Hayek’s trade cycle theory is entirely wrong (at any rate in the Prices and Production form); and this is independent of the rights and wrongs of the Austrian theory. That is to say, I don’t think Hayek ‘follows’ from the Austrian theory of capital at all; and would be equally wrong even if Böhm-Bawerk and Wicksell were spotless.”
Kaldor’s position in this debate is interesting because the main point that Hayek stressed in his controversy with Keynes (which was also influenced by Wicksell) in 1931 was the logical consequences of a capital theoretical microfoundation to business cycle research. Soon after Kaldor’s exchange with Knight, he abandoned the Austrian theory of capital in his conversion process to Keynes. However, many implications of the controversies mentioned above will be noted in his mature writings on the construction of the post-Keynesian growth and distribution models in the 1950s and 1960s (such as his Keynesian income distribution theory used as the solution to the Harrodian instability problem), the Cambridge capital controversy, and his critiques to what he called neoclassical equilibrium economics in the 1970s and 1980s.
This story might appear surprising for many since Kaldor is mainly identified with the Cambridge school. Moreover, as a long-time Fabian socialist, he was an influential voice within the Labour Party in England, performing an important role as Special Adviser to the Chancellor of the Exchequer when the Party came to power in 1964 (until 1968) and later in 1974–6. Not to mention his major contributions in making the two William Beveridge Reports, first the White Paper report on Social Insurance in 1942 and later the extremely influential Full Employment in a Free Society (1944). In Beveridge’s 1944 book, Kaldor authored the famous appendix C where quantitative revenue and expenditure estimations of an active fiscal policy aimed at full employment were provided. In Hayek’s view (1983, pp. 111, 183),
Kaldor, through the Beveridge Report, has done more to spread Keynesian thinking than almost anybody else. […] I have reason to say that it probably should be called a Kaldorian revolution, not for anything which is connected with Kaldor’s name, but what spread it was really Lord Beveridge’s book on full employment, and that was written by Mr. Nicholas Kaldor and not by Lord Beveridge, because Lord Beveridge never understood any economics.
Some implications to the long-run analysis of Keynes’ principle of effective demand (i.e. that investment determines savings derived from income variation via the marginal propensity to save), which emerged in the early 1930s, were worked on by Roy F. Harrod’s path-breaking “An Essay in Dynamic Theory” (1939). The same dynamic instability theory was developed and extended independently a few years later by the Russian American economist Evsey Domar (1946) in the context of the post-Second World War secular stagnation thesis propagated by the “American Keynes” Alvin Hansen (1944, part III), his Ph.D. advisor at Harvard University.
Keynes’ short-period income and employment determination analysis ignored the dual character of the investment process, investment both determines present income (present aggregate demand) and increases future productive capacity (future aggregate supply). The attempt of generalizing the General Theory beyond the walls of short-period aggregate demand with given capital stock and fixed prices was largely a challenge to the very foundations of neoclassical marginal productivity theory based on factor substitution and diminishing returns. Something that Keynes himself had accepted at least partially from his teacher Marshall, for instance, in the second chapter of The General Theory. In particular, as the Cambridge capital controversy famously exposed (a controversy in which Kaldor himself was a protagonist), it was a challenge to the existence of a decreasing monotonic function between the aggregate quantity of capital and interest rates. In other words, an inverse relationship between capital intensity and distributive shares.
A lost generation of Hayekians? Kaldor and the London School of Economics (LSE)
In 1981, Hayek and Kaldor exchanged two letters concerning a dispute over Austria’s economic picture. Answering Hayek, Kaldor wrote: “If you talk about the ‘lost generations of Keynesians,’ what about the (even older) ‘lost generations of Hayekians’ (Like myself!) who believed in Prices and Production?” (Ingrao & Ranchetti, 2005, p. 383). This resentment and unfriendly tone marked their mature personal relationship. But it was not always like that. In 1925, Kaldor was enrolled in the Humboldt University of Berlin. In April 1927, he departed for the London School of Economics (LSE) as a visiting general student, officially enrolling for the B.Sc. degree in Economics in October. Until his graduation with first-class honors in 1930, Kaldor attended lectures by, just to mention a few, Hugh Dalton, John Hicks, Allyn Young and Lionel Robbins.
In 1927, the American Young was brought by Beveridge from Harvard to LSE to substitute Edwin Cannan, who retired one year before, as the Chair of the Economics Department. At the height of his influence and intellectual powers, Young was the dominant figure in Kaldor’s second year at the School, while Robbins exerted a major influence on Kaldor’s third and last year. In December 1928, Young had published in the Economic Journal his famous article on “Increasing Returns and Economic Progress” (1928). In Kaldor’s (1986, p. 4) opinion, Young was his “first real teacher in economics, albeit for a brief period,” and caused him a lasting and profound impression. It was due to Young that Kaldor inherited “a basic distrust of abstract systems per se, and an awareness of the need to adapt the tools of theoretical analysis to the practical problems which they are intended to illuminate.”
However, with Young’s sudden death from pneumonia in the winter of 1928–9, Robbins was appointed to the position. Robbins was “young, flamboyant and enthusiastic.” It was natural and inevitable, Kaldor (1986, p. 4) recollects, that Robbins’ first pupils “should fall completely under his spell.” Robbins was very “much influenced by his contacts with Viennese economists, mainly von Mises,” and the Lausanne general equilibrium approach. His lectures followed closely the formulation given by Phillip Wicksteed, Wicksell, and Frank Knight’s Risk, Uncertainty, and Profit (1921) . The neoclassical theoretical keystone in this presentation is the generalized marginal productivity theory of distribution à la Wicksell and Wicksteed. In Kaldor’s (p. 5) view, Robbins absorbed this theory “with the fervency of a convert and propounded it with the zeal of a missionary.”
As a Robbins’ protégee, Kaldor’s first publications were in the context of a two-year research studentship at LSE where, amongst other things, he went to analyze the economic “Problems of the Danubian Succession States.” In researching for his project, Kaldor spent the summer term of 1931 (beginning in May until the end of July) at the University of Vienna as a visiting student. While in Vienna, Kaldor apparently joined the so-called Geist Kreis, a circle composed of young scholars created by Hayek, Gottfried Haberler, and Oskar Morgenstern – with the participation of Alfred Schütz, Fritz Machlup, Felix Kaufmann, Karl Menger, Erich Voegelin, and others. Many of these were also members of the Mises Kreis, the continuation by Ludwig von Mises of the famous seminar held by Böhm-Bawerk. It is presumed that Kaldor and Hayek had been introduced to each other by Robbins before this summer period in 1931.
In December 1930, Kaldor wrote to Hayek regarding his own offer to translate Hayek’s first book, Geldtheorie und Konjunkturtheorie (1929a). Hayek thanked Kaldor for his willingness to translate the book into English and made the arrangements for the translation under Robbins’ supervision. The book was translated by Kaldor and Honoria M. Croome and published in 1933 as Monetary Theory and the Trade Cycle (1933a). Hayek’s main goal in this book was to integrate the study of business cycles and industrial fluctuations within a theoretical equilibrium structure. This effort contrasted with the historicist and empirical approach expressed by Wesley Claire Mitchell. Hayek had entered into contact with this approach during his 1923–4 travel to the United States, where he sat in Mitchell’s “Types of Economic Theory” class at Columbia University. In 1928, Hayek (1928) had just published his innovative paper on intertemporal equilibrium as an attempt to solidify a business cycle theory.
Hayek sought to explain economic cycles as equilibrium phenomena, i.e. as a consequence of the logic of action by economic agents, drawing from the work of the Swedish economist Knut Wicksell and his mentor Mises. Geldtheorie was a product of his initial efforts to enter the German-speaking academic world. To qualify for his Habilitation, which allowed a teaching position at the University of Vienna, Hayek had to write a book and make a public defense in a chosen subject related to the book. The subject of his habilitation lecture to Privatdozent at Vienna was “Gibt es einen ‘Widersinn des Sparens’?” (1929b) published in the first volume of Zeitschrift for Nationalökonomie in June 1929. The paper was translated by Kaldor and Georg Tugendhat as “The Paradox of Savings” (1931a) and was published in Economica in May 1931.
The fact that both the translations of Geldtheorie and “Widersinn des Sparens?” into English were made by Kaldor jointly with other contemporary students at LSE suggests that Robbins was the mind behind the endeavor. Robbins was fluent in German and widely read and acquainted with the Continental economic literature. He was impressed with the critique exposed in “The Paradox of Savings” of some very influential pre-Keynesian American underconsumption theories championed by William Trufant Foster and Waddill Catchings. A similar intellectual attempt, but in terms of monetary theory, had been made by no one other than Keynes himself in the 1920s within the context of a deflationary post-World War I Britain. This led Robbins to suggest to Beveridge, the long-time director of LSE, that Hayek should be invited to give four advanced lectures at the London School of Economics in the lent term of 1930–1.
“Hayek’s triumphal entry on the London stage with his lectures on Prices and Production,” as his former student Ludwig Lachmann (1982, p. 630) writes, was stunning. Soon after the lectures, Lachmann continues, “all important economists there [at the LSE] were Hayekians.” In his monumental History of Economic Analysis (1954, p. 1120), Joseph Schumpeter writes that Hayek’s account of the Austrian business cycle theory in Prices and Production (1931b), “on being presented to the Anglo-American community of economists, met with a sweeping success that has never been equaled by any strictly theoretical book that failed to make amends for its rigors by including plans and policy recommendations or to make contact in other ways with its readers’ loves or hates. A strong critical reaction followed that, at first, but served to underline the success, and then the profession turned away to other leaders and other interests. The social psychology of this is interesting matter for study.”
After the success of the lectures, published in Prices and Production (1931b), Beveridge invited Hayek to spend one year as a visiting professor at LSE using the long-vacant Tooke Chair. With the refusal of Jacob Viner and Hubert Henderson to take the Tooke Chair, the Chair was offered permanently to Hayek in 1932. In his book, Hayek initially describes the working of a barter economy adopting Böhm-Bawerk’s stationary general equilibrium state. Hayek then analyzes the effects of an intertemporal preference change, that is, the transition to a more or less roundabout method of production. In this endeavor, he employs the notion of intertemporal equilibrium under perfect foresight merged with his views on the mechanics of a capital-theoretic barter economy.
In Monetary Theory and the Trade Cycle ([1929] 1933a), a barter economy is characterized by a high price-adjustment velocity to changes in external data. Hayek argued that the standard equilibrium theory cannot explain the business cycle or any kind of disequilibrium phenomena. Indeed, a satisfactory explanation of the business cycle, Hayek sustains, can only be found in an endogenous generating and propagating mechanism of disequilibrium. And this mechanism is money. Therefore, a satisfactory investigation into business cycle theory can only be accomplished by the integration of monetary theory into business cycle research, thus the name of the book. In Hayek’s judgment, the only instruments available to analyze business cycles (the systematic errors made by entrepreneurs) are the methods of static analysis, in particular, the notion of intertemporal equilibrium. This does not necessarily mean equilibrium as a stationary state, since stochastic, exogenous and particular fluctuations or errors can be sufficiently explained by the adjustments process to irregular changes in external data.
Hayek ([1929] 1933a, pp. 69–70) seems to assume a perfect foresight environment in his delineation of a barter economy, arguing that we “have to assume that the price which entrepreneurs expect to result from a change in demand,” which includes the dates and quantities of consumers’ goods for which investment is destined, “will more or less coincide with the equilibrium price.” No systematic error can be made by the entrepreneurs since they “will generally be in a position to estimate the price that will rule after the changes have taken place.” The expected price “is just as likely to be lower than the equilibrium price as to be higher.” Therefore, “on the average, it should more or less coincide, since there is no reason to assume that deviations will take place only in one direction.” After drawing the intertemporal effects in his benchmark economy, Hayek goes on to contrast this case with a monetary economy in which divergences between the money and natural interest rates transmit false price signals to entrepreneurs, resulting in a failed intertemporal transition to a more roundabout method of production .
Kaldor’s initial publications were products derived from his research studentship dealing with the economic problems of Danubian succession states. In fact, although never submitted, Kaldor’s planned Ph.D. dissertation was on this topic, entitled “Commercial Policy of the Danubian States after the War.” In October 1932, Kaldor published in the Harvard Business Review his first paper on “The Economic Situation of Austria” (1932e) employing mainly an Austrian approach to the industrial fluctuations in the region. On the occasion already at Harvard, it was Haberler who initiated the submission of Kaldor’s paper, initially rejected by Keynes in the Economic Journal. The Austrian influence can also be clearly seen in Kaldor’s (1932) first letter to The Times in March 1932 dealing with the dominance of farming in Danubia and in four anonymous articles published between May and June in The Economist on “The Danubian Problem” (Kaldor, 1932b; see also Kaldor, 1932d).
Reviewing Emil Lederer’s 1931 book on technological unemployment, Kaldor (1932c, p. 195) argued that unemployment could only be due to the money wage downward rigidities, a “monopolistic interference with the price system” by trade unions. In his review of Carl Landauers’s 1931 book Planned Economy and Market Economy, which advocated an early German Marktsozialisten solution, Kaldor (1932f, p. 279) maintained that Mises’ economic calculation problem still would be not resolved in the market socialism “competitive” solution. “Even if we assume that a ‘free market’ for consumption goods can be preserved, the methods of producing these goods will have to be decided arbitrarily; as the Socialist producer cannot, even if he tried to, find out the true displacement [i.e. opportunity] costs of the factors of production. This problem, which emerged as soon as the conception of ‘real costs’ was abandoned, has so far proved insoluble.”
At the time when Kaldor was appointed Assistant Lecturer at LSE, in 1932, he could fairly be classified as an adherent of the Austrian approach (see also Kaldor, 1935). In his recollections, Kaldor (1986, p. 7) admitted that “[i]n 1932 I was much under the influence of the views not only of Robbins but also of Hayek.” As Hayek (1994, p. 86) notes, Kaldor “occasionally freely admitted that in his beginnings he was a Hayekian.” In the early 1930s, therefore, Kaldor could be called an Austrian economist. What changed? In Hayek’s (ibid.) impression, “it was Keynes’ Treatise which convinced him, and got him around the other side. And he worked closely with Beveridge. He wrote Beveridge’s book on unemployment.” However, Kaldor declared that “[m]y enthusiasm for the doctrine of Professor Hayek had already suffered a relapse when as a first year research student I undertook to translate his ‘Gibt es einen ‘Widersinn des Sparens’?’ article into English, and in the course of struggling with the translation detected various gaps and flaws in the argument.” Nevertheless, this state of affairs was only really subverted in 1933 due to two main reasons related to the role of capital, interest and equilibrium in a dynamic economy.
First, Piero Sraffa's (1932a) review of Hayek’s Prices and Production was a strong blow to the initial intellectual euphoria created by the lectures at LSE. Sraffa argued that outside the stationary equilibrium there are as many natural interest rates as there are commodities. There are a set of rates in which some will be above, and some will be below, the money rate. Thus, monetary neutrality in Wicksellian terms is far from unproblematic. Second, Hicks introduced Kaldor to the work of the Swedes, particularly Gunnar Myrdal. Kaldor and Hicks were close friends at the time. Kaldor (1983, p. 7) “spent many hours in discussion in our neighbouring flats, on Sunday walks, or occasionally on a Continental holiday.” Kaldor (ibid.) writes that “Hicks (unlike me) was an indefatigable reader of books in at least three foreign languages, and it was owing to him that I was put on the track (among others) of the younger Swedish economists, particularly Myrdal, who first made me realise the shortcomings of the ‘monetarist’ approach of the Austrian School of von Mises and von Hayek and made me such an easy convert to Keynes after the appearance of the General Theory three years later.”
Both Hicks and Kaldor read the German revised version of Myrdal’s “Der Gleichgewichtsberiff als Instrument der Geldtheoretischen Analyse” (1933) published in an “omnibus” book, Beiträge zur Geldtheorie (1933b), edited by Hayek. Indeed, they probably read the original German manuscript when Myrdal was visiting the LSE in 1933. Hicks (1934) wrote a very positive review of the book in the November 1934 issue of Economica. Myrdal’s original article first appeared in 1932 in Swedish under the title “Om penningteoretisk jämvikt” (1932) in Ekonomisk Tidskrift.
Originally, the space in Hayek’s Sammelband book was destined for a contribution by Erik Lindahl but he was unable to deliver the submission in time and suggested Myrdal as a contributor. Although Hayek opposed Myrdal’s argument and its implications, he reluctantly accepted it. Finally, in 1939, an English book translation appeared as Monetary Equilibrium ([1939] 1965) with some modifications, after Keynes’ prophesied revolution. Myrdal’s short book, Kaldor (1986, p. 7) notes, “contained many of the features of Keynes’ system particularly as regards the role of expectations in investment and the relation of the marginal efficiency of capital to the rate of interest.”
Business cycle, capital theory, and equilibrium
In late October 1930, the long-awaited A Treatise on Money (1930) by John Maynard Keynes was finally published. The book received great criticism from the contemporary audience. Even within Cambridge corridors, the Treatise was widely criticized by established figures such as Arthur C. Pigou and Dennis Robertson. In addition, it was also criticized by more sympathetic younger figures such as the members of the Cambridge Circus around Keynes, composed of Sraffa, Kahn, Joan and Austin Robinson, and James Meade. Meanwhile, at LSE, Robbins had in charge Hayek to do a review of the Treatise for Economica, which part I was published as “Reflections on the Pure Theory of Money of Mr. J. M. Keynes” (1931c) in August 1931. This, of course, was the beginning of the famous controversy between Keynes (1931) and Hayek (1931d, 1932a). In his early response to the review in the November issue, Keynes attacked Hayek’s Prices and Production (1931b), published in September 1931, and ultimately asked Sraffa to do a review of the book for the Economic Journal.
Hayek’s main critique of the Treatise is that Keynes attempted to structure a business cycle theory based on monetary causes drawing from Wicksell’s cumulative process without working first in the real-based capital infrastructure of a decentralized economy within a relative price coordination system. In his first book on Value, Capital, and Rent ([1893] 1954), Wicksell integrated Böhm-Bawerk’s capital theory and its average production period into a general equilibrium framework, in what became known as the neoclassical synthesis of the Austrian theory of capital. However, Wicksell’s cumulative process developed and worked in his Geldzins und Güterpreise ([1898] 1936) is only a matter of the effect of changes in the interest rate on prices in the sense of a general price level. The Austrian business cycle theory is concerned with the proper capital micro-foundations and their movements caused by relative prices regarding the macro-phenomena of industrial fluctuations.
This contrasts with the aggregate approach that Keynes employed in his Treatise, as exemplified by the Fundamental Equations and its average macroeconomic definitions (e.g. average entrepreneurial profit or losses). Indeed, it also contrasts in some sense with Wicksell’s (and Keynes’) theoretical corollary regarding the stabilization of the price level. The controversy between Hayek and Keynes in 1931 was a controversy regarding the heritage of the Wicksellian legacy, in what Axel Leijonhufvud (1981) called the “Wicksell connection.” Hayek's (1931c, p. 279) review of Keynes’ Treatise on Money is very clear on this point saying that “[i]n Wicksell’s system these [cumulative processes] are necessary outgrowths of the most elaborate theory of capital we possess, that of Böhm-Bawerk. It is a priori unlikely that an attempt to utilise the conclusions drawn from a certain theory without accepting that theory itself should be successful.”
It is in this context that Sraffa’s review of Prices and Production and Myrdal’s critique of Wicksell’s conditions of monetary equilibrium are relevant. Indeed, in Lachmann’s (1986, p. 226) opinion, “Sraffa’s review was an onslaught conducted with unusual ferocity, somewhat out of keeping with the tone ordinarily adopted by reviewers in the Economic Journal.” According to Sraffa (1932a, b), there is no qualitative difference between ex ante voluntary savings and ex post forced savings. The only difference is in terms of income distribution from which economic participants the new savings appropriate to the new amount of investment will be generated. Indeed, in both cases, the necessary savings will be generated in the same process through income variation if the transition to the new structure of production is completed.
However, Sraffa went further. He sustained that, in a world without money, even in the long run with capital variability the question of traversing to a new intertemporal equilibrium that Hayek posed would not be a problem. Outside stationary equilibrium, Sraffa argued that the natural rate of interest is a fictitious notion. In his view, Hayek misused the Wicksellian long-run natural interest rate in the construction of his cycle theory. Outside the long-run equilibrium, Sraffa continued, there are as many natural rates as commodities so the question of a supposed traverse to a new equilibrium is misplaced. There would be multiple equilibrium positions compatible with the same physical capital structure and capital goods. Therefore, once the long-run equilibrium is perturbed, the equilibrium position itself would be undetermined.
Hayek (1932b, p. 245) conceded Sraffa’s point that there would be as many natural rates as there are commodities, but he maintained his ground that all these would be equilibrium rates. “[T]here would be no single rate,” but “there might, at any moment, be as many ‘natural’ rates as there are commodities, all of which would be equilibrium rates,” in an intertemporal equilibrium view. Sraffa was criticizing the Austrian theory of capital which connects a notion of intertemporal equilibrium between consumers’ time preference – a rising waiting function rate for the ratio between goods in the present (consumers’ goods) and in the future (capital goods) – and the average length of production, which at the margin gives us the marginal productivity of capital of the roundabout period of production. In equilibrium, the marginal productivity of capital is equal to the consumers’ intertemporal preference (the waiting rate), this rate is the natural interest rate. For Hayek, divergences between money and natural interest rates implied misallocation in the real capital structure from intertemporal equilibrium – which was the cause of business cycles.
However, Wicksell’s neoclassical synthesis of the Austrian capital theory derived from Böhm-Bawerk had some restricted assumptions. Wicksell assumes (1) a stationary state (i.e. a long-run equilibrium), (2) a uniform one-year production period, and (3) the technical impossibility of lengthening or shortening the investment period. Wicksell then proceeds to suppose a rise in the natural rate caused by some exogenous factor (e.g. a rise in the rate of technological progress or population growth) while the money rate remains constant to argue that an upward cumulative process would persist until the gap between the two rates continues. As Thomas (1936b, p. 292) noted, Lindahl (1930, pp. 36–7) had already called attention that “if the investment period is technically rigid, there can be no ‘natural’ rate of return on capital which is independent of the loan rate of interest.” The notion of the natural rate in Wicksell’s cumulative process is grown from his capital theory that assumes only one variable factor of production and one product, therefore, the proportion of output to input varies directly with the period of consumers’ waiting.
As Thomas (1936b, p. 292) observed, “a lowering of the money rate brings about a redistribution of income in favour of classes whose ability and willingness to save are relatively high. On this account, therefore, there will be a rise in voluntary saving, while, at the same time, no reduction need necessarily follow a lowering of the rate of interest.” This, of course, is part of Sraffa’s argument discussed above. Thomas continues saying that, echoing Myrdal and the Swedes, “[t]he upward swing can for some time be fed out of this additional saving. Whether it will develop into an inflationary boom depends to a great extent on the state of entrepreneurs’ expectations.”
Sraffa’s criticism of the Wicksellian long-run natural rate is also a critique of Keynes’ Treatise foundations. Indeed, in the famous pivotal chapter 17 on “The Essential Properties of Money and Interest” in The General Theory (1936), Keynes abandoned his earlier notion of a long-run natural interest rate and developed his new theory of interest based on the liquidity preference drawing from Sraffa’s argument against Hayek. Since out of the long-run equilibrium position there are many and different natural rates as there are commodities and capital goods (i.e. many different spots and forward prices for all commodities and heterogeneous capital goods), the greatest of the own-rates is the one that at the margin sets the limit to the level of investment (thus, employment and income). And this rate will always be the money rate due to its low carrying costs and liquidity premium. This allowed Keynes to introduce the essential role of expectations in a radically uncertain environment on the determination of the long-run interest rate in the bonds market. There is no longer a single Wicksellian natural interest rate to conform to some kind of intertemporal equilibrium between consumers’ time preference and marginal productivity of capital. Instead, what we find is an extremely fluid expectational and conventional environment where multiple equilibrium positions can arise (see Telles, 2022).
The Swedish connection: Myrdal’s critique, equilibrium and expectations
In the second volume of his Lectures dealing with money, Wicksell ([1906] 1936) defines the natural rate as being “the rate at which the demand for new capital is exactly covered by simultaneous savings.” That is, the natural rate is the rate at which the ex ante investment (demand for new capital) is exactly covered by simultaneous ex ante savings. Nevertheless, Wicksell did not work out the implications of his new definition (e.g. which necessarily involves anticipations of future prices) to divergences of the natural and money rates. For Wicksell, three conditions to monetary equilibrium are necessary. Namely, (1) the market rate of interest should be equal to the natural rate defined as the technical marginal productivity of the average period of production; (2) the loans fund market should operate as if funds were lent in natura, i.e. “as if no use were made of money, and all lending were effected in the form of real capital goods; ” and (3) the price level should be constant.
Myrdal’s “The Equilibrium Concept as an Instrument of Monetary Analysis” ([1932] 1933) is a devoted, detailed, and immanent critique of Wicksell’s analysis, in particular, his three conditions to monetary equilibrium. In his 1934 review, Hicks (1934, pp. 480–1) classified Myrdal’s little book as “to me quite the most exciting work on monetary theory which has appeared since Mr. Keynes’ Treatise and Professor Hayek’s Prices and Production.” Independent of Myrdal’s conclusions, Hicks argues that it “marks a very definite step in advance. It is even one of those books one feels loath to criticise, for fear that one’s criticisms may perhaps deter some readers from examining the book itself - and that would be a disaster.”
It was natural for Myrdal and others from Sweden to address and develop their theories starting from Wicksell’s framework. Indeed, in the 1933 German version, Myrdal ([1933] 1939, pp. 8–9) complains that in England Wicksell’s framework was highly neglected and misunderstood. He mentions Robertson’s Banking Policy and the Price Level (1926) as an important and “significant little book.” However, Robertson, “too, obviously lacks a thorough knowledge of Wicksell and his pupils, and he has therefore been forced unnecessary to think for himself.” Moreover, Myrdal (ibid.) continues, “J. M. Keynes’ new, brilliant, though not always clear, work A Treatise on Money, is completely permeated by Wicksell’s influence. Nevertheless Keynes’ work, too, suffers somewhat from the attractive Anglo-Saxon kind of unnecessary originality, which has its roots in certain systematic gaps in the knowledge of the German language on the part of the majority of English economists.”
Of course, this was emphasized by Hayek in his position against Keynes. Until 1933, as Hicks (1934, p. 479) pointed out, only two streams of thought originating from Wicksell’s Geldzins were presented and “generally familiar to the English reader. There is the school of Professor Mises and Professor Hayek; there is the school of Mr. Keynes. It is perhaps fortunate that these do not in reality exhaust the list.” This is relevant because it showed that a Wicksellian-inspired theory could be very different from the business cycle theory propagated by Mises and Hayek.
After restating Wicksell’s conditions to monetary equilibrium, Myrdal ([1933] 1939) submits each of the three conditions to several criticisms. First, following Davidson’s argument, he argues that the equality of the money and natural rates and money neutrality does not necessarily imply the price level being unchanged, i.e. conditions (1) and (2) do not necessarily imply condition (3). Second, following Lindahl’s steps, Myrdal states that the seemingly objective and technical quality of the equilibrium natural rate is derived exclusively from the simplicity and irrealism of the assumptions that constituted Wicksell’s theory of capital, namely, one original factor of production and one finished good. Indeed, as Hicks (1934, p. 481) notes, this is “[a]n argument made familiar to us in England by Mr. Sraffa” in his review of Hayek’s Prices and Production.
Once the unrealistic hypothesis of the Austrian theory of capital is dropped, e.g. allowing for a multiplicity of finished products, Myrdal argues that the natural rate of capital goods can only be understood as an expected rate of yield or profit, in monetary terms. The natural rate can only be interpreted as the marginal value product, the result of the marginal physical product of the factor multiplied by the expected average revenue or price of the product. This introduces many new elements to monetary equilibrium, especially psychological and expectational factors regarding future prices. In addition, it means the abandonment of the rigid notion of a capital structure defined by a single natural rate of interest. As Hicks (1934, p. 481) writes, “this interpretation not only makes the natural rate dependent on psychological elements (the expected course of prices), but it also raises serious difficulties about ‘maintaining capital intact,’’’ an expression used by Hayek to design the real capital allocation in a scenario of money neutrality.
In face of these modifications, Myrdal argues that the Wicksellian first condition of monetary equilibrium translates to the equality between the value (the new, expected “natural” rate) and cost (the money rate) of production of new capital goods. This value-cost equation is dependent in both terms on the market rate of interest. Concerning the second condition, Myrdal shows that it can only be interpreted as the equality between savings and investment. Moreover, since the natural rate is the rate at which the ex ante facto demand for new capital is exactly covered by simultaneous savings, this equality necessarily implies the equality in the value-cost equation of the first condition and vice versa. Therefore, Myrdal demonstrates that divergences between savings and investment (i.e. a divergence between the value and cost of capital goods) are always fulfilled by profit and losses by the entrepreneurs.
Savings and investment can be different only ex ante when all the different expectations of entrepreneurs and their action plans are simultaneously aggregated. These expectations encompass, for instance, expected income, i.e. income looked forward and anticipated by entrepreneurs and workers. In the workers’ case, these expected incomes can in general be counted since they are submitted to nominal contractual arrangements. In contrast, the entrepreneurs bear the risk and uncertainty of contracting labor and inputs for pay when there is nothing that guarantees that their expected revenue product value will be concretized. If their revenue is less than expected, they realize a loss – and, in the aggregate, savings proved to be greater than investment. However, quantities that are registered in the bookkeeping records are quantities seen ex post facto. In this sense, savings and investment are always equal by definition and cannot be distinguishable due (in Myrdal’s – and also in Keynes’ Treatise – analysis) to the equilibrating role of variations on prices (profit and losses). In fact, the celebrated Stockholm terms of ex ante and ex post in Myrdal’s analysis were only introduced by the German translator in 1933. This is a rare case of gains of clarity and understanding in translation.
Drawing from his reinterpretation of Wicksell’s natural rate as a monetary yield or profit rate involving expectational and psychological elements, Myrdal concludes that any price level could be compatible with monetary equilibrium . There is an indeterminateness of monetary equilibrium in relation to the price level – even if the amplitude of price-level movements is limited by sticky nominal prices such as long-term contracts, wage rates, etc. This led Myrdal to abandon not only Wicksell’s price-level stabilization but the inverted relation between the price level and productivity gains in productivity norms to the price level defended by Davidson, Lindahl, Hayek, and others. Therefore, Wicksell’s third condition of monetary equilibrium regarding the price-level stability is denied.
For Myrdal, the only concept which is not touched on in his critical remarks is the Wicksellian cumulative process, implied in monetary disequilibrium. However, as Hicks (1934, p. 483) writes in his review, “at the stage he has reached, has he the right to refer back to Wicksell any longer? Just what is the precise difference between such a cumulative process and the sort of inflation which he would consider, theoretically at least, as consistent with monetary equilibrium?” Indeed, Hicks (ibid.) asks, “what is the point of Professor’s Myrdal monetary equilibrium?” After this, Hicks notes that there is “nothing which altogether convinces one that the [monetary equilibrium] concept, in the form in which he has left it, remains an essential part of monetary theory.”
Myrdal’s critique is an imminent criticism of the equilibrium concept as an instrument of monetary analysis. Myrdal emphasizes the fundamental importance of expectations (i.e. anticipations) to the definition of the natural rate of interest. In Myrdal’s hands, Wicksell probably would not recognize the natural rate as being his offspring. The internalization of expectations to the natural rate changed the whole character of a supposed unique, long-run equilibrium stable rate. Any price-level dynamics could be compatible with monetary equilibrium.
After reading Myrdal, Kaldor (1934b) used the ex ante and ex post analysis in his contribution to a debate that occurred in the pages of The Economist concerning the objective of monetary policy, namely, “Stable prices or neutral money.” In a growing economy with increasing productivity, Hayek argued that aiming for general price stability was not sufficient to guarantee the equality between money and natural interest rates. In this case, the average price stability target implies a situation out of monetary equilibrium in the monetary market (the money rate is lower than the natural rate) and in the real-goods market (investment is greater than voluntary savings). Hayek ([1929] 1933a) had argued that this was precisely the case experienced by the United States in the 1920s, where the average price-level stability in a productivity-increasing economy obscured the expansionist monetary policy practiced by the Federal Reserve System in that decade. A monetary expansion that culminated in the 1929 bust and the Great Depression.
Hayek (1931b, p. 126) was opposed to the aims of monetary policy guided by the “widespread illusion that we only have to stabilise the value of money in order to eliminate all monetary influences in production.” Hayek's (1934) policy recommendation was for monetary policy to follow a productivity rule, in which the price level should vary inversely to the productivity gains in a growing economy (e.g. see Selgin, 1999). In Hayek's (1931b, p. 130) framework, neutral money is not necessarily equal to stable prices. Money is neutral if the economic decisions and allocations (in particular, intertemporal decisions and the capital structure) are “as if they were only influenced only by the real factors.”
On the other hand, Harrod (1934) argued that the equality of savings and investment is tautological and always true. In particular, this tautology is also valid in the case of a stable price level. Indeed, Harrod believed that the equality between savings and investment is compatible with any behavior of the price level. Therefore, it is also true in the case of money neutrality and stable price level. Kaldor (1934b) entered the debate in a middle-ground position between Hayek and Harrod. Using Myrdal’s ex ante and ex post analysis, Kaldor (1934b) argued that the compatibility between stable prices and money neutrality depends on the correct foresight by economic agents in relation to the price-level dynamic path.
In this sense, both a falling and a stable price level can preserve money neutrality if this scenario is correctly predicted ex ante. There is a multiplicity of equilibrium positions that combine different price levels with perfect foresight solutions. In this scenario, any policy can be practiced without falling out of the neutrality of money if the banking policy and prices are correctly predicted. Since the natural rate of interest embodies expectations, the only way to have a monetary disequilibrium is if a divergence occurs between ex ante expectations and ex post facts.
Myrdal’s monetary equilibrium was also, in part, a response to the use by Mises and Hayek of the Wicksellian cumulative process in a business cycle theory – beyond the short-period price-level determination. Indeed, Myrdal ([1933] 1939, p. 32) maintained that the main purpose of his work was to “include anticipations in the monetary system.” Something that the recent contributions had completely failed to do – in particular, the theses advanced by Keynes and Hayek. In both Keynes’ Treatise and Hayek’s Prices and Production, in his opinion, there was simply “no place for the uncertainty factor or for anticipations” in their theoretical construction. The Swedes showed that a Wicksell-inspired theoretical framework could be very different from the one propagated by the Austrians. Thus, the policy recommendations could also be radically different.
The Welsh economist Brinley Thomas introduced and spread the word of the Swedes at the LSE and in England in general. Thomas completed his Ph.D. at LSE in 1931, being appointed as Assistant Lecturer in the same year. In 1932, he was awarded an Acland Travelling Scholarship to study in Germany (for nine months) and Sweden (for six months) in the period spanning 1932–4. He would return to Sweden many times thereafter. In this period, Thomas was acquainted with the Swedish developments in monetary theory and practice, mastering the advances made by Wicksell, Davidson (who had played a significant part in Swedish economic policy), Gustav Cassel, Lindahl, Myrdal, and others. Thomas (1936a) propagated Myrdal’s ideas on monetary equilibrium in his lectures at LSE, using the ex ante and ex post terminology and soon converted Hicks, Kaldor, and George L. S. Shackle .
The London reaction: Hayek, Hicks and Kaldor
Written in the spring of 1932, Myrdal’s Monetary Equilibrium ([1933] 1939, p. 32) was a direct attack on the perfect foresight assumption. “The main purpose of the subsequent analysis,” Myrdal writes, “is to include anticipations in the monetary system. A criticism of Keynes and Hayek would have to begin by pointing out the fact that in their theoretical systems there is no place for the uncertainty factor and for anticipations.” In Keynes’ Treatise, this is explicit in his Fundamental Equations equilibrium, in particular, in his notion absorbed from John Bates Clark of windfall profits and unexpected losses.
In Hayek’s theory, although Myrdal (p. 32) concedes that it has “the merit of a more intensive analysis of the roundabout process of production and consequently of the questions of profitability,” the analysis “is stationary or quasi-stationary only.” Indeed, in 1931, Hayek compared two processes of capital accumulation. One is a successful traverse between two stationary states financed by voluntary savings, the other is a failed traverse, initiated by a false intertemporal relative price and drastically interrupted in the process of plans revision. In Myrdal’s (p. 33) opinion, Hayek developed an “abstract case where among other things anticipations are excluded by assumptions which are fundamental to the whole analysis.”
After its publication, Robbins asked Hicks to write a mathematical appendix to Hayek’s Prices and Production. Hicks struggled with this effort since at the core of its difficulties was the appropriate equilibrium concept to represent a disequilibrium development within equilibrium theory. Indeed, as Hayek stressed in many places, his cycle theory is only comprehensible within the notion of intertemporal equilibrium formulated in his 1928 article. This essay is the starting point to a dynamic equilibrium analysis, where the equilibrium price vector is the one in which demand and supply of different commodities at different dates are equal. Thus, to reach equilibrium, this equilibrium price vector must be anticipated by economic actors, resulting in the perfect foresight condition intrinsically connected with intertemporal equilibrium.
In this vein, in June 1933, Hicks published in Zeitschrift fur Nationalokonomie his first work dealing with monetary theory. It was translated into English as “Equilibrium and the Trade Cycle” and published by Robert Clower only in 1980. In this essay, Hicks (1933) tried to generalize an equilibrium notion compatible with money and its relation with the business cycle, beyond stationary equilibrium. Following Frank Knight’s (1921) argument, Hicks concludes that a positive demand for money only is justifiable under imperfect foresight, i.e. under intertemporal disequilibrium. Thus, as it is well known in the case of the Walrasian general equilibrium model, monetary theory stricto sensu is incompatible with equilibrium theory.
Hicks proposed to incorporate money in the sphere of the theory of value instead of the theory of capital. Under Swedish influence, in particular Myrdal, Hicks (1933, p. 143) substituted the notion of intertemporal equilibrium for his notion of temporary short-run equilibrium with given expectations and constant equipment in his 1935 article on “Wages and Interest” (1935b), en route to his “Suggestion to Simplifying Monetary Theory” (1935a). In this temporary sequential equilibrium, expectations are regarded as exogenous, thus the equilibrium in a determined Hicksian week did not imply that individuals’ plans are compatible in the future (i.e. it did not imply intertemporal equilibrium with perfect foresight). In this manner, Hicks adapted the Walrasian equilibrium notion to the short period including nonstationary conditions and the existence of money (as a reserve of value).
In response to Myrdal’s critique, Hayek gave a lecture on “Price Expectations, Monetary Disturbances and Malinvestments” ([1933] 1935) delivered in December 1933 in the Sozialökonomisk Samfund in Copenhagen. The paper was first published in 1935 in German in Nationalokonomisk Tidsskrift, reprinted in French also in 1935 but only translated into English and published in his collection of essays Prices, Interest, and Investment (1939) in 1939. At the end of his lecture, Hayek ([1933] 1939, p. 155) acknowledged that “I cannot quite agree with Professor Myrdal when he alleges that in my theory there is no room for the role played by expectations - to show how important a place they do play was in fact one of the purposes of this lecture.”
It is in his Copenhagen lecture that Hayek first expresses his discontent with the theoretical apparatus of equilibrium analysis to deal with dynamic, expectational, and imperfect foresight situations, problems involved in business cycle theory. In addition, as Nicolai Foss (1995) called attention, it is in this lecture that Hayek first conceptualized the epistemic distinction between individual objective equilibrium and social intersubjective equilibrium. Moreover, he also articulates for the first time the notion of subjectivity of knowledge and expectations. This would be a crucial building block in Hayek’s reformulation of equilibrium analysis in his pivotal essay on “Economics and Knowledge” (1937). As Hayek (1983, p. 425–6) explained in an interview,
It was, as we just discussed, my essays on socialism, the use in my trade-cycle theory of the prices as guides to production, the current discussion of anticipation, particularly in the discussion with the Swedes on that subject, to some extent perhaps Knight’s Risk, Uncertainty and Profit, which contains certain suggestions in that direction -- all that came together. And it was with a feeling of a sudden illumination, sudden enlightenment, that I wrote that lecture in a certain excitement. I was aware that I was putting down things which were fairly well known in a new form, and perhaps it was the most exciting moment in my career when I saw it in print.
The Copenhagen lecture anticipated many of the discussions that Hayek posed in his 1937 critique of the perfect knowledge assumption of standard equilibrium theory. In “Economics and Knowledge,” Hayek (1937, p. 33) begins by reminding the reader of different attempts made “to push theoretical investigation beyond the limits of traditional equilibrium analysis,” whose “answer has soon proved to turn on one question which, if not identical with mine is at least part of it, namely the question of foresight.”
Hayek mentions the discussions concerning foresight in the theory of risk, especially starting with Irving Fisher’s Appreciation and Interest (1896) and developing in Knight’s (1921) profound work. Moreover, such assumptions are of fundamental importance in the “theory of imperfect competition, the questions of duopoly and oligopoly.” This was emphasized by Morgenstern's (1935) famous essay claiming that any perfect foresight process was inconsistent with convergence to equilibrium. Morgenstern illustrates his argument, in this case, a strategic interaction between two agents, with his Holmes-Moriarty paradox.
Hayek (1937, p. 41) refers to this work in his article. More importantly for our purposes, however, is that “it has become more and more obvious that in the treatment of the more ‘dynamic’ questions of money and industrial fluctuations the assumptions to be made about foresight and ‘anticipations’ play an equally central role, and that in particular the concepts which were taken over into these fields from pure equilibrium analysis, like those of an equilibrium rate of interest, could be properly defined only in terms of assumptions concerning foresight. The situation seems here to be that before we can explain why people commit mistakes, we must first explain why they should ever be right” (p. 34).
Hayek reformulates equilibrium analysis in terms of compatibility of action plans conducted by different agents with different subjective, dispersed, and tacit knowledge of the same objective reality. Since individual knowledge is “all facts given to the person in question, the things as they are known to (or believed by) him to exist, and not in any sense objective facts” (p. 36), each individual must take into his own action plan the expectations over the other individuals’ plans as an objective fact. In this sense, social equilibrium means that each agent has correctly predicted in a special sense all the action plans carried over by the rest of society and the external reality. Hayek ([1937] 1948, p. 42) concludes, in consequence, that “[c]orrect foresight is then not, as it has sometimes been understood, a precondition which must exist in order that equilibrium may be arrived at. It is rather the defining characteristic of a state of equilibrium.”
Hayek mentions his Copenhagen lecture in “Economics and Knowledge,” referring to it as a concrete example of the meaning of a state of equilibrium defined as the coordination of plans and how it can be disturbed. The intertemporal coordination problem of savings and investment is, in this sense, “the proportion (in terms of relative cost) in which entrepreneurs provide producers’ goods and consumers’ goods for a particular date, and the proportion in which consumers in general will at this date distribute their resources between producers’ goods and consumers’ goods” (p. 42). As he put it ([1933] 1939, pp. 153–4), the consistency between these two sets of independent decisions made by different agents implies the savings-investment equilibrium and “the idea of an equilibrium rate of interest.” Assuming a unitary elasticity of expectations, a money rate below the natural rate, Hayek argues, creates unfounded expectations in entrepreneurs concerning the intertemporal consumption behaviors of the society.
Until 1933, the subjective element was not present in Hayek’s writings, although the notion of division of knowledge had been incorporated. In his Copenhagen lecture, Hayek ([1933] 1939, p. 139) contrasts individual equilibrium in the realm of the pure logic of choice – something which we can define as “a necessary equilibrium between the decisions which a person will make at a given moment” due to subjective consistency between means and ends – and societal equilibrium, a much more vague notion since individuals’ “successive responses to their fellow-beings necessarily take place in time.”
In 1933, Kaldor was an active participant in the notable weekly seminar organized by Robbins and Hayek at LSE. It was at the seminar that Kaldor read his paper on “A Classificatory Note on the Determinateness of Equilibrium” (1934). In this important essay, Kaldor (1934, p. 125) describes the conditions in which an equilibrium position can be classified as determinate or indeterminate (“according as the final position is independent of the route followed or not”), unique or multiple (“according as there is one, or more than one, system of equilibrium prices, corresponding to a given set of data”), and definite or indefinite (“according as the actual situation tends to approximate a position of equilibrium or not”). Kaldor was searching for a more rigorous definition of the assumptions utilized in which was possible to determine the existence, stability, and uniqueness of the equilibrium position from a system of data (independent variables).
Kaldor (p. 123) makes six general assumptions under which economic theorists had found it necessary to define an equilibrium position taking into consideration the time dimension. (1) A closed economy (either an isolated individual or a closed self-sufficient community); (2) perfect knowledge, i.e. “all the relevant prices quoted in all markets are known to all individuals; ” (3) perfect competition, i.e. “no individual can influence any of the prices which he is confronted; ” (4) direct exchange, with all prices expressed in one good working as the numéraire; (5) all independent variables remain constant through time; (6) no price -changes are anticipated, i.e. the Hicksian elasticity of expectations is unitary.
In relation to the time-dimension assumptions (5) and (6), Kaldor (p. 123) notes that “[t]he only alternative assumption consistent with the degree of abstractness necessary for the generalisations of pure theory would be the assumption of complete foresight: that everybody foresees correctly the future course of prices.” Thus, referring to Hicks’ 1933 essay on “Equilibrium and the Trade Cycle,” Kaldor argues that the complete foresight assumption could be more conveniently adopted as dynamic analysis.
According to Kaldor (1934, pp. 124–5), in the case of determinateness, to secure equilibrium, it is necessary that “(1) an equilibrium system of prices will be established immediately, or (2) the set of prices actually established leaves the conditions of equilibrium unaffected (in which case the final position will be independent of the route followed).” Similar to Hayek (1937), Kaldor distinguishes requirements for equilibrium in the case of the isolated individual and a closed community. In the first, Robinson Crusoe must possess “full experience” or full knowledge of his tastes, preferences and the external world. The word experience is used here merely to relate to Crusoe’s knowledge. “It excludes any accumulation of knowledge which represents a change in the technical terms at which he can obtain various things.”
In a community, the necessary conditions to equilibrium are more rigorous. We must assume not only that all individuals have full knowledge regarding their own tastes, abilities, and external experience, but that “all exchange transactions are undertaken at the same system of prices.” Kaldor mentions the Deus ex machina devices such as Walras’s tâtonnement (excluding ex hypothesis trading at false, nonequilibrium prices) and Francis Y. Edgeworth’s “principle of re-contract” – where provisional contracts operate until no recontracts can be made with advantage to the recontracting parties. Both analytical methods are devices to discover the true equilibrium prices before individuals undertake their exchanges. In this sense, equilibrium will always be determinate if it is immediately reached. Thus, Kaldor (p. 127) concludes that one central problem in equilibrium theory is that “[t]he formation of prices must precede the process of exchange and not be the result of it.”
Kaldor then discusses the implications of the independence of the equilibrium position and the actual path followed to this position for equilibrium to be determinate. At the individual level, Crusoe’s system of data in one period must not be affected by his actions in previous periods. It must be assumed, therefore, that there is no – or constant – carryover and that his effective preferences are unaffected between periods. In contrast, Kaldor (p. 128) argues that the effects of learning and experience through time are the elements “which the ‘causal-genetic-approach’ of the Austrian School ha[ve] been mainly concerned.” This approach was defined by Hans Mayer (1932) in which he contrasted the Austrian approach with the Lausanne general equilibrium functional analysis. Mayer (1932) was also referred to in Hayek’s 1937 article,
Kaldor summarizes the causal-genetic notion writing that its aim is “to show how, in a given situation, a position of equilibrium is reached - the problem of how prices come into being rather than what system of prices will secure equilibrium. It is, however, only under our present very rigid assumptions that a causal-genetic theory can reach the same conclusions concerning the nature of equilibrium as are evolved, by using a different method, by the ‘functional’ theories. In the absence of these conditions it is only by means of a ‘theory of the path’ (a theory showing what determines the actual path followed) that a causal-genetic approach can arrive at generalisations concerning the nature of equilibrium - and such a theory has not hitherto been forthcoming, although the necessity for it has frequently been emphasised by writers of the Austrian School.” Indeed, Hayek’s equilibrium as a coordination problem is devoted to the expression and reformulation of this problem.
It is curious to note that, discussing the additional assumption of constant marginal utility of money introduced by Marshall in the case of a community case, Kaldor writes that “[i]f we assume that individuals accumulate experience relating not only to their own system of data but also to the ‘tastes and obstacles’ of others, they will gradually acquire an ability to judge the ‘equilibrium prices’ of a given market.” Nevertheless, Kaldor is anxious to write that it can be argued “that this alternative assumption - that individuals will be able to judge equilibrium prices before any transactions are made - is inconsistent with one of our initial assumptions since it means that they are influenced by expected future prices rather than by prices already ruling. It all depends on how rigidly this assumption is interpreted, and it can easily be shown that under our present assumption of a ‘constant carry-over’ a very rigid interpretation would lead, by a different route, to the same result.” A constant carryover can be translated in the consistency of ex ante expectations and ex post results, i.e. correct foresight.
In the case of definiteness, not only may equilibrium be “indeterminate” but “if the various forces do not react instantaneously on the incentive of price changes, the economic system need not tend towards a position of equilibrium at all. The successive alterations of prices will then merely represent a constant or an expanding range of fluctuations” (p. 125). In Kaldor’s view, the question if equilibrium is definite or indefinite (i.e. is stable or not) depends on the velocities of adjustment of the factors in the analysis, i.e. the time required for a full quantity adjustment given a price change. For instance, consider an adjustment completely discontinuous where the full quantity adjustment occurs only after a certain period. In this scenario, the equilibrium stability (its definiteness) will depend on the relative elasticities of demand and supply.
It is here that Kaldor (1934, pp. 133–4) pronounces the novel description of the famous ideas advanced by Henry Schultz and Umberto Ricci, coining for the first time the expression “cobweb theorem,” regarding the temporal lag between supply and demand sequential decisions to explain the oscillatory behavior of prices. He concludes that, in this case, “[i]f the velocities of adjustment are greater on the demand side than on the supply side, movements will lead towards an equilibrium, i.e. equilibrium will be ‘definite’” (p. 135). Kaldor gives two agricultural examples, rubber and corn, since in agricultural contexts, there is a lag between planting and harvesting.
In the case of multiple equilibria, Kaldor (pp. 131–2) analyzes the intrinsic connection between stages of increasing returns to single industries (i.e. stages of diminishing technical marginal substitution rates) and the indetermination of equilibrium. In these cases, “the final situation will be ‘indeterminate’ in the sense that it will depend upon the direction which happens to be adopted initially; though equilibrium may still be determinate on our definition of the term, since all the possible equilibrium positions may still be deduced from the data of the initial situation.” Of course, the argument reflects the notion of path dependence in which each action predetermines the possible realms in the future. We should note the intimate relation of Young’s (1928) influential paper on increasing returns here, an idea that will be very dear to Kaldor.
The age of capital
The Age of Capital: 1848–75 ([1975] 2001) is the title of the second book of the trilogy on “the long nineteenth century” by the well-known Marxist historian Eric Hobsbawm. A similar age could be periodized in relation to the age of the theory of capital in “the long twentieth century” in economics, dating from the marginal revolution in 1871. We could argue that this age should be dated from 1871 to 1941, the year that Hayek finally published his The Pure Theory of Capital (1941). In the 1935–6 academic year, Kaldor traveled to the United States on a Rockefeller Research Fellowship, visiting Columbia, Harvard, Chicago and the University of California. He met numerous leading economists, attending the 1935 and 1936 meetings of the Econometric Society. As a product of his fellowship, Kaldor was commissioned to write the 1937 Annual Survey of Economic Theory, published in the Society’s Econometrica.
In the survey, “The Recent Controversy on the Theory of Capital” (1937), Kaldor reviewed Frank Knight's (1932, 1936a, b) criticism of the “traditional theory” of capital, i.e. that a given index or measurement of capital intensity is positively correlated with roundaboutness of production and inversely correlated with interest rates. This “traditional theory” is nothing more than the Wicksellian neoclassical synthesis of Austrian theory of capital. In Kaldor's (1937a, p. 231–2) view, “the material content of the Austrian theory of capital could be equally well expressed by saying that capital accumulation leads to a reduction in the marginal productivity of the services of those factors whose quantity can be augmented by […] accumulation, as by saying that it increases the investment period of the services of those resources whose quantity remains constant.”
With his survey, Kaldor entered into the theory of capital controversy that involved Hayek and Knight in the years before (e.g. see Cohen, 2003). Kaldor adopted the Austrian tradition in the sense that a theory of capital should be characterized by the time dimension of the production period, contrary to Knight’s view of a perpetual fund of goods. Knight was following John Bates Clark’s concept of capital as a homogeneous social value form, an abstract always existing fund (like land) called jelly. Nevertheless, Kaldor (1937a, p. 213) dropped the average period of production (or investment period) as an index of capital intensity in favor of his favorite alternative, the ratio of initial costs to annual (maintenance) costs.
In their controversy, both Kaldor (1938a) and Knight (1938) agreed on the intrinsic problems that arise in general models with heterogeneous inputs and/or outputs so that the results of the simple one homogeneous commodity model – namely, a decreasing monotonic function between capital intensity measured by an index of capital quantity and the interest rate – could not be sustained. Indeed, the existence of a well-behaved index measure for capital quantity in an economy in steady-state equilibrium would be revived in the Cambridge controversy on capital in the 1950s and 1960s (e.g. see Harcourt, 1972; Cohen & Harcourt, 2003). The central problem posed by the Cambridge capital controversy is the circularity of the equilibrium notion involved. The quantum of capital is determined by the marginal productivity principle and, at the same time, the marginal productivity of capital is determined by the quantum of capital. In 1936, Knight (1936a, pp. 434–5) expressed the problem arguing that the
[d]ifficulty and complexity arise because the relation between capital and interest take different forms and especially because of the danger of circular reasoning. On the one hand, capital is usually and properly defined as ‘income’ capitalized at some ‘rate of return’. But the interest rate is usually thought of as the ratio between the net annual yield and a quantity of capital. On the face of this is a vicious circle; interest cannot be a rate of return; i.e. a ratio to a principal, unless the terms of the ratio are definable independently of the rate return itself; yet in the same units of both numerator and denominator.
Hayek (1941, p. 143) was also conscious of these problems but argued that as a process dynamic story, as a causal-genetic notion, the average period of production and the Austrian theory of capital were relevant. In his words, “[i]n order to arrive at an aggregate figure of the amount of waiting involved in each process we have to assign different weights to the different units of input, and these weights must necessarily be expressed in terms of value. But the relative values of the different kinds of input will inevitably depend on the rate of interest, so that such an aggregate cannot be regarded as something that is independent of, or as a datum determining the rate of interest.” Hayek (1994, p. 96) wrote later in life that he “rather hoped that what I’d done in capital theory would be continued by others. […] [Completing it myself] would have meant working for a result which I already knew, but I had to prove .”
In his controversy with Keynes, Hayek criticized Keynes’ failure in ignoring the Wicksellian roots in capital theory. Hayek soon sensed that the main difference between him and Keynes was grounded in the capital theoretical micro-foundations. Hayek was heavily criticized by Sraffa, Myrdal and others for incorporating in his business cycle theory the Austrian theory of capital in the simple Böhm-Bawerkian model with the average period of production. In Hayek’s (1983, p. 46) view, “an elaboration of the still inadequately developed theory of capital was a prerequisite for a thorough disposal of Keynes’ argument.” Therefore, he went up on a big book project in which he planned a new development on capital theory drawing from and systematizing the roots of Böhm-Bawerk, Wicksell, and Mises in Volume I. Volume II was planned to introduce these new capital theoretical foundations into monetary theory and business cycle.
In the writing process, Hayek (1941, p. vi) perceived that the very simplifications that his predecessors made had “such far-reaching consequences as to make their conceptual tools almost useless in the analysis of more complicated situations.” The main deficiency, in his view, was the attempt to introduce the temporal dimension in the capital structure, which resumed in the average period of production. The task showed itself much more painfully difficult than initially foreseen and Hayek did not complete his initial project, only publishing a part of what would be the first part in The Pure Theory of Capital. In the end, Hayek also abandoned the notion of the average period of production in 1941.
In The Pure Theory of Capital (1941, pp. 23–4), Hayek adopts his reformulation of equilibrium analysis in terms of compatibility of plans. The equilibrium is understood as “a state of complete compatibility of ex ante plans,” where in consequence “the ex post situation is identical with the ex ante.” He states, mentioning Myrdal’s Monetary Equilibrium (1939, p. 46), that this causal analysis “is not fundamentally different from the comparison between the prospective and retrospective (or ex ante and ex post) views ·of a particular situation, as used by the younger Swedish economists since the ex post situation can be derived from the ex ante only by reference to the degree of correspondence or non-correspondence between individual intentions.”
In the Kaldor and Knight controversy, as Avi Cohen (2006, p. 156) documented, the debate focused “on three questions: Is capital a distinct factor of production? Is capital quantifiable in a theoretically consistent manner? Do we need process stories around convergence to, or changes in, equilibrium interest rates? To all questions, Kaldor essentially answers ‘yes’ to Knight’s ‘no.’” Kaldor assumed (again) a middle-ground position between Knight and Hayek, but he essentially defended the Austrian capital theory as the only theory known capable of systematizing the causal-genetic relationships and the process dynamic story between the quantity of capital and interest rates. As a positive theory of capital, the Austrian theory was “the only one yet produced.”
In the Kaldor and Knight controversy, the long historical points in dispute in the capital theory wars since the controversy between Clark and Böhm-Bawerk in the early twentieth century moved from the adequacy of periods of production to the production function form; and from roundaboutness as a proper index to capital intensity to diminishing returns. This controversy was pivotal to Kaldor’s conversion concerning the theoretical shortcomings of a pure theory of capital and its interrelations with equilibrium. As Kaldor (1937) wrote to Knight,
[T]he Austrian theory was a grand attempt at a ‘positive’ theory of capital, in fact the only one yet produced. It failed, and the theory must be rejected, for it could not survive the criticisms leveled upon it […]. On the other hand, I do believe that the disappearance of Böhm-Bawerk and his school leaves behind a vacuum in economic theory as we know it and I doubt if it will be filled. To me its failure points to the necessity for the abandonment of the whole system of analysis (of the static equilibrium type) of which the Austrian theory was a part.
Growth, capital accumulation, and distribution
In 1938, Kaldor published “Stability and Full Employment” (1938b) on the question of stability of full employment vis-à-vis the non-variability of the structure of production. He emphasized the crucial aspects of complementarity and specificity of capital goods that composed the structure of the means of production. Indeed, this was precisely the point that Hayek had argued in relation to industrial fluctuations but in terms of the stages of production and capital organicity. As it is well known, in a Leontief production function (which exhibits perfect production factors complementarity), the transition, or the traverse to, different equilibrium states are far from unproblematic and could threaten the possibility of a full employment long-run stability position.
This is precisely the case worked in Harrod's (1939) dynamic instability analysis and posed by the second Harrodian (equilibrium instability) problem. Assuming a complementary production structure, that can be expressed in a Leontief production function, Harrod showed that given the capital–output ratio to be constant there is a unique warranted capital accumulation rate that guarantees the equality between aggregate demand and aggregate supply along the equilibrium dynamic path. However, to secure the full employment position along time with increasing population and technical progress, the warranted growth rate (gW) has to be equal to the natural rate of growth (gN) defined as the rate of growth in which output is constrained at full employment given the population and technological growth rate. Thus, the balanced growth rate with full employment of the labor force and technological progress must satisfy the following condition, gN=sv=gW (1), where s is the marginal propensity to save and v is the capital–output ratio.
However, although possible, there is no economic adjustment mechanism that guarantees that the parameters in the equilibrium condition described in Equation (1) will take the necessary values to match the warranted and natural growth rates. Indeed, as the variables s,v, and gN are determined by different exogenous factors, it is highly improbable that the equilibrium conditions will ever be attended to. Moreover, even if a full employment situation is achieved, this position is unstable since any shock or change in the parameters will launch the economy on a dynamic instability path through time. Harrod conjectured an inherent instability of gW, so even if gN<gW full employment will be achieved but it could not be sustained for a long time. In fact, in this case, if gW is stable, the economy would be in an explosive growth trajectory . The reconciliation of the warranted rate of capital accumulation with the natural rate of growth became the basic dynamic economic problem.
There are only two ways to restore the stability of the equilibrium dynamic path. First, the capital–output ratio (the capital intensity) can be the adjustment variable between differences in the warranted and natural growth rates. This solution was exactly the kind of approach that the Austrian theory of capital predicted and that Hayek had worked on in his business cycle theory. In this theory, divergences between the natural and monetary interest rates distort the intertemporal equilibrium between the capital–output ratios defined as the length of production of the average production period, thus the traverse to the new equilibrium would be aborted because of the capital structure maladjustments due to the new required forced savings. Indeed, it was the endogenization of the capital–output ratio via a Cobb-Douglas production function – with the elasticity of substitution equal to one and diminishing returns – the grand neoclassical solution made by the Solow-Swan model to the Harrodian instability dilemma.
Nevertheless, Kaldor used the same argument of complementarity and specificity of capital goods in the structure of production to state that for these same reasons the capital intensity as measured by the capital-output relation is inelastic as a medium and long-run adjustment mechanism between gW and gN. Anthony Thirlwall (1991, p. 24) writes that “[t]he paper that gave Kaldor the most intellectual satisfaction, however, and his most notable, but neglected, contribution to the immediate Keynesian revolution, was ‘Speculation and Economic Stability’ (including ‘Keynes’s Theory of the Own-Rates of Interest’ originally written as an appendix, but published much later) .” In a private correspondence with Kaldor, Hicks described this article as the “culmination of the Keynesian revolution in theory. You ought to have had more honour for it” (quoted in Targetti and Thirlwall, 1989, p. 4).
In “Speculation and Economic Stability” (1939b), Kaldor argued that the elasticity of demand for holding stocks is distinct from the elasticities of flows of the ultimate buyers and sellers. Due to speculation forces, prices are stabilized; and the greater the stability of prices, the greater the instability of quantities. According to Kaldor, the most important asset in an economy that speculation forces tend to stabilize is the long-term bonds market canalized by savings. With the long-term bonds’ prices stabilized, the adjustment mechanism between savings and investment must be variations in income, securing the conditions for the validity of the income multiplier and Keynes’ principle of effective demand. Thus, Keynes’ multiplier theory is a result of the stabilizing influences of speculative expectations in stocks . As Kaldor (1980, p. xvii) writes, his intention in the paper was
to generalise Keynes’ theory of the multiplier by demonstrating that it results from the stabilising influence of speculative expectations on prices which applies in all cases in which the elasticity of speculative stocks is high … [and] to show that Keynes’ theory of interest contains two separate propositions. The first regards interest as the price to be paid for parting with liquidity, and it arises on account of the uncertainty of the future prices of non-liquid assets. The second concerns the dependence of the current rate of interest on the interest rates expected in the future. While the first proposition provides an explanation of why long-dated bonds should normally command a higher yield than short-term paper, it is the second which explains why the traditional theory of the working of the capital market was inappropriate – why, in other words, savings and investment are brought into equality by movements in the level of incomes, far more than by movements in interest rates. And this second effect will be the more powerful the less is the uncertainty concerning the future, or the greater the firmness with which the idea of ‘a normal price’ is embedded in the minds of professional speculators and dealers.
In 1939, in addition, Kaldor attempted a theoretical and empirical critique of Hayek’s business cycle theory in “Capital Intensity and the Trade Cycle” (1939a), continued in his controversy with Hayek over the so-called Ricardo and Concertina effects in the pages of Economica in 1942 (Kaldor, 1940b, 1942; Hayek, 1942). Kaldor (1939a) addresses what determines the optimum degree of capital intensity and its relation with the trade cycle. In 1937, Kaldor argued that the investment period is only one way of measuring the capital/output ratio. Adopting an ordinal measure, he favored an index of the ratio of the initial cost to annual cost in output production. Therefore, what he called actual capital intensity is defined by the selling prices and costs ratio. In this sense, actual capital intensity must fall in the boom and rise in the bust period, since in the short run, capital stock is fixed and only labor can be incorporated into the production.
In its turn, normal capital intensity increases by more durable equipment and capital goods (which require a lower amortization per unit of output) and more automatic capital goods (which require less labor per unit of output). Kaldor (1939a) maintains that probably the normal capital intensity varies inversely with the trade cycle because real wages fall and the interest rate rises in the boom period, the exact opposite result of the Austrian business cycle theory. Moreover, the optimum capital intensity of new investments is determined by the technique which maximizes the area between the Keynesian marginal efficiency of the capital curve and the supply curve of investible funds . In 1940, in his “A Model of the Trade Cycle,” Kaldor (1940a) utilized nonlinear investment and savings functions to produce limits to the trade cycles.
In 1947, Hayek refused Kaldor’s request for leave of absence, thus Kaldor resigned from LSE to become Director of Research and Planning at the recently founded United Nations Economic Commission for Europe (UNECE) in Geneva . Kaldor was invited by Myrdal, the first Executive Secretary of the Commission. During his time at the Economic Commission for Europe, Kaldor developed with Myrdal the notion of circular cumulative causation (a concept that Myrdal appropriated from Wicksell and that encounters echoes and parallels in Thorstein Veblen’s idea on cumulative causation). While Kaldor applied this notion mainly to the demand–supply relationships in the manufacturing sector, Myrdal concentrated on the political economy and social provisioning aspects of underdeveloped regions, arguing that there is no tendency for automatic self-stabilization in the social system. In the same manner, there is no such tendency in the economic system.
Kaldor’s use of cumulative causation is closely related to the empirical positive linear long-run relationship between productivity growth and output growth, known as Verdoorn’s law. In 1949, drawing from statistics of industrial production, the Dutch economist Petrus J. Verdoorn (1949) argued that output growth increases productivity growth due to increasing returns in an approximate estimated rate of the square root of the output (a Verdoorn coefficient close to 0.5). Verdoorn’s article was written while he was a staff member of the Research and Planning division of the UNECE under Kaldor’s direction. In his 1966 Cambridge inaugural chair lecture on the “Causes of the Slow Rate of Economic Growth in the United Kingdom” (1966), Kaldor regressed the rate of growth of labor productivity on the rate of growth of manufacturing output using data from several industrialized countries from 1953–4 to 1963–4. Using a modified version of Verdoorn’s law, he explained Britain’s poor economic performance – sustaining the strong relationship particularly in manufacturing, public utilities, and construction.
Kaldor argued that the potential productivity growth is limited by the supply of labor which allows the exploration of static and dynamic (on capital accumulation and technical progress) increasing returns. This became known as Kaldor’s second growth law, or Kaldor–Verdoorn law, which establishes a positive deterministic relation between the growth of manufacturing productivity and the growth of manufacturing output (see Thirlwall, 1983) . The Kaldor–Verdoorn law became a crucial foundation for the cumulative causal model of economic growth, which places in demand instead of supply (e.g. à la Solow-Swan) the drive for growth.
In October 1949, Kaldor would return to academic life at Cambridge University, resuming the offer made after Keynes’ death by the Provost of King’s College in 1947. In the meantime, his interests moved from the trade cycle to economic growth, stimulated by Harrod’s research. The interrelationship between the rate of capital accumulation and the rate of growth of labor productivity led Kaldor (1986, p. 17) to think about the intrinsic connection between technical progress and capital goods investment in the sense that “inventions require to be embodied in ‘machines’ or equipment of some kind.” This means that “it is impossible therefore to isolate the effects of capital accumulation and the effects of ‘technical progress’ on the productivity of labor.” In other words, it is impossible to isolate movements along the production function from shifts of the same function.
Kaldor then used a technical progress function, relating the rate of productivity growth and the rate of new investment per worker, completely rejecting the notion of a production function and the technological frontier of substitution between labor and capital, thus the marginal productivity theory of distribution (between wages and profits). Reflecting on Keynes’ widow’s cruse parable in the Treatise on Money, Kaldor (p. 19) concluded that to aggregate business profits to be positive (an essential fact in a market economy) the outlays of business must largely exceed personal savings and that the “savings out of profits must be large relative both to the total capital outlay and to the total profit.” These two basic inequalities resulted in his Keynesian theory of distribution, namely, (2) sP>sW≥0 and (3) sP>IY>sW.
Kaldor relied on the endogeneity of the marginal propensity to save as a function of the income distribution (between wages and profits) as the solution for the Harrodian instability dilemma. This endogenization is an outgrowth of Kaldor’s perhaps major original contribution, his Keynesian theory of income distribution delineated in the final pages of his “Alternative Theories of Distribution” (1956). Kaldor incorporates Keynes’ savings propensities into a framework of income distribution à la Ricardo. However, using Keynes’ principle of effective demand, Kaldor reversed Ricardo’s causal chains, which take wages as an exogenous magnitude determined by workers’ subsistence and profits as residual, by taking profits as exogenous (at a level determined by full employment investments) and wages as a residual. This reversed the causality chain of the classical Ricardian and neoclassical marginal productivity distribution theory.
In the 1950s and 1960s, Kaldor combined the technical progress function, the Keynesian savings function, and an investment function à la Keynes-Harrod to build his three different versions of a model of economic growth and distribution (Kaldor, 1957, 1961; Kaldor & Mirrlees, 1962), the first with the help of David Champernowne and the last co-authored with James Mirrlees. Kaldor (1986, p. 19) was able to demonstrate that “it is possible to construct a model which has a determinate solution in terms of growth rates, the capital/output ratio, the investment coefficient, the profit share and the profit-rate without involving a ‘production function’ or indeed marginal analysis of any kind.”
The different savings propensities solution proposed by Kaldor (and later Pasinetti) was the building block of the post-Keynesian growth and income distribution models. In this class of models, the aggregate marginal propensity to save is variable because different income recipients such as wage earners or profit recipients (Kaldor) or different social classes (Pasinetti) have different marginal propensities to save. In this manner, changes in the wages or profits participation in total income can change the total propensity to save – since the aggregate propensity to save is nothing more than a ponderate mean weight of the marginal propensities to save of different income components. Therefore, there is a determined income distribution between wages and profits which will generate precisely a corresponding amount of profit share in national income compatible with full employment predetermined investments.
Epilogue
Kaldor’s solution to Harrod’s instability dilemma is the forced savings scenario described by Sraffa’s critique of Hayek’s theory. It is interesting to note that the capital theory wars (between Knight, Hayek and Kaldor) and especially Keynes’ General Theory killed the Austrian theory of (heterogeneous) capital in favor of Bates Clark’s aggregate production function with malleable capital jelly and diminishing returns. Paradoxically, in the Cambridge capital controversy in the 1950s and 1960s, Kaldor and others would deny the existence of a well-behaved inverse relationship between capital accumulation and interest rates in the production function form in growth models, emphasizing capital heterogeneity and capital and labor non-substitutability. However, Kaldor himself abandoned all the capital theoretical issues involved in heterogeneous capital adopting the one good model with flow equilibrium in his models. As Desai (1991, p. 55) wrote, Hayek’s “challenge of integrating money and heterogeneous capital in a dynamic cyclical growth model still remains. Kaldor was one of the few if not the only modern economist who knew all the pieces of the jigsaw puzzle.”
In the early 1930s, Kaldor was a Hayekian economist working within the Austrian theory of capital and business cycle. In their 1931 controversy, Hayek had criticized Keynes’ Treatise for adopting Wicksell’s ideas but not his Austrian theory of capital. However, Sraffa’s (1932a, b) critique of the Wicksellian natural interest rate and the traverse to a new equilibrium in a forced savings scenario, Myrdal’s ([1932] 1933) critique of Wicksell’s three conditions to monetary equilibrium, and Knight's (1935) reaffirmation of Clark’s theory of capital, exposed not only the frailties of the Austrian business cycle theory but the limitations of the Austrian theory of capital.
The Austrian theory of capital was the epitome of the neoclassical generalizing marginal productivity theory, as exposed by Wicksteed and Wicksell. Its limitations revealed in essence the shortcomings of the theoretical apparatus of equilibrium analysis in dynamic contexts, inherent in the theory of capital and business cycle theory. This state of affairs led to Kaldor’s theoretical emancipation in 1934 and later to an early conversion to Keynes’ new ideas, already in circulation. It also led Hayek to his pivotal 1937 essay on “Economics and Knowledge” where he first stated the fundamental problem of social sciences, the problem of knowledge – a problem that will completely shape his entire intellectual development. These controversies also influenced Kaldor’s later dissent developments in the trade cycle theory, the post-Keynesian models of growth and distribution, the Cambridge controversy on capital, and his critical views of neoclassical equilibrium economics.
In the 1970s and 1980s, Kaldor attacked what he called “The Irrelevance of Equilibrium Economics” (1972), claiming that neoclassical equilibrium economics is not a science in the strict sense of the word since the many empirical observations contradicting its assumptions and theoretical hypotheses (e.g. that most firms operate in imperfect markets) are just ignored. Indeed, Kaldor (1986, p. 5) argues that the a priori approach of general equilibrium theory meant that “its followers should be pre-occupied with the properties of the notion of ‘equilibrium,’” resulting in the acceptance that scientific progress “took the form not of removing the scaffolding [of the simplifying and unreal postulates] but of constantly adding to it.” In his Arthur M. Okun Lectures delivered in October 1983 at Yale University, Kaldor rather favored Economics Without Equilibrium (1983).
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If any twentieth-century economist was a Renaissance man, it was Friedrich Hayek. He made fundamental contributions in political theory, psychology, and economics. In a field in which the relevance of ideas often is eclipsed by expansions on an initial theory, many of his contributions are so remarkable that people still read them more than fifty […]
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https://www.econlib.org/library/Enc/bios/Hayek.html
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If any twentieth-century economist was a Renaissance man, it was Friedrich Hayek. He made fundamental contributions in political theory, psychology, and economics. In a field in which the relevance of ideas often is eclipsed by expansions on an initial theory, many of his contributions are so remarkable that people still read them more than fifty years after they were written. Many graduate economics students today, for example, study his articles from the 1930s and 1940s on economics and knowledge, deriving insights that some of their elders in the economics profession still do not totally understand. It would not be surprising if a substantial minority of economists still read and learn from his articles in the year 2050. In his book Commanding Heights, Daniel Yergin called Hayek the “preeminent” economist of the last half of the twentieth century.
Hayek was the best-known advocate of what is now called Austrian economics. He was, in fact, the only major recent member of the Austrian school who was actually born and raised in Austria. After World War I, Hayek earned his doctorates in law and political science at the University of Vienna. Afterward he, together with other young economists Gottfried Haberler, Fritz Machlup, and Oskar Morgenstern, joined Ludwig von Mises’s private seminar—the Austrian equivalent of John Maynard Keynes’s “Cambridge Circus.” In 1927 Hayek became the director of the newly formed Austrian Institute for Business Cycle Research. In the early 1930s, at the invitation of Lionel Robbins, he moved to the faculty of the London School of Economics, where he stayed for eighteen years. He became a British citizen in 1938.
Most of Hayek’s work from the 1920s through the 1930s was in the Austrian theory of business cycles, capital theory, and monetary theory. Hayek saw a connection among all three. The major problem for any economy, he argued, is how people’s actions are coordinated. He noticed, as Adam Smith had, that the price system—free markets—did a remarkable job of coordinating people’s actions, even though that coordination was not part of anyone’s intent. The market, said Hayek, was a spontaneous order. By spontaneous Hayek meant unplanned—the market was not designed by anyone but evolved slowly as the result of human actions. But the market does not work perfectly. What causes the market, asked Hayek, to fail to coordinate people’s plans, so that at times large numbers of people are unemployed?
One cause, he said, was increases in the money supply by the central bank. Such increases, he argued in Prices and Production, would drive down interest rates, making credit artificially cheap. Businessmen would then make capital investments that they would not have made had they understood that they were getting a distorted price signal from the credit market. But capital investments are not homogeneous. Long-term investments are more sensitive to interest rates than short-term ones, just as long-term bonds are more interest-sensitive than treasury bills. Therefore, he concluded, artificially low interest rates not only cause investment to be artificially high, but also cause “malinvestment”—too much investment in long-term projects relative to short-term ones, and the boom turns into a bust. Hayek saw the bust as a healthy and necessary readjustment. The way to avoid the busts, he argued, is to avoid the booms that cause them.
Hayek and Keynes were building their models of the world at the same time. They were familiar with each other’s views and battled over their differences. Most economists believe that Keynes’s General Theory of Employment, Interest and Money (1936) won the war. Hayek, until his dying day, never believed that, and neither do other members of the Austrian school. Hayek believed that Keynesian policies to combat unemployment would inevitably cause inflation, and that to keep unemployment low, the central bank would have to increase the money supply faster and faster, causing inflation to get higher and higher. Hayek’s thought, which he expressed as early as 1958, is now accepted by mainstream economists (see phillips curve).
In the late 1930s and early 1940s, Hayek turned to the debate about whether socialist planning could work. He argued that it could not. The reason socialist economists thought central planning could work, argued Hayek, was that they thought planners could take the given economic data and allocate resources accordingly. But Hayek pointed out that the data are not “given.” The data do not exist, and cannot exist, in any one mind or small number of minds. Rather, each individual has knowledge about particular resources and potential opportunities for using these resources that a central planner can never have. The virtue of the free market, argued Hayek, is that it gives the maximum latitude for people to use information that only they have. In short, the market process generates the data. Without markets, data are almost nonexistent.
Mainstream economists and even many socialist economists (see socialism) now accept Hayek’s argument. Columbia University economist Jeffrey Sachs noted: “If you ask an economist where’s a good place to invest, which industries are going to grow, where the specialization is going to occur, the track record is pretty miserable. Economists don’t collect the on-the-ground information businessmen do. Every time Poland asks, Well, what are we going to be able to produce? I say I don’t know.”
In 1944 Hayek also attacked socialism from a very different angle. From his vantage point in Austria, Hayek had observed Germany very closely in the 1920s and early 1930s. After he moved to Britain, he noticed that many British socialists were advocating some of the same policies for government control of people’s lives that he had seen advocated in Germany in the 1920s. He had also seen that the Nazis really were National Socialists; that is, they were nationalists and socialists. So Hayek wrote The Road to Serfdom to warn his fellow British citizens of the dangers of socialism. His basic argument was that government control of our economic lives amounts to totalitarianism. “Economic control is not merely control of a sector of human life which can be separated from the rest,” he wrote, “it is the control of the means for all our ends.”
To the surprise of some, John Maynard Keynes praised the book highly. On the book’s cover, Keynes is quoted as saying: “In my opinion it is a grand book…. Morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in deeply moved agreement.”
Although Hayek had intended The Road to Serfdom only for a British audience, it also sold well in the United States. Indeed, Reader’s Digest condensed it. With that book Hayek established himself as the world’s leading classical liberal; today he would be called a libertarian or market liberal. A few years later, along with Milton Friedman, George Stigler, and others, he formed the Mont Pelerin Society so that classical liberals could meet every two years and give each other moral support in what appeared to be a losing cause.
In 1950 Hayek became professor of social and moral sciences at the University of Chicago, where he stayed until 1962. During that time he worked on methodology, psychology, and political theory. In methodology Hayek attacked “scientism”—the imitation in social science of the methods of the physical sciences. His argument was that because social science, including economics, studies people and not objects, it can do so only by paying attention to human purposes. The Austrian school in the 1870s had already shown that the value of an item derives from its ability to fulfill human purposes. Hayek was arguing that social scientists more generally should take account of human purposes. His thoughts on the matter are in The Counter-Revolution of Science: Studies in the Abuse of Reason. In psychology Hayek wrote The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology.
In political theory Hayek gave his view of the proper role of government in his book The Constitution of Liberty. It is actually a more expansive view of the proper role of government than many of his fellow classical liberals hold. He discussed the principles of freedom and based his policy proposals on those principles. His main objection to progressive taxation, for example, was not that it causes inefficiency but that it violates equality before the law. In the book’s postscript, “Why I Am Not a Conservative,” Hayek distinguished his classical liberalism from conservatism. Among his grounds for rejecting conservatism were that moral and religious ideals are not “proper objects of coercion” and that conservatism is hostile to internationalism and prone to a strident nationalism.
In 1962 Hayek returned to Europe as professor of economic policy at the University of Freiburg in Breisgau, West Germany, and stayed there until 1968. He then taught at the University of Salzburg in Austria until his retirement nine years later. His publications slowed substantially in the early 1970s. In 1974 he shared the Nobel Prize with Gunnar Myrdal “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.” This award seemed to breathe new life into him, and he began publishing again, both in economics and in politics.
Many people get more conservative as they age. Hayek became more radical. Although he had favored central banking for most of his life, in the 1970s he began advocating denationalizing money. Private enterprises that issued distinct currencies, he argued, would have an incentive to maintain their currency’s purchasing power. Customers could choose from among competing currencies. Whether they would revert to a gold standard was a question that Hayek was too much of a believer in spontaneous order to predict. With the collapse of communism in Eastern Europe, some economic consultants have considered Hayek’s currency system as a replacement for fixed-rate currencies.
Hayek was still publishing at age eighty-nine. In his book The Fatal Conceit, he laid out some profound insights to explain the intellectuals’ attraction to socialism and then refuted the basis for their beliefs.
About the Author
David R. Henderson is the editor of The Concise Encyclopedia of Economics. He is also an emeritus professor of economics with the Naval Postgraduate School and a research fellow with the Hoover Institution at Stanford University. He earned his Ph.D. in economics at UCLA.
Selected Works
1931. “Richard Cantillon.” Translated by Micheál Ó Súilleabháin in the Journal of Libertarian Studies 7, no. 2 (1985): 217–247. Available online at: http://www.econlib.org/library/Essays/JlibSt/hykCnt1.html.
1935. Prices and Production. 2d ed. Reprint. New York: Augustus M. Kelley, 1975.
1937. “Economics and Knowledge.” Economica, n.s., 4 (February): 33–54. Reprinted in James M. Buchanan and G. F. Thirlby, eds., L.S.E. Essays on Cost. London: Weidenfeld and Nicolson, 1973. Available online at: http://www.econlib.org/library/NPDBooks/Thirlby/bcthLS3.html.
1939. “Price Expectations, Monetary Disturbances, and Malinvestments.” In Hayek, Profits, Interest, and Investment. Reprint. New York: Augustus M. Kelley, 1975.
1944. The Road to Serfdom. Chicago: University of Chicago Press.
1945. “The Use of Knowledge in Society.” American Economic Review 35 (September): 519–530. Available online at: http://www.econlib.org/library/Essays/hykKnw1.html.
1948. Individualism and Economic Order. Chicago: University of Chicago Press.
1952. The Counter-Revolution of Science: Studies on the Abuse of Reason. Glencoe, Ill.: Free Press.
1960. The Constitution of Liberty. Chicago: University of Chicago Press. Reprint. Chicago: Henry Regnery, 1972.
1973. Law, Legislation, and Liberty. Chicago: University of Chicago Press.
1976. Denationalization of Money. London: Institute of Economic Affairs.
1977. Foreword to Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek by Gerald P. O’Driscoll Jr. Kansas City: Sheed, Andrews, and McMeel.
1988. The Fatal Conceit. Chicago: University of Chicago Press.
1995. Introduction to Selected Essays on Political Economy by Frédéric Bastiat. Trans. from the French by Seymour Cain. Edited by George B. de Huszar. Princeton: Van Nostrand, 1995. Available online at: http://www.econlib.org/library/Bastiat/basEss0.html#Introduction,byF.A.Hayek.
Footnotes
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https://www.ucl.ac.uk/economics/about-department/famous-economists/famous-economists
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Famous Economists
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UCL Department of Economics
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https://www.ucl.ac.uk/economics/about-department/famous-economists/famous-economists
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London has been associated with many pioneers in economics and statistics. Many of these have associations with University College, either as students or teachers there. Below we summarise the place of London in the history of economics, statistics and related sciences until the mid twentieth century.
List of London's Famous Economists
Members of the economics department have put together a series of Economists' walks around London
One of the earliest contributors was the London merchant and mercantilist, Thomas Mun (1571-1641) whose emphasis on the importance of the balance of trade in economic prosperity deeply influenced subsequent economic thought. William Petty (1623-1687) was an advocate of data collection and quantitative enquiry in economics and other issues of state whose own exercises in political arithmetic’ included an attempt to estimate national income and can be seen as early examples of applied econometrics. John Locke (1632-1704), best known for his contributions to epistemology and political philosophy, wrote also on economics and provided, for example, an early statement of the Quantity Theory of Money.
In 1776 probably the most influential book in the history of economics, The Wealth of Nations, was published in London. Its author, the Scotsman Adam Smith (1723-1790) spent most of the previous three years in London debating the book’s chapters with friends and refining it for publication. At times also in London was Smith’s greatest friend, fellow Scottish philosopher David Hume (1711-1776) who also wrote on economics, arguing, for example, against mercantilism and introducing specie-flow arguments into analysis of international trade.
The late eighteenth century saw London at the centre of intellectual advance in economics. Jeremy Bentham (1748-1832) introduced the notion of utility’ and developed the utilitarian framework still underpinning much applied policy evaluation, besides writing occasionally on explicitly economic issues. Living most of his life in London, his ideas influenced the founders of UCL and, according to the terms of his will, his dressed skeleton can still be seen in a glass cabinet in the college’s cloisters. Reverend Thomas Robert Malthus (1766-1834) is believed to have worked on his controversial but influential ideas on population and economy while living in London. Among his ideas was that of diminishing returns in production, an idea discovered at the same time by two other London-born thinkers, Edward West (1782-1828) and David Ricardo.
Arguably the greatest economist of his time, David Ricardo (1772-1823) corresponded with both Malthus and Bentham. Born into a Jewish family in east London, he made his fortune in the City’s emerging financial quarters before working out his theories of political economy, developing, for instance, ideas of gains from trade and a theory of distribution of factor returns that remain influential. In his thorough application of comparative static ways of thinking to the analysis of economic equilibria he has been said to have literally invented the technique of economics.
The Ricardian system dominated economic thought in the country for the next half century. The Chair of Political Economy founded in his name at UCL was occupied first by his follower John Ramsay McCulloch (1789-1864). Also working in London was his adherent Thomas de Quincey (1785-1859), now better known for literary memoirs recounting his time as an opium eater. Most influential among his followers however were the London father and son, James Mill (1773-1836) and John Stuart Mill (1806-1873) whose works expounded and developed both utilitarian ethics and classical economic theory. Living in London as a political exile, Karl Marx (1818-1883) was heavily though not uncritically influenced by Ricardo’s theories as he developed his own economic theory working in the Reading Room of the nearby British Museum. Nassau William Senior (1790-1864) was an influential critic of Malthus’ and Ricardo’s assumptions and made important contributions to the theory of international trade. Now better known for his place in the history of computing, Charles Babbage (1791-1871), a lifelong Londoner, also contributed around this time to the economic theory of production.
The most eminent figure to hold a professorship of economics at UCL was William Stanley Jevons (1835-1882), also earlier a student of the college. Often seen as the main British contributor to the marginalist revolution in economic thought of the 1870s, he challenged Ricardian ideas, seeking for instance to replace theories of value based on labour input with theories based on utility. In his support for the use of mathematical analysis in economics and in his practical use of economic statistics, he can be seen as one of the first exponents of recognisably modern econometric methods. His ideas were influential on later London economists, including Philip Wicksteed (1844-1927), Edwin Cannan (1861-1935) and Lionel Robbins (1898-1984). Among Jevons’ friends was Francis Ysidro Edgeworth (1845-1926), then a professor at King’s College London, whose own contributions included the idea of the indifference curve and important insights into economic equilibrium, whilst he also made contributions to the earliest developments in mathematical statistics.
In subsequent years economics in Britain was dominated by Alfred Marshall (1842-1924), who, though he later worked outside the city, was born and educated in London. His approach sought to reconcile classical and modern thought. Among his followers was Arthur Cecil Pigou (1877-1959) who began his career as a lecturer at Kings College London and who made important contributions to analysis of taxation.
At the turn of the century, the London School of Economics and Political Science was founded and played a major role in economic thought in the following years through figures such as Cannan and Robbins, already mentioned above, and others such as Arthur Bowley (1869-1957), John Hicks (1904-1989), Abba Lerner (1903-1982), Roy Allen (1906-1983), Friedrich Hayek (1889-1992) and Bill Phillips (1914-1975) – of the Phillips-curve - who made various hydraulic models of the economy, one being on display in the Science Museum.
Perhaps the most influential and well known British economist of the twentieth century was John Maynard Keynes (1883-1946). Although academically attached to Cambridge, he associated with a group of aesthetes and scholars known as the Bloomsbury Group named after the Bloomsbury area of London (particularly, Gordon Square) where they met and where the World Congress takes place.
Several of the above figures, such as Petty, Edgeworth and Bowley, also contributed to the history of statistics. Here also London, and especially UCL, has played an outstanding role.
John Graunt (1620-1674), a friend and collaborator of Petty, studied London mortality statistics, projected population and created the first known life tables. Abraham de Moivre (1667-1754), tutoring in London as a Huguenot emigré, made several fundamental contributions to the theory of probability including definitions of concepts such as independence and the first use of the normal distribution (which he linked to the binomial distribution in a precursor of the central limit theorem), besides working on problems of annuities. Not known for his contributions to economic theory, though one of the greatest scientists ever, was the Warden/Master of the Mint (from 1696 until his death) Isaac Newton (1642-1727). Needless to say, that his invention of differentiation was not just a milestone for physics, but proved to be indispensable for the development of (mathematical) economics too. It yielded numerous further tools, for instance Taylor’s theorem, a creation of Brook Taylor (1685-1731).
Reverend Thomas Bayes (1702-1761), best known for the theorem bearing his name, ministered and is buried in London. His work was published after his death by Richard Price (1723-1791), another dissenting cleric who made contributions of his own to the theory of probability and to many other areas, including actuarial science, social insurance and government finance. Thomas Simpson (1710-1761), mathematician, also made important contributions to probability and annuities.
Through the nineteenth century, enquiry into public health led to developments in statistical practice. William Farr (1807-1883), an associate of McCulloch, modeled spread of epidemics. His collaboration with John Snow (1813-1858), a London medic, identifying the source of the 1854 cholera outbreak in Broad St to an infected water supply was a landmark in epidemiology. Farr worked closely with Florence Nightingale (1820-1910), nurse and national heroine, who made important advances in collection of medical statistics. William Guy (1810-1885), professor at Kings College London, also contributed to the development of medical statistics. In the late nineteenth century Charles Booth (1840-1916) initiated and oversaw an innovative fifteen year social survey of poverty in London.
In the same era the two early pioneers of matrix algebra were the friends Arthur Cayley (1821-1895) and James Joseph Sylvester (1814-1897). Ineligible, because Jewish, for university employment elsewhere in Britain, the latter was professor of Natural Philosophy at UCL from 1838 until 1840. Returning after a time in the US and now practising law, he met Cayley, who was trained as a mathematician too. Later both returned to chairs in mathematics.
The notions of correlation and regression were introduced in the work of the eugenicist, Francis Galton (1822-1911). The Chair in Eugenics founded at UCL by Galton was first held by Karl Pearson (1857-1936) who founded the college’s Department of Applied Statistics. He continued to explore the ideas of regression and correlation with, for example, George Udny Yule (1871-1951) also then at UCL. Among Pearson’s other contributions were both the introduction of the chi-squared test and the method of moments. Also briefly in the department at this time was William Gosset (1876-1937), discoverer of the t test for a sample mean. Pearson’s son, Egon Pearson (1895-1980) followed him into a post at UCL where he met Jerzy Neyman (1894-1981) with whom he developed the theory of hypothesis testing. Pearson’s successor at UCL was Ronald Aylmer Fisher (1890-1962) whose many contributions include the application of t and F tests to regression coefficients and proposing the method of maximum likelihood estimation. Meanwhile factor analysis was being developed by Charles Spearman (1863-1945) a professor of psychology at UCL. Other UCL statisticians of the early twentieth century included John Wishart (1898-1956), later of Imperial College, and Maurice Kendall (1907-1983), later at LSE and Maurice Bartlett (1910-2002), who succeeded Egon Pearson, but held other positions afterwards.
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Did Hayek Deserve the Nobel Prize?
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"Friedrich Hayek",
"Classical Liberalism",
"Austrian Economics",
"Road To Serfdom",
"Nobel Prize",
"Nobe Prize In Economics",
"Prices And Production",
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2002-01-19T11:30:00+05:30
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Friedrich Hayek (A Biography) by Alan Ebenstein; Palgrave for St Martin’s Press, New York, 2001; pp 403 (hardback), price not stated.
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/themes/contrib/epw/images/epw.ico
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Economic and Political Weekly
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https://www.epw.in/journal/2002/03/book-reviews/did-hayek-deserve-nobel-prize.html
|
This work claims to be an intellectual biography of Hayek, who, according to the author, was the greatest philosopher of liberty during the twentieth century and whose contributions to political theory and philosophical economics are immense. Paradoxically, this is a well-researched candid biography, which draws on primary sources, and most notably on oral archives, but provides enough evidence to refute the claims of the author and to question the award of the Nobel Prize in Economics to Hayek (jointly with Gunnar Myrdal) in 1974. This award is said to have surprised Hayek because he received it and surprised Myrdal because he had to share it with Hayek. The award was 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. The book also serves to expose his covert racism and to explode the myth that he migrated from Vienna to the London School of Economics as a refugee from persecution. In point of fact, Hayek was a Roman Catholic who suffered no disabilities like his fellow Austrian Jews and left Austria long before the Nazi takeover. His migration to the London School of Economics was sponsored by Lionel Robbins. The financial incentive was the prime motive as Hayek found that the Dozenten system of payment to teachers from the fees paid by attending students did not give him a living wage. In fact, every move he made was for financial reasons, beginning from Vienna to Freiburg by way of London, Arkansas, and Chicago. A perfectly legitimate reason according to the dictates of rational self-interest and free markets, except that the principle of payment by consumers (students) was not acceptable to Hayek as to any other economist proponent of the market mechanism. Economists of all stripes are unanimous in preferring tenured contracts to the vagaries of payments by pupils as their source of income. What in fact is the intellectual contribution of Hayek to analytic or empirical economics? The truth is that there is no killer theorem, concept, or paradigm associated with Hayek. During the early 1930s Hayek figured prominently in the debates when economists were in search of the causes of the Great Depression. But even then his contributions were suspect. Keynes called his Prices and Production as one of the most frightful muddles I have ever read, with scarcely a sound proposition in it...an extraordinary example of how, starting with a mistake a remorseless magician can end up in Bedlam. Milton Friedman wrote: I am an enormous admirer of Hayek but not for his economics. I think Prices and Production was a very flawed book...his capital theory is unreadable. On the other hand, The Road to Serfdom is one of the great books of our time...he found his right vocation with The Road to Serfdom. But Friedman omitted to point out that The Road to Serfdom is essentially an ideological tract for the times that lacks the originality and rigour of political theorists like John Rawls and Robert Nozick. Of his Pure Theory of Capital, an astute critic like G L S Shackle (Hayeks doctoral pupil at the LSE) wrote: It is inconceivable that any statistical or practical use can be made of the Austrian theory of capital. John Hicks gave the clinching assessment of The Hayek Story (1967): Hayeks economic writings...are almost unknown to the modern student indicating, as Ebenstein says, the black hole in which Hayeks economic writings fell. The decline and fall of Hayek the economist, and his relative position in the peer group, is well captured in the following table of the Most Cited Economists in the Index of Economic Journals in which Hayek does not figure at all in 1940-44. 1931-35 Keynes 66 Robertson 44 Hayek 33 1936-39 Keynes 125 Robertson 48 Hayek 24 1940-44 Keynes 59 Hicks 30 Haberler 24 Hayek did generate at least one testable hypothesis, not discussed by Ebenstein, viz, the Ricardo-Hayek Effect: profits will be higher on the method with the higher rate of turnover...because the profits on the less capitalistic method will begin to accrue earlier than those on the more capitalistic method (Hayek, The Ricardo Effect, Economica, May 1942). Even this did not evoke any empirical interest. Surprisingly, Hayek was never attracted to empirical economics despite his early spell as Director of the Austrian Institute for Business Cycle Research. His solitary excursion into inductive economics was a social survey of Gibraltar after second world war, which resulted in a government report. But he declined to do a similar survey for Cyprus when asked by the British government. Be that as it may, Hayek retained his modesty and intellectual integrity. He admitted, I never expected to receive the Nobel Prize...the Swedish Committee seems to have been very anxious to keep a certain balance between differing views (emphasis provided) and therefore selected a rather peculiar pair of which I was one. This was patently unfair to Myrdals highly original work in monetary and business cycle theory and his use of economic tools like cumulative causation to address social issues like racism in his classic An American Dilemma. Ebenstein also grossly exaggerates Hayeks contribution to societal philosophy when he contends that more than anyone else he put forward the ideas of spontaneous order, division of knowledge and the crucial role of prices to overcome this division. The idea of spontaneous order was first expounded by the pillars of the Scottish Enlightenment, Adam Smith, David Hume and Adam Fergusson. Hayek himself acknowledged his intellectual debt to the seminal work of Ludwig Von Mises, particularly his opus Human Action and his Socialism. Hayeks contributions to the sub-genre of philosophical economics were thus essentially derivative. The only economist with an entry in the authoritative Cambridge Dictionary of Philosophy is Keynes for his Theory of Probability. What was Hayek like as a teacher and how did he relate to colleagues and pupils? He had profound respect even for colleagues who were not his friends and were ideologically poles apart. He abhorred Harold Laski but stoutly defended him against the various charges periodically levelled at him. Similarly, although he disagreed with R H Tawney (my socialist prototype) he had high regard for him as a very wise man. He would strongly recommend Erich Rolls History of Economic Thought despite its Marxist bias and selected Roll as the external examiner for Said Ahmad Meenais (an Indian student, later vice-president, Islamic Development Bank) doctoral dissertation on Lauderdale and Keynesian economics. But he had a strong anti-Keynes bias, not referred to in the book, and particularly objected to the multiplier coupled with a somewhat overzealous pursuit of every conceivable forerunner of Keynes. His prodigious memory and scholarship held the attention of his always full classroom, but he conspicuously lacked the pedagogic skills of Lionel Robbins, Phelps Brown, Beales, Laski, Tawney or Graham Wallas, who surpassed anyone I have ever known (Robbins). Hayek never acquired the English fluency of the Germanic diaspora at the LSE Popper, Moser, Radomysler and had a peculiar penchant for three-dimensional diagrams, to eke out his turgid English with a thick German accent. Whatever his merits as a teacher, Hayek was never a collegial person: and by choice did not make friends readily and was rather stand-offish as recalled by Anne Bohm, a longtime LSE staff member. He was in the Senior Common Room but not of it and lacked the typical British dons flair for conviviality and the arts of littleness. He was intimate only with Popper and with Robbins at least till his divorce from his first wife. No wonder Hayek never had the loyal student following of Robbins, Meade, Sayers, and others who always had a deep human interest in their students, whether writing timely references or walking down with them on the Strand or from Holborn Station to Houghton Street. One can scarcely visualise Hayek holding an informal seminar in a LSE neighbourhood pub like the economic historian F J Fisher. There is no better lubricant for thought than draft beer. Altogether, Hayek was an aloof figure, who, alas, was not free from visceral prejudices, as this book reveals, albeit in a very discreet end-note where Hayek is exposed in his own words for the first time, as a covert racist, anti-Asian and anti-Semitic. After the customary disclaimer of all bigots, he responded to an interview question as follows:
I have no racial prejudices in general but there were certain types, and conspicuous among them the Near Eastern populations, which I still dislike because they are fundamentally dishonest...It was a type...described as Levantine, typical of people of the eastern Mediterranean...I have a profound dislike for the typical Indian students at the London School of Economics, which I admit are all one type Bengali moneylender sons. They are to me a detestable type, I admit, but not with any racial feeling. I have found a little of the same amongst the Egyptians. Hayek was also obtuse and insensitive of anti-Semitism and wrote after second world war:
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Friedrich A. Hayek: A Centenary Appreciation
|
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In 1967, English economist Sir John Hicks published an essay titled “The Hayek Story” in which he said that:
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Foundation for Economic Education
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https://fee.org/articles/friedrich-a-hayek-a-centenary-appreciation/
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In 1967, English economist Sir John Hicks published an essay titled “The Hayek Story” in which he said that:
When the definitive history of economic analysis during the nineteen thirties comes to be written, a leading character in the drama (it was quite a drama) will be Professor Hayek. . . . Hayek’s economic writings . . . are almost unknown to the modern student; it is hardly remembered that there was a time when the new theories of Hayek were the principal rival of the new theories of Keynes. Which was right, Keynes or Hayek?[1]
In February 1931, Friedrich August von Hayek had arrived in England from Vienna, Austria, to deliver a series of lectures at the London School of Economics. The lectures created such excitement and sensation that he was invited to permanently join the faculty of the LSE.[2] In the early fall of 1931 these lectures appeared in book form under the title Prices and Production and began the “drama” to which John Hicks referred. Indeed, in the years between 1931 and 1935, Hayek was the third-most frequently cited economist in the English-language economics journals. (John Maynard Keynes and his Cambridge University colleague Dennis Robertson came in first and second.)[3]
But by the 1960s, when Hicks wrote the passage quoted, the general opinion among economists and policy-makers would have been almost unanimous. The “New Economics” of Keynes dominated the economics profession and was the guiding star for macroeconomic policy. Hayek was only known to those who took an interest in the economic ideas of the earlier decades of the twentieth century. Thirty years later, however, it is Keynesian economics that is now merely a passing episode in the history of economic ideas. And it is Hayek’s ideas in economics, political philosophy, social theory, and the methodology of the human sciences that have gained increasing attention and relevancy as the twentieth century draws to a close.
One War, Two Doctorates
On May 8, 1899, F.A. Hayek was born in Vienna. The occasion of his centenary serves as an appropriate opportunity to appreciate the man and his contributions to the cause of liberty and the free-market economy. Hayek had briefly served in the Austrian Army on the Italian front during World War I. Shortly after returning from the battlefield in 1918 he entered the University of Vienna and earned two doctorates, one in jurisprudence in 1921 and the other in political science in 1923. While at the university, he studied with one of the founders of the Austrian school of economics, Friedrich von Wieser.
But perhaps the most important intellectual influence on his life began in 1921, when he met Ludwig von Mises while working for the Austrian Reparations Commission. It is not meant to detract from Hayek’s own contributions to suggest that many areas in which he later made his profoundly important mark were initially stimulated by the writings of Mises. This is most certainly true of Hayek’s work in monetary and business-cycle theory, his criticisms of socialism and the interventionist state, and in some of his writings on the methodology of the social sciences.
In 1923 and 1924, Hayek visited New York to learn about the state of economics in the United States. After he returned to Austria, Mises helped arrange the founding of the Austrian Institute for Business Cycle Research, with Hayek as the first director. Though Hayek initially operated the institute with almost no staff and only a modest budget primarily funded by the Rockefeller Foundation, it was soon recognized as a leading center for the study of economic trends and forecasting in central Europe. Hayek and the institute were frequently asked to prepare studies on economic conditions in Austria and central Europe for the League of Nations. When Hayek moved to London in September 1931, Oskar Morgenstern became the institute’s director until the Nazi annexation of Austria in March 1938, when it ceased to operate as an independent organization. Beginning in 1929, Hayek was also a Privatdozent (an unsalaried professor) at the University of Vienna.
Hayek and the Great Depression
Hayek remained at the London School of Economics until 1949. During that time he published a large body of work that established his international stature as one of the leading economists of his time. It was during this period that he became the greatest challenger to the emerging New Economics of Keynes. In Prices and Production; Monetary Theory and the Trade Cycle (1933); a series of articles reprinted in 1939 under the title Profits, Interest and Investment; and The Pure Theory of Capital (1941), Hayek argued that business cycles had their origin in the mismanagement of the monetary system. Also, in 1931–1932, Hayek wrote a lengthy two-part review of Keynes’s Treatise on Money for the journal Economica. It was considered a definitive critique of Keynes’s work.[4] The Great Depression served as the backdrop against which Hayek explained his own theory and criticized Keynes.
Hayek argued that in the 1920s, the American Federal Reserve System had followed a monetary policy geared toward stabilizing the general price level. But that decade had been one of major technological innovations and increases in productivity. If the Federal Reserve had not increased the money supply, the prices for goods and services would have gently fallen to reflect the increased ability of the American economy to produce greater quantities of output at lower costs of production.
Instead, the Federal Reserve increased the money supply just sufficiently to prevent prices from falling and to create the illusion of economic stability under an apparently stable price level. But the only way the Fed could succeed in this task was to increase reserves to the banking system, which then served as additional funds lent primarily for investment purposes to the business community. To attract borrowers to take these funds off the market, interest rates had to be lowered. Beneath the calm surface of a stable price level, interest rates had been artificially pushed below real market-clearing levels. That generated a misdirection of labor and investment resources into long-term capital projects that eventually would be revealed as unsustainable because there was no savings available to complete and maintain them.
The break finally came in 1928 and 1929, when the Fed became concerned that prices in general were finally beginning to rise. The Fed stopped increasing the money supply, investment profitability became uncertain, and the stock market crashed in October 1929. Hayek argued that the economic downturn that then began was the inevitable consequence of the investment distortions caused by the earlier monetary inflation. A return to economic balance required a writing down of unprofitable capital investments, a downward adjustment of wages and prices, and a reallocation of labor and other resources to uses reflecting actual supply and demand in the market.
But the political and ideological climate of the 1930s was one increasingly dominated by collectivist and interventionist ideas. Governments in Europe as well as the United States did everything in their power to resist these required market adjustments. Business interests as well as trade unions called for protection from foreign competition and government support of various types to keep prices and wages at their artificial inflationary levels. International trade collapsed, industrial output fell dramatically, and unemployment increased and became permanent for many of those now out of work.
Throughout the 1930s Keynes presented arguments to justify activist monetary and fiscal policies to try to overcome the imbalances the earlier monetary manipulation and interventions had created. This culminated in his 1936 book, The General Theory of Employment, Interest and Money, which soon became the bible of a new macroeconomics that claimed that capitalism was inherently unstable and could only be saved through government “aggregate demand management.” Hayek and other critics of Keynesian economics were rapidly swept away in the euphoric belief that government had the ability to demand-manage a return to full employment.
But while seemingly “defeated” in the area of macroeconomics, Hayek realized that what was at stake was the wider question of whether in fact government had the wisdom and ability to successfully plan an economy. This also led him to ask profoundly important questions about how markets successfully function and what institutions are essential for economic coordination to be possible in a complex system of division of labor.
Debunking Central Planning
In 1935, Hayek edited a collection of essays titled Collectivist Economic Planning, which included a translation of Mises’s famous 1920 article, “Economic Calculation in the Socialist Commonwealth.” For the volume, Hayek wrote an introduction summarizing the history of the question of whether socialist central planning could work and a concluding chapter on “the present state of the debate” in which he challenged many of the newer arguments in support of planning. This was followed by a series of articles over the next several years on the same theme: “Economics and Knowledge” (1937), “Socialist Calculation: The Competitive ‘Solution’” (1940), “The Use of Knowledge in Society” (1945), and “The Meaning of Competition” (1946). Along with other writings, they were published in a volume with the title Individualism and Economic Order (1948).[5]
In this work Hayek emphasized that the division of labor has a counterpart: the division of knowledge. Each individual comes to possess specialized and local knowledge in his corner of the division of labor that he alone may fully understand and appreciate how to use. Yet if all of these bits of specialized knowledge are to serve everyone in society, some method must exist to coordinate the activities of all these interdependent participants in the market. The market’s solution to this problem, Hayek argued, was the competitive price system. Prices not only served as an incentive to stimulate work and effort, they also informed individuals about opportunities worth pursuing. Hayek clearly and concisely explained this in “The Use of Knowledge in Society”:
We must look at the price system as such a mechanism for communicating information if we want to understand its real function. . . . The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action.[6]
In elaborating his point, Hayek wrote that “The marvel is that in a case like that of a scarcity of one raw material, without an order being issued, without more than perhaps a handful of people knowing the cause, tens of thousands of people whose identity could not be ascertained by months of investigation, are made to use the material or its products more sparingly.”[7]
Hayek added: “I am convinced that if it [the price system] were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind.”[8]
It was in this period that Hayek applied his thinking about central planning to current politics. In 1944 he published what became his most famous book, The Road to Serfdom, in which he warned of the danger of tyranny that inevitably results from government control of economic decision-making through central planning. His message was clear: Nazism and fascism were not the only threats to liberty. The little book was condensed in Reader’s Digest and read by millions.
In 1949 Hayek moved to the United States and took a position at the University of Chicago in 1950 as professor of social and moral science. He remained there until 1962, when he returned to Europe, where he held positions at various times at the University of Freiburg in West Germany and the University of Salzburg in Austria.
Undesigned Order
The realization that something so significant—the price system—was undesigned and not intended to serve the purpose it serves so well became the centerpiece of Hayek’s writings for the rest of his life. He developed the idea in several directions in another series of works, including, The Counter-Revolution of Science (1952); The Constitution of Liberty (1960); Law, Legislation and Liberty in three volumes (1973–1979); in various essays collected in Studies in Philosophy, Politics and Economics (1967) and New Studies in Philosophy, Politics, Economics and the History of Ideas (1978); and in his final work, The Fatal Conceit: The Errors of Socialism (1988).
His underlying theme was that most institutions in society and the rules of interpersonal conduct are, as the eighteenth-century Scottish philosopher Adam Ferguson expressed it, “the result of human action, but not the execution of any human design.”[9] In developing this idea, Hayek consciously took up the task of extending and improving the notion of the “invisible hand” as first formulated by Adam Smith in The Wealth of Nations and refined in the nineteenth century by Carl Menger, the founder of the Austrian school of economics.[10]
Hayek argued that many forms of social interaction are coordinated through institutions that at one level are unplanned and are part of a wider “spontaneous order.” Language, customs, traditions, rules of conduct, and exchange relationships have all to a large extent evolved and developed without any conscious design guiding them. Yet without such unplanned rules and institutions, society would have found it impossible to progress beyond a rather primitive level.
Another way of expressing this is that in Hayek’s view, the unique characteristic of an advanced civilization is that no one mind (or group of minds) controls or directs it. In a small tribal society all members often share basically one scale of values and preferences; the chief or leader can know the potentialities of each member and can assign roles and duties so that the tribe’s physical and mental means can be applied more or less successfully to the common hierarchy of ends.
However, once the group passes beyond a simple level of development, any further social progress will require radical revision of the social rules and order: the complexity of social and economic activity will make it impossible for any individual to master the information necessary to coordinating the members of the group. Nor will the members continue to agree on preferences and values; their actions and interests will become more diverse.
An advanced society, therefore, must always be a “planless” society, that is, a society in which no one overall “plan” is superimposed over the actions and plans of the individuals making up the society. Instead, civilization is by necessity a “spontaneous order,” in which the participants use their own special knowledge and pursue their own individually chosen plans without a higher will or mind guiding them.
“Social Justice”
The very complexity that makes it impossible to know all the information required to guide society, Hayek reasoned, makes it equally impossible to judge the “justice” or “worthiness” of an individual’s total actions. As a result, the popular call for “social,” or “distributive,” justice is inapplicable in a free society. Social justice requires not merely that individuals receive what is rightly theirs in general terms, but that individuals and groups also receive some stipulated distributional share of the society’s total output or wealth. However, Hayek showed that in the market economy, distributions of income are not based on some standard of “deservedness,” but rather on the degree to which the individual has directly or indirectly satisfied consumer demand within the general rules of individual rights and property.
To attempt to distribute income shares by “deservedness” would require the government to establish some overarching standard for disbursing “social justice,” and would necessitate an economic system in which that government had the authority and the power to investigate, measure, and judge each person’s “right” to a share of the society’s wealth. Hayek suggested that such a system would involve a return to the mentality and the rules of a tribal society: government would reimpose a single hierarchy of ends and would decide what each member should have and what should be expected from him in return. It would mean the end of the free and open society.
In October 1974, Hayek won the Nobel Prize in economics (along with Swedish welfare-state economist Gunnar Myrdal). In explaining its reasons for choosing Hayek for this highest of awards, the Nobel Committee drew especial attention to his contributions to monetary and business-cycle theory and to his work on alternative economic systems.
By the time Hayek died on March 23, 1992, at the age of 91, an answer could finally and clearly be given to Sir John Hicks’s question: “Who was right, Hayek or Keynes?” Hayek was right, regarding both Keynesianism and socialism.
And thanks to his ideas, the 21st century may very well be a freer and more prosperous place to live.
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¡¡The Hayek Centenary
May 8, 1999 is the centenary of the birth of F.A. Hayek:
Friedrich August von Hayek: 1899¨C1992
By Murray N. Rothbard
The death of F.A. Hayek at the age of 92 marks the end of an era, the Mises-Hayek era. Converted from Fabian socialism by Ludwig von Mises's devastating critique, Socialism, in the early 1920s, Hayek took his place as the greatest of the glittering generation of economists and social scientists who became followers of Mises in the Vienna of the 1920s, and who took part in Mises's famed weekly privatseminar held in his office at the Chamber of Commerce.
In particular, Hayek elaborated Mises's brilliant business cycle theory, which demonstrated that boom-bust cycles are caused, not by mysterious defects inherent in industrial capitalism, but by the unfortunate inflationary bank credit expansion propelled by central banks. Mises founded the Austrian Institute for Business Cycle Research in 1927, and named Hayek as its first director.
Hayek proceeded to develop and expand Mises's cycle theory, first in a book of the late 1920s, Monetary Theory and the Trade Cycle. He was brought over to the London School of Economics in 1931 by an influential English Misesian, Lionel Robbins. Hayek gave a series of lectures on cycle theory that took the world of English economics by storm, and were published quickly in English as Prices and Production.
Remaining at a permanent post at the London School, Hayek soon converted the leading young English economists to the Misesian-Austrian view of capital and business cycles, including such later renowned Keynesians as John R. Hicks, Abba Lerner, Nicholas Kaldor, and Kenneth E. Boulding. Indeed, in two lengthy review-essays in 1931¨C32 of Keynes's widely trumpeted magnum opus, the two-volume Treatise on Money, Hayek was able to demolish that work and to send Keynes back to the drawing board to concoct another economic "revolution."
One of the reasons for the swift diffusion of Misesian views in England in the 1930s was that Mises had predicted the Great Depression, and that his business cycle theory provided an explanation for that harrowing event of the 1930s. Unfortunately, when Keynes came back with his later model, the General Theory in 1936, his brand new "revolution" swept the boards, swamping economic opinion, and converting or dragging along almost all the former Misesians in its wake.
England was then the prestigious center of world economic thought, and Keynes had behind him the eminence of Cambridge University, as well as his own stature in the intellectual community. Add to this Keynes's personal charm, and the fact that his allegedly revolutionary theory put the imprimatur of "economic science" behind statism and massive increases of government spending, and Keynesianism proved irresistible. Of all the Misesians who had been nurtured in Vienna and London, by the end of the 1930s only Mises and Hayek were left, as indomitable champions of the free market, and opponents of statism and deficit spending.
In later years Hayek conceded that the worst mistake of his life was to fail to write the sort of devastating refutation of the General Theory that he had done for the Treatise, but he had concluded that there was no point in doing so, since Keynes changed his mind so often. Unfortunately, this time there was no demolition by Hayek to force him to do so.
If the business cycle theory was swamped by the Keynesian model, so too was the Mises-Hayek critiques of socialism, which Hayek had also brought to London, and to which he had contributed in the 1930s. But this line of argument had been brought to an end, in the late 1930s, when most economists came to believe that socialist governments could easily engage in economic calculation by simply ordering their managers to act as if they were participating in a real market for resources and capital goods.
During World War II, at a low point in the fortunes of human freedom and Austrian economics, in the midst of an era when it seemed that socialism and communism would inevitably triumph, Hayek published The Road to Serfdom (1944). It linked the statism of communism, social democracy, and fascism, and demonstrated that, just as people who are best suited for any given occupations will rise to the top in those pursuits, so under statism, "the worst" would inevitably rise to the top. Thanks to promotion efforts funded by J. Howard Pew of the then Pew-owned Sun Oil Company, the Road to Serfdom became extraordinarily influential in American intellectual and academic life.
In 1974, perhaps not coincidentally the year after his mentor Ludwig von Mises died, F.A. Hayek received the Nobel Prize. The first free-market economist to receive that honor, Hayek was accorded the prize explicitly for his elaboration of Misesian business cycle theory in the 1920s and ¡®30s. Since both Mises and Hayek had by that time dropped down the Orwellian memory hole of the economics profession, many economists were sent scurrying to find out who this person Hayek might be, thus helping give rise to a renaissance of the Austrian School.
Hayek's receipt of the Nobel at this time was deeply ironic, since after World War II his ideas began to diverge increasingly from those of Mises and thus acquire acclaim from latter-day Hayekians who are scarcely familiar with the work which had made Hayek eminent to begin with.
To the extent that Hayek remained interested in cycle theory, he began to engage in shifting and contradictory deviations from the Misesian paradigm¡ªranging from calling for price-level stabilization, in direct contrast to his warning about the inflationary consequences of such measures during the 1920s; to blaming unions instead of bank credit for price inflation; to concocting bizarre schemes for individuals and banks to issue their own newly named currency.
Increasingly, Hayek's interests shifted from economics to social and political philosophy. But here his approach differed strikingly from Mises's ventures into broader realms. Mises entire lifework is virtually a seamless web, a mighty architectonic, a system in which he added to and enriched monetary and cycle theory by wider economic political and social theories. But Hayek, instead of providing a more elaborate and developed system, kept changing his focus and viewpoint in a contradictory and muddled fashion. His major problem, and his major divergence from Mises, is that Hayek, instead of analyzing man as a rational, conscious, and purposive being, considered man to be irrational, acting virtually unconsciously and unknowingly.
Since Hayek was radically scornful of human reason, he could not, like John Locke or the Scholastics, elaborate a libertarian system of personal and property rights based on the insights of human reason into natural law. Nor could he, like Mises, emphasize man's rational insight into the vital importance of laissez-faire for the flourishing and even survival of the human race, or of foregoing any coercive intervention into the vast and interdependent network of the free market economy.
Instead, Hayek had to fall back on the importance of blindly obeying whatever social rules happened to have "evolved," and his only feeble argument against intervention was that the government was even more irrational and was even more ignorant, than individuals in the market economy.
It is sad commentary on academia and on intellectual life these days that Hayek's thought, possibly because of its very muddle, inconsistency, and contradictions, should have attracted far more scholarly dissertations than Mises's consistency and clarity.
In the long run, however, it will be all too obvious that Mises has left us a grand intellectual and scientific system for the ages whereas Hayek's lasting contribution will boil down to what was acknowledged by the Nobel committee¡ªhis elaboration of Misesian cycle theory. In addition, Hayek must always be honored for having the courage to stand shoulder to shoulder with his mentor, in the dark days of the interwar and postwar years, against the twin evils of socialism and Keynesianism.
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The London School of Economics’ Legacy to the Discipline
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The London School of Economics has been and continues to be one of the foremost global centres for researching and teaching of economics. Founded in 1895, the School was for the two decades of its existence overshadowed, at least when it came to the discipline of economics, by Cambridge University. However, spurred on by the work and activities of some of its early professors, notably Edwin Cannan, the LSE soon found itself at the forefront of the various economics debates which raged in the 1920s and 1930s. Leading the charge for the School was the formidable figure of Lionel, later Lord, Robbins, who was prepared to go up against the equally dominant John Maynard Keynes (who was also to become a peer) at Cambridge. However, Robbins was not on his own. He recruited a host of other economists, many of whom would go on to become important in their own right, to help him strengthen the economics offering coming out of LSE, most notable amongst them being Friedrich von Hayek and John Hicks.
As well as Robbins and his acolytes, LSE was producing other economists who would go on to achieve worldwide notoriety. For example, Ronald Coase came through the ranks at the School, first as a student in the 1930s and then, after a short interval, securing an appointment on the staff before leaving for the USA in the early 1950s. It was whilst he was at LSE that Coase’s highly influential 1937 article, The Nature of the Firm, appeared, it being one of the reasons why Coase was later to receive the Nobel Prize in Economics. In the 1950s, the School was also home to Bill Phillips of Phillips Curve fame.
In more recent decades, at least two key areas of contributions to economics can be identified. First, LSE was home to a number of eminent econometricians, spearheaded by James Durbin, who specialised in the analysis of economic time series and serial correlation, and Denis Sargan, whose expertise was also in time series. Second has been the important work of the School’s labour economists, led by Richard (Lord) Layard, with a particular focus on unemployment and matching theory, the latter resulting in a Nobel Prize for LSE economist Chris Pissarides in 2010. In the last few years, Layard has also become a leading figure in the research of the economics of happiness.
These currents of thought and more are brought together in the recently published volume entitled The Palgrave Companion to LSE Economics, edited by Robert Cord. With six chapters on themes in LSE economics and 29 chapters on the lives and work of LSE economists, The Palgrave Companion to LSE Economics shows how economics became established at the School, how it produced some of the world’s best-known economists, and how it remains a global force in economics. With original contributions from a stellar cast, The Palgrave Companion to LSE Economics provides economists – especially those interested in macroeconomics and the history of economic thought – with the first in-depth analysis of LSE economics.
The Palgrave Companion to LSE Economics follows the publication of The Palgrave Companion to Cambridge Economics (2017, and will be followed itself by The Palgrave Companion to Oxford Companion (due 2020). We then cross the pond to examine the influence of American universities, including MIT, Chicago and Harvard.
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Hayek’s intellectual contributions
Hayek’s writings span seven decades. He was professionally active through most of his adult life, and he contributed to a variety of disciplines, among them economics, political philosophy, psychology, the history of ideas, and the philosophy and methodology of the social sciences. Hayek was also controversial. A member of the Austrian school of economics, he was part of a tradition that was marginalized politically and generally dismissed by the economics community for about 50 years, starting in the 1930s. In that decade and the next, for example, Hayek was endorsing free market economics and classical liberal political doctrines when many intellectuals regarded socialist and welfare state policies as providing the “middle way” between totalitarianism (especially in its communist or fascist forms) and the perceived failures of unfettered capitalism (particularly in the aftermath of the Great Depression). As an early opponent of Keynes, Hayek lived through an era (especially in the 1950s and ’60s) when Keynesianism dominated the economics profession and the necessity of widespread government intervention in the economy was, by and large, universally accepted in the Western democracies. It was not until the stagflation (high levels of inflation and unemployment coupled with low growth) of the 1970s that Keynesian dominance was brought to an end, and in the late 1980s the collapse of communist states in the former Soviet Union and eastern Europe triggered a reassessment of Hayek’s contributions. There is now a significant secondary literature on Hayek and the Austrian school—some of which is critical, some adulatory. All these considerations call for caution in approaching Hayek as a historical figure. A survey of his most important contributions must, because of the breadth of Hayek’s work, be selective. Four general areas in which he made contributions will be reviewed below.
Trade cycle theory
Hayek’s earliest contribution was his development of a business cycle theory that built on the earlier work by Swedish economist Knut Wicksell and von Mises. Hayek’s theory posits the natural interest rate as an intertemporal price; that is, a price that coordinates the decisions of savers and investors through time. The cycle occurs when the market rate of interest (that is, the one prevailing in the market) diverges from this natural rate of interest. This causes the structure of the capital stock to become distorted, so that it no longer reflects the desires of savers and investors as expressed in the market. His theory had the unfortunate policy implication that attempts to counteract a recession, or period of high unemployment, with an increase in the money supply would further distort the structure of the capital stock. His remedy was simply to allow the recession to play itself out, thereby permitting the market rate to return to the natural rate.
While Hayek’s trade cycle theory, articulated during the Great Depression, has relatively few defenders today, some aspects of it remain valuable. These include Hayek’s conception of the interest rate as an intertemporal price and his idea that changes in the money supply can be an important cause of discoordination, particularly as those changes affect the ability of prices to accurately reflect relative scarcities.
Economics and knowledge
Among economists Hayek’s analysis of the role of assumptions about knowledge in economic theories is highly regarded. Hayek began developing his ideas during the 1930s, when the static equilibrium theories of the day were full information models; in other words, they assumed that all agents have access to the same objectively correct information. Hayek believed that such models fail to illuminate the role of market prices in providing information to market participants.
In his 1936 presidential address to the London Economic Club, Economics and Knowledge, Hayek posited instead a world in which knowledge is dispersed among many different agents and in which the information that any one agent holds is not necessarily correct. He then asked how social coordination could ever occur in such a world. His answer was that freely formed and freely adjusting market prices contain information about the plans and intentions of millions of market participants. Because of this, changes in prices reflect changing relative scarcities for factors, goods, and services, and they thereby enable market agents to plan and to bring their subjectively formed perceptions and expectations about market conditions into line with actual conditions. In other words, the world is constantly changing and errors are constantly being made; but errors create profit opportunities for alert entrepreneurs, whose actions bring market prices back in line with underlying relative scarcities. Hayek argued that market prices thus allow agents—all of whom operate with limited information—to coordinate their activities. By contrast, the full information equilibrium models obscure the process by which real markets deal with the problem of dispersed information, because they are based on the assumption that such coordination has already occurred.
Hayek came to these insights as the result of debates with opponents over his monetary theory and over the viability of socialism. As noted above, he demonstrated how changes in the money supply can interfere with the interest rate’s ability to coordinate intertemporal decisions and how inflation can disrupt the efficacy of price signals. According to Hayek, socialist schemes that either do away with markets (as, for example, when the means of production is nationalized, thereby eliminating factor markets in capital goods) or do not allow prices to adjust, or allow them to adjust only slowly (as is the case in planned economies in which prices are fixed by a central authority), further interfere with the ability of prices to coordinate dispersed knowledge.
Hayek later added to his analysis, first by noting that knowledge, in addition to being localized, is often tacit (that is, implied but not clearly stated). By its nature, tacit knowledge cannot be articulated, but it affects people’s behaviour and is captured in market prices. Hayek also noted that price systems were far from being a singular influence and that other social institutions assisted in coordinating human action.
The economics of information is now an important area of economics, and many theorists (among them, Leonid Hurwicz, Sanford Grossman, and Joseph Stiglitz) credit Hayek with being among the first to emphasize the role of market prices in conveying information. Interestingly, certain of Hayek’s ideas about knowledge (especially its tacit dimension) do not fit in so easily with mainstream information economics, so his analyses may with equal justice be seen as posing challenges to as well as anticipating later developments.
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https://statelegitimacy.com/2020/10/26/the-philosophical-influences-of-f-a-hayek/
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The Philosophical Influences of F. A. Hayek
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2020-10-26T00:00:00
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Friedrich Hayek receives the Nobel Prize in Economics, in 1974 Friedrich Hayek is perhaps best known as the father of neoliberalism, a quasi-messianic belief in markets as the prime source of a concept of value (and deliverance from totalitarianism), and the idea of spontaneous order, that things - all things - are not controlled, but…
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State Legitimacy
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https://statelegitimacy.com/2020/10/26/the-philosophical-influences-of-f-a-hayek/
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Friedrich Hayek is perhaps best known as the father of neoliberalism, a quasi-messianic belief in markets as the prime source of a concept of value (and deliverance from totalitarianism), and the idea of spontaneous order, that things – all things – are not controlled, but ordered, spontaneously. His Nobel prize in 1974 was awarded in part for his ‘penetrating analysis of the interdependence of economic, social and institutional phenomena.’ In other words, he was no mere ‘financial’ economist, whatever that might mean. His was a big project, one that encompassed the ultimate political objective of protecting individual liberty, in a career that spanned over sixty years, and major works including The Road to Serfdom and The Constitution of Liberty.
Hayek is important because the neoliberal order (such a pejorative term these days, but it wasn’t always the case) that he envisaged has entirely shaped the liberal democratic world to the point where work, education, healthcare, technology, and even theory itself have each been reduced to an incentive- and market-driven enterprise. The ‘marketisation’ of everything, or indexicality as the French documentalist Suzanne Briet refers to it, is about counting, ranking and scoring, what Leo Strauss would doubtless have called a relativist nightmare. In particular, it has shaped technology, specifically information technology, that has such an oversized influence on our current affairs. Indeed, a good part of his speech in accepting that Nobel Prize in 1974 was given over to criticism of science and scientism, and the myth of what he refers to as ‘conscious human control’.
His fundamental philosophical position then is that markets, or more specifically the price system, offers a mechanism to understand the order that has spontaneously emerged around us. Where did this come from? Three philosophers who I’ve consciously sought connections with of late are Baruch de Spinoza, Carl Schmitt, and Friedrich Nietzsche. I should be careful to note that this is not from an investigation of Hayek’s influences, but rather from a study of these thinkers, and seeing connections there to his thought.
Spinoza was a leader of what Jonathan Israel refers to as the Radical Enlightenment. This was an enlightenment unburdened by a belief in God, although Spinoza’s philosophy didn’t necessarily preclude such a possibility. He believed in a single substance, containing everything in existence, and saw no separation between human beings and nature, or indeed human beings and other human beings. This substance had an internal order, which reflected Hayek’s later construction of ‘spontaneous order’. The influence on Hayek appears only to have been acknowledged indirectly, though Mandeville (ref: Wagener, 1994), though it was most certainly a strong presence. My own research into Spinoza’s thought is in its infancy, but as a precursor to modern secular liberalism it appears to have been far more influential and persistent than any of the French (Voltaire, Rousseau) or English (Hobbes, Locke) thinkers of the seventeenth and eighteenth centuries.
Carl Schmitt’s Political Theology was conjured just before Hayek began to substantively contribute to twentieth century thought. The connections however are strained to say the least. Still, the concept of state in Schmitt and Hayek appear both to coalesce in the futility of human supremacism: that the state itself no more exerts actual control than is evident in the state of nature. For Hayek, our order is a spontaneous order, not – as quoted above – conscious human control. For Schmitt, the modern liberal democratic state only becomes active in its denial of liberalism: in the state of emergency. So for Hayek, we delude ourselves into thinking that somehow the State is acting upon its subjects for good or ill, and ‘making’ freedom in some sense, while for Schmitt we are all free until the State becomes active in our lives.
As for Nietzsche, like Spinoza and Schmitt he saw a certain hubris in mankind, a falseness in the learned environment. True freedom, for Nietzsche, lay in first unlearning; then progressing to the state of the child. The State was no bringer of freedom; liberalism was merely a word. How could that have influences Hayek? In his Constitution of Liberty, Hayek ferociously defends the idea of individual liberty as a precursor to wealth and growth. This should be the object of our endeavours. Liberty, in Hayek’s view, could not be imposed, traded, or dictated: it was a particularly personal thing. Therefore the State should be creating the conditions for liberty.
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https://mediatheque.lindau-nobel.org/recordings/31497/evolution-and-spontaneous-order-1983
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Friedrich von Hayek - Lectures
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2014-08-06T17:16:20+00:00
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Evolution and Spontaneous Order
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Lindau Nobel Mediatheque
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https://mediatheque.lindau-nobel.org/recordings/31497/evolution-and-spontaneous-order-1983
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Ladies and gentlemen, in the hope to be able to offer something which will be of interest not only to economists but also to natural scientists generally, I've chosen a problem to discuss, which although derives from my study of economic problems, seems to me to apply in a much wider field. In fact everywhere where the increasing complexity of the phenomena with which we have to deal, forces us to abandon the hope of finding simple explanations of cause and effect. And have to substitute an explanation of the evolution of complex structures. I'd like to speak in this connection of the two problems of spontaneous formation of orders and evolution. Since it is usually an evolution of cases by which alone they can account for, but account to a very limited extent, with the existence of certain types of structures. In this sense I can agree with what Sir John Hicks said yesterday that the degree to which in these sciences we can make predictions is very limited. What I'd like to say in this connection that we are confirmed to pattern predictions to the likelihood of the formation of certain structures. They have never been able to make very special predictions of particular events. And in this sense, as Sir John Hicks indicated, we are scientists of a second order but what we have in common with such an enormous field is a biological theory of evolution, which under strict tests, which Sir John has yesterday suggested, would also not be a science since it is not able to make specific predictions and the same is true in our field. Now, the whole interrelation between the theory of evolution and higher accounts of the existence and formation of complex structure of interaction, has a very complex and paradoxical history. I will allow myself, even if it delays the length of my lecture, to tell you a little about the historical evolution which in itself has had profound effects on our attitude to these phenomena. In recent times the application of evolution to social phenomena has been rather and justifiably discredited when social scientists had to learn from Charles Darwin and developed something known as social Darwinism as if the idea of evolution were originally an idea of the biological sciences. While in fact as a much rathered tradition of evolution in the study of society that can be demonstrated that it was Darwin who borrowed it from the social sciences and not the other way round. There's another deep connection which I want to say a few words. The attitude towards social phenomena particularly higher judgement of various models used is very closely connected with an age old tradition which starts in antiquity with no lesser person than Aristotle, who has given us a wholly a-evolutionary conception of social institution, which through its effect on St. Thomas Aquinas has become the attitude of a large part of Christianity towards everything which amounted to a growing development of civilisation because he had defined as good what was necessary to preserve an existing order without ever asking himself the question how was it ever possible that if all our duty was to provide for the preservation of what is that mankind ever greatly developed. It has even been asserted by a modern economic historian that Aristotle could not have seen the problem of evolution and the problem of the connection of evolution with operating market economy. Because at the time when he lived the market economy, as we call it, which is a result of evolution did not yet exist. On two points I can give you a rather interesting brief evidence, since my assertion that Aristotle did not possess any conception of evolution, which prevented him forever understanding social problems has remarkably been confirmed by the grand latest history of the biological sciences, one of the greatest historians of any modern science which I've recently come across, Ernst Mayr's 'The Growth of Biological Thought'. In which he, to my great satisfaction, since this has been part of my argument for a long time, explicitly argues that the idea that the universe could have a development from an original state of chaos, that higher organism then evolves from lower ones was totally alien to Aristotle's thought. To repeat, Aristotle was opposed to evolution of any kind. Now, that had the profound effect on his views about society which we have inherited from him. The view which I have already suggested that was good which served the preservation of existing institutions. But he never asked himself how in fact in his very lifetime Athens had about doubled in size, a largely increased population had arisen. But he detested the market, as so many intellectuals did. But I will just give you another illustration of how lively the market at the time was. Which comes from a contemporary of Aristotle, one of these writers of comedy of his time from whom only fragments are preserved, but that particular one is especially amusing because Mr. Eubulus, as his name was, with the even then common attitudes of intellectuals to commercial affairs expressed his contempt for the role of the market in a few lines which have been preserved, in which he tells us: figs, salmon, grapes, turnips, pears, apples, sausages, honeycombs, roses, medals, chickpeas, water clocks, metals, lamps, blueberries, laws, impeachments, lawsuits, carts, beastings and the ballot box." Now, that in a society in which the comedians could make themselves fun about the market in such a form clearly the market was most active. Now, why did Aristotle not see it, what effect had it? Well, the fact is that at that time the idea of evolution had hardly yet arisen in any field, except two. The original insight of man and the fact that his institutions have gradually grown, not as a result of intellectual deliberate design, but as a matter of slowly growing tradition existed even then in two fields, law and linguistics. At least the ancient Rome students of law and linguistics were fully aware that these institutions had not been deliberately designed by the human mind but had grown by a process of evolution. And that concept of evolution remained for the next 2.000 years. But in the 18th century things began to change. A new first a remarkable instance at the very beginning of the 18th century, when a man, a Dutch man living in England, called Bernard Mandeville, began to study the formation of institutions and already pointed out four paradigms, or paradigmata as I prefer to call them, of these phenomenon But adding to them morals, money and the market. David Hume was a great figure who took over from Mandeville this idea and created the tradition of Scottish philosophers. And particularly and basically relevant to what I shall be going to say, had the deep insight that human morals are not the design of human reason. An insight of double importance: it followed for him that if human morals were not a design of human reason, it also followed that the reason science did not allow us to judge human morals. You could never derive moral conclusions from purely factual statements. An idea which is nowadays mainly usually ascribed to Max Weber, but was since the time of David Hume was well established. But in this connection of course he arose a problem, what were our morals really due to? And the conclusion from his principle is not that science has nothing to say about morals at all, but that the questions which we can legitimately ask are limited. A question which we can still ask, which we can demand an answer from science is: What are the morals which we have inherited due to? How came it about that we developed those morals and never others? And secondly, until we connected with it, a second question, which is also a scientific question: What have these morals done to us? What has been the effect of mankind developing this particular kind of morals? As a field in which I as an economist had to pursue these problems where they were of enormous importance is the field of the morals of property, honesty and truth. They are all moral rules which are not the creation of human design, which on the human terms we cannot scientifically say whether they are good or bad, unless we look at them from the point of view of what effect they had on the development of humankind, of the number of humans and of their civilisation. This remains a basic question. At the same time we must be aware that the very tradition of several, or as we usually say private property, is that part of our morals which is the most disputed and disliked. That is due to the fact that politically opposed. And that is due to the fact that it truly is a tradition which is neither natural in the sense that it is innate in our physical makeup, nor artificial in the sense of being deliberately made by human reason, because as the Scottish philosophers of the 18th century so clearly understood, man had never deliberately made his society. Indeed, when we look back at history, we find that these traditions never rationally justified were preserved in a variety of groups or communities, because they were confirmed by supernatural beliefs, not scientific reasons, but beliefs which I think I should respectfully call ceremonial truths. They are not truth in the sense of scientific truths, demonstrable truths. But truth in the sense of making men actually do what was good for them. Good for them in the sense of helping them to maintain even larger numbers of themselves. Yet without being able to give the actual reasons why they ought to do them. Truths would stand between the natural insights, which are innate in us, and the rational insights, which we construct from our reason, what is belonged to the intermediate field of tradition, which is a result of a product of selective evolution, in many ways similar to the selective evolution of which for the first time we got a full theory developed by Charles Darwin and the Darwinian school. But there are fundamental respects different from it. I referred before that it was a great misfortune that the social scientists about a hundred years ago had to borrow the idea of evolution from Charles Darwin. And borrowed with it the particular mechanism which Charles Darwin, or rather the neo-Darwinism later, had provided as an explanation of this process of evolution, which was very different from the mechanism of cultural evolution, as I shall call it. Now, that was a misfortune and quite unnecessary misfortune. Due to the fact that it seems that by that time the social scientists had forgotten what was a much older tradition in their own field. And weren't even aware that Charles Darwin developed his ideas largely by learning of the idea in the other field. I believe recently it has even been shown that the crucial idea came to Darwin's mind in 1838 when he was reading - what book? - The Wealth of Nations of Adam Smith. Which of course was a classical exposition of the Scottish idea of evolution and which seems to have been the decisive influence even on Charles Darwin. Darwin himself admitted that he was influenced by the school, but he usually mentioned Malthus as an influence which he recollected, but his notebooks now show that what he was actually reading at the time seems to have been the Wealth of Nations of Adam Smith. And the result is that this first great success in developing an actual theory of evolution, in the field of biology, made people believe that this example had to be followed. I might just insert here another illustration of my story which I have only recently discovered. But this is perhaps more clearly than anything else confirms my basic assumption that the conception of evolution derives from the study of society and was taken over by the study of nature. I can demonstrate very easily that the term 'genetic', which today is an exclusive term for biological evolution, was actually coined in Germany in the 18th century by men like Herder, Wieland and Schiller, and was used in the quite modern term by Wilhelm von Humboldt, long time before Darwin. The Humboldt passages are so interesting that I can even quote them. Humboldt spoke in 1836 about the fact that the definition of language can only be a genetic one ("nur ein genetisches sein kann") and goes on to argue that the formation of language, successively through many stages, like the origin of national phenomena, is clearly a phenomena evolution. All that was ready in the theory of languages, Yet it had been forgotten, or at least ignored, outside the two classical instances of language, law and I may now add economics including some market and money. And when it was reintroduced by the social Darwinists, all the parts of the explanation of the mechanism were also taken over. So my next task will be clearly to distinguish what the social theories of evolution and the biological theories of evolution have in common and what they do not have in common. I shall begin with the much more important differences, before I turn to the crucial but very confined similarity between the two. The differences are the following, and I'm now concentrating on the account of the mechanism of biological evolution given by neo-Darwinism. Darwin was in some of these points still himself not quite sure, particularly on the first point I shall mention. Cultural evolution depends wholly on the transmission of acquired characteristics exactly what is absolutely excluded from modern biological evolution. If one were to compare cultural evolution with biological evolution and not have to compare it with (???25:30) rather than with Darwinian theory. Number two, the transmission of habits and information from generation to generation in cultural evolution does of course not only pass from the physical ancestor to the physical descendants. But in the sense of cultural evolution, all our predecessors may be our ancestors and all the next generation may be our successors. It's not a process proceeding from physical parent to physical child, but proceeding in a wholly different matter. Thirdly, that perhaps is even more important, the process of cultural evolution undoubtedly rests, not on the selection of individuals, but on the selection of groups. Biologists still dispute, I believe, what role group selection plays in biological evolution. There is no doubt that in cultural evolution group selection was the central problem. It were groups which had developed certain kinds of habits, even certain kinds of complementarities between different habits within the same group, which decided the direction of cultural evolution, and in that respect it is fundamentally different from biological evolution. Now, this implies what I shall call number four, perhaps it's already implied, that of course the transmission of cultural evolution is not of innate characteristics, but is all to be learnt in the process of growing up. The contribution of natural evolution to this is a long period of adolescence of man, which gives him a long chance of learning. But what is transmitted in cultural evolution is taught or learnt by imitation. Now, that has produced an immaterial structure of beliefs and opinions, which recently Sir Karl Popper has given the name of World Three. A world of structures which existed, not only because they are known by a multiplicity of people, but yet, in spite of the immaterial character, can be passed on from generation to generation. Finally cultural evolution, because it does not depend on accidental variation and their selection, but on delivered efforts which contribute to it, is infinitely faster than natural evolution can ever be. There is a time of 10,000 or 20,000, or perhaps 40,000 years that modern civilization has grown up, man could have developed all that he has developed by the process of biological evolution is wholly out of the question. In this respect the much greater speed of cultural evolution is decisive. Now, having got here, you will ask: What similarity remains? They are wholly different all together. There are two fundamental similarities between the two, which justify up to a point the application of the same name 'evolution'. The first is that the principle of selection is the same, in biological evolution and in cultural evolution. What is being selected is what contributes to assist man in his multiplication. This assists him in growing in numbers, just as do his physical properties which helps the individuals to survive. So the cultural properties which are being selected are those which helps a group which has adopted it to multiply faster than other groups and transforms (???30:53) gradually to this place and takes the place of Darwinism (???). There's a second close similarity which is very important but generally not understood. And it may even surprise you at first when I mention it. Both biological evolution and cultural evolution do not know any laws of evolution. Laws of evolution in the sense of necessary stages through which the process has to pass. This is a wholly different conception of evolution which asserts since Hegel and Marx and similar thinkers that they have discovered laws or sequences of stages for which the evolution process must pass. There's no justification for such an assertion. Much worse, they are in conflict with the other ideas of evolution. Both biological evolution and cultural evolution consist in a mechanism of adaptation to unknown future events. Now, if there's an adaptation to unknown future events, it's wholly impossible that we should know laws it must follow, because this development is by definition determined by events which we cannot foresee and not know. And that brings me to what ought to have been my simple subject but for which I'm afraid I do not have as much time now as I would like to have. What is the essential subject of the cultural evolution to which I attach such importance? As I indicated before, there are two general characteristics which all civilizations which have survived and expanded have so far possessed and against which all revolutionaries have at all time protested. This is a tradition of several - as I would prefer to call it - private, I prefer to call it several property. And the tradition of the family. I haven't time here to consider any further the tradition of the family. It's a much more difficult problem because I believe there are changes in our factual knowledge which will probably lead to fundamental changes in the tradition of the family. So I confine myself wholly to the proposition of private property, which of course is that tradition against which for 2,000 years all revolutionaries have directed efforts. Nearly all the religious reformers with very few exceptions invented a new religion which abolished several property and usually also the family. But none of these reforms, or none of these revolutionary religions which constantly crop up have ever lasted for more than a hundred years. And I think the most recent one of that type which we also must regard as such religion opposed to property and the family, that of communism, has not yet lasted for its hundred years and I very much doubt that it will reach its hundred years. But all the great religions which have come to expand and to be held by an ever increasing part of the world have these two things in common that they affirmed private property and the family. Not only these monotheistic religions, but also the two or three great eastern religions all agree on these two features. My contention is, it is because they affirmed and preserved those traditions in their groups that these groups were selected for indefinite expansion. Because they made possible some multiplication of the people who obeyed morally restricted by them. Now, such religious support was indispensible. Because if it is true what is my main and starting contention that the morals of private property and use of the family are neither natural in the sense of innate nor rational in the sense of design. It is a great problem why any group should long enough stuck to a habit in order to give the process a chance of it to expand and select only groups which for long periods believed in what I have meant to call symbolic terms. I couldn't remember the word a minute ago. Only traditions which succeeded in making whole to certain symbolic truths would be left to maintain moral rules whose advantages they never understood. It implies the assertion that the institution of private property was never due to the fact that it was a small proportion of a population who could see how private property benefited them, defended their interest. It can only exist in the much larger numbers than those who know that they benefited from private property supported these things. And it was possible only due to religious beliefs which taught it to them. This is what I meant before when I said we owe civilisation who believes which in our modern opinion we no longer regard as true, which are not true in the sense of science, scientific truths, but which nevertheless were a condition for the majority of mankind to submit to moral rules whose functions they did not understand. They could never explain and this indeed to all rational critics appeared very soon to be absurd. Why should people respect private property if this private property seems to benefit only the few people who have it in societies where very soon very much larger numbers are existed than those in the primitive agricultural society still the majority and who owned the instruments of their production. That creates a situation which is historically very interesting. Did mankind really owe its civilisation to beliefs, which in the scientific sense were false beliefs? And further the beliefs which men very much disliked? Because I can't really not very much doubt and if this thesis is true, mankind was civilized by a process which it intensely disliked. They're being made to submit to rules which it neither could understand nor liked. But I believe that this is perfectly true. And I believe I can claim that before the birth of the science of economics, before the 18th century began to explain why the market society could arise only on the basis of institution of private property, it would have been impossible for mankind to ever to multiply as much as it did. And equally it was only in the 18th century, a century David Hume, Adam Smith and his contemporaries did clearly see that the mechanism of selection was that groups were selected which thanks to the institution of private property were able to multiply faster than others. This is of course a criteria which again has become very unpopular, which only the economists and only some of the economists understand. At the present time the general attitude is to think that the multiplication of mankind is a great misfortune, that nothing we have to fear more than the too rapid multiplication of mankind, and we are constantly painted the horror of a society in the near future, which will be a society of standing room only. There are several things to be said about this. I must abbreviate it, or this could be a subject of another interesting lecture. The first is, as a fear of an increase of population leading to impoverishment is wholly unfounded and it has never in history yet happened, that an increase of population lead to people becoming poor. The contrary impression is due to the fact that the concept of poor and rich is mentioned in terms of averages and not in terms of individuals. It is true that economic progress based on the private property and the division of labour leads to a faster increase of the poor than of the rich. With the result that average incomes may indeed fall as a result of the population. But nobody need to have to become poorer for this reason. It only means that the poor have increased more than the rich. Therefore the average is pulled down but nobody has been pulled down as the result of this development. The explanation of this, both of the actual fact and the mistake which derives largely from Malthus, is that with an increase of population human labour must also be subject of decreasing returns. That would be true in a world like the one in which Malthus was largely thinking, where human labour was uniform and nearly all people were working in agriculture. And in such a society indeed an increase of population would lead to the reduction of the product per unit of labour. But the great benefit of an increase of population, he said it makes possible a constant differentiation of human activities. An increase in the quantity of men is not an increase in the number of one factor of production. It's a constant growth of new additional and different factors of production which in collaboration can produce much more. It seems indeed that in a way the increase of population, where it leads to an increase in civilization, brings increasing rather than decreasing returns. Let me repeat, there is no evidence that ever in history an increase of population has led to the real impoverishment of the existing population. There are two or three special cases which I must mention. It has of course happened that when other circumstances destroyed the source of income which made an increase in population possible, great poverty resulted. The classic case of course being Ireland in the 19th century, which on the potato had increased its population to something near four times what it had been before. And when the potato disease struck, removed the source of the income and led to the result that this great increased population could no longer be nourished. Another case which one must consider separately, and that I think ought to give us cause to serious reflection, that there are instances and we are now creating instances, when increase of local population is due not to an increase of that population to produce more, but to foreign help. And that instances probably there will never be space or food for a larger home produced population in these places. I can give you an instance, a much quoted instance of the region immediately south of the Sahara, the so-called Sahel regions, which are clearly not able now to feed their population, and which we are exerted to help to feed. With the result of course that, because there are further increases of population, which will be our responsibility, because for all one knows, they will never have the opportunity in their own region to produce enough. I think that raises extremely serious problems for our present policy of help to some underdeveloped countries. Now, all these changes of course are aspects, are attitude to policy in a great many ways. But the crucial one is still a one towards the necessity and essential condition of the institution of several property, and particularly several property in the means of production as an indispensible instrument of preserving the present population of the mankind. Half the mankind, at least officially, we are told, believes in the opposite. Believes that it is by abolishment of the institution of several property that we not only can still maintain the present population, but that we can provide for it better than we did. Now, if what I'm saying is right, if it is true that I can only hint at, that several property is the indispensible basis of the utilisation of widely dispersed knowledge on which a market economy rests, it means that the opposite view, chiefly represented by communism, would lead not to an improvement of the population, but probably bring it about something like half the present population of the world would die. We have of course very significant illustrations of this. Quite a number of countries who are great exporters of food, so long as they were operated on a market economy, not only Russia, but also Argentina and others, are already no longer able themselves to maintain their own population, which is has not increased a great deal, nothing like as much as the population in the West. But the final conclusion is therefore what seems to be a political conclusion. A conclusion about the consequences of two alternative ethical systems to which the two halves of the world now adhere. If it is true that we can maintain even the present population of the world, only by relying on the whole system of market economy resting on the several properties and the instrument of production. And then this abolition would lead to something like a large proportion of mankind dying of hunger. That would seem an undesirable result, even if the scientists are not allowed to call it undesirable. But I can say the result which most people would not desire if they knew it. And it allows the conclusion which I'm afraid I will draw, even at the risk of totally discrediting this Laureates meeting of scientists here, that the contrary view, which believes that we can do better in maintaining the present population of the world by abolishing several property is well meant but very foolish. Thank you.
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John Gray: The Friedrich Hayek I knew, and what he got right – and wrong
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In the 1980s, when F A Hayek was one of the intellectual icons of the New Right, some of the more doctrinaire members of that complicated and fractious movement used to say that for him a minimal government was one that provided three things: national defence, law and order, and a state opera. It was an observation made only partly in jest. The Austrian-born economist and
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https://www.newstatesman.com/long-reads/2015/07/john-gray-friedrich-hayek-i-knew-and-what-he-got-right-and-wrong
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In the 1980s, when F A Hayek was one of the intellectual icons of the New Right, some of the more doctrinaire members of that complicated and fractious movement used to say that for him a minimal government was one that provided three things: national defence, law and order, and a state opera. It was an observation made only partly in jest. The Austrian-born economist and philosopher may have been the thinker who, more than anyone else, articulated the free-market ideology that came to power along with Margaret Thatcher; but his view of politics was formed not in Britain, his adopted country, but in the Habsburg empire, where the Vienna Court Opera was a department of government whose existence no one would dream of questioning.
Born in that city in 1899, Hayek came from an upper-middle-class background – his father was a medical doctor with a passion for botany who always wanted to be a professor, while his mother came from a wealthy land-owning family. The Hayeks enjoyed the prosperity of the closing decades of what the Austrian author Stefan Zweig described as “ the age of security”: the long period of stability provided by the 68-year reign of its last-but-one emperor, Franz Joseph. Hayek witnessed the collapse of an imperial regime that for generations had been more civilised and more liberal than most of the nation states that replaced it in interwar Europe. It was this Habsburg realm, as he experienced it in its final years, which shaped Hayek’s thinking about freedom and government.
My interest in Hayek, which began in the early 1970s, was as much to do with intellectual life in the Vienna of his youth as with the condition of British politics at the time. One of the first questions I asked after we had met through one of the right-wing think tanks that were proliferating around the end of that decade was whether he had known Karl Kraus, the incomparable Viennese satirist, who in 1909 had written, with some prescience: “Progress celebrates victories over nature. Progress makes purses out of human skin.” Hayek replied that he had not talked with Kraus, though he remembered seeing him crossing the road to enter a coffee house some time during the First World War. Hayek had little in common with Kraus. Cool and reserved, he had nothing of Kraus’s wit. Although he was academic in his manner, Hayek’s most striking intellectual trait was one that is uncommon in academic life – independence of mind, which enabled him to swim against some of the most powerful currents of the age.
I was also keen to learn something of Hayek’s connection with Wittgenstein, a relative of his about whom he had written a biographical fragment, “Remembering My Cousin, Ludwig Wittgenstein”, published in Encounter in 1977. Hayek met Wittgenstein by chance, on a railway station in August 1918, when they were both in the uniform of the Austro-Hungarian army. Travelling on together, they talked throughout the journey – a conversation Hayek told me had influenced him deeply, though not because of any philosophical exchange that he could remember. The two would never become close and their paths crossed only occasionally; but there seems to have been a meeting of minds between the two artillery ensigns on their way back to war. At the time both were ardent socialists who attributed the disaster that had befallen Europe to the malign impact of capitalism.
At the start of the 20th century, Vienna was one of the world’s great cosmopolitan cities. Though not without grievous bigotry – in 1897, after repeated attempts by the emperor to block the appointment, the city elected a virulently anti-Semitic mayor – the population was not divided, as much of central Europe soon would be, into violently hostile groups. The antique structures of the Habsburg state supported a society that was remarkably modern, not only in its embrace of technology (railways and trams, electric lighting and public sanitation) but also in enabling people with widely differing cultures to coexist and work productively with one another. The destruction of this order after the Great War by the forces of nationalism – which the US president Woodrow Wilson inflamed by insisting that Europe could be rebuilt only on the basis of popular self-determination – framed a dilemma with which Hayek struggled for the rest of his long life (he died in 1992).
How could liberal values be renewed in a time of political tribalism? It was a question Hayek could not answer. Instead, he came up with a mix of evolutionist pseudo-science and rationalistic designs for an ideal liberal regime. Having abandoned his youthful socialism under the influence of the doctrinaire market economist Ludwig von Mises (1881-1973), Hayek came to believe that a process of social evolution would impel humankind in the direction of the values he favoured. His legacy to liberal thinking has been a type of scientism – the mistaken attempt to apply the methods of the natural sciences when examining the human world. It’s an ironical outcome, given that he was a forceful critic of scientism in economics. In his speech on receiving the Nobel Prize in 1974, Hayek described the efforts of economists to mimic the methods of the natural sciences as having produced a “pretence of knowledge”.
***
One of the oddities of Hayek’s career is that while his professional standing was secured through his work as an economist, he had by the mid-1940s given up economics as his central intellectual activity. A major reason for Hayek’s shift into social philosophy was that he believed – correctly – that he had lost the debate with John Maynard Keynes about the causes of the Great Depression. There can be no doubt that his encounter with Keynes was the most important event in his intellectual life. Yet he had little insight into Keynes either as a thinker or a human being. He told me that during their acquaintance he never realised that Keynes had been homosexual – a surprising admission, as it was hardly something Keynes concealed within his circle of friends. The two men had quite different kinds of minds – Keynes’s swift and mobile, with an almost clairvoyant power of entering into the thinking of others; Hayek’s slowly probing, inwardly turned and self-enclosed. They were nonetheless on cordial terms.
Keynes found Hayek rooms in King’s College when the London School of Economics (where Hayek became a professor of economics in 1931) moved to Cambridge for the duration of the Second World War, and for a time the pair shared fire-watching duties on the roof of the college when it was feared that Cambridge might be bombed. With characteristic generosity, Keynes – while firmly rejecting its claim that government management of the economy is bound to lead to totalitarianism – heaped praise on Hayek’s anti-socialist tract The Road to Serfdom when it appeared in 1944.
The differences between the two thinkers were as much in their underlying philosophies as in their economic theories. Both were sharply aware of the limits of human knowledge. But whereas Hayek invoked these limits to argue for non-intervention in the economy, Keynes recognised that bold action by governments is sometimes the only way in which the economy can be lifted out of depression – as when Roosevelt (to whom Keynes had written an open letter in 1933) successfully adopted some aspects of Keynesian thinking in the New Deal.
Hayek was most original when he argued that the market is a means of discovering and transmitting information that is dispersed throughout society. It was this insight into the knowledge-creating function of markets that enabled him to formulate a decisive argument against central economic planning.
Generations of socialists have maintained that the failings of the Soviet economy were because of historical causes extraneous to the planning system: a lack of democracy rooted in tsarist traditions of despotism, the underdevelopment of the Russian economy when the Soviet system came into being, and Stalin’s deformation of Lenin’s supposedly more benign inheritance.
As Hayek perceived, none of these factors can account for the universal failings of planned economies, which have followed a similar pattern in countries as different as Czechoslovakia and Mongolia, East Germany and Cuba. The fundamental reason for the failures of central economic planning is that economic knowledge cannot be centralised. More than the love of power or the inevitability of corruption, it is the limitations of human knowledge that make socialist planning an impossible dream. Here Hayek’s argument was unanswerable.
The trouble is that it also applies to unfettered market capitalism. No doubt markets transmit information in the way that Hayek claimed. But what reason is there to believe that – unlike any other social institution – they have a built-in capacity to correct their mistakes? History hardly supports the supposition. Moods of irrational exuberance and panic can, and often do, swamp the price-discovery functions of markets.
When considering how to overcome the Great Depression, Hayek opposed Keynes-style fiscal stimulus for the same reason he opposed monetary expansion of the sort later advocated by his friend the American economist Milton Friedman (1912-2006). In attempting to generate recovery by macroeconomic engineering, both monetarism and Keynesianism required a knowledge of the economy that no one could possess. Unlike monetarism – with which it has sometimes been confused – the Austrian school of economics that Hayek promoted insists that the quantity of money cannot be measured precisely, and that expanding the money supply cannot reflate the economy in a sustainable way.
For Hayek, the causes of the Depression lay in earlier central bank policies of cheap money, which resulted in large-scale misallocation of capital. Because no central authority could grasp the shifting pattern of relative scarcities and prices, only the market could determine the right allocation. Accordingly, believing that misguided investments had to be liquidated, Hayek argued in the 1930s for policies that were more contractionary than those that were actually pursued. The task of government was to get out of the way and let the process of adjustment run its course.
If they had been adopted while the crash was under way, Hayek’s prescriptions would have made the Depression even worse than it proved to be – a fact he later admitted. But he never accepted Keynes’s core insight that large-scale economic discoordination could be the result of the workings of the market itself. For him it was always government intervention that accounted for market disequilibrium. More sceptical as well as more radical in his turn of mind, Keynes questioned the self-regulating powers of the market. His work on the theory of probability disclosed insuperable gaps in our knowledge of the future; all investment was a gamble, and markets could not be relied on to allocate capital rightly. There were booms and busts long before the emergence of modern central banking. Left to its own devices, the free market can easily end up in a dead end like that of the 1930s.
***
Keynes’s own experience told against Hayek’s theories. As one of the 20th century’s most successful speculative investors, playing the markets on behalf of his college from a phone at his bedside before he got up for the day, he understood – in a way that the inveterately professorial Hayek did not – the ineradicable uncertainty of economic life. As a member of the British delegation at the Paris Peace Conference in 1919, Keynes had been horrified at the punitive conditions imposed by the Allies, which he forecast would destroy the German economy and lead to an upheaval that would “submerge civilisation itself”. Keynes had an acute sense of the risks posed to social stability by misguided economic policies. In contrast, Hayek consistently ignored these hazards.
Hayek’s blind spot with regard to politics was clear in the early 1980s when the first Thatcher government, in an attempt to reduce inflation and bring the public finances closer to a balanced budget, was raising interest rates and cutting public spending. As he had done during the 1930s, Hayek attacked these policies as not being severe enough. It would be better, he told me in a conversation we had around this time, if Thatcher imposed a more drastic contraction on the economy so that the wage-setting power of the trade unions could be broken. He appeared unfazed by unemployment, which was already higher (more than three million people) than at any time since the 1930s, and would rise much further if his recommendations were accepted.
Fortunately Hayek never had any influence on Thatcher’s policies. (Her chief economic adviser in these years was Alan Walters, a Friedman-style monetarist.) Equally, and perhaps also happily, Thatcher had no understanding of Hayek’s ideas. If it was true that she carried about with her for a time a copy of Hayek’s magnum opus, The Constitution of Liberty (1960), she cannot have read its postscript, “Why I am not a Conservative”, in which Hayek explains that he rejects conservatism because it lacks a vision of human progress. A case can be made that Thatcher was no conservative, either – at least if being conservative includes an aversion to policies that impose deep changes on inherited social institutions. But this is a view that goes only so far. Unlike Hayek, Thatcher understood and accepted the political limits of market economics.
Though he witnessed at first hand the collapse of liberal civilisation in interwar Europe, Hayek had little sense of the fragility of freedom. He observed how the Habsburg regime was destroyed, first by war and economic ruin and then by nationalism, but his response was to look for what he called in his book Individualism and Economic Order (1949) “a permanent legal framework”, which could serve as a guarantor of liberty in the economy and society. Here Hayek disregarded the principal lesson of the interwar years, which is that a liberal regime cannot be secured by legal diktat.
Geopolitical conflict and war, economic upheavals and new social movements have repeatedly damaged or destroyed liberal regimes. No ideal constitution can overcome the permanent threats to liberal values.
Yet throughout his writings Hayek invoked the mirage of a legal order in which vital freedoms are protected by being insulated from the political process. Something like this protection was provided by the Austro-Hungarian empire during the reign of the emperor Franz Joseph, and it is almost as if Hayek were trying to reconstitute the Habsburg realm in a new form that would last for ever. He was always sympathetic to the attempt to build a European federal union – a fact that only confirms his blindness to political realities.
***
Hayek’s attempt to fashion a regime in which the freedoms he cherished would be invulnerable to political challenge led him to some curious proposals. In The Political Order of a Free People (1979), the third volume of his last major work, Law, Legislation and Liberty, he outlined a scheme for a bicameral legislature in which the upper chamber is composed only of people elected at the age of 45 for a 15-year term by an electorate also consisting only of 45-year-olds. When they reached 60, members of the upper house would be retired and given a lifelong sinecure.
Hayek liked to ridicule the idea that institutions could be designed on the basis of abstract models – a view he criticised as embodying a philosophy of “constructivist rationalism”. Yet his scheme for an ultra-liberal constitution was a prototypical version of the philosophy he had attacked.
It may have been a half-conscious awareness of the limitations of this rationalistic philosophy that fuelled his evolutionary speculations. Underpinning his defence of the free market was a belief in what he called “spontaneous order in society” – the idea that, if only human beings were not subject to oppressive governments, they would evolve in ways that allowed them to live together in peace and freedom. This was not a view held by Hayek’s friend and LSE colleague Karl Popper, who gently demolished it when I talked with him, or by the conservative philosopher Michael Oakeshott, also a colleague at the LSE, who dismissed it – accurately – as “rubbish”. A type of unplanned order may well emerge in society but there is no reason why it should respect liberal values. There is nothing particularly liberal about the Mafia.
The fallacy that a process of social evolution is at work that will promote the spread of some version of liberal values goes back a long way. Propagated by Herbert Spencer, the prophet of laissez-faire who first coined the expression “survival of the fittest”, it was widespread in the late 19th century. There are many similarities between Hayek’s and Spencer’s theories, not least the idea that capitalism will prevail over other economic systems because it is more productive and can support a larger human population. Hayek assured me that he had never read Spencer, and I’m sure this was the case. Very similar ideas had been popular in fin-de-siècle Vienna. Hayek was doing no more than reviving a recurrent modern delusion – the belief that history obeys evolutionary laws, which somehow underpin a process of progressive social development.
The spread of capitalism over the past decades is a result of human decisions, not the workings of some imagined evolutionary process. Communism collapsed in the former USSR not because it was less productive than capitalism (though this was certainly the case) but because the Soviet state became embroiled in an Afghan war it could not win, while losing control of parts of eastern Europe and the Baltic states. Another important factor was the unintended impact of Mikhail Gorbachev’s reform policies, which, rather than strengthening the regime as he intended, exposed how little popular legitimacy it possessed.
A variety of capitalism came to China through the policies of Deng Xiaoping, who pulled down the curtain on the Maoist era. None of these developments resulted from the operation of evolutionary laws, and we are now seeing a reassertion of state power in both Russia and China.
Hayek’s belief that vital freedoms can be enshrined in law and thereby taken out of politics is ultimately delusive. But it is not an aberration peculiar to the brand of right-wing liberalism that he professed. An anti-political liberalism is the ruling illusion of the current generation of progressive thinkers. Philosophers such as John Rawls and Ronald Dworkin had views of justice very different from Hayek’s. Whereas Hayek rejected any redistribution of income beyond that required by a minimum level of subsistence, Rawls and Dworkin demanded different versions of egalitarianism. What all these thinkers had in common was the idea that reasonable people will converge on a shared conception of what justice requires. In this view, politics isn’t a rough-and-tumble in which rival interests and ideals contend with one another unceasingly, but a collective process of deliberation that leads to a common set of values. Some such vision seems to have possessed Ed Miliband, until he discovered that his ideal of equality was not widely held and the parliamentary road to predistribution was closed.
***
Hayek may still have lessons to teach us. The policies he recommended during the Great Depression may have been badly flawed but his insight that prosperity cannot be restored by unending expansion of debt may have some value at a time when the limits of “Keynesian” quantitative easing are becoming clear. It is in any case far from obvious that Keynes would have supported a continuation of QE once a disastrous collapse had been averted. “Keynesianism” is a confection of Keynes’s more mechanical disciples, not an indication of how this mercurially brilliant mind would have responded to our present dilemmas. Again, Hayek’s claim that nothing can be done to mitigate the impact of free markets on social cohesion was dangerously misguided. But he was right to point out that capitalism cannot be remodelled to fit some conception of an ideally fair distribution of resources. Whether any kind of social democracy can be reconciled with the anarchic energies of global markets is an open question.
Hayek may have shown the unreality of left-liberal visions of egalitarian capitalism, but it was Keynes who understood fully the vanity of liberal rationalism. In “My Early Beliefs” (1938), a talk later published as a memoir, Keynes mocked the philosophy held by himself and his friends before the First World War: “We were not aware that civilisation was a thin and precarious crust . . . only maintained by rules and conventions skilfully put across and guilefully preserved.”
Hayek watched the interwar collapse with horror, as Keynes did, and shared many of Keynes’s liberal values. What he failed to understand is that these values cannot be renewed by applying any formula or doctrine, or by trying to construct an ideal liberal regime in which freedom is insulated from the contingencies of politics.
John Gray’s latest book is “The Soul of the Marionette: a Short Inquiry into Human Freedom” (Allen Lane)
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The Era of Lionel Robbins
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The arrival of Lionel Robbins brought about considerable changes to the teaching of Economics at LSE. His book An Essay on the Nature and Significance of Economic Science (1932) (Second Edition Robbins 1935) provided a definition of Economics that had a great impact: "Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses." (p. 16). This led to a more theoretical approach to teaching and research in Economics at LSE, such as in the work of John Hicks (1904-1989) and his Value and Capital (1939).
A second important impact Robbins had on LSE was his interest in European Economics. Unlike Cambridge, where there was very little interest in Economics outside Marshall's Principles, students in Economics at LSE had to study languages and read passages of Economics in French or German. Robbins enjoyed reading German texts and became very interested in Austrian Economics. In 1931, he encouraged Fritz von Hayek (1899-1992) to come to LSE to give some public lectures. These were so successful that Hayek was offered a Chair in 1931. Given the Great Depression, Hayek's work on Business Cycles was seen as important. Robbins, with support at times from Plant and Hayek, ran a famous Seminar for graduate students and staff that led to the production of much important research. Among those who attended were Hicks, Roy Allen (1906-1983), Ronald Coase (1910-2013), Nicholas Kaldor (1908-1986) and Abba Lerner (1903-1982).
The possibility of developing a more Austrian approach to Economics at LSE by Robbins and Hayek was cut short by two events. The first was the publication in 1936 of The General Theory of Employment, Interest and Money by Maynard Keynes and the second was the outbreak of the Second World War.
The General Theory had an immediate impact, not least on some of the younger economists at LSE, such as Kaldor and Lerner, who quickly became Keynesians. Another effect was that in The General Theory, Keynes avoided dealing with genuine dynamic analysis by continuing to use Marshallâs comparative statics, so that the Austrian approach to dynamic analysis became of less interest.
With the outbreak of the Second World War, many LSE academics, including Robbins, left LSE to contribute to the war effort. LSE moved to Cambridge, where Hayek, whose offer to contribute to the war effort had been declined, taught and edited Economica. In his research, he continued to move away from pure theory and into more political and philosophical areas and published The Road to Serfdom in 1944.
With the end of the Second World War, LSE returned to Houghton Street, academics returned from government service and Robbins began rebuilding the Economics Department. The Department attracted excellent young economists, such as Dick Lipsey, Kevin Lancaster, Max Steuer, Bernard Corry and Maurice Peston and the Robbins Seminar was revived and flourished.
There was one area in which LSE lagged behind developments elsewhere and this was in Econometrics. In The Nature and Significance, Robbins (1935) had expressed extreme scepticism about the use of statistical estimation in Economics and so there were no econometricians in the Economics Department. This concerned the younger economists in the Department and a number of those mentioned above formed a group and set up the Methodology, Measurement and Testing (M2T) Seminar to carry out empirical tests on economic theories. The arrival of Bill Phillips (1914 â 1975) in the Economics Department and support from Jim Durbin (1923 â 2012) in the Statistics Department began to change views on the need for Econometrics, but the changes came after the end of the Robbins Era.
Suggested Reading:
General:
References to the Economics Department and individual economists are threaded through Dahrendorf (1995), as a diligent examination of the index will reveal. Cord (2018a) contains thematic chapters concerning the Economics Department and biographical chapters on economists from all three periods.
Robbinsâs autobiography (Robbins 1971) and Susan Howsonâs biography (Howson 2011) provide much material on this period.
A brief introduction to Austrian Economics is provided by Kurz (2018). For evidence of the Austrian influence on Robbinsâs economic analysis, see Robbins (1934) and Robbins (1972).
For biographical information on Hayek, see Ebenstein (2003) and Boettke and Piano (2018). Garrison and Barry (2014) present essays covering the range of Hayekâs research interests. Cord (2013) and Backhouse (2014) evaluate the debate between Hayek and Keynes in the 1930s. Finally, Kresge and Wener (1994) have an extended interview in which Hayek presents his forthright views on LSE and many other topics.
There is a good deal of information on the younger economists who flourished at LSE during the Robbins Era:
For Ronald Coase, see: Mariano (2018) Thomas (2016) and Williamson and Winter (1993)
For John Hicks, see: Hagemann (2018), Hagemann and Hamouda (1994), Helm (1984) and Puttqaswamaiah (2001)
For Kaldor, see: Kaldor (1996) and Targetti (1992)
For Lerner, see: Young, Schiffman and Zelekha (2018).
Both Coase (1994c) and Hicks (1982b) comment on their personal experiences in the LSE Economics Department in the 1930s, while Coats (1993c) looks at the Inter-War years at LSE.
Lionel Robbinsâs scepticism about statistical estimation in economics and the early econometric efforts presented at the (M2T) Seminar are discussed in Thomas (2009). The influence of Karl Popper on members of the Seminar is discussed in de Marchi (1988b). For a biography of Dick Lipsey, see Steuer (2018).
For information about Jim Durbin and his role in the development of econometrics at LSE, see Harvey and Batholomew (2018) and Phillips (1988b).
Bill Phillips's influence on Economics and Econometrics has generated a considerable literature. As a sample, see: Bollard (2016), a biography that combines an account of Phillipsâs life with a non-technical discussion of his research; Forder (2018), a further biographical note; Hendry and Mizon (2000), with an evaluation of his contributions to Econometrics; Leeson (2000), which reprints all Phillipsâs publications with comments and evaluations; and Lipsey (2000), with a discussion of the Phillips Curve.
References:
Please click on the button for a detailed list of references.
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John R. Hicks
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https://contemporarythinkers.org/friedrich-hayek/bibliography/essays/
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Friedrich Hayek
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Friedrich Hayek
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https://contemporarythinkers.org/friedrich-hayek/bibliography/essays/
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Essays
The Common Sense of Progress
– "The Common Sense of Progress." The Freeman (November 1960). Reprinted from The Constitution of Liberty (London: Routledge and Kegan Paul, 1960).
Excerpt: If today in the United States or western Europe the relatively poor can have a car or a refrigerator, an airplane trip or a radio, at the cost of a reasonable part of their income, this was made possible because in the past others with larger incomes… More
The Defense of Our Civilization Against Intellectual Error
– "The Defense of Our Civilization Against Intellectual Error." The Freeman (March 2004). Reprinted from What’s Past Is Prologue, a collection of tributes published in honor of FEE founder Leonard E. Read’s 70th birthday, September 26, 1968.
Excerpt: I believe that what the Foundation for Economic Education, with Leonard Read at its head, and all his co-fighters and friends are committed to is nothing more nor less than the defense of our civilization against intellectual error. I do not mean… More
Introduction: Selected Essays on Political Economy
– Introduction by F. A. Hayek. In Selected Essays on Political Economy, trans. by Seymour Caln. Irvington-on-Hudson, NY: The Foundation for Economic Education, Inc., 1995.
Excerpt: Even those who may question the eminence of Frédéric Bastiat as an economic theorist will grant that he was a publicist of genius. Joseph Schumpeter calls him “the most brilliant economic journalist who ever lived.” For the purpose of… More
Richard Cantillon
– "Richard Cantillon." Journal of Libertarian Studies, VII, no. 2 (Fall 1985), 217–247.
Excerpt: In economics, just as in other sciences, it is by no means an exceptional occurrence to find that, no sooner has a “new” doctrine made its mark, than earlier, completely forgotten writers are discovered who perceived those newly accepted… More
Gesammelte Aufsätze
– Ewald Schams. Gesammelte Aufsätze. Prefaced by F.A. Hayek. Ready in Spring 1983. Munich: Philosophia Verlag.
Socialism: An Economic and Sociological Analysis
– Ludwig von Mises. Socialism: An Economic and Sociological Analysis. Translated by Jacques Kahane. 1981 Introduction by F.A. Hayek. Indianapolis: LibertyClassics, 1981
Hayek’s Foreward pays tribute to Mises for the anti-socialist impact that Mises’ Die Gemeinwirtschaft: Untersuchungen über den Sozialismus (Jena: Gustav Fischer, 1922) created on many intellectuals after the First World War.
Review of Thomas Sowell’s Knowledge and Decisions
– Review of Thomas Sowell's Knowledge and Decisions. (New York: Basic Books, 1980). In Reason 13 (December 1981): 47–49.
Dankadresse
– “Dankadresse.” In Erich Hoppmann, ed. Friedrich A. von Hayek. Baden—Baden: Nomos Verlagsgesellschaft, 1980. pp. 37–42.
The Muddle of the Middle
– “Midju—Modid.” Frelsid (Journal of the Freedom Association of Iceland) 1 (1980): 6–15.
An Interview with F. A. Hayek
– “An Interview with F. A. Hayek.” Conducted by Richard E. Johns. The American Economic Council Report (May 1980.)
Free Choice of Currency Standards
– “Freie Wahl de Währungen.” In Geldpolitik, ed. by J. Badura and O. Issing. Stuttgart and New York, 1980, pp. 136–146.
Notes on the Evolution of Systems of Rules of Conduct
– “Notas sobre la Evolución de Sistemas de Reglas de Conducta.” Teorema 9, no. 1 (1979): 57–77.
Towards a Free Market Monetary System
– “Towards a Free Market Monetary System.” The Journal of Libertarian Studies 3, no. 1 (1979): 1–8.
When a little over two years ago, at the second Lausanne Conference of this group, I threw out, almost as a sort of bitter joke, that there was no hope of ever again having decent money, unless we took from governments the monopoly of issuing money and… More
Social Injustice, Socialism and Democracy
– Social Injustice, Socialism and Democracy. Sidney, Australia, 1979.
The Three Sources of Human Values
– “The Three Sources of Human Values.” The Hobhouse Lecture given at the London School of Economics, May 17, 1978. Published in the Epilogue to Law, Legislation and Liberty, Vol. III. London: Routledge & Kegan Paul, 1979
Three Lectures on Democracy, Justice, and Socialism
– "Three Lectures on Democracy, Justice, and Socialism," CIS Occasional Papers, 1979.
Exploitation of Workers by Workers
– “Exploitation of Workers by Workers.” The last of three talks given by Professor F. A. Hayek under the title, “The Market Economy” (Radio 3, BBC). The Listener (August 17, 1978): 202–203.
Can we still avoid inflation?
– “Can we still avoid inflation?” In Richard M. Ebeling (ed.) The Austrian Theory of the Trade Cycle and Other Essays. New York: Center for Libertarian Studies (Occasional Paper Series 8) 1978.
Excerpt: “In one sense the question asked in the title of this lecture is purely rhetorical. I hope none of you has suspected me of doubting even for a moment that technically there is no problem in stopping inflation. If the monetary authorities really… More
The Dethronement of Politics
– “Die Entthronung der Politik.” In Uberforderte Demokratie? hrsg. von D. Frei, Sozialwissenschaftliche Studien de schweizerischen Instituts für Auslandsforschung, N.F. 7, Zurich 1978.
Will the Democratic Ideal Prevail
– “Will the Democratic Ideal Prevail?” In Arthur Seldon, ed. The Coming Confrontation: Will the Open Society Survive to 1989? London: The Institute for Economic Affairs (Hobart Paperback No. 12), 1978, pp. 61–73.
The Miscarriage of the Democratic Ideal
– “The Miscarriage of the Democratic Ideal.” Encounter (March 1978).
Excerpt: “It is no longer possible to ignore that more and more thoughtful and well-meaning people are slowly losing their faith in what was to them once the inspiring ideal of democracy. This is happening at the same time as, and in perhaps partly in… More
Coping with Ignorance
– “Coping with Ignorance.” Ludwig von Mises Memorial Lecture. Imprimis (Hillsdale College) 7 (July 1978) 6 pp.
Excerpt: “It is to me not only a great honor but also the discharge of an intellectual duty and a real pleasure to be allowed to deliver a Ludwig von Mises memorial lecture. There is no single man to whom I owe more intellectually, even though he was… More
The Mirage of Social Justice
– Law, Legislation and Liberty, Volume 2: The Mirage of Social Justice, University of Chicago Press, 1978
The Reactionary Character of the Socialist Conception, Remarks by F. A. Hayek
– The Reactionary Character of the Socialist Conception, Remarks by F. A. Hayek. Hoover Institution, Stanford University, 1978.
Liberalism
– "Liberalism," New Studies in Philosophy, Politics, Economics and the History of Ideas, Routledge & Keagan Paul, London and Henley, 1982 [1978], pp. 119-151.
Excerpt: “The term is now used with a variety of meanings which have little in common beyond describing an openness to new ideas, including some which are directly opposed to those which are originally designated by it during the nineteenth and the… More
Economic Progress in an Open Society
– Economic Progress in an Open Society. Seoul, Korea: Korea International Economic Institute (Seminar Series No. 16), 1978.
The Reactionary Character of the Socialist Conception
– The Reactionary Character of the Socialist Conception, Remarks by F. A. Hayek. Hoover Institution, Stanford University, 1978.
Economic Freedom and Representative Government
– "Economic Freedom and Representative Government," New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul, 1978.
Excerpt: “Thirty years ago I wrote a book which, in a manner which many regarded as unduly alarmist, described the danger that the then visible collectivist tendencies created for personal freedom. I am glad that these fears have so far not… More
The Errors of Constructivism
– "The Errors of Constructivism," New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul, 1978.
Excerpt: “It seemed to me necessary to introduce the term ‘constructivism’ as a specific name for a manner of thinking that in the past has often, but misleadingly, been described as ‘rationalism.’ The basic conception of this… More
Competition as a Discovery Procedure
– “Competition as a Discovery Procedure.” New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge & Kegan Paul, 1978.
Excerpt: “It is difficult to defend economists against the charge that for some 40 to 50 years they have been discussing competition on assumptions that, if they were true in the real world, would make it wholly uninteresting and useless. If anyone… More
Economics as a Coordination Problem
– Foreword by F. A. Hayek. In Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek, ed. by Gerald P. O'Driscoll, Jr. Kansas City: Sheed Andrews and McMeel, Inc., 1977.
Foreword by Hayek: “To give a coherent account of the whole of the theoretical work of an economist who has not attempted to do so himself is sometimes a useful task. But the proof of its worthwhileness must be that the attempt at systematization leads… More
Toward Free Market Money
– “Toward Free Market Money.” Wall Street Journal (August 19, 1977).
Remembering My Cousin Ludwig Wittgenstein
– “Remembering My Cousin Ludwig Wittgenstein.” Encounter (August 1977).
Excerpt: “Between the rails and the building of the railway station of Bad Ischl there used to be ample space where, sixty years ago, in the season, a regular promenade used to develop before the departure of the night train to Vienna. I believe it… More
The Problem of Money Today
– “Il Problema della Moneta Oggi.” Academia Nationale dei Lincei. Atti de Convegni Rome (1976).
Adam Smith’s Message in Today’s Language
– “Adam Smith's Message in Today's Language.” Daily Telegraph, London (March 9, 1976.)
Excerpt: “During the 40-odd years over which I have been lecturing on the history of economics, I have always found the lectures on Adam Smith particularly difficult to give. By the time one comes to him one has shown that most of the decisive insights… More
Institutions May Fail, but Democracy Survives
– “Institutions May Fail, but Democracy Survives.” U.S. News and World Report (March 8, 1976.)
The New Confusion about Planning
– “The New Confusion about Planning.” The Morgan Guaranty Survey (January 1976): 4–13.
Socialism and Science
– "Socialism and Science," A Lecture delivered to The Economic Society of Australia and New Zealand on October 19, 1976.
Excerpt: “Socialism is related to Science in various ways. Probably the least interesting relation today is that from which Marxism lays claim to the name of “scientific socialism”; and according to which by an inner necessity, and without men… More
Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies
– Denationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: The Institute of Economic Affairs (Hobart Paper Special 70), October 1976, 107 pp.
Excerpt: “In my despair about the hopelessness of finding a politically feasible solution to what is technically the simplest possible problem, namely to stop inflation, I threw out in a lecture delivered about a year ago a somewhat startling… More
Choice in Currency: A Way to Stop Inflation
– Choice in Currency. A Way to Stop Inflation. London: Institute of Economic Affairs (Occasional Paper 48), February 1976/1977, 46 pp.
Excerpt: The chief root of our present monetary troubles is, of course, the sanction of scientific authority which Lord Keynes and his disciples have given to the age-old superstition that by increasing the aggregates of money expenditure we cannot lastingly… More
World Inflationary Recession
– “World Inflationary Recession.” Paper presented to the International Conference on World Economic Stabilization, April 17–18, 1975, co-sponsored by the First National Bank of Chicago and the University of Chicago. First Chicago Report 5/1975.
Politicians Can’t Be Trusted with Money
– “Politicians Can't Be Trusted with Money.” [(Newspaper editor's title. Paper delivered in September at the Gold and Monetary Conference in Lausanne, Switzerland.) The Daily Telegraph of London, Part I (September 30, 1975).
Two Types of Mind
– “Types of Mind.” Encounter 45 (September 1975).
Excerpt: “Accident has drawn my attention to the contrast between two types of scientific thinking which I have since again and again been watching with growing fascination. I have long wished to describe the difference but have been deterred by the… More
The Formation of the Open Society
– “The Formation of the Open Society.” Address given by Professor Friedrich A. von Hayek at the University of Dallas Commencement Exercises, May 18, 1975. [Unpublished typescript, available at the Institute for Humane Studies.]
The Courage of His Convictions
– "The Courage of His Convictions.” In Tribute to Mises 1881–1973. The Session of the Mont Pélèrin Society at Brussels 1974 devoted to the Memory of Ludwig von Mises. Chislehurst, 1975.
The Preservation of the Liberal Ideal of Thought
– “Die Erhaltung des liberalen Gedankengutes.” In Friedrich A. Lutz (ed.) Der Streit um die Gesellschaftsordnung (Zurich 1975).
Economics, Politics and Freedom: An Interview with F. A. Hayek
– “Economics, Politics & Freedom: An Interview with F. A. Hayek.” Interview conducted by Tibor Machan in Salzburg, Austria. Reason 6 (February 1975): 4–12.
Excerpt: “REASON is proud to present the highlights of this conversation, to give our readers a better appreciation of one of the intellectual giants of our time. REASON: Dr. Hayek, your book, The Road to Serfdom predicted serious problems for England… More
Freedom and Equality in Contemporary Society
– “Freedom and Equality in Contemporary Society.” PHP 4 (The PHP Institute, Tokyo), (Tokyo 1975).
The Pretense of Knowledge
– “The Pretence of Knowledge.” An Alfred Nobel Memorial Lecture, delivered December 11, 1974 at the Stockholm School of Economics. In Les Prix Nobel en 1974. Stockholm: Nobel Foundation, 1975.
Excerpt: “The particular occasion of this lecture, combined with the chief practical problem which economists have to face today, have made the choice of its topic almost inevitable. On the one hand the still recent establishment of the Nobel Memorial… More
Full Employment at Any Price?
– Full Employment at Any Price? London: Institute of Economic Affairs (Occasional Paper 45), 1975/1978, (Italy 1975), 52 pp.
The Repercussions of Rent Restrictions
– "The Repercussions of Rent Restrictions,” in F. A. Hayek, Milton Friedman, et al. Rent Control: A Popular Paradox. Evidence on The Effects of Rent Control. Vancouver: The Fraser Institute, 1975, pp. 67–83.
Excerpt: “A unique feature of price control in housing compared with that in other goods and services is that wartime housing regulations have been retained and enforced ever since. The reason is not that housing is more “necessary” than, say, food,… More
Banquet Speech
– Speech at the Nobel Banquet, December 10, 1974.
Excerpt: Now that the Nobel Memorial Prize for economic science has been created, one can only be profoundly grateful for having been selected as one of its joint recipients, and the economists certainly have every reason for being grateful to the Swedish… More
Inflation and Unemployment
– “Inflation and Unemployment.” New York Times (Nov. 15, 1974).
Inflation: The Path to Unemployment
– “Inflation: The Path to Unemployment.” Addendum 2 to Lord Robbins et. al. Inflation: Causes, Consequences, Cures: Discourses on the Debate between the Monetary and the Trade Union Interpretations. London: The Institute for Economic Affairs (IEA Readings, No. 14), 1974, pp. 115–120.
Talk at the Mont Pélèrin
– “Talk at the Mont Pélèrin.” Newsletter of the Mont Pélèrin Society 3 (Luxembourg 1973).
Tribute to von Mises, Vienna Years
– “Tribute to von Mises, Vienna Years.” National Review (Autumn 1973).
In Memoriam Ludwig von Mises 1881–1973
– “In Memoriam Ludwig von Mises 1881–1973.” Zeitschrift für Nationalökonomie 33 (Vienna 1973).
The Place of Menger’s Grundsätze in the History of Economic Thought
– “The Place of Menger's Grundsätze in the History of Economic Thought.” In J. R. Hicks and W. Weber (eds.), Carl Menger and the Austrian School of Economics. Oxford, 1973, pp. 1–14
Excerpt: “When the Grundsatze appeared in 1871, it was only 95 years since the Wealth of Nations, only 54 since Ricardo’s Principles, and a mere 23 it since the great restatements of classical economics by John Stuart Mill. It is well to begin… More
The Outlook for the 1970’s: Open or Repressed Inflation
– “The Outlook for the 1970's: Open or Repressed Inflation.” In Sudha R. Shenoy (ed.) A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40-Years’ Running Commentary on Keynesianism. London: Institute of Economic Affairs (Hobart Paperback 4), 1972.
Excerpt: “In the last 40 years monetary policy has increasingly committed us to a development which has recurrently made necessary further measures that weakened the functioning of the market mechanism. We have now reached a point when it is widely… More
Economic Thought VI: The Austrian School
– “Economic Thought VI: The Austrian School.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & Free Press, 1968, 1972; Volume 4, pp. 458–462.
A Tiger by the Tail: The Keynesian Legacy of Inflation
– A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40 Years’ Running Commentary on Keynesianism by F. A. Hayek. Compiled and introduced by Sudha R. Shenoy. London: Institute of Economic Affairs (Hobart Paperback #4), 1972
Excerpt from Introduction: “The small book you are holding in your hands is unique. It is perhaps the finest introduction to the thought of a major thinker ever published in the discipline of economics. What makes it unique is the fact that it comprises… More
The Genius Of the West
– Louis Rougier. The Genius of the West. Introduction by F.A. v. Hayek. Los Angeles: Nash Publishing (published for the Principles of Freedom Committee), 1971.
To quote the book jacket: “Western Civilization is the result of a mentality which responds to the challenge of existence with intellectual force & courage. This mentality developed during the ages through a series of cumulative and convergent… More
Nature vs. Nurture Once Again
– “Nature vs. Nurture Once Again.” A comment on C. D. Darlington, The Evolution of Man and Society, London, 1962 in Encounter (February 1971).
Excerpt: “After his authoritative Genetics and Man, Dr. C.D. Darlington has now given us a magnificent account of The Evolution of Man and Society. This monumental work is bound to have great influence on many who will never trouble to study the former.… More
Principles or Expediency?
– “Principles or Expediency?” In Toward Liberty: Essays in Honor of Ludwig von Mises on the Occasion of his 90th Birthday, September 29, 1971. Sponsoring Committee F. A. von Hayek et.al; F. A. Harper, Secretary. Menlo Park, California: Institute for Humane Studies, 1971, vol I, pp. 29–45.
Excerpt: “A condition of liberty in which all are allowed to use their own knowledge for their own purposes, restrained only by rules of just conduct of universal application, is likely to produce for them the best conditions for achieving their… More
The Competitive System as a Tool of Knowledge
– “Il sistema concorrenziale come strumento di conoscenza.” L'industria 1 (Turin, January-March 1970): 34–50.
Market Economy or Syndicalism?
– “Marktwirtschaft oder Syndikalismus?” In: Protokoll des Wirtschaftstages der CDU/DSU (Bonn 1969).
The Primacy of the Abstract
– “The Primacy of the Abstract.” In Arthur Koestler and J. R. Smythies (eds.), Beyond Reductionism—The Alpbach Symposium. London, 1969.
Excerpt: “What I shall try to explain under this paradoxical heading seems to me in some ways merely a final step in a long development, which would probably have been explicitly formulated some time ago had it not required the overcoming of a barrier… More
Three Elucidations of the ‘Ricardo Effect’
– “Three Elucidations of the ‘Ricardo Effect’.” Journal of Political Economy 77 (March-April 1969): 274–285.
Excerpt: “The immediate aim of this paper is to clear up a point on which Sir John Hicks in his recent review of my earlier discussions of the relation between the demand for consumer goods and investment, is in error. It deserves careful analysis, as I… More
Scientism
– “Szientismus.” In W. Bernsdorf (ed.), Wörterbuch der Soziologie, Edited by W. Bernsdorf. 2nd ed. (Stuttgart, 1969).
The Trend of Economic Thinking
– “The Trend of Economic Thinking,” Studies in Philosophy, Politics and Economics. London: Routledge & Kegan Paul, 1967/1969;
Excerpt: “The position of the economists in the intellectual life of our time is unlike that of practitioners of any other branch of knowledge. Questions for whose solution his special knowledge is relevant are probably more frequently encountered than… More
Wieser, Friedrich von
– “Wieser, Friedrich von.” In International Encyclopaedia of the Social Sciences. Edited by David L. Sills. New York: The Macmillan Co. & The Free Press, 1968, 1972; Volumes 15, 16, 17, pp. 549–550.
Speech on the 70th Birthday of Leonard Reed
– Speech on the 70th Birthday of Leonard Reed. In: What's Past is Prologue. New York: Foundation for Economic Education, 1968.
A Self-Generating Order for Society
– “A Self-Generating Order for Society.” In John Nef (ed.), Towards World Community. The Hague, 1968.
Excerpt: “It is very difficult to know where to begin when one would wish to comment on almost every preceding speaker. I am particularly tempted to make some remarks on the problem of the differences or similarities of the methods of the exact sciences… More
Juridical Regulation and Social Order
– “Ordinamento giuridico e ordine sociale.” Il Politico 33, no. 4 (December 1968): 693–724.
Bruno Leoni, the Scholar
– “Bruno Leoni, the Scholar.” Il Politico 33, no. 1 (March 1968): 21–25
The Confusion of Language in Political Thought, With Some Suggestions for Remedying It
– The Confusion of Language in Political Thought, With Some Suggestions for Remedying It. London: Institute of Economic Affairs (Occasional Paper 20), 1968/1976, 36 pp.
Excerpt: “Modern civilization has given man undreamt powers largely because, without understanding it, he has developed methods of utilizing more knowledge and resources than any one mind is aware of. The fundamental condition from which any intelligent… More
The Constitution of A Liberal State
– “The Constitution of A Liberal State.” Il Politico 32, no. 1 (Sept. 1967): 455–461.
Legal Order and Commercial Order
– “Rechtsordnung und Handelnsordnung.” In Eric Streissler (ed.), Zur Einheit der Rechts-und Staatswissenschaften, Vol. 27. Karlsruhe, 1967.
Remarks on “Ernst Mach und das sozialwissenschaftliche Denken in Wien”
– Remarks on “Ernst Mach und das sozialwissenschaftliche Denken in Wien.” In Ernst Mach Institut (ed.), Symposium aus Anlass des 50. Todestages von Ernst Mach. (Freiburg i. B., 1967.)
The Results of Human Action but not of Human Design
– Résultats de l'action des hommes mais non de leurs desseins.” In: Les Fondements Philosophiques des Systèmes Economiques. Textes de Jacques Rueff et essais rédiges en son honneur. (Paris 1967).
Excerpt: “The belief in the superiority of deliberate design and planning over the spontaneous forces of society enters European thought explicitly only through the rationalist constructivism of Descartes. But it has its sources in a much older… More
Dr. Bernard Mandeville
– “Dr. Bernard Mandeville.” Proceedings of the British Academy 52 (1966), London 1967.
Excerpt: “It is to be feared that not only would most of Bernard Mandeville’s contemporaries turn in their graves if they could know that he is today presented as a mastermind to this August body, but even that now there may have been some raising… More
The Economy, Science and Politics
– "The Economy, Science and Politics,” Studies in Philosophy, Politics and Economics. London: Routledge & Kegan Paul, 1967/1969, pp.251-269.
Excerpt: “In spite of the fact that at least the first half of my career as an economist has been fully devoted to pure theory, and because I have since devoted much time to subjects entirely outside the field of economics, I do welcome the prospect… More
The Gold Standard—Its Evolution
– “L'Etalon d'Or — Son Evolution.” Revue d'Economie Politique 76 (1966).
The Principles of a Liberal Social Order
– “The Principles of a Liberal Social Order.” Il Politico 31, no. 4 (December 1966): 601–618.
Excerpt: “It should be specially emphasized that the two political philosophies which both describe themselves as “liberalism” and lead in a few respects to similar conclusions, rest on altogether different philosophical foundations. The first is… More
The Misconception of Human Rights as Positive Claims
– “The Misconception of Human Rights as Positive Claims.” Farmand Anniversary Issue II/12 (Oslo, 1966): 32–35.
Personal Recollections of Keynes and the ‘Keynesian Revolution’
– “Personal Recollections of Keynes and the ‘Keynesian Revolution’.” The Oriental Economist 34 (Tokyo, January 1966).
Excerpt: “Even to those who knew Keynes but could never bring themselves to accept his monetary theories, and at times thought his pronouncements somewhat irresponsible, the personal impression of the man remains unforgettable. And especially to my… More
Kinds of Rationalism
– “Kinds of Rationalism.” The Economic Studies Quarterly 15, no. 3 (Tokyo, 1965).
Excerpt: “In the course of my critical examination of certain dominance beliefs of our time I have sometimes had to make a difficult choice. It often happens that quite specific demands are labeled by a perfectly good word which in its more general… More
The Perception of the Majority and Contemporary Democracy
– “Die Anschauungen der Mehrheit und die zeitgenössische Demokratie.” Ordo 15/16 (1965): 19–41.
What Has Happened to the Gold Standard. A Report Beginning with the Year 1932 with Two Supplements
– Was der Goldwährung geschehen ist. Ein Bericht aus dem Jahre 1932 mit zwei Ergänzungen. Tübingen: Walter Eucken Institut (Vorträge und Aufsätze, 12), 1965, 36 pp. (France 1966): Révue d'Economie Politique 76 (1966), for French version. [“What Has Happened to the Gold Standard. A Report Beginning with the Year 1932 with Two Supplements.”]
Commerce, History of
– Parts of “Commerce, History of.” Encyclopaedia Britannica, vol. VI. Chicago: 1964.
The Theory of Complex Phenomena
– “The Theory of Complex Phenomena.” In Mario A. Bunge (ed.) The Critical Approach to Science and Philosophy: Essays in Honor of Karl R. Popper. New York: The Free Press of Glencoe, Inc., 1964.
Excerpt: “Man has been impelled to scientific inquiry by wonder and by need. Of these wonder has been in comparably more fertile. There are good reasons for this. Where we wonder we have already a question to ask. But however urgently we may want to… More
The Legal and Political Philosophy of David Hume
– “The Legal and Political Philosophy of David Hume.” Il Politico 28, no. 4 (December 1963): 691–704.
Excerpt: “It is always misleading to label an age by a name which suggests that it was ruled by a common set of ideas. It particularly falsifies the picture if we do this for a period which was in such a state of ferments as was the eighteenth century.… More
Introduction to “The Earlier Letters of John Stuart Mill.”
– Introduction to “The Earlier Letters of John Stuart Mill.” In F.E. Mineka, ed. John Stuart Mill, Vol. XII. Toronto: Toronto University Press and London: Routledge & Kegan Paul, 1963.
Excerpt: “John Stuart Mill has not been altogether fortunate in the manner in which his memory was served by those most concerned and best authorized to honour it. It is true that his stepdaughter, heir, and literary executor, Helen Taylor, promptly… More
Right, Law, and Economic Freedom
– “Recht, Gesetz und Wirtschaftsfreiheit.” In: Hundert Jahre Industrie und Handelskammer zu Dortmund 1863–1963. Dortmund, 1963.
Kinds of Order in Society
– “Arten der Ordnung.” Ordo 14 (1963).
Excerpt: “We call a multitude of men a society when their activities are mutually adjusted to one another. Men in society can successfully pursue their ends because they know what to expect from their fellows. Their relations, in other words, show a… More
Old Truths and New Errors
– “Alte Wahrheiten und neue Irrtümer.” In: Internationales Institut der Sparkassen, ed. Das Sparwesen der Welt, Proceedings of the 7th International Conference of Savings Banks. Amsterdam: 1963.
Rules, Perception and Intelligibility
– “Rules, Perception and Intelligibility.” Proceedings of the British Academy 48 (1962), London, 1963, pp. 321–344.
Excerpt: “The most striking instance of the phenomenon from which we shall start is the ability of small children to use language in accordance with the rules of grammar and idiom of which they are wholly unaware. “Perhaps there is”, Edward Sapir… More
The Uses of ‘Gresham’s Law’ as an Illustration of ‘Historical Theory’
– “The Uses of ‘Gresham's Law’ as an Illustration of ‘Historical Theory’.” History and Theory 1 (1962).
Excerpt: “Mr. A. L. Burns’ use of Gresham’s Law as an illustration provides a good example for showing how useful it would be for the historian if he examined what Gresham’s Law amounts to as a theoretical statement and not merely as… More
The Vienna School
– “Wiener Schule.” Handwörterbuch der Sozialwissenschaften 12 (Stuttgart-Tübingen-Göttingen, 1962).
The Moral Element in Free Enterprise
– “The Moral Element in Free Enterprise.” In: National Association of Manufacturers (eds.) The Spiritual and Moral Significance of Free Enterprise. New York: 1962.
Excerpt: “Economic activity provides the material means for all our ends. At the same time, most of our individual efforts are directed to providing means for the ends of others in order that they, in turn, may provide us with the means for our ends. It… More
Two Essays on Free Enterprise
– Two Essays on Free Enterprise. Bombay: Forum of Free Enterprise, 1962.
How Much Education at Public Expense?
– “How Much Education at Public Expense?” Context 1 (Chicago 1961).
The Origins of the Constant Danger to Freedom
– “Die Ursachen der ständigen Gefährdung der Freiheit.” Ordo 12 (1961): 103–112.
Freedom and Coercion: Some Comments and Mr. Hamowy’s Criticism
– “Freedom and Coercion: Some Comments and Mr. Hamowy's Criticism.” New Individualist Review 1, no. 2 (Summer 1961): 28–32.
The ‘Non Sequitur’ of the ‘Dependence Effect’
– “The ‘Non Sequitur’ of the ‘Dependence Effect’.” The Southern Economic Journal 27 (April 1961).
Excerpt: “For well over a hundred years the critics of the free enterprise system have resorted to the argument that if production were only organized rationally, there would be no economic problem. Rather than face the problem which scarcity creates,… More
What is ‘Social’—What Does It Mean?
– “What is ‘Social’—What Does It Mean?” Translated in an unauthorized English translation in Freedom and Serfdom (ed. A. Hunold), Dordrecht, 1961.
Excerpt: “Except in the fields of philology and logic, there are probably few cases in which one would be justified in devoting a whole article to the meaning of a single word. Sometimes, however, such a little word not only throws light upon the… More
The Case for Freedom
– "The Case for Freedom." The Freeman (October 1960). Reprinted from The Constitution of Liberty (London: Routledge and Kegan Paul, 1960).
Excerpt: “What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of… More
Why I Am Not a Conservative
– In The Constitution of Liberty (Chicago: The University of Chicago Press, 1960)
Excerpt: At a time when most movements that are thought to be progressive advocate further encroachments on individual liberty, those who cherish freedom are likely to expend their energies in opposition. In this they find themselves much of the time on the… More
The Corporation in a Democratic Society: In Whose Interest Ought It and Will It Be Run?
– “The Corporation in a Democratic Society: In Whose Interest Ought It and Will It Be Run?” In: M. Anshen and G. L. Bach (eds.)Management and Corporations 1985. New York: McGraw-Hill, 1960.
Excerpt: “My thesis will be that if we want effectively to limit the powers of corporations to where they are beneficial, we shall have to confine them much more than we have yet done to one specific goal, that of the profitable use of capital entrusted… More
Democratic Government and Economic Activity
– “Gobierno Democratico y Actividad Economica.” Espejo 1 (Mexico City 1960).
Progenitor of Scientism
– “Progenitor of Scientism.” National Review (1960).
Freedom, Reason and Tradition
– “Freedom, Reason and Tradition.” Proceedings of the 16th Annual Meeting: The Western Conference of Prepaid Medical Service Plans, (Winnipeg 1960).
The Social Environment
– “The Social Environment.” In B. H. Bagdikian (ed.) Man's Contracting World in an Expanding Universe Providence, R.I.: 1960.
The Economics of Abundance
– “The Economics of Abundance,” in Henry Hazlitt, ed. The Critics of Keynesian Economics. Princeton and London: Van Nostrand Co., 1960, pp. 126–130.
Excerpt: “Now in such a situation, in which abundant unused reserves of all kinds of resources, including all intermediate products, exist, may occasionally prevail in the depths of the depression. But it is certainly not a normal position on which a… More
The Free Market Economy: The Most Efficient Way of Solving Economic Problems
– “The Free Market Economy: The Most Efficient Way of Solving Economic Problems.” Human Events 16, no. 50 (Dec. 16, 1959).
On Röpke
– “An Röpke.” In Wilhelm Röpke, Gegen die Brandung. Zürich: E. Rentsch, 1959.
Market Economy and Structural Policy
– “Marktwirtschaft und Strukturpolitik.” Die Aussprache 9 (1959).
Responsibility and Freedom
– “Verantwortlichkeit und Freiheit.” In: Albert Hunold (ed.) Erziehung zur Freiheit. Erlenbach-Zürich: E. Rentsch, 1959: 147–170.
Freedom and Independence
– “Freiheit und Unabhängigkeit.” Schweizer Monatshefte 39 (1959).
Unions, Inflation and Profits
– “Unions, Inflation and Profits.” In: Philip D. Bradley (ed.) The Public Stake in Union Power. Charlottesville, University of Virginia Press: 1959.
Excerpt: “Tendencies are observable in the field of labor economics which most seriously threaten our future prosperity. The developments which are bringing this about are not of recent dates. They extend at least over the last twenty-five years. But… More
Liberalism
– “Liberalismus (1) Politischer Liberalismus.” Handwörterbuch der Sozialwissenschaften 6 (Stuttgart-Tübingen-Göttingen, 1959).
Excerpt: The term is now used with a variety of meanings which have little in common beyond describing an openness to new ideas, including some which are directly opposed to those which are originally designated by it during the 19th and the earlier parts… More
The Reality of a Teaching
– “Attualitá di un insegnamento,” In: Angelo Dalle Molle, ed. Il Maestro dell’ Economia di Domani (Festschrift for Luigi Einaudi on his 85th Birthday). Verona, 1958, pp. 20–24.
Equality, Value, and Profit
– “Gleichheit, Wert und Verdienst.” Ordo 10 (1958): 5–29.
Freedom, Reason, and Tradition
– “Freedom, Reason, and Tradition.” Ethics 68 (1958).
Excerpt: “Though freedom is not a state of nature but an artifact of civilization, it did not arise as a result of design. The institutions of freedom, like all that freedom has created, were not established because people foresaw the benefits they… More
The Creative Powers of a Free Civilization
– “The Creative Powers of a Free Civilization.” In: Felix Morley (ed.) Essays in Individuality. Philadelphia: University of Pennsylvania Press, 1958.
Excerpt: “The socratic maxim that the recognition of our ignorance is the beginning of wisdom has a profound application to social life. If we are to comprehend how society works we must first become aware, not merely of our individual ignorance of… More
The Individual and Change of Economic System
– “Das Individuum im Wandel der Wirtschaftsordnung.” Der Volkswirt No. 51–52 (Frankfurt am Main 1958).
Liberty, the Planned Economy, and the Law
– “La Libertad, La Economia Planificada y el Derecho.” Temas Contemporaneos (Buenos Aires) 3 (1958).
Inflation Resulting from the Downward Inflexibility of Wages
– “Inflation Resulting from the Downward Inflexibility of Wages.” In: Committee for Economic Development (ed.) Problems of United States Economic Development, New York: 1958, Vol. I, pp. 147–152.
Excerpt: “Contrary to what is widely believed, the crucial results of the “Keynesian revolution” is the general acceptance of a factual assumption and, what is more, of an assumption which becomes true as a result of it being generally accepted. The… More
The Fundamental Facts of Progress
– “Grundtatsachen des Fortschritts.” Ordo 9 (1957): 19–42.
Review of Mill and His Early Critics
– Review of Mill and His Early Critics by J.C. Rees. Leicester: University College of Leicester, 1956. In Journal of Modern History (June 1957): 54.
On the ‘Meaning’ of Social Institutions
– “Uber den ‘Sinn’ sozialer Institutionen.” Schweizer Monatshefte 36 (October 1956).
The Dilemma of Specialization
– “The Dilemma of Specialization.” In Leonard D. White (ed.) The State of the Social Sciences. Chicago: University of Chicago Press, 1956.
Excerpt: “We have been commemorating the foundation of a research centre within our University, and our thoughts have inevitably often touched upon the problem of the relation between research and education, and of education for research. It may… More
Progressive Taxation Reconsidered
– “Progressive Taxation Reconsidered.” In: Mary Sennholz (ed.) On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises. Princeton: D. von Nostrand Co., 1956
Excerpt: “Among the measures of economic policy which are gradually transforming our society and producing far-reaching results which few people yet clearly grasp, few are as firmly established and as widely accepted as the redistribution of income by… More
Comments
– “Comments.” In: Congress for Cultural Freedom (ed.) Science and Freedom. London: (Proceedings of the Hamburg Conference of the Congress for Cultural Freedom) 1955.
Towards a Theory of Economic Growth, Discussion of Simon Kuznets’ Paper
– “Towards a Theory of Economic Growth, Discussion of Simon Kuznets’ Paper.” In: National Policy for Economic Welfare at Home and Abroad. New York: Columbia University Bicentennial Conference, 1955.
Degrees of Explanation
– “Degrees of Explanation.” The British Journal for the Philosophy of Science 6, no. 23 (1955): 209–225.
Excerpt: “The discussion of scientific method has been guided almost entirely by the example of classical physics. The reason for this is mainly that certain features of the scientific method can be most easily illustrated by instances from this field,… More
Economic History and Politics
– “Wirtschaftsgeschichte und Politik.” Ordo 7 (March 1955).
Capitalism and the Historians
– Capitalism and the Historians. Edited and introduced by F. A. Hayek. London: Routledge & Kegan Paul, and Chicago: University of Chicago Press, 1954.
Excerpt: “The influence which the writers of history thus exercise on public opinion is probably more immediate and extensive than that of the political theorists who launch new ideas. It seems as though even such new ideas reach wider circles usually… More
Market Economy and The Economic Policy
– “Marktwirtschaft und Wirtschaftspolitik.” Ordo 6 (February 1954): 3–18.
The Rise and Fall of the Ideal of the Constitutional State
– “Entstehung und Verfall des Rechtsstaatsideales.” In: Albert Hunold (ed.) Wirtschaft ohne Wunder. Volkswirtschaftliche Studien für das Schweizerische Institut für Auslandsforschung. Zurich, 1953.
Substitute for Foreign Aid
– “Substitute for Foreign Aid.” The Freeman 3 (April 6, 1953): 482–484.
Excerpt: “For the time being financing for rearmament has in a large measure taken the place of other forms of capital movements to Europe. But this provides only a partial and temporary solution to the problem with which in recent years this country… More
Decline of the Rule of Law. Part I
– “Decline of the Rule of Law. Part I.” The Freeman 3 (April 20, 1953): 518–520; Part II The Freeman 3 (May 4, 1953): 561–563.
The Actonian Revival
– “The Actonian Revival.” Review of Lord Acton by Gertrude Himmelfarb and Acton's Political Philosophy by G. E. Fasnacht. The Freeman3 (March 23, 1953): 461–462.
Leftist Foreign Correspondent
– “Leftist Foreign Correspondent.” The Freeman 3 (January 12, 1953): 275.
Excerpt: “The editorial comments of The Freeman on the apparent professional bias of foreign correspondents tempt me to set down on paper some observations which have long puzzled me. Why should foreign correspondents almost everywhere tend to have a… More
The Case Against Progressive Income Taxes
– “The Case Against Progressive Income Taxes.” The Freeman 4 (December 28, 1953): 229–232.
The Injustice of the Progressive Income Tax
– “Die Ungerechtigkeit der Steuerprogression.” Schweizer Monatshefte 32 (November 1952).
Friedrich Freiherr von Wieser
– “Friedrich Freiherr von Wieser” The Development of Economic Thought: Great Economists in Perspective. Edited by Henry William Spiegel. New York & London: John Wiley & Sons, Inc. 1952, 1961, pp. 554–567.]
Commemorative article on the occasion of the death of Hayek’s Austrian School of economics mentor, von Wieser (1851–1926).
Equality and Justice
– “Gleichheit und Gerechtigkeit.” Jahresbericht der Züricher Volkswirt-schaftlichen Gesellschaft (1951).
The Ideals of Economic Freedom: A Liberal Inheritance
– “The Ideals of Economic Freedom: A Liberal Inheritance,” in The Owl (London 1951), pp. 7–12.
Excerpt: “At the end of the First World War the spiritual tradition of liberalism was all but dead. True, it was still uppermost in the thoughts of many a leading figure of public and business life, many of whom belonged to a generation which took… More
Comments on ‘The Economics and Politics of the Modern Corporation’
– “Comments on ‘The Economics and Politics of the Modern Corporation’.” The University of Chicago Law School, Conference Series no. 8, (December 7, 1951).
Comte and Hegel
– “Comte and Hegel.” Measure 2 (Chicago, July 1951).
Excerpt: “The discussions of every age are filled with the issues on which its leading schools of thought differ. But the general intellectual atmosphere of the time is always determined by the views on which the opposing schools agree. They become the… More
Capitalism and the Proletariat
– “Capitalism and the Proletariat.” Farmand 7, no. 56 (Oslo: February 17, 1951).
Full Employment, Planning and Inflation
– “Full Employment, Planning and Inflation.” Institute of Public Affairs Review 4 (6) (Melbourne, Australia 1950).
Excerpt: “In the five years that have elapsed since the war, central planning, “full employment,” and inflationary pressure have been the three features which have dominated economic policy in the greater parts of the world. Of these only full… More
Ricardo, David
– “Ricardo, David.” Chambers’ Encyclopaedia 11 (Oxford 1950).
Economics
– “Economics.” Chambers’ Encyclopaedia 4 (Oxford 1950).
A Levy on Increasing Efficiency: The Economics of Development Charges
– “A Levy on Increasing Efficiency. The Economics of Development Charges.” The Financial Times (April 26–28, 1949).
The Intellectuals and Socialism
– “The Intellectuals and Socialism.” The University of Chicago Law Review 16, no. 3 (Spring 1949): 417–433.
Excerpt: “In all democratic countries, in the United States even more than elsewhere, a strong belief prevails that the influence of the intellectuals on politics is negligible. This is no doubt true of the power of intellectuals to make their peculiar… More
Wesley Clair Mitchell 1874–1948
– “Wesley Clair Mitchell 1874–1948” (Obituary). Journal of the Royal Statistical Society 111 (1948).
The Political Effects of the Planned Economy
– “Die politischen Folgen der Planwirtschaft.” Die Industrie. Zeitschrift der Vereinigung Österreichischer Industrieller. No. 3 (Vienna, January 1948).
Man in the Planned Economy
– “Der Mensch in der Planwirtschaft.” In Simon Moser (ed.) Weltbild und Menschenbild. Innsbruck and Vienna: 1948.
Full Employment
– “Le plein emploi.” Economie Appliquée 1, no. 2–3, (Paris, 1948): 197–210.
Problems and Difficulties of the English Economy
– “Probleme und Schwierigkeiten der englischen Wirtschaft.” Schweizer Monatshefte 27 (1947).
The London School of Economics 1895–1945
– “The London School of Economics 1895–1945.” Economica N.S. 13 (February 1946): 1–31.
Excerpt: “In October, 1945, the London School of Economics and Political Science completed its 50th year. It had been hoped that this event would be marked by the publication of a full history of the School, which would have made an interesting… More
Fuld Beskaeftigelse
– “Fuld Beskaeftigelse.” Nationalökonomisk Tidsskrift 84 (1946): 1–31.
Individualism: True and False
– Individualism: True and False. (The Twelfth Finlay Lecture, delivered at University College, Dublin, on December 17, 1945.) Dublin: Hodges, Figgis & Co. Ltd. 1946; and Oxford: B. H. Blackwell Ltd. 1946, 38 pp.
Excerpt: “To advocate any clear-cut principles of social order today is an almost certain way to incur the stigma of being an unpractical doctrinaire. It has come to be regarded as the sign of the judicious mind that in social matters one does not… More
Notes on N.W. Senior’s Political Economy’ by John Stuart Mill
– Edited: “‘Notes on N.W. Senior's Political Economy’ by John Stuart Mill.” Economica N.S. 12 (1945): 134–139.
Excerpt: “The following notes are reproduced from an interleaved copy of the first (quarto) edition of N.W. Senior’s Outline of the Science of Political Economy.”
Nationalities and States in Central Europe
– “Nationalities and States in Central Europe.” Central European Trade Review 3 (London, 1945): 134–139.
Time-Preference and Productivity: A Reconsideration
– “Time-Preference and Productivity: A Reconsideration.” Economica, N.S. no. 4, 12 (February 1945): 22–25.
Excerpt: “The question I wish here to reconsider is in the 1st instance the purely theoretical one of the relative importance, in determining the marginal productivity of investment, of the productivity schedule on the one hand and the so-called time… More
The Use of Knowledge in Society
– “The Use of Knowledge in Society.” American Economic Review 35 (September 1945): 519–530.
Excerpt: “What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough if we possess all the relevant information, if we can start out from a given system of… More
Report on the Changes in the Cost of Living in Gibraltar 1939–1944 and on Wages and Salaries
– Report on the Changes in the Cost of Living in Gibraltar 1939–1944 and on Wages and Salaries. Gibraltar, no date (1945).
Richard von Strigl
– “Richard von Strigl” (Obituary). Economic Journal 54 (1944): 284–286.
Strigl, who died in 1944, was a “Neo-Austrian” involved in developing the theory of saving and investment and analyzing monopolistic competition theory.
The Case of the Tyrol
– The Case of the Tyrol. London: Committee on Justice for the South Tyrol, 1944.
John Rae and John Stuart Mill: A Correspondence
– “John Rae and John Stuart Mill: A Correspondence.” Economica N.S. 10 (1943): 253–255.
Planning and the Rule of Law
– “Gospodarka planowa a idea planowania prawa.” Economista Polski (London, 1943).
The Geometrical Representation of Complementarity
– “The Geometrical Representation of Complementarity.” Review of Economic Studies 10 (1942–1943): 122–125.
Excerpt: “Geometrical representation of complementarity encounters difficulties because complementarity involves a relationship between the three commodities and three-dimensional diagrams are notoriously difficult to handle. A family of indifference… More
The Facts of the Social Sciences
– “The Facts of the Social Sciences.” Ethics 54 (October 1943).
Excerpt: “There there exists today no commonly accepted term to describe the group of disciplines with which we shall be concerned in this paper. The term “moral sciences,” in the sense in which John Stuart Mill used it, did approximately cover the… More
A Commodity Reserve Currency
– “A Commodity Reserve Currency.” Economic Journal 53 (1943).
Excerpt: “The gold standard as we knew it undoubtedly have some grave defects. But there is some danger that the sweeping condemnation of it which is now the fashion may have secure the fact that it’s also had some important virtues which most of… More
John Stuart Mill, The Spirit of the Age
– John Stuart Mill, The Spirit of the Age. Introduced by F.A. Hayek. Chicago: University of Chicago Press, 1942.
Hayek’s Introduction is entitled, “John Stuart Mill at the Age of Twenty-Four,” and surveys Mill’s intellectual development at the time of Mill’s famous essay, “The Spirit of the Age,” which represented important deviations from… More
A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’
– “A Comment on an Article by Mr. Kaldor: ‘Professor Hayek and the Concertina Effect’.” Economica N.S. 9 (November 1942): 383–385.
Scientism and the Study of Society
– “Scientism and the Study of Society.” Part I: Economica N.S. 9 (1942). Part II: Economica 10 (1943). Part III: Economica 11 (1944).
Excerpt: “In the course of its slow development in the 18th and early 19th centuries the study of economic and social phenomena was guided in the choice of its methods in the main by the nature of the problems it had to face. It gradually developed a… More
The Ricardo Effect
– “The Ricardo Effect.” Economica N.S. 9 (1942).
Excerpt: “When in a recent essay on industrial fluctuations the author introduced “the familiar Ricardian proposition that a rise in wages will encourage capitalists to substitute machinery for labor,” this was done under the illusion that thus an… More
Planning, Science and Freedom
– “Planning, Science and Freedom.” Nature 148 (November 15, 1941).
Excerpt: “The last ten years have witnessed in Great Britain a strong revival of a movement that for at least three generations has been a decisive force in the formation of opinion and the trend of social affairs in Europe: the movement for… More
Maintaining Capital Intact: A Reply to Professor Pigou
– “Maintaining Capital Intact: A Reply [to Professor Pigou.]” Economica N.S. 8 (1941): 276–280.
Excerpt: “Professor Pigou’s defense of the conception of “maintaining capital intact” consists essentially of two parts. The first is a restatement of his own attempt to define its meaning. The second is a plea that’s, even if this… More
The Counter-Revolution of Science
– “The Counter-Revolution of Science.” Parts I-III. Economica N.S. 8 (February - August 1941): 281–320.
Excerpt: “In the course of its slow development in the eighteenth and early nineteenth centuries the study of economic and social phenomena was guided in the choice of its methods in the main by the nature of the problems that it had to face. It… More
Socialist Calculation: The Competitive ‘Solution’
– “Socialist Calculation: The Competitive ‘Solution’.” Economica N.S. 7 (May 1940): 125–149.
Excerpt: “Two chapters in the discussion of the economics of socialism may now be regarded as closed. The first deals with the belief that socialism will dispense entirely with calculation in terms of value and will replace it with some sort of… More
An Enquiry into the Nature and Effects of the Paper Credit of Great Britain
– Henry Thornton. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802). Edited and introduced by Friedrich A. Hayek. London: Allen and Unwin, 1939.
Excerpt: “To most of the contemporaries of Henry Thornton his authorship of the book which is now reprinted after one hundred and thirty-six years would by no means have been regarded as his major titles to fame. To them the fact that he was a… More
Pricing versus Rationing
– “Pricing versus Rationing.” The Banker 51 (London, September 1939).
Economic Conditions of Inter-State Federation
– “Economic Conditions of Inter-State Federation.” New Commonwealth Quarterly 5 (London, 1939).
Excerpt: “It is rightly regarded as one of the great advantages of inter-state federation that it would do away with the impediments as to the movement of men, goods, and capital between the states and that would render possible the creation of common… More
The Maintenance of Capital
– “The Maintenance of Capital,” Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The significance of the problem. It is not likely that in the whole field of economics there are many more concepts which are at the same time so generally used and so little analyzed as that of a “constant amounts of capital.” But while… More
Price Expectations, Monetary Disturbances and Malinvestments
– “Price Expectations, Monetary Disturbances and Malinvestments," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The most characteristic feature of the work of our generation of economists is probably the general endeavor to apply the methods and results of the pure theory of equilibrium to the elucidation of more complicated “dynamic” phenomena.… More
The Paradox of Saving
– "The Paradox of Saving," Profits, Interest and Investment: and Other Essays on The Theory on Industrial Fluctuations. London: Routledge & Kegan Paul, 1939.
Excerpt: “The assertion that saving renders the purchasing power of the consumer insufficient to take up the volume of current production, although made more often by members of the lay public van by professional economists, is almost as old as the… More
Freedom and the Economic System
– “Freedom and the Economic System.” Contemporary Review (April 1938).
Excerpt: The link between classical liberalism and present-day Socialism — often still misnamed liberalism — is undoubtedly the belief that the consummation of individual freedom requires relief from the most pressing economic cares. If this seems… More
The Gold Problem
– “Das Goldproblem.” Österreichische Zeitschrift für Bankwesen 2 (1937).
Introduction to a Theory of Capital
– “Einleitung zu einer Kapitaltheorie.” Zeitschrift für Nationalökonomie 8 (1937): 1–9.
Investment that Raises the Demand for Capital
– “Investment that Raises the Demand for Capital.” Review of Economic Statistics 19 (November 1937).
Excerpt: “The purpose of this article is to state a proposition which underlies the modern “monetary over-investment theories” of the trade cycle in a form in which, as far as I know, it has never before been expressed but which seems to… More
Economics and Knowledge
– “Economics and Knowledge.” Economica N.S. 4 (February 1937): 33–54.
Excerpt: “The ambiguity of the title of this paper is not accidental. Its main subject is of course the role which assumptions and propositions about the knowledge possessed by the different members of society play in economic analysis. But this is by… More
The International Monetary Situation
– “La situation monétaire internationale.” Bulletin Périodique de la Societé Belge d'Études et d'Expansion (Brussels), No. 103. (1936).
Utility Analysis and Interest
– “Utility Analysis and Interest.” Economic Journal 46 (1936): 44–60.
Technical Progress and Overcapacity
– “Technischer Fortschritt und Überkapazität.” Österreichische Zeitschrift für Bankwesen 1 (1936).
The Mythology of Capital
– “The Mythology of Capital.” Quarterly Journal of Economics 50 (1936): 199–228.
Excerpt: “Professor Knight’s crusade against the concept of the period of investment revives a controversy which attracted much attention thirty and forty years ago but was not satisfactorily settled at that time. In his attack he uses very… More
Economic Planning in Soviet Russia
– Boris Brutzkus. Economic Planning in Soviet Russia. Edited and prefaced by Friedrich A. Hayek. London: George Routledge & Sons, 1935; xvii, 234 pp.
From a review: These two volumes, together with a translation (yet to appear) of Mises’ Die Gemeinwirtschaft, constitute a formidable counterattack by laissez-faire on all forms of planning, and in particular on socialism. The economic impossibility of… More
Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism
– Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism. Edited with an Introduction and a Concluding Essay by F. A. Hayek. Contributions by N. G. Pierson, Ludwig von Mises, Georg Halm, and Enrico Barone. London: George Routledge & Sons, 1935.
Excerpt: “There is reason to believe that we are at last entering an era of reasoned discussion of what has long uncritically been assumed to be a reconstruction of society on rational lines. For more than half a century, the belief that deliberate… More
Edwin Cannan
– “Edwin Cannan” (Obituary). Zeitschrift für Nationalökonomie 6 (1935): 246–250.
Spor miedzy szkola ‘Currency’ i szkola ‘Banking’
– “Spor miedzy szkola ‘Currency’ i szkola ‘Banking’.” Ekonomista 55 (Warsaw, 1935).
A Regulated Gold Standard
– “A Regulated Gold Standard.” The Economist (May 11, 1935).
Excerpt: “It is still impossible to predict when conditions will make a solution of international currency problems appear practicable. This does not mean that it is too early to ask what sort of system we really want, and we can begin to survey the… More
Stable Prices or Neutral Money
– “Stable Prices or Neutral Money.” The Economist 7 (1934).
The Outlook for Interest Rates
– “The Outlook for Interest Rates.” The Economist 7 (1934).
Saving
– “Saving.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 13, pp. 548–552.
Philippovich, Eugen von
– “Philippovich, Eugen von.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1934. Vol. 12, p. 116.
Carl Menger
– “Carl Menger.” Economica N.S. 1 (November 1934): 393–420.
Excerpt: “The history of economics is full of tales of forgotten forerunners, men whose work had no effect and was only rediscovered after their main ideas had been made popular by others, of remarkable coincidences of simultaneous discoveries, and of… More
On the Relationship between Investment and Output
– “On the Relationship between Investment and Output.” Economic Journal 44 (1934): 207–231.
Capital and Industrial Fluctuations
– “Capital and Industrial Fluctuations.” Econometrica 2 (April 1934): 152–167.
Excerpt: A sympathetic criticism of the kind to which the views of the present author have been subjected by Messrs Hansen and Tout in a recent issue of ECONOMETRICA, offers a welcome opportunity of clearing up some points upon which I have obviously not… More
Contributions on Monetary Theory
– Beiträge zur Geldtheorie. Edited and prefaced by Friedrich A. Hayek. Contributions by Marco Fanno, Marius W. Holtrop, Johan G. Koopmans, Gunnar Myrdal, Knut Wicksell. Vienna, 1933.
The Present State and Immediate Prospects of the Study of Industrial Fluctuations
– Contribution to Gustav Clausing, ed. Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff. Munich: Duncker & Humblot, 1933.
Concerning Neutral Money
– “Über Neutrales Geld.” Zeitschrift für Nationalökonomie 4 (October 1933).
Norman, George W.
– “Norman, George W.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2.
Macleod, Henry D.
– “Macleod, Henry D.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1933. Vol. 2, p. 30.
Gossen, Hermann Heinrich
– “Gossen, Hermann Heinrich.” Encyclopaedia of the Social Sciences. New York: Macmillan, 1932. Vol. 7, p. 3.
Capital Consumption
– “Kapitalaufzehrung.” Weltwirtschaftliches Archiv 36 (July 1932/II): 86–108.
Foreign Exchange Restrictions
– “Foreign Exchange Restrictions.” The Economist 6 (1932).
The Fate of the Gold Standard
– “Das Schicksal der Goldwährung.” Der Deutsche Volkswirt 6 (20), (1932).
Reflections on the Pure Theory of Money of Mr. J. M. Keynes
– “Reflections on the Pure Theory of Money of Mr. J. M. Keynes.” Economica 12 (February 1932 - Part II): 22–44.
A Note on the Development of the Doctrine of ‘Forced Saving’
– “A Note on the Development of the Doctrine of ‘Forced Saving’.” Quarterly Journal of Economics 47 (November 1932): 123–133.
Excerpt: “The enhanced interest in the problem of “forced saving,” due to recent developments in the theory of industrial fluctuations, has led to the discovery of so many more or less distinct allusions to that subject in the works of earlier… More
Money and Capital: A Reply to Mr. Sraffa
– "Money and Capital: A Reply to Mr. Sraffa.” Economic Journal 42 (June 1932): 237–249
Excerpt: “With an article devoted to a critical discussion of my Prices and Production, Mr. Sraffa has recently entered the arena of monetary controversy. There is no denying the fact that reviewing books on money, at a time when monetary theory is in a… More
The Pure Theory of Money: A Rejoinder to Mr. Keynes
– “The Pure Theory of Money: A Rejoinder to Mr. Keynes.” Economica 11, no. 34 (November 1931): 398–403.
Comments on the Preceding Reply of Prof. Emil Lederer
– “Bemerkungen zur vorstehenden Erwiderung Prof. Emil Lederers.” Zeitschrift für Nationalökonomie 1 (5), (1930).
The Repercussions of Rent Restrictions
– “Wirkungen der Mietzinbeschränkungen.” Munich: Schriften des Vereins für Sozialpolitik 182 (1930)
The Rent Control Problem, Political Economic Considerations
– Das Mieterschutzproblem, Nationalökonomische Betrachtungen. Vienna: Steyrermühl-Verlag, Bibliothek für Volkswirtschaft und Politik, No. 2, 1929.
Theorie der Preistaxen
– “Theorie der Preistaxen.” Közgazdasági Enciklopédia, Budapest, 1929.
Discussion Comments on ‘Credit and Business Cycle’
– “Diskussionsbemerkungen über ‘Kredit und Konjunktur.’” Shriften des Vereins für Sozialpolitik 175, Verhandlungen 1928, (1928).
Some Remarks on the Relationship between Monetary Theory and Business Cycle Theory
– “Einige Bemerkungen über das Verhältnis der Geldtheorie zur Konjunkturtheorie.” Schriften des Vereins für Sozialpolitik 173/2 (1928): 247–295.
The Intertemporal Equilibrium System of Prices and the Movements of the ‘Value of Money.’
– “Das intertemporale Gleichgewichtssystem der Preise und die Bewegungen des ‘Geldwertes.’” Weltwirtschaftliches Archiv 28 (1928): 33–76.
The Laws of Human Relationships and of the Rules to be Derived Therefrom for Human Action
– Hermann Heinrich Gossen. Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln. Introduced by Friedrich A. Hayek. 3rd edition. Berlin: Prager, 1927, xxiii, 278 pp.
“The Laws of Human Relationships and of the Rules to be Derived Therefrom for Human Action.” Cf.: A-15. Gossen’s (1810–1858) fame rests on this one book, first published in 1854, in which he developed a comprehensive theory of the hedonistic… More
On the Setting of the Problem of Rent Theory
– "Zur Problemstellung der Zinstheorie." Archiv für Sozialwissenschaften und Sozialpolitik 58 (1927): 517-532.
Business Cycle Research in Austria
– “Konjunkturforschung in Osterreich.” Die Industrie 32 (30), (Vienna 1927).
The Meaning of Business Cycle Research for Economic Life
– “Die Bedeutung der Konjunkturforschung für das Wirtschaftsleben.” Der Österreichische Volkswirt 19 (2), (Vienna 1926).
Comments on the Problem of Imputation
– “Bemerkungen zum Zurechnungsproblem.” Jahrbücher für Nationalökonomie und Statistik 124 (1926): 1–18.
The Monetary Policy in the United States Since Overcoming the Crisis of 1920
– “Die Währungspolitik der Vereinigten Staaten seit der Überwindung der Krise von 1920.” Zeitschrift für Volkswirtschaft und Sozialpolitik. N.S. 5 (1925).
The American Banking System since the Reform of 1914
– “Das amerikanische Bankwesen seit der Reform von 1914.” Der Österreichische Volkswirt 17 (29–33), (Vienna 1925).
Discount Policy and Commodity Prices
– “Diskontopolitik und Warenpreise.” Der Österreichische Volkswirt 17 (1,2), (Vienna 1924).
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